Trinity Term
[2016] UKPC 17
Privy Council Appeal
No 0017 of 2015
JUDGMENT
The United Policyholders Group and others (Appellants)
v The Attorney General of Trinidad and Tobago (Respondent) (Trinidad and
Tobago)
From the Court of Appeal
of the Republic of Trinidad and Tobago
before
Lord Neuberger
Lord Mance
Lord Clarke
Lord Sumption
Lord Carnwath
JUDGMENT GIVEN ON
28 June 2016
Heard on 18, 19 and 20
January 2016
|
Appellants
Peter Knox QC
Ramesh L Maharaj SC
Robert Strang
(Instructed by
Sheridans)
|
|
Respondent
Howard Stevens QC
Rowan
Pennington-Benton
Professor Satvinder
Juss
(Instructed by
Charles Russell Speechlys)
|
LORD NEUBERGER: (with whom
Lord Mance, Lord Clarke, Lord Sumption and Lord Carnwath agree)
Introduction
1.
The appellants, who are all residents of Trinidad and Tobago, are
holders of life policies issued by the Colonial Life Insurance Company (CLICO).
Their claim arises out of the banking crisis in early 2009 when CLICO was in
serious financial difficulties. That claim is based on assurances of support
for CLICO given by the then government, which they say created a “legitimate
expectation” enforceable in law. They assert that, following the elections in
May 2010, the new government failed to honour that expectation, and that they
are entitled to relief accordingly. Their claim succeeded in the High Court but
failed in the Court of Appeal.
Factual background
CLICO
2.
CLICO is a company regulated by the Insurance Act and is a subsidiary of
a holding company, CL Financial Ltd (CLF); one of CLICO’s subsidiaries is CLICO
Investment Bank (CIB). As the Court of Appeal noted, CLF was the largest
private conglomerate in Trinidad and Tobago. The reported value of its assets
was equivalent to more than 70% of the country’s gross domestic product, and a
substantial part of those assets are in the financial sector.
3.
Under section 37(1) of the Insurance Act, CLICO was required to
establish and maintain a statutory fund to cover its liabilities to
policyholders under long-term insurance business. Section 37(4) of the same Act
required CLICO to maintain a fund in Trinidad and Tobago with sufficient assets
to cover its liability (including its contingency reserves) to policyholders’
resident in Trinidad and Tobago. The Insurance Act contained investment
rules for such Funds, including, for example, in section 46 and Schedule 2, a
prohibition on investment in more than 30% of the shares of a single company.
There were also restrictive rules for the valuation of assets in such Funds.
Under section 80(1) of the Insurance Act, policyholders protected by a Fund are
to be treated in preference to other creditors in insolvency, and in such an
event the assets and liabilities of the Fund are to be assessed separately and,
with the exception of any surplus, used only to pay off liabilities of the
Fund.
4.
CLICO was under the general supervision of the Central Bank of Trinidad
and Tobago. Under section 41 of the Insurance Act, it was required to report to
the Central Bank with particulars of the assets and liabilities of the Fund.
Section 44D of the Central Bank Act gave the Central Bank power to take control
of a financial institution and to take all steps it considered necessary to protect
the interests of depositors and creditors of the institution, where it was of
the opinion that those interests are threatened, or that the institution was
likely to be insolvent or that it was not maintaining high standards of probity
or sound business practices. Section 44F(5) of the Central Bank Act required
the Central Bank to comply with general or special directions of the Minister.
5.
The appellants all held versions of a CLICO policy called the Executive
Flexible Premium Annuity (EFPA). These policies were distinguished by the offer
of relatively high interest rates paid out on the premium for a fixed initial
period. They also included provision for an annuity on the life of the
policyholder, and (as is now common ground) were thus within the definition of
“long term insurance business” for the purposes of the Insurance Act.
The crisis and the government’s
response
6.
In January 2009 the Central Bank became aware that CIB had serious
liquidity problems, and that both CIB and CLICO were in substantial deficit. On
24 January 2009, the Central Bank advised the Minister of Finance and the Prime
Minister that there would be a run on both institutions if the problems became
public. On 30 January 2009, the Central Bank took control of CIB using its
emergency powers under section 44D of the Central Bank Act.
7.
On the same day the government and CLF came to an agreement which was
set out in a Memorandum of Understanding (the MoU). The preamble of the MoU
recorded that CLF had asked for the government’s intervention in the
“rehabilitation” of CIB, CLICO and another subsidiary British American
Insurance Company (BA). It stated:
“The financial condition of CIB,
CLICO and BA threaten the interest of depositors, policy holders and creditors
of these institutions and pose danger of disruption or damage to the financial
system of Trinidad and Tobago.”
The agreement had been reached to correct the financial
position of the three companies and to protect the interests of their
depositors, policyholders and creditors. Among other things:
a)
CLF agreed to sell its
shareholdings in a number of identified companies and such other assets as
might be necessary, and to apply the proceeds (a) to correct CIB’s financial
position, and (b) to ensure that CLICO’s and BA’s statutory fund requirements
were satisfied.
b)
The government agreed to provide
collateralized loan financing to CLICO and BA to meet any residual statutory
fund deficit which might still exist after this sale of CLF’s shareholdings and
assets.
c)
CLF agreed that CLICO and BA would
restructure their operations to conform to traditional life insurance business
in a manner to be approved by the Central Bank.
d)
CLF was required to make full and
fair disclosure of the liabilities and assets of companies within the group.
8.
On 6 February 2009 the Central Bank Act was amended to extend the
Central Bank’s powers of intervention under section 44D to cover insurance
companies. On 13 February 2009 the Central Bank took control of CLICO. A
statement issued by the Central Bank on that day said:
“These steps would convince
policyholders that CLICO has the full backing and commitment of the Government
and the Central Bank of Trinidad and Tobago. Policyholders should also feel
confident that their funds are protected and this should encourage the maximum
roll-over of policyholder funds. At worst, to facilitate an orderly recovery of
CLICO, we would request that policyholders to do not seek withdrawals before
their maturity dates …”
9.
The appellants rely on a number of public statements, made at this time
and over the following months, about the nature of the government’s support for
CLICO. It is unnecessary to set them all out. Some were qualified specifically
by reference to the conditions of the MoU, but others were not so qualified.
For example, on 15 February 2009 a full-page advertisement was placed in local
newspapers in the name of CLICO (signed by the new Chief Executive, Mr Musaib-Ali,
appointed at or about the time of the takeover by the Central Bank).
“CLICO [TRINIDAD] wishes to assure
all its Policyholders and Clients that our normal business operations will
continue.
All terms and conditions of
existing policy contracts will be honoured.
All Policyholders’ funds are
guaranteed by the Government of Trinidad and Tobago and the Central Bank.” (original
emphasis)
10.
In a Parliamentary Answer on 24 June 2009, the Minister of Finance
referred to “the restructuring agreement … carried out in the Memorandum of Understanding
signed with [CLF]” under which the government was “committed to restructuring
[CLF] as a going concern” to ensure that other creditors and shareholders would
“at the end of the day … get back and recoup all of their losses or potential
losses”. But that was “not a guarantee to them”. She explained:
“We guarantee the policyholders
and resident of this country, that is our guarantee, but we are committed to
seeing that CLICO becomes a going concern because we want to ensure that the
moneys that the taxpayers have invested are recouped, and in so doing the
persons to whom you spoke will therefore benefit because that will be part of
the whole exercise of creating solvency for CLICO and [CLF].”
11.
On 24 July 2009 the Cabinet approved funding of $5 billon to facilitate
the restructuring of CLICO and BA. The initial injection through the Central
Bank of $1.2 billon was later increased to $1.9 billon. Further funding of $3.1
billon was provided in the form of government bonds issued directly to CLICO
and placed in the Fund to reduce the deficit. They were to be drawn upon to
meet liabilities as they arose and which CLICO was not able to meet.
12.
CLICO continued to trade under the control of the Central Bank, but
problems continued into the following year. On 13 January 2010, in an
interview, the Minister of Finance spoke of the wide implications of the CLICO
intervention:
“I would say everyone will get
their money but in the context of the enormity of the situation and the fact
that it will affect us all. It is not just those who invested. If you do not
contain it, it can have a contagion effect for the whole economy. What it
requires is the confidence of the people of Trinidad and Tobago and the
patience and understanding that it is a national issue and understand the
enormity of the situation …”
In March 2010, in media briefing, the Governor of the Central
Bank explained that CLF’s assets had been “far more leveraged” than originally
thought, the contribution from the sale of assets in the short to medium term
was likely to be much lower than envisaged, and values had been affected by the
weakness of both the local stock market and the real estate market. Options
were being considered for restructuring CLICO. A preliminary report from
consultants had recommended that CLICO should be split into two units, one
dealing with traditional insurance and the other with the “workout” of the
short term deposits. All of the options required extensions to the periods of
payment upon maturity as there were insufficient funds to deal with the short
term deposit products.
A change of government
13.
