England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
ADMINSTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		7 July 2005

Mr Justice Elias:

1. Introduction.

This is an application for judicial review. The Claimant Diana Elias is now 81. Her parents were both Jewish; her mother was from Iraq and her father from Iraq or India. She was born in Hong Kong on 9^th January 1924 and she was registered, as a British subject, with the British High Commission in Hong Kong. She was still in Hong Kong when the Japanese forces invaded that territory in 1941. The British authorities gave a list of British subjects to the Japanese. Her name was included on that list together with her parents and siblings. Her home was raided and she and her family were all interned by the Japanese, by virtue of being British civilians, in Stanley Camp. She was there between 1941 and the liberation of Hong Kong in 1945. During that period she suffered extremely traumatic experiences which it is not necessary to recount. She has suffered serious psychological effects identified in a medical report from Professor Robbins. Mrs Elias remains a British citizen. From 1945 until 1976 she lived partially in this country and since 1976 she has lived here full time. Her children and all her grandchildren are British citizens.

2. Her complaint relates to the non-statutory compensation scheme for those who were interned by the Japanese during the war. The scheme is termed "The Far Eastern Prisoner of War Ex-Gratia Compensation Scheme". When setting up the scheme, the government said that it was "to repay the debt of honour" owed by the United Kingdom to British civilians interned by the Japanese during the war. The scheme applies both to members of the armed services who served during the war and to civilians, but different rules of eligibility were established for the two categories. A single ex-gratia payment of £10,000 is made to those who qualify under the scheme. So far as civilian internees are concerned, in order to qualify they either have to have been born in the United Kingdom or have a parent or grandparent born here ("the birth link criteria"). Mrs Elias does not meet that requirement and therefore has not been allowed to benefit from the scheme. She feels very deeply aggrieved that the perceived "debt of honour" does not extend to her. She contends that the Secretary of State, in refusing to compensate her, has acted unlawfully in two distinct ways. First, it is said that he has erred in law in failing to consider whether, because of the extreme suffering she has undergone, she should be made an exceptional case. She recognises that everyone interned by the Japanese was treated extremely harshly but contends that her treatment was particularly brutal and merits recognition. Second, it is submitted that the scheme is unlawfully discriminatory. The Claimant submits that the criteria operate as direct discrimination on grounds of national origins or alternatively, are indirectly discriminatory and cannot be justified.
3. There is a further ground that in formulating the scheme the government failed to comply with its obligations under s71 of the Race Relations Act 1976. This is essentially a discrete and self-contained point and I deal with it separately at the end of this judgment. The Commission for Racial Equality was permitted to intervene and make submissions on the discrimination and the section 71 grounds. They were represented by Mr Pannick QC.
4. Earlier Challenges to the Scheme.

The scheme in issue in this case has already been the subject of two challenges in the courts. First, in R (Association of British Civilian Internees: Far East Region) v Secretary of State for Defence [2003] EWCA Civ 473 [2003] QB 1397 ("the ABCIFER case") it was claimed that the criteria were unlawful because they were disproportionate and /or irrational, and also on the ground that they defeated the legitimate expectation, created it was alleged by the announcement in Parliament setting up the scheme, that those who were British subjects at the time of their internment would be entitled to the compensation. The Court of Appeal, Lord Phillips of Worth Matravers MR, Schiemann and Dyson LJJ rejected the challenge. The court held, after reviewing a number of authorities, that proportionality had not replaced the test of rationality in judicial review claims which raised no Human Rights or European Community Law issues. It was further held that the objective of seeking to limit the beneficiaries of the scheme to those with close links to the United Kingdom at the time of the internment, and the introduction of the birth link criteria to demonstrate those close links, were rational. The court also held that there was no frustration of any legitimate expectation. The grounds now being advanced were not pursued in that case.

5. In the case of Phalam Gurung v Ministry of Defence [2002] EWHC 2463 Admin, Mr Justice McCombe held that it was irrational for the scheme to discriminate against Ghurkhas who had fought in the British-Indian Army and had been denied benefits under the scheme. The ostensible reason for distinguishing them from British service personnel who also served in the Indian army was that the Ghurkhas were subject to Indian military discipline whereas the British were subject to British Military Law. McCombe J held that the scheme was a de facto racial one concealed beneath the cloak of de jure constitutional distinctions. That case, however, concerned soldiers as opposed to civilians, and different criteria were under consideration than in this case.
6. The history of the scheme.

I will not set this out in any detail. It was fully and helpfully recounted in the judgment of Lord Justice Dyson handing down the judgment of the court in the ABCIFER case: see paragraphs 8 to 31. The bare bones are as follows. It was announced that the scheme would be set up on 7^th November 2000. Dr Mooney, then Parliamentary Under Secretary for Defence, informed the House of Commons that "British civilians who were interned" would receive the compensation.

7. It became apparent that it was necessary to define precisely who fell within the concept of "British civilians." The criteria were subsequently fixed at an inter-departmental working group meeting on March 21^st. In the weeks following that meeting, Mr Alan Burnham, then Acting Chief Executive of the Veterans Agency (formerly the War Pensions Agency) expressed concerns as to whether these criteria were defensible and suggested that wider eligibility criteria might be adopted, perhaps on a discretionary basis. Notwithstanding these concerns, the inter departmental working party, at a meeting on the 18 May, confirmed the birth criteria. The minutes of that meeting note that the committee considered that what it termed the "bloodline connection with the United Kingdom" should be retained and was consistent with the war pensions arrangements. The criteria were made public by an announcement in the House of Commons on the 11 July 2001.
8. The justification for the adoption of the criteria was explained in a witness statement in the ABCIFER litigation by Mr McKane who was the chair of the Interdepartmental Working Group which advised ministers on the scheme. Mr McKane said this:

"In reaching this definition we were guided by our understanding that the Ministerial intention was that there should be a requirement that the Claimant should have had strong links with the UK. We initially considered that a strong link with the UK required that either the Claimant or at least one of their parents was born in the UK.

In extending the link to the UK back to grandparents, we bore in mind representations made by ABCIFER in respect of the Governments proposals on a distinct but analogous matter, namely to revise the policy for determining whether a former civilian Far East internee "belongs to the UK" for the purpose of entitlement to a War Pension".

It is somewhat ironical that it is the extension back to grandparents which is relied upon as an important element in the alleged discrimination in this case. However, if the unlawful discrimination is made out, it is trite law that the fact that it resulted from benign intentions is irrelevant.

9. Mrs Elias' claims.

In the context of the history of the scheme as a whole, I turn briefly to deal with the factual background relating to Mrs Elias' own claims. Soon after the scheme was set up, she made a claim for compensation. At that stage she understood that she would be eligible as a British citizen, and it was only through correspondence that she appreciated that she was being denied the payment because she did not satisfy the criteria. She wrote a number of letters to the Prime Minister, but to no avail. She was formally notified in a letter from the War Pensions Agency on 25^th June 2001 that because of her failure to satisfy the criteria, "you are not eligible to receive the ex gratia payment".

10. Mrs Elias' solicitors wrote on 20^th January 2004 specifically asking whether any other information might assist the War Pension Agency in making a decision in her favour even although she fell outside the terms of the scheme. Following further correspondence, it was made clear to them by a letter date 15^th April 2004 that no exceptions would be made for individual claims.
11. Mrs Elias wrote personally on the 16^th July 2004 pointing out that it was unjust that others who had not suffered as much as she had should receive payment whereas she did not. She set out certain features of her case which she submitted had resulted in particularly traumatic consequences for her. But the Agency continued to make it plain that it considered itself bound by the terms of the scheme and could make no exceptions. That has been confirmed by Mr McKane in the witness statement lodged in these proceedings. It is the failure to consider whether she should be treated as an exception which is the first ground of challenge.
12. Legislation

The basic principle of discrimination under the Race Relations Act 1976 is found in section 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: or

b. he applies to that other a requirement or condition

which he applies or would apply equally to persons not of the same racial group as that other but-

(i) which is such that the proportion of persons of the same racial group as that other who can comply with it is considerably smaller than the proportion of persons not of that racial group who can comply with it; and

(ii) which he cannot show to be justifiable irrespective of the colour, race, nationality or ethnic or national origins of the person to whom it is applied;

and

(iii) which is to the detriment of that other because he cannot comply with it"

The former discrimination identified in sub paragraph (a) is generally known as direct discrimination and that in sub paragraph (b) as indirect discrimination. The difference between them is that direct discrimination is not capable of being justified whereas indirect discrimination is.