On 24 May 2010 there was a general election, and this led to a new
administration. The new Minister of Finance, Mr Dookeran, stated in his
evidence in these proceedings that CLICO was “the biggest and most difficult
issue” that he had had to deal with in preparing the government’s first budget
due in September. He noted also that the International Monetary Fund considered
the stability of Trinidad and Tobago’s economic outlook to be heavily dependent
on the resolution of CLICO’s restructuring.
14.
In June 2010 the government appointed an expert select committee to
provide recommendations on the way forward for CLICO and the Group. Its mandate
required it to make recommendations on “a preferred solution, from a menu of
options, for the repayment of CLICO’s traditional and non-traditional (EFPA)
insurance liability products”, a financial reorganisation plan for CLF, and a
“clear path and timetable” for the government to “exit its loan capital
position and restore public confidence”.
15.
At the end of July the committee reported on three options (in summary):
i)
Provide no further funding and liquidate CLICO and BA;
ii)
Fully fund the entire asset shortfall of CLICO and BA and repay all
creditors based on contractual terms (not just policyholders protected by the
statutory fund);
iii)
Provide $75,000 to all EFPA and Mutual Fund policyholders (including
non-residents not protected by the fund), and pay remaining liabilities by
government bonds spread over a 20-year period.
On 12 August the Cabinet considered the report and
approved option (iii).
16.
On 8 September 2010, in his budget statement to the House of Assembly,
Mr Dookeran reported on the position of CLICO. He made critical observations
about the actions taken by the previous administration, which, he said, had
treated it as a liquidity issue that could be covered in the short-to-medium
term, but had done so without full information on the financial conditions of
the companies. He described this as “a reckless assumption” which had cost the
nation significant public funds involving more than 10% of the country’s gross
domestic product, and affecting 250,000 of its citizens. He also made reference
to the “numerous public statements” made by the then Minister of Finance, the
Central Bank and CLICO, assuring depositors that their money was safe and would
be protected by the government. Total funding provided up to May 2010 had
amounted to approximately $7.3 billion.
17.
Announcing the government’s proposals he said that the traditional
insurance business would be separated from short term investment business, and
that “the obligation to the 225,000 policyholders would be honoured, backed by
the statutory fund. For short term investors (including EFPA holders), the
government would make “an initial partial payment of a maximum of $75,000 …
intended to bring relief to the small depositors”. This would result in full
payment to “approximately 45% of the 25,000 investors in these products,
including more than 140 credit unions and 15 trade unions”. Those whose
principal balances exceeded $75,000 would be paid through “a government IOU
amortized over 20 years at zero interest” structured in such a way that it
could be traded on the secondary markets, thereby creating “a measure of
immediate liquidity for the depositors”.
18.
On 9 September 2010, pursuant to a direction of the Minister of Finance,
CLICO placed a moratorium on all EFPA transactions and all payments to EFPA
policyholders. It continued to collect premiums from traditional policyholders
and to pay out claims.
19.
In a media briefing on 28 September Mr Dookeran commented on suggestions
that the government was not honouring the “guarantee” given by the previous
administration. He accepted that there had been “utterances of guarantees”, but
he contended that, in order to be effective, they would have required
parliamentary appropriations which had not been obtained. Accordingly, these
guarantees had “no backing, either in terms of the allocation of funds through
the parliament or certainly in any other way”. He explained:
“What we have done instead, we
have allocated in our budget $3.2 billion … and we will be issuing bonds so
that the individual will have certainty now of getting back his principal,
albeit over some years …”
20.
On 1 October 2010, in a speech to the House of Assembly, the Prime
Minister also criticised the former administration’s handling of the CLICO
matter. In particular she criticised it for adopting a “narrow view” directed
solely to local investors covered by the statutory fund, and ignoring the 1,100
investors in EFPAs from outside the country, worth some £1.2 billon. The
government was under “no legal obligation” to put in more public money to help
those placed in this position because of “mismanagement on the part of the
former administration” or of the companies themselves.
21.
In the following year, on 29 April 2011 the appellants wrote to the
Prime Minister challenging the legality of the government’s proposals, on the
grounds (inter alia) that they would frustrate their legitimate expectations
arising out of promises by the previous administration, and asking for further
information about CLICO’s assets. Following further exchanges, in August 2011
they sent a draft application for judicial review.
The revised plan
22.
Meanwhile the Cabinet was considering further options aimed at improving
the return to policy-holders. On 14 September 2011 the Minister of Finance
announced an “enhanced pay-out regime” for those EFPA policyholders with
balances greater than $75,000. Under the new proposals, policyholders could
exchange their bonds with maturities of 11 to 20 years for units in a new
entity, thereby obtaining a value equivalent to the face value of those bonds.
As a result, the average return would be in the order of 92% of the value of
the principal balances of their holdings. The new entity was set up in 2012 and
named the CLICO Investment Fund. On 20 September 2011 the Central Bank Act was
amended to prohibit proceedings against an institution (such as CLICO) which
had been taken under control under section 44D of that Act.
23.
From the time the new bailout plan was devised (either in its original
form or as revised in September 2011), it was a condition that investors should
either give up their rights against the statutory fund and take up the
government’s bailout plan or stand on their rights. The final deadline for
acceptance was 30 November 2012. On the appellants’ case, up to two weeks
before that deadline, and in spite of numerous requests, they were given no
information as to the status of the fund and the rights that they were being
asked to give up.
More recent developments
24.
Since the High Court decision, on 27 and 28 March 2015 the Central Bank
announced that policyholders would receive 85% of their contractual
entitlements within three months (principal balances plus contractual
interest), and those sums have been paid. As to the balance of 15%, this was
said to depend on the sale of one of CLICO’s assets, Methanol Holdings International
Ltd (“MHIL”). In 2009 CLF transferred shares in both Methanol Holdings
(Trinidad) Ltd (“MHTL”) and MHIL to CLICO. These shares, together with the MHTL
and MHIL shares already held by CLICO, constituted about a third of CLICO’s
total assets. The transfer of the shares prompted arbitration proceedings,
brought by the holders of preference rights in the shares. The proceedings were
only resolved in 2013. The tribunal ordered that the MHTL shares be transferred
for value to the holder of the preference rights. The value at which they were
to be sold was determined in 2014.
The proceedings
25.
The present proceedings were commenced by the appellants against the
Attorney General (on behalf of the government) on 1 December 2011. On 18 April
2012 Charles J granted leave to apply for judicial review. She rejected the
government’s argument that the appellants had been guilty of delay, on the ground
that “significant changes” had been made to the government’s proposal between 8
September 2010 and 14 September 2011, so that the latter date should be taken
as the point at which the decision subject to challenge was taken.
26.
She heard the application over three days in November 2012, and she gave
judgment on 12 March 2013 upholding the claim. She ordered the respondents to
make arrangements to secure that the appellants recovered 100% of CLICO’s
contractual liability to them. In July 2015 the Court of Appeal (Archie CJ,
Narine and Smith JJA) heard the appeal, which they allowed on 23 June 2014 in a
single judgment given by Narine JA.
The judge’s reasoning
27.
Charles J’s approach to the claim started from the proposition, which
had been conceded, that the appellants had a legitimate expectation to the
effect that -
“the Government would make good
the deficit in CLICO’s Statutory Fund; that the Company would be returned to
stability and would be placed in a position to fulfil all of its obligations
including that of the [appellants].” (para 67)
It was incumbent, she thought, on the government to
justify the breach of that expectation, which it had failed to do. In so far as
CLICO had assets which could not be put into the fund because of restrictions
in the Insurance Act, the government had, she considered, given no reason for
failing to seek the necessary amendment to bring those assets within the
permitted classes (para 70). Further, their failure to provide the information
necessary for the claimants to make an informed choice was, Charles J said,
“wholly unfair and in the circumstances not proportionate” (para 71).
28.
Mr Dookeran’s evidence gave no assessment of the public interest factors
which at that time justified the breach of the legitimate expectation, having
regard in particular to the “fiscal improvement” by then in both the country’s
finances and CLICO’s balance sheet (para 74). She rejected the submission of Mr
Newman QC for the Attorney General that the matter lay within “the
macro-economic/political field” requiring deference to the government’s
decision; it was for the court to examine all of the circumstances to determine
whether there was “an overriding public interest” justifying the breach (para
76).
29.
Further, Charles J said that the government had failed to take proper
account of the promises made by the previous administration. Mr Dookeran’s
affidavit spoke of “statements” made by the previous administration and the
“expectation” of the policyholders; but failed to acknowledge that the
statements amounted to promises which gave rise to a legitimate expectation or
to address the fact that the new plan was in breach of this legitimate
expectation” (para 78).
The Court of Appeal’s reasoning
30.
Narine JA took a different view from Charles J on each of the principal
issues. He held that the statements relied on had not been “clear, unambiguous
and devoid of relevant qualification”. He noted in particular that the
statements failed to specify what was being guaranteed, whether principal
alone, or principal plus interest; there was no indication when the payment was
to be made; and the guarantee was premised upon the assets of CLF being sold
and the proceeds deposited into the statutory fund, and on the restructuring of
CLICO, and its solvency as a going concern. CLF had not carried out its
obligations to sell assets and place the proceeds into the statutory fund, so
that the government’s obligation to finance any deficit in the fund was not
triggered (paras 55-56). Although he had earlier accepted that the CLICO full
page advertisement of 15 February 2009 “appear[ed] to go further”, it had been
placed in the local media by CLICO, not the government or the Central Bank
(paras 45-46). Similarly, there was no evidence of breach; in the absence of a
“specified time frame” there was no basis for saying that the guarantee had
fallen due, or the preconditions had been fulfilled (paras 64-70).