13. The meaning of racial grounds and racial group is found in section 3.

3(1) "racial grounds means any of the following grounds, namely colour, race nationality or ethnic or national origins;

"racial group" means a group of persons defined by reference to colour, race nationality or ethnic or national origins, and references to a person's racial group refer to any racial group into which he falls".

3(2) "The fact that a racial group comprises two or more distinct racial groups does not prevent it from constituting a particular racial group for the purposes of the Act".

14. The concept of racial discrimination as defined in section 1 was widened in certain respects by a section 1(A) which was implemented to give effect to the European directive, Council Directive 2000/43/EC of 29^th June 2000 implementing the principle of equal treatment between persons irrespective of racial or ethnic origin. That Directive states that there should be no direct or indirect discrimination based on racial or ethnic origin. It was specifically provided in Article 6 that the implementation of the Directive should not constitute grounds for a reduction in the level of protection against discrimination. Section 1(1A) is as follows:

"(1A) A person also discriminates against another if, in any circumstances relevant for the purposes of any provision referred to in subsection (1B), he applies to that other as 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 that other at that disadvantage, and

(c) which he cannot show to be a proportionate means of achieving a legitimate aim".

15. It is accepted that the provision of compensation under the scheme falls within the scope of a provision referred to in subsection (1B), either because it is caught by the inclusion in (1B) of the exercise of functions by a public body relating to a form of social advantage under section 19B, or because it involves the provision of a service under section 20. Where discrimination falls within subsection (1A) then it is expressly provided that section 1(1)(b) does not apply. In fact, however, subsection (1A) did not come into force until 19 July 2003. I understood Mr Sales to accept that it was applicable to the continuing refusal to pay compensation after that date. Whether that is so or not, I do not think that in the circumstances of this case it adds anything significant to the protection afforded by the original section 1(1)(b). It was not suggested that the application of the concept of proportionality, at least in the context of this case, would lead to any different result than would the application of the concept of justification found in the original legislation.
16. There are provisions which expressly permit certain forms of discrimination which would otherwise be unlawful. Section 41(1) as originally enacted, provided that otherwise unlawful discrimination was not to be treated as unlawful if it was done in pursuance of an Order in Council, an instrument made by a minister under an enactment, or an order to comply with a condition or requirement imposed by a minister by virtue of an enactment. In addition, certain forms of discrimination based on nationality and residence were also permitted by subsection (2).
17. However, section 41 was amended with effect from the 19 July 2003 by stipulating that such acts as fall within section 1(1B) will not be saved by section 41 if the discrimination is on grounds of race or ethnic or national origins. This amendment also gives effect to the European Directive and came into force on July 19, 2003.
18. In fact, it was accepted by Mr Sales that although the scheme was made prior to July 2003 it was not made by an instrument covered by section 41 in its original form. The Defendant therefore has never sought to rely on this provision. The amendment to section 41 is of some relevance, however, both in showing that nationality discrimination is frequently permitted but that the same tolerance is not given to discrimination on grounds of ethnic or national origin.
19. Finally, I was referred to the International Covenant on the Elimination of all forms of Racial Discrimination which entered into force on the 4 January 1969 and is specifically referred to in the preamble to the European Directive to which I have made reference. Article 1(1), put broadly, renders discrimination unlawful on grounds of race, colour, descent or national or ethnic origin which has the effect or purpose of nullifying or impairing the recognition, enjoyment or exercise of human rights or fundamental freedoms. This is not directly applicable to this case, but it is relied upon by the Claimant because of the recognition that descent is in principle an unacceptable form of discrimination. It is also pertinent to note that Article 1(2) by contrast provides expressly that the covenant does not apply to discrimination between citizens and non-citizens.
20. The grounds of challenge.

I preface my analysis of the arguments in this case by making the trite but important observation that I am not concerned directly with the merits of the scheme which have been adopted. It is not for the court to determine whether the government ought to have been more generous or should have committed further public funds to widen the scope of those who might be eligible. The only issue for the court is whether, in adopting the scheme, the government has acted in some way unlawfully. As I have indicated, certain challenges to the lawfulness of the scheme have been tried and failed. But it is accepted that this case raises distinct grounds which were not directly pursued in the ABCIFER case.

21. Unlawful fettering of discretion.

The first ground of challenge is that the Minister has acted unlawfully in fettering his discretion and refusing to consider whether Mrs Elias should be treated as an exceptional case, either because of the particularly harsh treatment meted out to her, or because she has developed a very close connection now with the United Kingdom.

22. It is well established that in exercising public law discretions, a decision maker must not adopt rules or policies which disable itself from exercising its discretion in individual cases. The principle was formulated by Lord Reid in the well-known case of British Oxygen v Board of Trade [1971] A.C.610, 625D as follows:

"The general rule is that anyone who has to exercise a statutory discretion must not "shut his ears to an application"……I do not think there is any great difference between a policy and a rule. There may be cases where an officer or authority ought to listen to a substantial argument reasonably presented urging a change of policy. What the authority must not do is to refuse to listen at all. But a Ministry or large authority may have to deal already with a multitude of similar applications and then they will almost certainly have evolved a policy so precise that it could well be called a rule. There can be no objection to that, provided the authority is always willing to listen to anyone with something new to say-of course I do not mean to say there need be an oral hearing."

23. British Oxygen was concerned with the exercise of statutory powers. But Mr Rabinder Singh QC, counsel for the Claimant, submits that at least ever since the seminal decision in Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 a similar principle applies to the exercise of common law discretions. The rationale for the principle is, he contends, different in each case. Where statutory powers are in play, it is a matter of vires and giving effect to Parliament's intention. In the case of common law powers, however, it is a question of exercising the powers fairly and lawfully.
24. It is a fundamental feature of this argument that the scheme was set up not under statute but pursuant to the common law powers of the Crown. These powers are always available to the Crown, acting through government. They did not come into being with the adoption of the scheme; rather the scheme merely identifies a set of circumstances when they will be exercised. In that sense they are unlike the laws passed by Parliament. Until Parliament passes legislation, no public body can purport to exercise statutory powers for the obvious reason that they do not exist; no such powers will have been conferred on them. Moreover, Mr Singh accepts that once a statutory scheme is created, officials implementing that scheme must act in accordance with its terms. It would not be lawful to exercise a discretion in favour of extending the scope of, or making exceptions to, those covered by a statutory scheme unless Parliament had provided for such a discretion to be available.
25. He submits, however, that common law powers are different. Precisely because they are conferred by the common law, they are always available to be used. Accordingly, whenever the government formulates a scheme relating to the exercise of common law powers, it is in effect making a policy as to how those powers will be exercised. It must therefore be willing to make exceptions in an appropriate case and it is accepted that it has refused to do so in the case of Mrs Elias. Even in the absence of a scheme, Mr Singh contended that it would be necessary for the government at least to consider a claim for payment made out of public funds, although in practice he submits that it could readily and speedily be refused.
26. The Claimant relies strongly on the case of R v Secretary of State for the Home Department ex parte Bentley [1994] QB 349. The applicant applied for judicial review of the decision of the Home Secretary not to pardon his brother who had been hanged 39 years earlier after being sentenced to death. The Secretary of State had applied an established policy that the grant of a pardon would only be made where the Defendant was both morally and technically innocent. The court accepted the submission that this involved too narrow a view of his powers. The Royal Prerogative of mercy was sufficiently broad to cover conditional as well as free pardons, and the Home Secretary should have considered whether to grant posthumously a conditional pardon whose effect would be to recognise that a mistake was made and that the death sentence ought to have been commuted to life imprisonment. In delivering the judgment of the court, Watkins LJ said this (p.363G):

"As the argument before us developed, it became clear that the substance of the applicant's case was that the Home Secretary failed to recognise the fact that the prerogative of mercy is capable of being exercised in many different circumstances and over a wide range and therefore failed to consider the form of pardon which might be appropriate to meet the facts of the present case. Such a failure is, we think, reviewable."

27. Mr Rabinder Singh submits that Bentley was a case where the court held that the Home Secretary had wrongly fettered his discretion. He had a adopted a policy and failed to consider exercising his discretion outside it. Likewise here, the Secretary of State has failed even to consider whether Mrs Elias should be treated as an exceptional case.
28. Mr Sales accepts that the prerogative or common law powers of the Crown may be reviewed in accordance with similar principles to those which the common law has developed for regulating the exercise of statutory powers. But he submits that it is misleading to say that the Secretary of State in setting up the scheme is adopting a policy to determine how a discretion should be exercised; rather he is exercising what is in effect a legislative function, creating a scheme for determining who should receive payment. He was not setting out rules of guidance to show how a discretion conferred by the scheme should be determined; he was defining the scheme itself and in a manner which left no room for the exercise of discretion.

29. Mr Sales prayed in support of his submissions a decision of Girvan J, sitting as a judge of the Queens' Bench Division in Northern Ireland in Re W's Application [1998] NI 19. The applicant suffered injuries as a result of criminal conduct and sought ex gratia compensation from the Secretary of State. This application was refused without considering the particular facts of the case. The judge held that the common law power had in fact been fettered by statute, but considered whether the facts of the individual case had to be considered assuming that the common law power remained in play. He concluded that they did not:

"The applicant's contention that the Secretary of State was bound to consider the individual circumstances of the applicant before declining to make an ex gratia payment is without substance in the absence of a policy or decision by the Secretary of State to put in place an extra-stutory scheme providing for ex gratia compensation (assuming such a power existed). While as a general principle a decision-making body exercising public law functions entrusted with a discretion must not by the adoption of a fixed rule of policy disable itself from exercising its discretion in individual cases, the existence of a general prerogative power available to a minister differs from a specific policy or specific statuary discretionary power conferred on a decision making body. A policy decision not to make provision for ex gratia compensation payments would itself be undermined by the co-existence of a duty to consider circumstance of individual cases. The consideration of individual cases would only be meaningful in the context of the possibility that ex gratia compensation might be paid. Such an exercise would be meaningless when the Secretary of State does not wish to or intend to make a case to the Treasury or Parliament to permit the funding of such compensation. The Treasury, even if a special case were made out to it by the Secretary of State, would inevitably be bound to consider the financial implications and ramifications for the funding of individual ex gratia payments and would require to explore the extent of the financial commitments required. This would be an impossible task in the absence of a clearly formulated policy relating to an extra-statutory compensation scheme which the Secretary of State has determined not to introduce".

This passage was approved by the Court of Appeal for Northern Ireland (Carswell LCJ, Nicholson and McCollum JJ: (1998) NI 219.

30. Mr Sales also relied upon certain observations of Diplock LJ (as he was) in R v Criminal Injuries Compensation Board ex parte Lain [1967] 2 QB 864. The court was there faced with the question whether it could review the exercise of powers exercised pursuant to another common law scheme which provides for compensation for the victims of crimes of violence. Diplock LJ said this (page 887):

"The scheme not only constituted and defined the authority of the board to make such payments but as published to applicants, was a lawful proclamation stating the conditions required to be satisfied by subjects seeking payment of compensation and requiring them as a condition precedent to the receipt of any payment to submit their claims to adjudication by the board in the exercise of its judicial functions."

31. As Mr Sales rightly observes, nowhere is it suggested that the Board should consider whether to compensate persons who claim that they have an exceptional claim, falling outside the scheme.

32. Finally, he also submits that as a matter of policy it would be highly undesirable if the Claimant's submission were right. The obligation to make exceptions in appropriate cases would extend the scope of the scheme and make its funding difficult to predict. Government would be disinclined to create such schemes at all if the effects were subject to such unpredictability. More specifically, he submitted that it would be particularly invidious in the context of its scheme for the Minister to make exceptions on the basis that some internees had suffered more grievously at the hands of the Japanese than others. I think there is merit in both these observations but I do not think they bear directly on the point in issue. The Claimant's contention is that it is implicit in the exercise of any common law powers by a public body that the possibility of exceptions will always have to be considered. The particular adverse consequences of requiring the application of such a principle in a particular context cannot be an answer to the existence of the principle itself, although it may be highly relevant to the question how, if there is a duty to consider such exceptions, that duty can properly be exercised.

29. There is something of a paradox in the Claimant's argument. It purports to equate the position of statutory and common law discretions by contending that the source of power is immaterial yet in fact it subjects the decision maker to a greater degree of regulation by the courts when exercising the latter. A minister would be obliged to consider exceptions to a common law scheme but would be forbidden from doing so with a statutory scheme.
30. I consider that the argument is misconceived. It rests on the assumption that the decision maker must always consider the exercise of common law powers if requested to do so. Mr Rabinder Singh did not resile from that proposition, but he observed that in practice, if someone simply asked for ex gratia compensation absent a specific scheme, there could be a simple one line refusal. However, one is constrained to ask why that should be. It can only be, it seems to me, because there is a policy in place that such payments will not be made. However, if the Claimant contends that his circumstances are exceptional then, if Mr Singh is correct, there would have to be at least some consideration of whether he should be made an exceptional case, and of course a policy that there should be no exceptional cases would itself be unlawful.
31. Even if the Claimant is right to say that an application, absent a scheme, could be cursorily dealt with, the question then arises why the adoption of a scheme should make any difference to the claim. Why should the existence of a scheme which does not apply to the Claimant change the way in which her application for ex gratia compensation has to be considered? It seems to be suggested that the reason is that if one looks at the purpose of the scheme, she falls within its broad compass. The scheme was to repay a debt of gratitude and she had good grounds for being considered to be part of the group to be repaid. I do not think that this is legitimate reasoning. The purpose and scope of the scheme is to be gleaned from its language rather than statements as to its broad objective. It has been carefully framed and its purpose is plainly not to compensate people like Mrs Elias who do not satisfy the birth link.
32. I see no basis for saying that because the government agrees to make payments in a certain class of situations, that it is now obliged to consider applications from those who do not fall within the rules in a different way than it would otherwise have done. In my judgment it is not obliged in every case effectively to consider extending the scheme on a case by case basis beyond the scope which it has carefully delineated. The court's task is to give effect to the scheme established by the Crown in the same way as it would a scheme established by legislation. It is no more an unfair or unlawful exercise of power for the Crown, acting through the Minister, to refuse to consider exceptional cases under the common law scheme than it would have been under a statutory scheme. Moreover, in so far as Parliament authorises funding for the scheme itself, there would be no authority to make payments outside the terms of the scheme. I respectfully agree with the observations of Girvan J referred to above.
33. Of course, it would have been open to the government to have provided for the possibility of exceptional cases, or to amend the scheme. That, in my view, is all that Dyson LJ was saying in the ABCIFER case when he commented that it was permissible to create an exception to the established criteria "where there is a justification for doing so which is rational and does not destroy the very foundation of the scheme" (para 46). I do not believe he had in mind individual exceptions. If such exceptions were established, involving the exercise of a discretion, it would frustrate the Crown's intentions to adopt an inflexible policy as to how the discretion should be exercised, and I see no reason why the common law could not then grant relief in an appropriate case. Whether jurisprudentially it would be a case of upholding legitimate expectations that the scheme will be properly applied, as Mr Sales suggested, or whether it could be seen simply as the courts giving effect to the properly expressed and otherwise lawful will of the Crown in the same way as it will give effect to the will of Parliament, is not a matter which needs to be explored here.
34. I agree with Mr Sales that the Bentley case does not assist the Claimant. In that case the Home Secretary had fettered himself by misunderstanding the scope of the powers available to him. He did not appreciate that the possibility of a posthumous conditional pardon was open to him and he was asked by the court to consider that possibility. By contrast, nobody suggests that the minister is under any misunderstanding as to the potential scope of his common law powers. He was fully aware that he could redraft the rules to encompass exceptional cases. Indeed, he considered it but decided that exceptions ought not to be allowed. There was nothing irrational about that decision.
35. I should add that Mr Rabinder Singh also relied on certain other well known authorities relating to judicial control of prerogative or common law powers, including R v Secretary of State for the Home Department ex parte Ruddock [1987] 1 WLR 1482 and R (Garner) v Secretary of State for the Home Department (19 April, 1999). I agree with Mr Sales that these do not advance the Claimant's case. They were concerned with determining whether the minister had properly applied an established policy rather than whether he was obliged to make exceptions to it. The Claimant also made reference to the well known case of Redereaktiebolaget Amphitrite v The King [1921] KB 500 establishing the proposition that the Crown cannot by contract fetter its future executive action. It cannot by contract tie its hands so that it may be precluded or hampered from acting in future in the public interest. But I do not see how it can possibly be said that the scheme in this case, by adopting the eligibility criteria that it has, will have that effect. It follows that in my judgment this ground of challenge fails.
36. Direct discrimination.