31.
In any event, the evidence filed on behalf of the Attorney General had
established an “overriding public interest” for the solution that the
government adopted, having regard to the importance of CLICO to the economy and
to the “increasingly difficult” financial position in 2010 (paras 75-94). The
time for considering that issue was September 2010 when the original plan was
introduced, but the same conclusion would have applied in September 2011 (para
101). The evidence also showed that the statements made by the previous
administration had been taken into account (para 114).
32.
Finally, Narine JA considered that the decision was “firmly anchored in
macro-economic and macro-political issues”, having regard (inter alia) to the
scale of CLF’s assets (roughly equivalent to 70% of the Gross Domestic Product
of the country, as mentioned above), the potential for systemic risk to the
financial system, the concerns of the IMF, and the possible downgrading of the
credit rating of the country by the international credit rating agencies, and
the potential impact on moneys available for public services. This issue had
been “glossed over” by the judge (paras 118-119). In this context it was for
the claimants to show that the decision to adopt option (iii), as described in
para 15 above, was “irrational”, which they had failed to do. Rather it was
“methodical, reasonable and proportionate in the circumstances” (para 125).
The issues and arguments in this appeal
33.
On 3 November 2014 the Court of Appeal gave final leave to the
appellants to appeal to the Privy Council. Although the grounds of appeal make
a number of criticisms of the Court of Appeal’s reasoning, the issues can be
summarised under two principal headings:
a)
Did the representations made by or
on behalf of the government during 2009 give rise to a “legitimate expectation”
that resident EFPA holders in the position of the appellants would be fully
protected?
b)
If so, was the government entitled
in law to resile from the expectation so created?
Mr Knox QC made various related criticisms on behalf of the
appellants of the government’s conduct, including complaints of its failure (as
noted by the judge) to provide full information about the financial position of
CLICO at different times. The Board does not understand these criticisms to
amount to separate heads of challenge in this appeal.
34.
In his submissions before the Board, Mr Knox for the appellants
generally supported the reasoning of Charles J. He conducted a meticulous
review of the evidence relating to the representations made during 2009 and to
the actions of the government in 2010 and 2011, with a view to showing (i) that
the concession which had been made on behalf of the government before the judge
that the appellants had a legitimate expectation founded on the assurances
given by the previous administration set out in paras 7 to 11 above (“the Assurances”)
was well-founded, and (ii) that the government’s subsequent decision not to
comply with the Assurances and to pursue a different policy (“the 2010/2011
policy”) was, on analysis, unjustifiable in the light of that legitimate
expectation and all other relevant factors - whether the date as at which to
assess this point is September 2010, or (as he argued) September 2011.
35.
Mr Stevens QC for the Attorney General supported the reasoning of the
Court of Appeal. Like them he placed weight on the “macroeconomic” character of
the issues facing the government in 2010, and the careful consideration given
to their response. He also contended that the assurances on which the
appellants relied were insufficiently unambiguous to found a claim based on
legitimate expectation. Even if a claim based on legitimate expectation was in
principle justified, he said that the government had taken proper account of
the assurances given by its predecessor, but also of the serious and largely
unpredicted financial problems affecting CLICO. These had to be balanced
against the wider impact on the financial system and the economy. The correct
date for assessment of its actions was, he said September 2010 when the
government made clear that it would not regard itself as absolutely bound by
the assurances of its predecessor. Within the bounds of rationality, it was
entitled to take that position.
The law on legitimate expectation
36.
Before addressing the two questions identified in para 33 above, it is
appropriate to summarise briefly the board’s understanding of the law relating
to legitimate expectation.
37.
In the broadest of terms, the principle of legitimate expectation is
based on the proposition that, where a public body states that it will do (or
not do) something, a person who has reasonably relied on the statement should,
in the absence of good reasons, be entitled to rely on the statement and
enforce it through the courts. Some points are plain. First, in order to found
a claim based on the principle, it is clear that the statement in question must
be “clear, unambiguous and devoid of relevant qualification”, according to
Bingham LJ in R v Inland Revenue Comrs, Ex p MFK Underwriting Agents Ltd
[1990] 1 WLR 1545, 1569, cited with approval by Lord Hoffmann in R
(Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2)
[2009] AC 453, para 60.
38.
Secondly, the principle cannot be invoked if, or to the extent that, it
would interfere with the public body’s statutory duty - see eg Attorney-General
of Hong Kong v Ng Yuen Shiu [1983] 2 AC 629, 636, per Lord Fraser of
Tullybelton. Thirdly, however much a person is entitled to say that a statement
by a public body gave rise to a legitimate expectation on his part, circumstances
may arise where it becomes inappropriate to permit that person to invoke the
principle to enforce the public body to comply with the statement. This third
point can often be elided with the second point, but it can go wider: for
instance, if, taking into account the fact that the principle applies and all
other relevant circumstances, a public body could, or a fortiori should,
reasonably decide not to comply with the statement.
39.
Quite apart from these points, like most widely expressed propositions,
the broad statement set out at the beginning of para 37 above is subject to
exceptions and qualifications. It is, for instance, clear that legitimate
expectation can be invoked in relation to most, if not all, statements as to
the procedure to be adopted in a particular context (see again Ng Yuen Shiu [1983] 2 AC 629, 636). However, it is unclear quite how far it can be applied in
relation to statements as to substantive matters, for instance statements in
relation to what Laws LJ called “the macro-political field” (in R v
Secretary of State for Education and Employment, Ex p Begbie [2000] 1 WLR 1115, 1131), or indeed the macro-economic field. As the cases discussed by Lord
Carnwath show, such issues have been considered by the Court of Appeal of
England and Wales, perhaps most notably, in addition to Begbie, in R
v North and East Devon Health Authority, Ex p Coughlan [2001] QB 213, R (Nadarajah)
v Secretary of State for the Home Department [2005] EWCA Civ 1363, and R
(Niazi) v Secretary of State for the Home Department [2008] EWCA Civ 755,
and also by the Board in Paponette v Attorney General of Trinidad and Tobago
[2012] 1 AC 1.
40.
For present purposes, for reasons which should become clear from the
ensuing part of this judgment, it is unnecessary for the Board to consider the
law on this difficult and important topic more fully.
Was there a legitimate expectation?
41.
This question involves considering whether the Assurances gave rise in
law to a legitimate expectation on the part of the appellants. Before the Board
turns to the substantive issue, there is a procedural aspect which needs to be
addressed.
A preliminary issue
42.
In paras 34-35 of her judgment, Charles J recorded a concession made by
Mr Newman QC for the Attorney General that the Assurances did in fact amount to
“promises to the claimants which gave rise to a legitimate expectation”. The
Attorney General was not held to this concession in the Court of Appeal.
Indeed, Narine JA criticised the judge for accepting it, thereby “in effect
surrender[ing] to the attorneys the very basis of her decision”, which he said
was particularly inappropriate in the context of declaratory proceedings, in
which it was for the court to “satisfy itself on the evidence and the law that
there is a proper basis for granting such relief” (paras 62-63).
43.
For the appellants Mr Knox argued that the Attorney General should not
have been allowed to go back on his concession, made by senior counsel on
instructions from the Attorney General, and presumably after careful
consideration of the evidence and arguments.
44.
The Board considers that it was harsh on the part of the Court of Appeal
to criticise Charles J for accepting the concession. Indeed, in a case with
experienced counsel making the concession, she might have been open to
criticism for not accepting that concession.
45.
However, while the Board accepts that the Court of Appeal’s decision to
permit the government to withdraw their concession could be characterised as
lenient, it is not the sort of decision with which an appellate tribunal should
lightly interfere. While it may not have been a case management decision, it
was a procedural, rather than a substantive, decision, which involved weighing
up competing arguments, and it was therefore a decision which an appellate
tribunal should respect, unless it was outside the bounds of reasonableness. The
Board does not consider that it was outside those bounds. The appellants were
not relevantly prejudiced by the withdrawal of the concession, as it had been
made at a relatively late stage in the hearing before the judge, and the
appellants had had the opportunity to call all the evidence, and make all the
submissions, which they wished to call and make on this issue. The Board has
also heard full argument on the facts and law relating to the issue.
46.
In all the circumstances, the Board rejects the contention that the
Attorney General should not have been allowed to challenge the appellants’ case
that they had a legitimate expectation as described by the judge and quoted in
para 27 above, and therefore turns to consider the issue.
The substantive issue
47.