I turn to the contention that the scheme has unlawfully discriminated against the Claimant on grounds of national origin. The Claimant also submits that there are other forms of unlawful discrimination, but for reasons I give below I do not think that it is necessary to give them separate consideration. It is alleged that there is both direct and indirect discrimination and I will deal with each separately.

37. The meanings of National Origins

The leading authority on the meaning of national origins is Ealing London Borough Council v Race Relations Board [1972] AC 342. In that case the House of Lords had to consider whether discrimination on grounds of national origins encompassed discrimination on grounds of nationality. The background was that the local authority maintained a waiting list of applicants qualified for housing accommodation. It was a condition of being accepted on the list that the person was a British subject within the meaning of the British Nationality Act 1948. At that time the Race Relations Act did not outlaw discrimination on grounds of nationality but only national origin. The House of Lords had to determine whether the rule amounted to such unlawful discrimination. Their Lorships held by a majority (Lord Donovan, Viscount Dilhorne, Lord Simon of Glaisdale, Lord Cross of Chelsea, Lord Kilbrandon dissenting) that it did not. Their Lordships considered what was meant by the concept of national origins. Viscount Dilhorne referred to a passage from Oppenheim's International Law 8^th Edition (1955) in which the author had distinguished between two meanings of nationality, one in the sense of citizenship of a state and the other membership of a certain nation in the sense of race. He concluded, bearing in mind the racial objects of the Race Relations legislation, that in the context of this Act the concept "national origins" meant national in the sense of race and not citizenship.

38. Lord Simon agreed, expressing the view that given that the concept of "race" is so elusive, the intention was to ensure that there was no loophole in the application of that concept. Lord Cross expressed a similar view (page 366B). He also sought to define what was meant by national origins in the following way:

"To me it suggests a connection subsisting at the time of birth between an individual and one or more groups of people who can be described as a "nation" – whether or not they also constitute a sovereign state. The connection will normally arise because the parents or one of the parents of the individual in question are or is identified by descent with the nation in question, but it may also sometimes arise because the parents have made their home among the people in question. Suppose, for example, that a man of purely French descent marries a woman of purely German descent and that the couple have made their home in England for many years before the birth of the child in question. It could, I think, fairly be said that the child had three "national origins": French through the father, German through the mother and English not because he happened to have been born here but because his parents made their home here. Of course, in most cases a man has only a single "national origin" which coincides with his nationality at birth in the legal sense and again in most cases his nationality remains unchanged throughout his life. But "national origins" and "nationality" in the legal sense are two quite different conceptions and they may well not coincide or continue to coincide".

39. It was suggested in argument that Ealing no longer represents the law as to the proper scope of the concept of national origin. Their Lordships were concerned with the 1968 Race Relations Act and that is different to the 1976 Act which does now, as a consequence of the Ealing decision, expressly include discrimination on grounds of nationality. In my view, far from casting doubt on the continuing relevance of the Ealing case, it reinforces its significance. I agree with the observations of Lord Cameron of Lochbroom in BBC Scotland v Souster [2001] IRLR 150 who commented that since Parliament had not amended or defined the concept of national origins when passing the 1976 Act, then in accordance with the principle in Barras v Aberdeen Steam Trawling and Fishing Company Limited [1933] AC 402, it should be presumed that Parliament intended the concept to have the same meaning as had been elucidated in their Lordships' House. (para 28) Moreover, Ealing has been followed in a number of subsequent decisions of the Court of Appeal including Tejani v The Superintendent Registrar for the District of Peterborough [1986] IRLR 502 and Naraine v Hoverspeed Limited (12^th November 1999).
40. In Naraine, Mr Naraine and his wife and two children wished to take a day trip by the Hoverspeed Ferry to France. The company refused to take them because Mr Naraine had only a British Visitor's Passport and it showed that he had been born in Guiana. The French would not admit into their country someone with such a passport who was born outside the United Kingdom. Moreover, France was in fact imposing substantial fines on sea carriers who sought to bring such passengers to France. Accordingly, Hoverspeed refused to carry Mr Naraine. (His wife and children had New Zealand passports and could have gone, but not with him). It was alleged that Hoverspeed had infringed his right to freedom of movement under European Union law and also had discriminated on grounds of his national origin under the Race Relations Act. The Court of Appeal rejected both arguments. As to the latter, one of his submissions was that in requiring that someone travelling on the ferry should have been born in the UK, there had been direct discrimination on the grounds of national origins. This argument failed. Lord Bingham, then Lord Chief Justice, observed that in Ealing the House of Lords had distinguished national origins from place of birth. Lord Justice May made observations to the same effect:

"A person's place of birth may be entirely fortuitous to say that a person was born a German is different from saying he was born in Germany. There is an intrinsic distinction between narrow national origins and place of birth. The distinction was recognised in the opinions of the House of Lords in Ealing London Borough Council v Race Relations Board [1972] AC 342 …

41. Mr Rabinder Singh for the Claimant, and Mr Pannick for the Commission for Racial Equality, accept that to discriminate purely by reference to the place of birth does not constitute discrimination on grounds of national origin. But they contend that in this case there is a combination of features about the criteria adopted which, when taken together, do amount to discrimination on grounds of national origin. They refer to the fact that the birth criteria focus on origins, and origins of a national character; they are analogous to the other grounds of race and ethnic origins in that they are immutable characteristics imposed at birth (even if they can exceptionally be acquired subsequently); they relate not merely to the birth place of the individual whose entitlement to compensation is under consideration but also the birth place of the parents and grandparents; and they must be seen in a context where the express purpose in adopting the criteria was to identify those who could show a concept of "belonging" to the United Kingdom in a more specific way than simply through being British subjects.
42. They advance a variation of this argument, namely that even if the birth criteria are not identical to national origins, they are nonetheless so closely related to that concept, and in practice would lead to an almost identical differentiation as the adoption of national origins criteria would do, that it should be treated as such discrimination. They recognise that there may be exceptional cases where persons are eligible to receive compensation who are not of British national origin but submit that this does not change the principle. There is discrimination on grounds of colour if, say, a barman serves the odd black man he has got to know but refuses to serve others. Similarly, it is said that in this case Mrs Elias has been discriminated against on grounds of national origin, even if some others of non-British national origin would have qualified for the compensation.
43. There is force in this submission. By linking the place of birth back through three generations it is very unlikely that someone whose origins are British will be excluded, even if he or she were not born in Britain. It must be highly likely that someone with British national origins will have at least one parent or grandparent who was born here, although no doubt there are a few exceptions such as those whose families have lived in the former Empire.
44. At the same time, however, a criterion which involves looking back over three generations also increases the chances that someone who does not have British national origins will nevertheless qualify because some relevant relative happened to be born here. There are no statistics to indicate the proportion of such persons, although I would imagine it is still small although by no means fanciful.
45. Mr Sales denies that the distinction drawn by the criteria can properly be defined as direct discrimination on grounds of national origin, even if the statistics fall out as I have suggested. He accepts that the authorities establish that the concept of national origins is wide enough to include non-British national origins: see the recent decision of the Court of Criminal Appeal in Attorney General's Reference (no 4 of 2004); R v D [2005] EWCA Crim 889; [2005] All ER (D) 332. But he submits that the differentiation being made in this case is different to one which is related to national origin, and that the grounds of discrimination are precisely as the criteria indicate, namely, place of birth. Even accepting-as he does- that it is legitimate to give concepts a broad meaning in this field (see the observations of the Inner House of the Court of Session in BBC Scotland v Souster [2001] IRLR 150), nonetheless as a matter of construction it is simply not possible to say that there has been discrimination on the forbidden ground of national origins. He also submitted – and I think there is force in this point – that since direct discrimination can never be justified, the courts ought not to strain unduly to find direct discrimination. If the proportionality test is not satisfied, the criteria will be unlawful in any event. If they can be justified, it would be unfortunate that the merits of the criteria adopted were not considered because of the rigid principle (applicable under domestic legislation but not under the case law of the European Court of Human Rights) that direct discrimination can never be capable of justification (save where the statute specifically allows it).
46. I am persuaded that Mr Sales' submission is correct. I accept that the effect of adopting the criteria used in this scheme is likely in fact to produce a very similar outcome as would have resulted had a national origins criterion been adopted. Nevertheless, it is not an identical form of differentiation. This case is distinguishable from the well known and controversial case of James v Eastleigh Borough Council [1990] 2 AC 751 in which the House of Lords, by a majority, held that it was unlawful for a council to give free admittance to a leisure centre for those over pensionable age. This amounted, it was held, to discrimination on grounds of sex since the state pension age at the time was 65 for a man and 60 for a woman. Notwithstanding the motives of the council, this was held to be unlawful discrimination. In that case the concept used, namely the state pension age was inextricably linked with discrimination on grounds of sex so that the same result was achieved whichever criterion was used. That is not the case here.
47. In James, Lord Goff of Chieveley suggested that the appropriate test for determining whether there had been direct discrimination should be as follows:

"Would the complainant have received the same treatment from the Defendant but for his or her sex."?

If one applies the "but for" test here it is not possible to say she would inevitably have been treated the same way. Even as someone with non-British national origins she might have qualified had a parent or grandparent been born in the United Kingdom whether or not they were of British national origin. Conversely, a comparator who did have British national origins would not inevitably qualify.

48. I accept that where the possibility of meeting the criteria is so fanciful and theoretical that it can in effect be discounted, then it may be legitimate to treat such a case as one of direct discrimination. That was the case in Gurung (see para. 5 above). But I do not think that is the position here, albeit that the number of those of non-British national origins who qualify is likely to be very small.
49. Indirect discrimination.

The Secretary of State has rightly conceded, albeit late in the day, that the criteria involved in this case inevitably involve indirect discrimination on grounds of national origin. They treat less favourably those who are of non-British origin. It surely did not need specific statistical evidence to establish that conclusion. Moreover, the Court of Appeal has held, after reviewing the case law of the European Court of Justice, that it is not necessary in all cases to adduce statistical evidence to establish disparate impact: see Secretary of State for Work and Pensions v Bobezes [2005] EWCA Civ 111 per Lord Slynn at para 24. Where the effects are obvious or intrinsic to the scheme being adopted, as in my opinion they clearly are in this case, then a broad approach is justified. I should add that the Claimant has produced her own statistics, admittedly of a somewhat sketchy nature, which nonetheless suggest that the rule has had a discriminatory impact of the kind one might expect. It does not only discriminate on grounds of national origin but also on grounds of ethnic origin. Of the 1100 or so members of ABCIFER rejected on the birth criterion, almost a third are non white and a similar proportion are Jewish (as is Mrs Elias.) These groups would constitute a much smaller proportion of the population of Britain.

50. The Claimant has made some play of the fact that the Secretary of State has not provided any relevant statistics showing the effect of the scheme on non-British nationals. It is alleged that had the Secretary of State properly complied with his duties under section 71 of the Act to monitor the discriminatory effects, the details would now be available. There is plainly force in that point, and had the Defendant not conceded the disparate impact on grounds of national origins, I would not have permitted him to contend that the Claimant had failed to prove disparate impact because of the lack of information. In the event, indirect discrimination, subject to justification, is now conceded, although Mr Sales did not formally concede that there was a disparate impact in terms of ethnic origins or race. In my view common sense, as well as the evidence produced by the Claimant, suggest that there is such discrimination. However, it seems to me that the existence of these grounds, arising as they do from the application of the same rules of the scheme, merely reinforce any argument based on national origins, where the effect is more striking. If the latter is justified, then so in my view are the other forms of indirect discrimination. Accordingly, I will not engage separately with them in this judgment.
51. Mr Rabinder Singh contended that the failure on behalf of the Defendant apparently even to appreciate the potentially discriminatory nature of the scheme also made it harder for him now to establish justification. He accepted that it is not necessary as a matter of law for the alleged discriminator to have analysed the proportionality question at the time of adopting a rule or policy. It is clearly established that the justification need not be the subject of contemporaneous consideration: see Cadman v Health and Safety Executive [2004] EWCA Civ 1317; [2004] IRLR 97 at paragraphs 27-29. But he submitted that evidentially the burden will be greater if the first proper consideration of justification is not undertaken until there is a challenge before the court.
52. I would broadly accept this. In particular, where a Defendant seeks to rely as the rationale for a particular rule or policy on something which he only identifies in the course of the litigation and which had not been in his mind at the time it was adopted a court would no doubt look with some concern to see whether it really did constitute a legitimate aim. It may be less difficult for a Defendant where he has identified clear reasons for the policy but not recognised, either at all or to its full extent, any discriminatory impact. He may still be in a position to satisfy the court that the principle of proportionality is satisfied. He would, however, have to adduce and rely on evidence before the court to make good that defence. The Claimant submitted that there is inadequate evidence before the court in this case. I return to this point below.
53. It is plain that Mrs Elias has suffered a detriment by not receiving the compensation. The only issue is therefore whether the admitted disparate impact can be justified.
54. Justification

The classic test for establishing whether or not the indirect discrimination may be justified is found in Bilka-Kaufhaus GmbH v Weber Von Hartz (Case 170/84) [1987] ICR. At paragraph 36 of its decision the European Court of Justice noted that if a measure which has a disparate impact is to be justified then the national court must be satisfied that the measures "correspond to a real need ….are appropriate with a view to achieving the objectives pursued and are necessary to that end".

55. Another way of putting this is reflected in the language of section 1A of the Act. The Defendant must show that the criteria he has adopted are a proportionate means of achieving a legitimate aim. There should be no difference in the application of the two tests.
56. The Secretary of State submits that it is perfectly proper to limit the payment of compensation to those who had close links to Great Britain at the time of their internment. That was a rational principle to adopt, as the Court of Appeal has held. The Secretary of State was entitled to have regard to the cost of potentially different mechanisms adopted; and in this case the birth place created a "bright line" rule which was well within the Secretary of State's margin of discretion. Other mechanisms could have been adopted, but this was a cogent and sensible rule to adopt. Moreover, it was important to adopt a scheme which was administratively workable and readily understood.
57. The Claimant submits that the Defendant is unable to show either that the scheme seeks to achieve a legitimate aim, or if it does, that the means chosen to achieve it are proportionate. I will consider the two aspects of legitimate aim and means separately.
58. Was there a legitimate aim?

The reason why the minister adopted this scheme is explained as follows in the ABCIFER case by Lord Justice Dyson (para 42):

"At the time of internment, large numbers of British subjects had no links to the UK save for their being British subjects by reason of the 1914 Act. By the time the scheme came to be set up, the UK had become a medium size European country which had lost its Empire. The situation was very different from what it was at the time of the war when Britain controlled a huge Empire. No doubt the government could have decided to include in the scheme all those who were British subjects at the time of their internment who were not entitled to compensation from their own country. But its failure to do so was not irrational".

The court therefore concluded that in principle it was rational to adopt a scheme to benefit those with a close link with the United Kingdom.

59. Notwithstanding this decision, Mr Rabinder Singh contended that the objective here was not a legitimate one. He relied upon certain comments made by Mr McKane which expressly state that the purpose of the birth link criteria is to identify those "belonging to the UK" or who had "strong links to the UK". He submitted that this made it clear that the objective was to discriminate on unlawful grounds, and it is common ground that an unlawful aim or objective can never be justified.
60. I do not accept this submission. Although discrimination on nationality grounds is one of the forms of discrimination rendered unlawful under the Race Relations Act, the state will frequently be able to justify conferring more favourable treatment on its nationals or on others with close links to the state. All countries limit the payment of welfare benefits to those whom it considers its own, and the right of abode is often limited in a similar way. Of course the right to differentiate on grounds of nationality or related grounds may be limited by international obligations. Hence the UK government has voluntarily restricted its right to discriminate on grounds of nationality against persons from other member states within the European Union. That is necessary to give effect to the principle of the single market. Moreover, section 41 of the Race Relations Act is a recognition of the justification in certain contexts for nationality discrimination, notwithstanding that treating a group less favourably on nationality grounds will inevitably involve discriminating indirectly on grounds of national origin.
61. A recent example of such a lawful preference is to be found in the decision of the House of Lords in R (on the application of Carson) v Secretary of State for Works and Pensions [2005] UKHL 37. The Claimant in that case was a woman who had emigrated to South Africa some 15 years ago. She was entitled to a United Kingdom retirement pension but she was paid less than she would have been had she remained living in the United Kingdom. She did not receive the annual increase and cost of living which resident pensioners were given. She contended that this was a breach of Article 14 of the European Convention when read together with Article 1 of Protocol 1. The House of Lords rejected her claim. In the course of giving judgment Lord Hoffmann said this (at para 18):