As explained in para 35 above, Mr Stevens’ case for the Attorney General
was that the Assurances were, as a matter of law, incapable of giving rise to a
legitimate expectation because (i) they fell within the macro-economic area
(and therefore also in the macro-political area), and (ii) in any event, they
did not amount to a sufficiently clear and unambiguous representation or
promise, particularly in the light of the terms of the MoU. To a significant extent,
these two points are closely connected, as a major factor in the second point
is that the MoU made it clear that substantial macro-economic issues were
potentially engaged by any of the Assurances.
48.
There is obvious force in these two points. The sums potentially
involved in complying with the Assurances were enormous when viewed in context:
as already mentioned, CLF was the largest private conglomerate in Trinidad and
Tobago, and its assets had an apparent value of 70% of the GDP of the country.
And the wider significance of the Assurances was made clear in the preamble to
the MoU itself, in which the financial condition of CLICO and its group was
said not only to threaten the interests of depositors and policy holders but to
“pose danger of disruption or damage to the financial system of Trinidad and
Tobago”. No interested investors can have failed to understand the policy
background against which the decisions were being made and the assurances
given.
49.
However, even though the assurances had macro-economic (and therefore
also macro-political) implications, the appellants can rely on the fact that
they were made to the appellants as investors rather than as members of the
public. Quite apart from this, there is obviously a case for saying that, as a
matter of principle, the macro-economic implications of the Assurances ought
not to go to the question whether they are capable of giving rise to a
legitimate expectation: rather they should be relevant to the question whether
it was permissible for the government not to adhere to any promises.
50.
Mr Knox for the appellants relied on the Assurances made in apparently
unqualified terms after the MoU was signed, most notably the full page
advertisement of 15 February 2009 which asserted in terms that policyholders’ funds
are being “guaranteed by the government”, and which made no reference to the
MoU. However, it was not until the Minister’s statements in June 2009, that it
was made clear that the “guarantee” was directed to a defined group, namely the
resident policy-holders protected by the section 37(4) statutory fund, rather
than investors in general, and those statements were linked in terms to the
MoU.
51.
In all the circumstances, the Board is prepared to assume, without
deciding, that the appellants succeed in crossing the first of the two hurdles
which their legitimate expectation argument faces. In other words, for the
purposes of this appeal it is accepted that the appellants had a legitimate
expectation, as a result of the Assurances, that the government would, as
Charles J put it, “make good the deficit in CLICO’s Statutory Fund … and [the
company] would be placed in a position to fulfil all of its obligations including
that of the claimants.”
Was the government entitled to resile from its
assurances?
The correct date as at which
the question is to be judged
52.
The first point to decide in this connection is as at what date the
government’s decision not to adhere to the Assurances is to be assessed. The
Board agrees with the Court of Appeal that the issue must be judged not later
than September 2010, when the government decided and announced that the
Assurances would not be regarded as binding, and that the 2010/2011 policy
would be pursued. The government made it clear at that point that its primary
duty was to the public at large, that the earlier Assurances to particular
groups had to be viewed against that background, and that they need not -
indeed they could not - regard themselves as precluded by those assurances from
giving effect to what they regarded as the most appropriate policy in the
national economic interest.
53.
It is true that Charles J decided that the correct date was September
2011, but that was at the stage when she was deciding whether to refuse the
appellants leave to seek judicial review on the ground of delay. More
importantly, the essential question is when the decision not to adhere to the
Assurances, or to put it another way, to abandon the previous administration’s
policy, was made, and that is apparent from the documents. The decision was made,
announced, explained and preliminarily implemented in the autumn of 2010 - see
paras 17-20 above. The fact that this led to the 2010/2011 policy which was
only finalised in September 2011 does not mean that the appellants can, as it
were, elect for the later date.
54.
If the 2010/2011 policy can be undermined by the appellants as at
September 2010, then it would be unnecessary to decide if the appellants are
right to contend that that is the wrong date. So it is only if that policy was
valid as at September 2010 that the appellants’ contention that September 2011
is the correct date would come into play. But it seems to the Board to be
unrealistic to contend that, having justifiably adopted a policy in September
2010, the government could be criticised for continuing with that policy in
September 2011, because of assurances given in 2009, especially given that the
implications of the policy were such that it took the best part of a year in
working out how to implement it. Government business would be severely impeded
if such an argument could succeed. As Mr Stevens put it, the appellants may, at
least in theory, be entitled to challenge the decision to implement the
2010/2011 policy in September 2011 on normal judicial review grounds, but their
challenge is to the decision not to adhere to the Assurances (and to embark on
the policy) and that decision was made in September 2010. For the same reason,
the fact that there were some changes in the policy between the time it was
made in September 2010 and the time it was finalised in September 2011 is of no
assistance to the appellants.
Was the Court of Appeal
entitled to interfere with the judge’s decision?
55.
When it comes to the question whether the government was entitled to
renege on the Assurances (which the Board is prepared to assume gave rise to a
legitimate expectation on the part of the appellants), Mr Knox contended that
the Court of Appeal ought not to have interfered with Charles J’s conclusion
that the government was not so entitled, as it was based on findings of fact.
The Board takes the view that there were a number of aspects on which the Court
of Appeal was entitled to criticise the judge, and, as a result, to substitute
its own view for that which she had reached. Although there may have been
others, there were three principal aspects, the first two of which are
connected.
56.
First, Charles J did not give any real weight to the point made by the
Prime Minister in her October 2010 speech (supported by Mr Dookeran’s evidence)
that as “a responsible government”, the government could not “deprive 1.2m
citizens … who did not invest in CLICO … of much needed expenditure,
infrastructure for health, for education, for security”, and that “the whole
budget” should not be “take[n] up” for that purpose”.
57.
The judge also failed to take into account the fact that compliance with
the assurances would not simply have meant topping up the Fund, but would have
had serious cash-flow implications for the government. That is reflected in
another passage in the Prime Minister’s speech (and Mr Dookeran’s evidence) to
the effect that committing the government to paying $1 billon a year for ten
years “would have crowded out the possibility of borrowing for the purposes of
resuscitating the economy and financing the development of the nation”.
58.
The judge further failed to take into account an impediment to an
important component of the implementation of the arrangements which had been
part of the basis upon which the Assurances had been given. The MHIL shares
remained with CLICO. As per the announcement of the Central Bank in March 2015,
it was envisaged that the MHIL shares would be sold to help fund the remaining
15% balance.
59.
Particularly because the decision whether or not to adhere to the
Assurances had potentially very serious implications for government finances,
especially for government expenditure on public projects, many of which could
be regarded as being of real general significance, it seems to the Board that
these criticisms amply justified the Court of Appeal’s decision to form its own
view as to the justifiability of the government’s decision not to comply with
the Assurances. In fairness to the judge, it should be added that the way in
which the Attorney General’s case was put before her appears to have been
rather different from the way in which it was put before the Court of Appeal
and the Board.
Was the Court of Appeal right
to decide that the government could resile?
60.
There is no real difference in principle between the parties so far as
the law is concerned, and, while there are differences of emphasis, it does not
appear to the Board that the differences in emphasis are of significance in the
context of this appeal. On the assumption that the appellants had a legitimate
expectation as claimed, Mr Stevens contends that, bearing in mind the factual
position as at September 2010, the new administration was, to put it at its
lowest, entitled not to adhere to the Assurances. Mr Knox accepts that the
government was not absolutely bound by the assurances, but says that the factual
basis for its justification for not being bound does not hold water. In effect,
the appellants say Charles J was right on this issue, and the Attorney General
contends that Narine JA was correct.
61.
In summary terms, Mr Stevens contended that, as explained by the Prime
Minister and Mr Dookeran to Parliament in 2010, and by Mr Dookeran in his
affidavit in these proceedings, CLICO’s financial problems were found to be
even more serious than originally anticipated. For example, the group assets
were far more leveraged than at first realised such that they were not going to
realise much cash in the short to medium term, the value of some of the assets
had fallen, the deficit in the Fund was larger than envisaged, and the
redemption of EFPAs had been much larger than expected (thereby increasing the
cash flow demand on CLICO above that expected). Furthermore, there were
particular problems in realising the value of the important MHTL holding which
were not resolved until much later. It was not possible to divert all the
assets to the Fund without threatening the viability of the company as a whole.
Since the basis of the Memorandum was that CLICO would continue as a going
concern, it was essential to consider the interests of other creditors.
62.
Even assuming that there were promises which had been sufficiently clear
and unqualified to satisfy the relevant test, the government was, said Mr
Stevens, entitled to take account of the wider policy issues, when deciding how
far to give effect to them. Unlike in Paponette where no explanation was
given for the change of policy, in this case the government’s thinking was
fully explained to Parliament at the time and later to the court. Mr Stevens
accepted that it was somewhat disingenuous for the Minister to suggest that the
promises might have been ineffective for lack of Parliamentary authorisation,
given that they were made on behalf of a government with a Parliamentary
majority; but it would be wrong to attach too much importance to political
point-scoring of this kind. Mr Stevens contended that the important point is
that the Minister took account of the assurances, but thought it wrong to use
government funds to give undue priority to a particular group of investors, at
the expense of the investors in general and the stability of the group as a
whole. None the less they were given a large measure of protection, albeit less
than 100% for the larger investors.
63.
Accordingly, the case for the Attorney General, as accepted by the Court
of Appeal, is that the government’s abandonment of the Assurances and adoption
of the 2010/2011 policy cannot be challenged as irrational applying Wednesbury
principles, especially when one bears in mind the heightened standard
applicable to decisions of national economic policy. Mr Stevens contended that
any legitimate expectation created by the Assurances given by the previous
administration had to be seen in the wider policy context, and the government
was entitled to depart from it for what it perceived to be good reasons in the
national economic interest. He also commended the Court of Appeal’s assessment
that the new administration’s approach was “methodical, reasonable and proportionate
in the circumstances”.
64.
Mr Knox’s assault on this submission was based on a number of points,
which, he contended undermined the case made out on behalf of the government as
to why it was entitled not to adhere to the assurances. The appropriate way of
dealing with those points is to set each of them out in turn and then discuss
them, albeit relatively summarily.
65.
The first of the points is that there were, according to a report from
Credit Suisse, sufficient assets in the Fund to cover its liabilities. The
conclusion reached in the Credit Suisse report was, however, contradicted by a
report produced by a select committee of experts appointed by the government.
In the Board’s view, the government was entitled (to put it at its lowest) to
rely on the latter report, especially as the former report was based on CLICO
and BA management accounts, and did not take into account the problem with the
MHTL shares referred to in paras 24, 58 and 61 above.
66.
More broadly, the appellants challenged the government’s contention that
it had become apparent by September 2010 that CLICO’s financial position was
significantly worse than it appeared when the Assurances were given in 2009.
However, Mr Dookeran, the Finance Minister and Mr Williams, the Governor of the
Central Bank, each stated in evidence that CLICO’s position was worse than it
had previously appeared, and there is contemporaneous support for this in what
was said during 2010 - even statements from members of the previous
administration: see para 12 above. Further, in their evidence, Mr Dookeran and
Mr Williams gave a number of reasons for this perceived deterioration,
including the facts that CLICO was far more leveraged than had been
appreciated, the value of some of its assets had fallen, the deficit in the
Fund appeared larger than had been thought, redemption of EFPAs had been more
widespread than anticipated, and the government’s injection of capital, which
had been expected to be sufficient, did not avoid a shortfall - to which can be
added the problem already mentioned in connection with the MHTL shares. The
Board can see no reason to suspect that the Court of Appeal went wrong in
accepting this evidence.
67.
The appellants also contended that the government did not explain why
the Fund could not be topped up, effectively on an ad hoc basis, in September
2010 (and indeed the following year). In so far as this contention would have
involved the government amending the statutory provisions relating to the
statutory funds, it seems to the Board that such a proposal could, to put it at
its lowest, have been reasonably rejected by the government. It would have
involved the rules relating to such funds being less prudent than they were - a
recipe, many may think, for a revival of the very sort of problem that gave
rise to the Assurances in the first place. In any event, there is no suggestion
that the Central Bank would have approved any such amendments.
68.
In so far as it is suggested that the government should have topped up
the Fund, as and when it needed topping up, from its own moneys, the evidence
was that this would have required a commitment over the years to inject around
$7 billon, which gives rise to the sort of macro-economic/political
considerations which are to be found in the remarks of the Prime Minister
quoted in paras 20, 56 and 57 above. The government’s evidence before the Court
of Appeal set out in some detail how difficult the future financial prospects
of Trinidad and Tobago were in September 2010. Mr Dookeran explained how
important it was that the IMF approved, as it duly did, his budget for
2010/2011 as “appropriately geared towards supporting the recovery”, and that
the credit ratings agencies gave, as they did, a satisfactory assessment of the
debt of Trinidad and Tobago. He said that there would have been “catastrophic
consequences for the economy of Trinidad and Tobago” if all policyholders were
“compensate[d] … fully”. The effect of his evidence was that considerations of
this sort played a very prominent part in the government’s decision in
September 2010 to abandon the Assurances and embark on the 2010/2011 policy. It
is hard to see how the Court of Appeal could be criticised for accepting this
evidence and giving it great weight in deciding whether it was reasonable for
the government to abandon the Assurances.
69.
Mr Knox suggested that the financial situation had not changed much
between the time that the assurances were given in 2009 and September 2010.
Even if that is true, the change of perception as to the national economic
prospects, risks and priorities, owing in part to the passage of time and in part
on a change of government is unsurprising. Such issues are ones in which any
court should be very diffident indeed about interfering. In any event, as
already mentioned in para 66 above, there was both significant contemporary
evidence and significant authoritative sworn evidence in these proceedings to
justify the Court of Appeal’s acceptance of the government’s case on this
point.
70.
The Board is also unimpressed with the appellants’ contention that it
would have been cheaper for the government to abide by the Assurances to pay
out the policyholders protected by the Fund as opposed to paying all
policyholders, which is what it proposed. Ignoring the fact that this is an
oversimplification of the government’s 2010/2011 policy when put forward in
2010, and when crystallised in 2011, it overlooks the fact that those proposals
involve payments being made over a much longer period than would have been
involved if the Assurances had been complied with. In any event, as explained
in para 68 above, a very significant reason for abandoning the Assurances and
adopting the 2010/2011 policy was to ensure IMF approval and the confidence of
the international financial community, and that is by no means necessarily
consistent with opting for the cheapest scheme.
71.
It was also contended by the appellants that, when deciding to abandon
the Assurances and to adopt the 2010/2011 policy, the government did not take
into account the fact that the Assurances had created a legitimate expectation
with all that that entailed. It is true that in the course of 2010 after the
election, both the Prime Minister and Mr Dookeran denied that there had been
“guarantees” to any policyholders, and on one occasion Mr Dookeran referred to
the Assurances as “empty, hollow statement[s]”. A judge has to be rather
careful of treating a statement made in a political context as if it was
intended to have the meaning which it would have if it had been given under
oath in court or in a legal document. Furthermore, it is technically right to
say that, even if they gave rise to a legitimate expectation, the Assurances
would have fallen short of being what a lawyer, or even someone engaged in
commerce, would regard as a “guarantee”.
72.
The notion that insufficient attention was given to the Assurances as a
factor against adopting the 2010/2011 policy has a little more attraction. If,
as the Board is assuming, there was a legitimate expectation in the light of
the assurances, there is obvious force in the point that the government should
have considered very seriously the fact that it would be reneging on the
Assurances before embarking on the 2010/2011 policy. The history as summarised
in paras 13 to 21 above does give rise to a concern whether the implications of
departing from the Assurances were given proper weight. In the end, however,
the Board is satisfied that they were.
73.
First, the fact that the Assurances were swept aside in public does not
mean that they were not given proper consideration by the government when
making decisions. The evidence from the government, and in particular from Mr
Dookeran, supports the contention that they were. He stated that the government
“gave careful consideration to the expectations engendered by those statements
[sic the Assurances] and the negative effect that might be suffered by those
who had relied on those statements”. Of course, courts should not always take
what is said in an affidavit or witness statement as accurate simply because it
is sworn to be true. However, where the deponent is the Finance Minister, and
there is no convincing evidence to contradict what he has said, then it seems
to the Board that a tribunal, in this case, the Court of Appeal, is entitled to
accept what he says as being accurate. It is true, as Mr Knox says, that
Charles J took a different view, but, as explained above, the Court of Appeal
was entitled to set aside her conclusions, and embark on its own assessment of
the facts.
74.
Secondly, and in any event, the proper weight to be given to a promise
giving rise to a legitimate expectation before departing from it must depend on
all the circumstances of the particular case. In this case, the Assurances had
macro-economic (and therefore macro-political) implications, and it is clear
from the evidence that the committee which came up with the three options and
recommendation identified in para 15 above gave careful consideration to the
implications of all possible courses, and it is also clear that the time
pressures were considerable. In those circumstances, on the totality of the
evidence, the Court of Appeal was certainly entitled to reach the conclusion
that appropriate attention was given by the government to the existence and
effect of the Assurances before they were abandoned.
75.
The appellants also suggested that the 2010/2011 policy was unlawful in
that (i) it required the Fund to pay out moneys at a time when it was in
deficit contrary to section 37 of the Act, and (ii) it required the trustees of
the Fund to pay out moneys without exercising their own discretion as to
whether it should be paid out. In the Board’s view, point (i) overstates the
effect of section 37, although it is a fair point that failure to make up a
deficit in the Fund represents a breach of duty. But such a breach has long
existed and would exist on any view. Further, especially in the light of that
fact, any breach of section 37 could not invalidate the 2010/2011 policy. As to
point (ii), a problem could possibly arise if the trustees refused to pay out
in accordance with the 2010/2011 policy (assuming they would be entitled to do
so), but it is hard to see how that possibility could render the policy
unlawful. At worst, it represents a risk for the implementation of the policy,
but, particularly as there has been no suggestion of the trustees taking such a
course, it would appear to be a risk which the government could reasonably
consider was one which was worth taking.
76.