"The denial of a social security benefit to Ms Carson on the ground that she lives abroad cannot possibly be equated with discrimination on grounds of race or sex. It is not a denial of respect for her as an individual. She was under no obligation to move to South Africa. She did so voluntarily and no doubt for good reasons. But in doing so, she put herself outside the primary scope and purpose of the UK social security system. Social security benefits are part of an intricate and interlocking system of social welfare which exists to ensure certain minimum standards of living for the people of this country. They are an expression of what has been called social solidarity or fraternité; the duty of any community to help those of its members who are in need. But that duty generally recognised to be national in character. It does not extend to the inhabitants of foreign countries. That is recognised in treaties such as the ILO Social Security (Minimum Standards) Convention 1952 (article 69) and the European Code of Social Security 1961)"

62. In my judgment it is clear that the minister was in principle entitled to seek to limit the category of persons who would be eligible to claim and to choose not to extend the benefit to all British subjects. In any event, I think I would be precluded from concluding otherwise by the decision of the Court of Appeal in the ABCIFER case. I recognise that the Court of Appeal was there considering the concept of rationality rather than proportionality, and it is well established that the reach of the latter is greater, albeit that they often lead to the same result: see Lord Steyn in Daly v Secretary of State for the Home Department [2001] UKHL 26 (para.27) 2 AC 532. But it seems to me that the Court of Appeal was concluding that this is a proper objective for government, and that will be so whether the principle of rationality or proportionality is adopted to attack it.
63. The Claimant also argued that even if the aim of identifying a close link with the United Kingdom was lawful, nonetheless the aim was not legitimate because of the specific criteria adopted. In my view that confuses means and ends. It is analytically more appropriate to consider the means when assessing whether the discriminatory effects were proportional to the objective sought.
64. There is also evidence that the cost of extending the scheme to all British subjects could be potentially very significant. Mr Rabinder Singh complained that there are no precise figures, and that the evidence is defective. I agree that it is not very precise and there is merit in the point, but in the end I have reached the conclusion that it was sufficient. The extension to all British subjects would clearly add significantly to the overall cost. It seems to me that it is only necessary in that context for the government to show that this is so in general terms. If the cost is significant, some limitation on those eligible will in principle be justified. Mr Mckane identified the costs implications in his witness statement:

"The financial consequences of a decision that every applicant who was a British subject at the time of captivity (including POWs) should receive a payment could run into hundreds of millions of pounds. Given the other calls on public revenues, and given the magnitude of the potential liability, the Government had to and did consider the potential financial impact of its decision to frame the criteria in a particular way."

Of course, this goes only to the legitimacy of the objective. The limited resources do not of themselves justify the criteria chosen since a number of different criteria could be used, each of which would limit those eligible for payment in accordance with the Defendant's wishes.

65. Mr Rabinder Singh also argued that having regard to these financial considerations was illegitimate and rendered the objective unlawful. I accept that it cannot be a legitimate defence for a discriminator to say that he or she did not wish to discriminate and would not have done so with greater resources. Budgetary concerns do not in general justify discrimination. That is clear on principle and is supported by certain authorities relied upon by Mr Singh, including R v Secretary of State for Education ex parte Schaffter [1987] IRLR 53 and Orphanos v Queen Mary College [1985] AC 761 HL at 771C.
66. However, that is quite different in my view to a state denying that there is any unlawful discrimination on the grounds that it can, in a proper case, "look after its own" to put it colloquially. Of course it must do so for a legitimate reason. The House of Lords has recently held that it was not lawful for the government to discriminate between British nationals and foreigners by locking up the latter who posed a risk to the security of the state whilst not also incarcerating the former when they posed an identical risk: A v Secretary of State for the Home Department [2004] UKHL 56; [2005] 2 WLR 87. But as I have said, making such distinctions for the purpose of deciding who should benefit from public funds is in principle perfectly sensible. Once that is accepted, then it must inevitably follow, as it seems to me, that questions of funding are inevitably material considerations. No doubt the state would happily confer benefits on everyone if resources were unlimited. Again some observations of Lord Hoffmann in the Carson case are in point (Para 25):

"It cannot be the law that the United Kingdom is prohibited from treating expatriate pensioners generously unless it treats them in precisely the same way as pensioners at home…..And in deciding what expatriate pensioners should be paid, Parliament must be entitled to take into account competing claims on public funds. To say that the reason why expatriate pensioners are not paid the annual increases is to save money is true but only in the most trivial sense; every decision not to pay more on something is to save money to reduce taxes or spend it on something else."

67. Certain observations of Lord Justice Laws in the Court of Appeal in the Carson case also recognise that Schaffter was not applicable here: see [2003] EWCA Civ 797 at [paras] 70-72 inclusive.
68. I therefore conclude that the aim was in principle a legitimate one, notwithstanding that budgetary considerations were plainly important in the formulation of the policy. No doubt if resources had been unlimited, all would have received payment.
69. Were the means chosen proportionate?

I turn to what in my opinion is the heart of this case, namely whether the criteria chosen could properly be adopted and was proportional to the aim of the measures.

70. The starting point must be that once it is accepted that limiting the compensation to persons with a close link to the U.K. is a legitimate objective, then adverse disparate impact is inevitable whatever criteria are adopted. It is not, therefore, the existence of some disparate impact which gives rise to the alleged discrimination; it is the particular form which it takes which is said to be unlawful.
71. It is trite law that the application of the principle of proportionality is not a mechanical process but is particularly fact sensitive. As Lord Steyn put it in his now much repeated phrase in R (Daly) v Secretary of State for Home Department [2001] UKHL 26; [2001] AC 532, para 28: "In law context is everything". That was said in the context of a case involving the application of the principle of proportionality. The intensity of review will be highly dependant on the subject matter in issue.
72. It follows that authorities from different fields of policy will often be of little assistance, and in any event must be viewed with considerable caution.
73. Mr Sales submitted that this is a case where the courts should be particularly wary of interfering with the carefully considered policy. He rightly observed that it is now well established that the court should allow a significant area of discretion to the executive when it is dealing with questions of economic or social policy. He cited in support a number of authorities. These included two decisions of the European Court of Justice, Nolte v Landesverisicherungsanstalt Hannover [1995] ECR 1-4625,para 33 and R v Secretary of State for Employment ex parte Seymour Smith [1999] ICR 447, 492. I accept that these cases do show that the European Court will give a margin of leeway to a state when determining whether its economic or social policies are properly related to a specific objective. The European Court of Human Rights has likewise, in certain contexts, also allowed a considerable margin of appreciation to a state when deciding which of a number of potential ways of dealing with a problem it will adopt: see e.g. Denmark v United Kingdom (2000) 30 EHRR CD 144.
74. Mr Sales submits that where the issue is how public money should be spent, that is classically an area where the courts should be slow to interfere. He recognised that there is, in principle, a difference between the application of the rationality and proportionality test and that they do not necessarily lead to the same conclusion, but he submitted that in this context they do. He noted the court in ABCIFER, applying the rationality test, had commented (para 86) that "the first criteria fell comfortably within the margin of appreciation that should be accorded to [the minister] by the court". He further argued that it was appropriate for the minister to adopt "bright line" criteria, that is criteria which could readily be understood and easily applied. He cited a number of authorities which show that the courts readily accept that in the interests of legal certainty and efficiency, it is lawful for the state to adopt clear and unambiguous rules, even if this leads to certain anomalies in specific cases. In particular he relied on two House of Lords authorities. In Wilson v First County Trust (No 2) [2004] 1 AC 816 the House of Lords held that certain provisions of the Consumer Credit Act 1974 which automatically prevented enforcement of loans if certain statutory requirements were not complied with did not infringe Article 1 of the First Protocol, which protects property rights. Lord Nicholls observed that even although it would yield an unreasonable result in particular cases, it was a proportionate response: "A tailor made response, fitting the facts of each case, may not be appropriate." In R (Hooper) v Secretary of State for Work and Pensions [2005] 1 WLR 1681 the House of Lords had to consider whether it was unlawful discrimination under the European Convention for benefits to be paid to widows in circumstances where they would not be paid to widowers. The rationale for the payment was that in general older widows of a similar age would not typically have been in work whereas widowers would have been. The discrimination was held not to be unlawful and Lord Hoffmann observed that although means testing would have been more discriminating, it would have increased the expense of the scheme and reduced the take up of those entitled to the benefits.
75. Mr Rabinder Singh accepted that there will be circumstances where the courts should recognise that a significant area of discretionary judgment rests with to the minister, and that "bright line" rules are often appropriate. However, he contended that this is not such a case. He sought to analyse each of the authorities relied upon by Mr Sales and to demonstrate why they were far removed from this case. I mean no disrespect to the subtlety of his analysis when I say that the essential point he made was that the criteria adopted under this scheme, if not directly discriminating on grounds of national origin, are very closely interlinked with such discrimination. That, he submitted, ought to cause the court to adopt a very stringent assessment of the justification advanced. The courts are the guardians of fundamental rights, of which the right not to be discriminated against on immutable and arbitrary criteria is one, and should not defer to the executive in such an important area.
76. He in turn relied on various authorities. I will simply cite some recent observations of the House of Lords. In Carson, as is plain from the passage I have quoted in paragraph 65 above, Lord Hoffmann made it plain, as did Lord Walker of Gestingthorpe in his speech (para. 70), that a significantly greater degree of scrutiny would be required where the criteria adopted discriminated on grounds such as race or gender, which denied equal respect.
77. In Ghaidan v Godin-Mendoza [2004] 2 AC 557 the House of Lords held that it was a breach of Article 14 read with Article 8 of the European Convention of Human Rights for a homosexual partner to be unable to succeed to a lease on the tenant's death in circumstances where a heterosexual partner would be able to do so. Lord Nicholls made the following observations about the court's role in cases of this nature (para 19):