Another problem with the policy according to the appellants is that it
was unlawful in discriminating between resident EFPA policyholders (who were to
be paid 75% at least according to the appellants’ evidence, although the
government say the figure is 92%) and traditional policyholders (who were to be
paid in full). There is a difference between these two classes of
policyholders, and therefore the Board has some doubt as to whether the
discrimination argument is well based in any event. But even if it is, as Mr
Stevens points out, the Central Bank, acting under the direction of the
government, is given very wide powers to deal with companies under sections 44D
and 44E of the Central Bank Act, and the Board considers that those provisions
cover the implementation of the 2010/2011 policy.
77.
Finally, the appellants relied on the fact that, as they saw it, the
government had wholly unreasonably refused to supply them with information
since September 2011. It is unnecessary at any rate at this stage to decide
whether the factual basis for this contention is correct (as Charles J found
that it was). Even if that were true, the Board cannot see how it assists the
appellants in contending that the decision to abandon the Assurances was
unjustified in law. At best, it might go to costs. In any event, once these
proceedings had been started, the appellants could have asked the court to
order disclosure of any documents which the court considered that they should
see.
Conclusion
78.
For these reasons the Board upholds the judgment of the Court of Appeal,
and dismisses the appeal.
LORD CARNWATH:
Legitimate expectation – continuing controversy
79.
I agree that the appeal should be dismissed for the reasons given by
Lord Neuberger. This is the second case before the Board in recent years
concerning the law of legitimate expectation. In this, as in the previous case
(Paponette v Attorney General of Trinidad and Tobago [2012] 1 AC 1), the
parties have been content generally to adopt the law as stated in the judgment
of Lord Woolf MR in R v North and East Devon Health Authority, Ex p Coughlan
[2001] QB 213, without detailed argument. As Lord Neuberger explains, that
has been sufficient for our decision in the appeal.
80.
In the previous case, Lord Brown (Paponette at para 61) referred
to the controversy, but felt unable in a dissenting opinion to conduct a detailed
re-examination of the law. He noted, with evident approval, an “illuminating”
article by Jack Watson (December 2010 SLS Legal Studies Clarity and ambiguity:
a new approach to the test of legitimacy in the law of legitimate expectations,
vol 30, No 4, p 633), in which the author had described the law as “a patchwork
of possible elements to consider” rather than an organised system of rules, and
“little more than a mechanism to dispense palm-tree justice”, and had called
for reconsideration by the Supreme Court (para 61). This is not the occasion
for detailed reconsideration, but it may be helpful in a concurring judgment to
offer some thoughts as to the present state of the law.
81.
The issues are discussed in detail in recent editions of several leading
text-books, including Craig Administrative Law 7th ed (2012), chapter
22; De Smith’s Judicial Review 7th ed (2015), para 12-001ff; Wade and
Forsyth Administrative Law 11th ed (2014), p 450ff. They have also been
the subject of numerous academic articles (see the list of some 20 articles
published between 1986 and 2011, in De Smith para 12-018 n 47). There is
valuable up-to-date review of the cases and the academic commentary by
Professor Mark Elliott From Heresy to Orthodoxy: Substantive Legitimate
Expectations in English Public Law (Cambridge Legal Research Paper No
5/2016).
The development of the principle
82.
It seems that the expression “legitimate expectation” first appeared in
the domestic case law in the context of procedural fairness (see eg Schmidt
v Secretary of State for Home Affairs [1969] 2 Ch 149, 170F per Lord
Denning MR). It was in that context also that it was recognised by the Privy
Council in Attorney-General of Hong Kong v Ng Yuen Shiu [1983] 2 AC 629
(“the Hong Kong case”), where Lord Fraser said of the principle:
“The justification for it is
primarily that, when a public authority has promised to follow a certain
procedure, it is in the interest of good administration that it should act
fairly and should implement its promise, so long as implementation does not
interfere with its statutory duty. The principle is also justified by the
further consideration that, when the promise was made, the authority must have
considered that it would be assisted in discharging its duty fairly by
any representations from interested parties and as a general rule that is
correct.” (p 638, emphasis added).
Thus the doctrine was seen as assisting, rather than
potentially conflicting with, the performance of the authority’s statutory
duties.
83.
The possible extension of the same principle to substantive rather than
merely procedural benefits emerged later in the law of England and Wales (De
Smith at para 12-012). Two decisions are commonly cited in this connection:
R v Secretary of State for the Home Department, Ex p Asif Mahmood Khan
[1984] 1 WLR 1337 CA, and R v Secretary of State for the Home Department, Ex
p Ruddock [1987] 1 WLR 1482 (Taylor J). Both concerned the application of
published government policy criteria (relating respectively to entry clearance
for children, and telephone tapping). In the former the criteria were equated
to procedural benefits, applying the principles stated by Lord Fraser in the Hong
Kong case (pp 1346-1347 per Parker LJ). In the latter, Taylor J (at p 1497)
treated the principle as one of “fairness” not limited to procedural benefits,
but he dismissed the claim on the facts.
84.
The extension to substantive benefits remained controversial for some
years: see eg R v Secretary of State for the Home Department, Ex p
Hargreaves [1997] 1 WLR 906, 921, where the suggested departure from Wednesbury
principles (as advocated by Sedley J in R v Ministry of Agriculture, Fisheries
and Food, Ex p Hamble (Offshore) Fisheries Ltd [1995] 2 All ER 714) was
described by the Court of Appeal as “heretical”. It was evidently for this reason
that in Coughlan in 1999 the Court of Appeal (Lord Woolf MR, Mummery and
Sedley LJJ) took the opportunity to undertake a comprehensive analysis of the
authorities and the principles underlying them.
85.
The principle has since been recognised as “well-established” in the
House of Lords, but without detailed argument: see R v Ministry of Defence,
Ex p Walker [2000] 1 WLR 806; R v Secretary of State for the Home
Department, Ex p Zeqiri [2002] UKHL 3; [2002] Imm AR 296 para 44; R (Reprotech
(Pebsham) Ltd) v East Sussex County Council [2003] 1 WLR 348 para 34. In R
(Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2)
[2008] UKHL 61; [2009] AC 453, para 60, Lord Hoffmann summarised the
requirements of legitimate expectation, but again without detailed discussion:
“It is clear that in a case such
as the present, a claim to a legitimate expectation can be based only upon a
promise which is ‘clear, unambiguous and devoid of relevant qualification’: see
Bingham LJ in R v Inland Revenue Comrs, Ex p MFK Underwriting Agents Ltd
[1990] 1 WLR 1545, 1569. 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 and such a change of policy may be justified
in the public interest, particularly in the area of what Laws LJ called ‘the
macro-political field’: see R v Secretary of State for Education and
Employment, Ex p Begbie [2000] 1 WLR 1115, 1131.”
86.
That case concerned an alleged promise by the Secretary of State to the
Chagos Islanders not to restrict their return to the islands from which they
had been evicted for military purposes. The majority held on the facts there
had been no such “clear and unambiguous” promise, and that in any event there
was “a sufficient public interest justification for the adoption of a new
policy in 2004”, having regard (inter alia) to the fact that “the decision was
very much concerned with the ‘macro-political field’” (paras 61, 63, per Lord
Hoffmann). Lord Carswell (also in the majority) noted that the principles
governing “substantive legitimate expectation” as outlined in Coughlan had
not yet been considered in depth by the House (para 133). Lord Mance
(dissenting on this issue) recorded that counsel for the Foreign Secretary had
reserved his right to argue in another case that Coughlan was wrongly
decided (para 177).
87.
The issues arising from Coughlan including its basis in legal
principle, have been subject to significant discussion by Laws LJ in
three subsequent judgments in the Court of Appeal: R v Secretary of State
for Education and Employment, Ex p Begbie [2000] 1 WLR 1115; R (Nadarajah)
v Secretary of State for the Home Department [2005] EWCA Civ 1363; R (Bhatt
Murphy) v Independent Assessor (also cited as R (Niazi) v Secretary of
State for the Home Department) [2008] EWCA Civ 755). As will be seen, Laws
LJ made some critical observations on the reasoning in Coughlan and took
the opportunity to develop in some detail his views as to the scope and content
of the principle.
88.
To set his observations in context, it is necessary to start by
considering the factual background of the Coughlan case, the authorities
on which the court relied, and how the principles so extracted were applied to
the case.
Coughlan
89.
The applicant was severely disabled. In 1993 she and seven other
patients were moved from a hospital which the health authority wished to close
to a house known as Mardon House. They agreed to the move on the basis of
assurances by the authority that Mardon House would be their home for life. In
1998, in the light of new government guidance and following public
consultation, the health authority decided to close Mardon House. It proposed
to transfer responsibility for long-term nursing care of the applicant and her
colleagues to the local authority, but without at that stage identifying any
specific alternative accommodation. On her application for judicial review the
judge quashed the decision on the grounds that she had been given a clear
promise, and that no overriding public interest had been identified to justify
breaking it. That decision was upheld by the Court of Appeal.
90.
Giving the judgment of the court, Lord Woolf MR referred to the
continuing controversy over the court’s role when a member of the public “as a
result of a promise or other conduct, has a legitimate expectation that he will
be treated in one way and the public body wishes to treat him or her in a
different way” (para 56). It was for the court in such a case to determine the
nature of the legitimate expectation, having regard to the precise terms of the
representation, the circumstances in which it was made, and the nature of the
statutory or other discretion; leading to one of “three possible outcomes”:
“(a) The court may decide that
the public authority is only required to bear in mind its previous policy or
other representation, giving it the weight it thinks right, but no more, before
deciding whether to change course. Here the court is confined to reviewing the
decision on Wednesbury grounds …
(b) On the other hand the
court may decide that the promise or practice induces a legitimate expectation
of, for example, being consulted before a particular decision is taken. Here it
is uncontentious that the court itself will require the opportunity for
consultation to be given unless there is an overriding reason to resile from it
… in which case the court will itself judge the adequacy of the reason advanced
for the change of policy, taking into account what fairness requires.
(c) Where the court
considers that a lawful promise or practice has induced a legitimate
expectation of a benefit which is substantive, not simply procedural, authority
now establishes that here too the court will in a proper case decide whether to
frustrate the expectation is so unfair that to take a new and different course
will amount to an abuse of power. Here, once the legitimacy of the expectation
is established, the court will have the task of weighing the requirements of
fairness against any overriding interest relied upon for the change of policy.”
(para 57)
91.
In respect of the second and third categories, he noted the difficulty
of “segregating the procedural from the substantive” but added that most cases
in the third category were likely to be cases where the expectation is “confined
to one person or a few people, giving the promise or representation the
character of a contract”. He recognised that the court’s role in relation to
the third category was “still controversial”; but as he hoped to show “now
clarified by authority”. (para 59)
93.
The authorities on which he relied as supporting, or
“clarifying”, the third category are apparent from the following discussion
(paras 61-82). He relied in particular on the decision of the House of Lords in
R v Inland Revenue Comrs, Ex p Preston [1985] AC 835, as applied in R
v Inland Revenue Comrs, Ex p MFK Underwriting Agents Ltd [1990] 1 WLR 1545
and R v Inland Revenue Comrs, Ex p Unilever Plc [1996] STC 681. All
three were tax cases, but Lord Woolf dismissed any suggestion that “special
principles of public law” might apply to the Inland Revenue or to taxpayers. It
is from the first of these cases that Lord Woolf evidently derived his
reference to a promise “having the character of a contract”.
93.
He referred to Lord Scarman’s concurring speech in Preston emphasising
the place of “the principle of fairness” in the law of judicial review, so that
“unfairness in the purported exercise of a power can be such that it is an
abuse or excess of power” ([1985] AC 835, 851), and to similar passages in the
leading speech of Lord Templeman. (Lord Templeman had also stated that it was
only in “exceptional circumstances” that the court could decide to be unfair
“that which the commissioners by taking action against the taxpayer have determined
to be fair”: p 864F).
94.
Lord Woolf quoted in full the final paragraph of this discussion (pp
866G-867C), leading to Lord Templeman’s conclusion that Mr Preston would have
been entitled to relief by way of judicial review for -
“… ‘unfairness’ amounting to abuse
of power if the commissioners have been guilty of conduct equivalent to a
breach of contract or breach of representations on their part.”
95.
In Preston, the taxpayer’s claim failed on the facts. No
connection was made in the argument or speeches with the principles of
legitimate expectation, as recently expounded in the Hong Kong case.
That connection was made four years later in the second of Lord Woolf’s tax
cases, Ex p MFK (1989). It was another unsuccessful taxpayer claim, this
time based on a change of revenue practice. Giving the leading judgment of the
Divisional Court, Bingham LJ spoke of his wish not to diminish the “valuable,
developing doctrine of legitimate expectation”, but emphasised the need for the
promise to be “clear, unambiguous and devoid of relevant qualification”, and
said:
“If in private law a body would be
in breach of contract in so acting or estopped from so acting a public
authority should generally be in no better position. The doctrine of legitimate
expectation is rooted in fairness …” (pp 1569-1570)
96.
Unlike the other two, Lord Woolf’s third tax case, Ex p Unilever (1996),
was a successful claim. It was based on the Revenue’s departure, without
notice, from its long standing practice (over some 20 years) in dealing with
the taxpayer’s tax computations. Applying the principles stated in Preston and
MFK, the Court of Appeal accepted on the “unique” facts of the case
that the Revenue’s action was “so unfair as to amount to an abuse of power” (p
4691G-H, per Sir Thomas Bingham MR).
97.
Lord Woolf concluded his review of the authorities by emphasising the
importance of the statutory context, and the need to “avoid jeopardising the
important principle that the executive’s policy-making powers should not be
trammelled by the courts” (citing Hughes v Department of Health and Social
Security [1985] AC 766, 788, per Lord Diplock). He added that, policy being
“for the public authority alone” would be accepted by the courts as “part of
the factual data - in other words, as not ordinarily open to judicial review”. The
court’s task was then limited to asking whether the application of the policy
to an individual who has been led to expect something different is “a just
exercise of power” (para 82).
98.
In applying these principles to the facts of the case, the court noted
the features of the “home for life” promise: “an express promise or
representation made on a number of occasions in precise terms”, made to “a
small group of severely disabled individuals …”, “specifically related to
identified premises …”, and “in unqualified terms”. It had been made by the
previous authority “for its own purposes” and “relied on by Miss Coughlan”. The
court concluded:
“This is not a case where the
health authority would, in keeping the promise, be acting inconsistently with
its statutory or other public law duties. A decision not to honour it would be
equivalent to a breach of contract in private law.” (para 86)
99.
Although the health authority had treated the promise as a starting
point, and a factor to which they should give “considerable weight”, they had
not considered it as “a legal responsibility or commitment to provide a home,
as distinct from care or funding of care”. They had thus missed “the
essential point of the promise”; their undertaking to fund her care for the
remainder of her life was “substantially different in nature and effect from
the earlier promise that care for her would be provided at Mardon House”
(para 88, Lord Woolf’s emphasis). Further the quality of the alternative
accommodation was as yet unknown. The court would not prejudge the effect of an
offer of accommodation reasonably equivalent to Mardon House. “Absent such an
offer, here there was unfairness amounting to an abuse of power by the health
authority” (para 89).
Ex p Begbie and later cases
100.
As already noted, Laws LJ commented in later cases on the limitations of
the Coughlan doctrine, and in particular on the need for caution in
applying it in cases involving wider policy issues. The first was Ex p
Begbie (2000), which concerned assurances allegedly given before a change
of government and a consequent change of education policy, as to the
continuation of the claimant’s assisted place at a particular school. The claim
failed on the facts (see pp 1125-1127, per Peter Gibson LJ), but in a
concurring judgment (pp 1129-1130), Laws LJ took the opportunity to comment
more generally on the principles derived from Coughlan. He acknowledged
the role of abuse of power as the “root concept” governing general principles
of public law, but he saw difficulty in translating the root concept into “hard
clear law”. In his view, the first and third categories explained in Coughlan
were not “hermetically sealed”; the facts of the case, viewed in their
statutory context, would steer the court to “a more or less intrusive quality
of review”. He continued (in a passage relied on by the Court of Appeal in the
present case):
“In some cases a change of tack by
a public authority, though unfair from the applicant’s stance, may involve
questions of general policy affecting the public at large or a significant
section of it (including interests not represented before the court); here the
judges may well be in no position to adjudicate save at most on a bare Wednesbury
basis, without themselves donning the garb of policy-maker, which they cannot
wear. The local government finance cases, such as R v Secretary of State for
the Environment, Ex p Hammersmith and Fulham London Borough Council [1991]
1 AC 521, exemplify this. As Wade and Forsyth observe (Administrative Law,
7th ed, p 404):
‘‘Ministers’ decisions on
important matters of policy are not on that account sacrosanct against the unreasonableness
doctrine, though the court must take special care, for constitutional reasons,
not to pass judgment on action which is essentially political.’
In other cases the act or omission
complained of may take place on a much smaller stage, with far fewer players.
Here, with respect, lies the importance of the fact in the Coughlan case
… that few individuals were affected by the promise in question. The case’s
facts may be discrete and limited, having no implications for an innominate
class of persons. There may be no wide-ranging issues of general policy, or
none with multi-layered effects, upon whose merits the court is asked to
embark. The court may be able to envisage clearly and with sufficient certainty
what the full consequences will be of any order it makes. In such a case the
court’s condemnation of what is done as an abuse of power, justifiable (or
rather, falling to be relieved of its character as abusive) only if an
overriding public interest is shown of which the court is the judge, offers no
offence to the claims of democratic power.”
There would be many cases falling between these extremes,
or sharing the characteristics of one or other, but the more a decision lay in
the “macro-political field”, the less intrusive would be the court’s supervision.
101.
He returned to the same theme in two later judgments, Nadarajah (2005)
and Bhatt Murphy (2008). It is unnecessary to consider the facts or
decisions in either case in any detail. Laws LJ’s purpose was, as he put it -
to “move the law’s development a little further down the road …” (para 66ff),
and -
“to see if we can conform the
shape of the law of legitimate expectations with that of other constitutional
principles …” (Nadarajah, para 70)
In summary, while he saw the principle as “grounded in fairness”,
he preferred to express it more broadly as “a requirement of good
administration, by which public bodies ought to deal straightforwardly and
consistently with the public”, and as such as “a legal standard which … takes
its place alongside such rights as fair trial, and no punishment without law”.