"For completeness, I should add that arguments based on the extent of the discretionary area of judgment accorded to the legislature lead nowhere in this case. As noted in Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816, 844 para 70, Parliament is charged with the primary responsibility for deciding the best way of dealing with social problems. The court's role is one of review. The court will reach a different conclusion from the legislature only when it is apparent that the legislature has attached insufficient importance to a person's Convention rights. The readiness of the court to depart from the view of the legislature depends upon the subject matter of the legislation and of the complaint. National housing policy is a field where the court will be less ready to intervene. Parliament has to hold a fair balance between the competing interests of tenants and landlords, taking into account broad issues of social and economic policy. But, even in such a field, where the alleged violation comprises differential treatment based on grounds such as race or sex or sexual orientation the court will scrutinise with intensity any reasons said to constitute justification. The reasons must be cogent if such differential treatment is to be justified."

78. I observe that these examples involve direct discrimination, whereas the issue here is one of indirect discrimination, and in circumstances where it is not intrinsically unlawful to require some closer link with the United Kingdom than being a British subject. However, Mr Singh contends that even if it is lawful for the minister to seek to limit and define the category of British subjects who can claim compensation under the scheme, nonetheless, he is not entitled to do so by adopting criteria whose effect is, to use the language of Viscount Dilhorne in Ealing, to focus far more on what might be termed the "racial" aspects of nationality as opposed to the "citizenship" aspect. It was objectionable, he submits, for the minister to have allowed the birth link to be extended back three generations because it inevitably focuses on the immutable characteristic of national origin and becomes too far removed from criteria which might legitimately seek to identify a narrower concept of citizenship by reference to links specifically with the United Kingdom.
79. In my judgment this is a case where the court should carefully scrutinise the justification claimed. This is not simply because there is some disparate impact on the unlawful grounds. But here it is plain that the extent of the discrimination on grounds of national origin is very marked indeed. I would accept that the court ought in general to give a wide margin of discretion to the executive about how public money should be distributed, but once issues of potentially unlawful discrimination as to the allocation come into play, the scrutiny must become more intense.
80. It is appropriate to remember that the Race Relations legislation is designed to prevent the adoption of criteria whose effect is to treat someone less favourably on grounds which are immutable and unrelated to the objective being sought. It is offensive to be singled out in that way. The government can legitimately limit the category of British subjects eligible under the scheme, and to that end can adopt criteria which seek to define more narrowly the necessary connection with the United Kingdom. That is so even although those criteria will involve adverse disparate impact. But the criteria themselves must not themselves be the forbidden grounds. Nor, in my opinion, should they consist of factors which in practice are closely related to them.
81. In my view the decision of the House of Lords in Orphanos v Queen Mary College [1985] AC 761 is particularly relevant when considering the question of justification. In that case different fees were charged for students studying at the College, depending on whether they had been ordinarily resident within the EEC for three years or not. The effect was that in general foreign students were obliged to pay significantly more than British nationals, although the criterion adopted was not strictly nationality. The issue arose as to whether the College could justify imposing different fees by reference to this criterion. Their Lordships held that they could not. The only speech in the House of Lords was given by Lord Fraser (with whose speech Lords Diplock, Keith, Roskill and Bridge concurred). He rejected the justification argument in the following way:

"On the assumption that the residence qualification is therefore caught by section 1(1)(b)(i), it is necessary to consider under 1(1)(b)(ii) whether the requirement is "justifiable irrespective of the colour, race, nationality or ethnic or national origins of the [student] to whom it is applied." Nationality is the only one of these grounds which is in question in this appeal. "Justifiable" means, in my opinion, "capable of being justified." "Irrespective of" in that subsection means "without regard to," as I said in Mandla (Sewa Singh) v. Dowell Lee [1983] 2 AC 548, 566, and I see no reason to alter that opinion. No doubt the main reason for introducing the residence requirement was, as Mr. Scrivener said, to curtail public expenditure on education in the interest of economy. That reason itself did not involve discrimination on racial grounds. But the particular method of curtailment may have done so. Various methods of curtailing the expenditure were possible; grants to all students could have been cut by an equal percentage, and their fees could have been correspondingly increased, or grants could have been restricted by reference to the academic qualifications of applicants. No doubt many other methods were possible. The method chosen was to concentrate grants on home students, and to cease subsidising foreign students. The justification relied on by the college is set out in more detail in the further and better particulars of their defence which includes statements to the following effect.

"3. The fees of home students are subsidised. There is no good reason why the fees of overseas students should be subsidised from public funds ... 4. The government cannot afford to subsidise overseas students. 6. The use of fees is a legitimate means of regulating the admission of overseas students and has the advantage of reducing public expense ... 7. The previous system had resulted in a large increase in numbers and a large increase in the cost to the British taxpayers with little relationship between the pattern of those large student numbers and Britain's own long-term priorities."

These statements show that the main motive for introducing the residence requirement was economy. But the economy was to be effected at the expense of foreign students. That may have been a perfectly reasonable and justifiable policy for the British Government to adopt but in my opinion the college, on whom the onus lies under section 1(1)(b)(ii), has not been able to justify the requirement without having regard to the nationality of the applicants at whose expense the policy was carried into effect. The typical example of a requirement which was caught by section 1(1)(b)(i) but which was nevertheless justifiable irrespective of racial grounds was Panesar v. Nestle Co. Ltd. (Note) [1980] I.C.R. 144 (mentioned in Mandla (Sewa Singh) v. Dowell Lee [1983] 2 AC 548, 567) where it was held that a rule forbidding the wearing of beards in the respondent's chocolate factory was justifiable on hygienic grounds notwithstanding that the proportion of Sikhs who could conscientiously comply with it was considerably smaller than the proportion of non-Sikhs who could comply with it. The justification there was purely a matter of public health and nothing whatever to do with racial grounds. But in the present case the discrimination is in accordance with a policy directed against persons who are not ordinarily resident in the E.E.C. area, and ordinary residence is in my view so closely related to their nationality that the discrimination cannot be justified irrespective of nationality.
For these reasons I agree with May L.J. that the college did discriminate on racial grounds against Mr. Orphanos".

82. As his Lordship recognised, the government may well have been able to justify the residence criterion in that case, which was however closely related to nationality rather than national origins. That also involves a recognition that what may be considered to be a justifiable way for the state itself to deal with funding concerns may not provide the same justification for institutions within the state.
83. However, the important point for the purposes of this case is that his Lordship considered that the concepts of nationality and residence were so closely interlinked that it could not be said that the criterion was chosen irrespective of nationality. Lord Fraser analysed the case as one of indirect rather than direct discrimination; he did not suggest that the issue of justification did not even arise. But he concluded that where the criterion adopted was so inextricably linked to a forbidden ground of discrimination, the less favourable treatment could not be shown to be irrespective of the unlawful grounds.
84. In my judgment that is equally the position here. The criteria chosen were very closely linked to national origins. Using these criteria was by no means the only way in which the Minister could achieve his legitimate objective. He could have chosen criteria which narrowed the category of British subjects without linking them so closely with descent and national origins. For example, a simple link to, say, a period of residence in the United Kingdom within a period leading up to internment, or the adoption of criteria based on domicile would have done so. It would, of course, still have involved a disparate impact statistically and the less favourable treatment of those who were not British nationals, but it would in my judgment have been proportionate to the objective being sought.
85. It follows that in my judgment the scheme as adopted is unlawful. Whether this ruling is of any direct benefit to Mrs Elias is a matter which will be the subject of further argument. I understand that the Claimant wishes to contend that she is entitled to the benefit of the scheme absent the discriminatory features. If that argument is unsuccessful however, then this may, I fear, prove to be a Pyrrhic victory for Mrs Elias, since it does not of course follow that any other lawful criteria which could be adopted would bring her within the fold. Indeed, if the government continues to choose to require the close link to be established at the time of internment and to ignore links established with the United Kingdom since that time, it is difficult to see how she would be likely to qualify whatever criteria are adopted, unless it is that all those interned because they were British subjects should be compensated after all.
86. The Race Equality duty issue

Section 71(1) of the 1976 Act provides that:

"Every body or other person specified in Schedule 1A or of a description falling within that Schedule shall, in carrying out its functions, have due regard to the need-

(a) to eliminate unlawful racial discrimination; and

(b) to promote equality of opportunity and good relations between persons of different racial groups."

The Defendant is one of the persons specified in Schedule 1A.

87. The Race Relations 1976 (Statutory Duties) Order 2001, obliges certain bodies identified in the order, including the Defendant, to publish a Race Equality Scheme. This is defined as a "scheme showing how it intends to fulfil its duties under section 71 (1) of the Race Relations Act and this Order". Article 2.2 of the order is as follows:

"A Race Equality Scheme shall state, in particular-

(a) those of its functions and policies, or proposed policies, which that person has assessed as relevant to its performance of the duty imposed by section 71(1) of the Race Relations Act;

(b) that person's arrangements for-

(i) assessing and consulting on the likely impact of its proposed policies on the promotion of race equality;

(ii) monitoring its policies for any adverse impact on the promotion of race equality;

(iii) publishing the results of such assessments and consultation as are mentioned in sub paragraph (i) and of such monitoring as is mentioned in sub paragraph (ii);

(iv) ensuring public access to information and services which it provides; and

(v) training staff in connection with the duties imposed by section 71(1) of the Race Relations Act and this Order

88. The Claimant and the Commission contend that the Secretary of State was in breach of his obligations under section 71. They submit that section 71 requires a proper and rational consideration to be given as to whether in carrying out his functions there may be issues relating to unlawful racial discrimination. It is further submitted that it was always plain in this case that such issues arose. Not only did the criteria employed necessarily give rise to prima facia indirect discrimination, at the very least because of the inevitable disparate impact on those of non-British national origins, but in addition the Secretary of State's attention had been drawn at the time the scheme was framed to the possibility that it gave rise to a breach of the legislation, and also on subsequent occasions thereafter. Moreover, by admitting now that there was a disparate impact, the Defendant has effectively accepted that there was no proper basis for originally concluding otherwise.
89. Mr Sales made two relevant concessions on this issue. The first was that the Claimant has standing to bring this complaint. The second was that although section 71 did not come into force until the 1 April 2001, nonetheless even if it could be said that the scheme had been framed by then (and the criteria had not in fact been published) nevertheless there would be a duty on the Secretary of State to comply with section 71 with regard to the scheme because it was still being carried into effect after that date.
90. He further accepts that it would be a breach of this section if the Secretary of State were to fail to properly consider whether there was any potential discrimination within the meaning of section 71. He submitted, however, that it is not a breach of the law for the Secretary of State to form the view on proper grounds that there is no issue of unlawful racial discrimination which could sensibly be said to arise in the scheme, even if he is in fact wrong about that.
91. I accept that submission, so far as it goes. The obligation is to have due regard to the matters identified in section 71. No doubt in some cases it will be plain even after a cursory consideration that section 71 is not engaged, or at least is not relevant. There is no need to enter into time consuming and potentially expensive consultation exercises or monitoring when discrimination issues are plainly not in point.
92. In effect Mr Sales contended that such is the case here. He relied upon certain statements from Mr McKane, which suggested that there had been a rational view taken that there was no unlawful discrimination and Section 71 was therefore not engaged. However, it seems to me that these comments of Mr McKane merely identify the stance being adopted in these proceedings. It is nowhere suggested that there was any careful attempt to assess whether the scheme raised issues relating to racial equality, although the possibility was raised; nor was there any attempt to assess the extent of any adverse impact, nor other possible ways of eliminating or minimising such impact. I accept that even after considering these matters the minister may have adopted precisely the same scheme, but he would then have done so after having due regard to the obligations under the section.
93. Given the obvious discriminatory effect of this scheme, I do not see how in this case the Secretary of State could possibly have properly considered the potentially discriminatory nature of this scheme and assumed that there was no issue which needed at least to be addressed. Furthermore, if there is uncertainty about it, further consideration of the potentially discriminatory effects will be necessary. As Mr Pannick pointed out, if section 71 is not addressed until the minister has first concluded that a policy does in fact demonstrate unlawful discrimination, it loses its value.
94. Mr Sales also suggested that in any event there has been a careful consideration now, in the course of this litigation, and therefore it was not necessary for the court to do anything about any earlier breach. I do not accept that. I accept the submission of Mr Pannick that the purpose of this section is to ensure that the body subject to the duty pays due regard at the time the policy is being considered –that is, when the relevant function is being exercised- and not when it has become the subject of challenge. Moreover, although Mr Sales did not accept this, there will be in many cases a tendency, perhaps subconscious, to make the assessment whether discrimination might arise with an eye on the outcome of the litigation. That will not produce the same unbiased analysis as might occur if consideration is given to the section 71 factors at the proper time.
95. There are two further matters I should mention. The first relates to the duty in subsection (b). I accept of course that in principle it is necessary for the Secretary of State to pay attention not only to what might be termed the negative aspect of eliminating unlawful discrimination in subsection (a), but also the positive obligations under the section found in subsection (b), namely, to promote equality of opportunity and good relations between persons of different racial groups. Mr Pannick contended that in a letter to the Claimant from the Secretary of State, when responding to an alleged breach of section 71, he did not refer to this obligation at all. Similarly in the Summary Grounds for Contesting the Claim, there was no apparent recognition that the subsection was relevant.
96. I do not think that there is any merit in this particular argument. In my opinion the obligations imposed by subsection (b) had no real relevance in this case. At any event, to the extent that they did, this was only insofar as they are entailed within subsection (a). The aim of the scheme was to distribute money, and the obligation in relation to this scheme was to eliminate unlawful racial discrimination. This was not intended to be a scheme directed to promoting equality of opportunity or good relations between persons of different racial groups. I think it quite unrealistic to think that the Secretary of State should have made specific reference to the obligation under sub section (b), or that his failure to do so demonstrates that he does not properly understand the nature of his duties under this section.
97. The second point is that it was alleged that the Secretary of State had failed to include the scheme in the government's race equality scheme. That would seem to be right, but it is not a matter which this Claimant can do anything about. This is because the obligations imposed by the Secretary of State pursuant to his power to make an order under section 71(2) are not capable of enforcement save by the Commission itself: see the enforcement provisions in sections 71(D) and 71(E). Accordingly, Mrs Elias cannot complain of any breach of the order itself. It follows that the failure to include this scheme or otherwise to make reference to the scheme in the Race Equality Scheme is not a matter which can be the subject of any relief in these proceedings. That does not however, preclude the more general challenge on the grounds that the Secretary of State did not lawfully carry out his obligations under section 71. I am minded to grant a declaration to that effect, but I will hear counsel on the appropriate relief.
98. Conclusions.

I uphold the application for judicial review on two grounds. First, I consider that the scheme adopted was unlawful and indirectly discriminated against those of non-British national origin. The desire of the government to limit the category of those who could claim under the scheme to persons with a close link with the United Kingdom at the time of internment was a legitimate aim. But in adopting criteria which assessed eligibility by reference to the place of birth of the applicant, a parent or grandparent, the effect was markedly to reduce the proportion of those of non-British national origin compared to those whose national origin was British. The Secretary of State has not satisfied me that these provisions were justifiable in all the circumstances.

99. In addition I have found that the Secretary of State was in breach of his duties under section 71 of the Act.
100. I will hear counsel as to the appropriate relief.