It followed that a public body’s promise or practice as to future conduct should
not be departed from, save in circumstances where to do so is -
“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.)” (see Nadarajah,
para 68; Bhatt Murphy, para 51)
102.
In Bhatt Murphy (by contrast with Begbie and Nadarajah)
he placed more emphasis on the differences between procedural and
substantive expectation. The “core” distinction was that in the latter the
court was concerned with a promise or practice “of present and future
substantive policy” (para 33). This type of legitimate expectation was
therefore concerned with an “exceptional situation” (citing Lord Templeman in Preston,
p 864 - see para 93 above), because a public authority would not often be required
by the law “to maintain in being a policy which on reasonable grounds it has
chosen to alter or abandon”. He added:
“There is an underlying reason for
this. Public authorities typically, and central government par excellence,
enjoy wide discretions which it is their duty to exercise in the public
interest. They have to decide the content and the pace of change. Often they
must balance different, indeed opposing, interests across a wide spectrum. …
This entitlement - in truth, a duty - is ordinarily repugnant to any
requirement to bow to another's will, albeit in the name of a substantive
legitimate expectation …” (para 41)
103.
Accordingly, authority showed that:
“… where a substantive expectation
is to run the promise or practice which is its genesis is not merely a
reflection of the ordinary fact … that a policy with no terminal date or
terminating event will continue in effect until rational grounds for its
cessation arise. Rather it must constitute a specific undertaking, directed at
a particular individual or group, by which the relevant policy’s continuance is
assured.” (para 43)
He referred to Coughlan as a particularly strong
case which illustrated the “pressing and focussed nature” of the assurance
required. He added that although there was in theory no limit to the number of
beneficiaries of such a promise, it was likely in reality to be small: first,
because it was “difficult to imagine a case in which government will be held
legally bound by a representation or undertaking made generally or to a diverse
class”; secondly because the broader the class claiming the benefit, “the more
likely it is that a supervening public interest will be held to justify the
change of position complained of” (paras 45-46).
Paponette
104.
Before commenting on the present state of the law, I return to the
decision of the Board in Paponette (Paponette v Attorney General of
Trinidad and Tobago [2012] 1 AC 1) in which the judgment of the majority
was given by Lord Dyson.
105.
The claimants were members of the Maxi-Taxi Association operating in
Port-of-Spain, Trinidad. Until 1995 they operated from a taxi stand which they controlled
themselves and for which they paid no fee. In 1995 they reluctantly agreed
government proposals to move them to the “City Gate” site, owned by the Public
Transport Service Corporation (PTSC), the body which operated the country’s bus
service. They did so in reliance on assurances by the Minister that they would
not be under the control of the PTSC (regarded as a competitor), but would in
due course be enabled to manage it themselves. Contrary to those assurances in
1997 the government decided to give management to the PTSC, and for this
purpose promoted new statutory regulations, which also conferred on PTSC the power
to grant permits and to charge for its use. The members of the association filed
a constitutional motion in the High Court, claiming (inter alia) that the
actions of the state had frustrated their legitimate expectations of a
substantive benefit, in a way which affected their property rights protected
under section 4(a) of the Constitution. They succeeded in the High Court but
failed in the Court of Appeal.
106.
On that issue Lord Dyson referred to the “convenient summary” given by
Lord Hoffmann in Bancoult (cited at para 85 above). As to whether
the representation was “clear, unambiguous and devoid of relevant qualification”
he said the question was “how on a fair reading of the promise it would have
been reasonably understood by those to whom it was made”. The members would
reasonably have understood the representations as reassuring them that they
would be able to continue to control and manage their own affairs if they moved,
and in particular that they would not have to seek permits or pay a fee. It did
not matter that there might have been “some uncertainty as to precisely what
management entailed” (para 30).
107.
On the “more difficult question” whether the government was entitled to
frustrate the legitimate expectation so created, Lord Dyson referred to
Coughlan, quoting Lord Woolf’s formulation of the test appropriate to
legitimate expectation of a benefit “which is substantive, not simply
procedural” (his category (c) see para 90 above): in short whether to frustrate
the expectation is “so unfair (as to) … amount to an abuse of power”, weighing
the requirements of fairness against “any overriding interest relied upon for
the change of policy”. Lord Dyson noted that it was not in dispute that this
was the test applicable to the case before the Board. The critical question was
whether there was a sufficient public interest to override the legitimate
expectation. This in turn raised the further question as to the burden of proof
in such a case (paras 34-36).
108.
The initial burden lay on an applicant to prove the legitimacy of his
expectation, and so far as necessary his reliance on the promise. But once
these elements had been proved, the onus shifted to the authority to justify
the frustration, and to identify any overriding interest on which it relied
(following Laws LJ in Nadarajah, para 68). It was then for the court “to
weigh the requirements of fairness against that interest”.
109.
In the present case the respondent had placed no evidence before the
judge or the Court of Appeal to explain why the 1997 Regulations were made. Although
some evidence had been admitted by the Court of Appeal, it failed to say why
the 1997 Regulations were made despite the representations, nor did it indicate
that in making them the minister took the representations into account (paras
37-40).
Discussion
110.
This review of Coughlan and the later cases reveals a striking
contrast between, on the one hand, the relatively narrow scope of the actual
decision in that case, and, on the other, the wide-ranging and open-ended
nature of the legal discussion. Similarly wide-ranging has been the intense
judicial and academic controversy, which in spite of the efforts of Laws LJ and
others, remains unresolved more than 15 years later.
111.
As the court emphasised in its application of legal principle to the
facts, Coughlan concerned an express promise by the authority for its
own purposes, made in unqualified terms to a small group of people with whom it
had an established relationship, and relied on by them, and given for the
specific purpose of persuading them to move out of premises which the authority
wished to have available for other purposes. The promise was thus designed to
promote the authority’s statutory functions, and keeping the promise would
involve no inconsistency with them. As Laws LJ said in Begbie at p 1131,
the facts in Coughlan were seen by the court as “discrete and
limited” raising “no wide-ranging issues of general policy”. (In considering
the court’s reasoning in Coughlan, it is irrelevant that this simple
characterisation of the facts may be open to question: see Elliott op cit p
7.) There was also mutuality of commitment: a specific promise by the authority
(a home for life) in return for specific action by the promisees (moving out).
As Lord Woolf said in Coughlan at para 54, failing to honour it would
indeed be “equivalent to breach of contract”.
112.
With hindsight, it appears that the court in Coughlan may have
been unnecessarily ambitious in seeking a grand unifying theory for all the
authorities loosely grouped under the general heading of legitimate
expectation. The first problem arises from the court’s apparent anxiety to
assimilate the by then well-established principles relating to expectations of
procedural benefits, with those relating to substance. This approach tended to
underplay the important difference that, as Laws LJ emphasised in Bhatt
Murphy, the latter involves potential conflict with the discretion
of public authorities to “formulate and reformulate” policy (para 41). The
court touched on this point at the end of its discussion, accepting that the
formulation of policy was a matter for the executive, but it appears to have
regarded its application to particular cases as no more than one aspect of the
court’s assessment by reference to a broad test of justice or fairness (para
82).
113.
Laws LJ by contrast saw it as “an exceptional situation”. In this he is
supported by Wade & Forsyth (op cit p 460) who observe that
it “involves the court in aspects of the decision-making process (eg the
allocation of resources) generally considered beyond the bounds of judicial
competence and authority”. The result, they say, is that the doctrine is to be
“narrowly construed”, and in practice “only exceptionally” leads to a
successful claim (as demonstrated by a long list of almost exclusively failed claims,
in their footnote 432).
114.
A related issue is the court’s reliance on Preston and the
other tax cases. It is of course true that the Revenue is not governed by
special principles of public law. But those principles take effect in a special
context. The Revenue has no free-standing policy-making function. So the
potential for conflict with executive policy does not arise in the same way as
in relation to most other government departments or local authorities. Tax
policy is set by the legislature. The Revenue’s function is not to make the policy,
but to collect the tax. It has a wide managerial discretion (see per Lord
Templeman in Preston at p 862), and for that purpose may give general
guidance or specific assurances to individual taxpayers. Even in that context,
it is only in “exceptional circumstances” that the court will overrule the
exercise of discretion by the commission (see para 93 above). As has been seen,
it was the “unique” facts of Unilever which enabled the court to treat it
as such an exceptional case.
115.
That approach has been refined in more recent cases, where the giving,
and honouring, of guidance or more specific undertakings by the Revenue has
been seen as -
“part of the cooperative
relationship between the Commissioners and the public, and ultimately … part of
the Commissioners’ tax collection function. But there are plainly circumstances
when the Commissioners can retreat from their published statements (or rulings)
…” (per Whipple J, R (Hely-Hutchinson) v Revenue and Customs Comrs [2015] EWHC 3261 (Admin), [2016] STC 962, para 42).”
In R (Davies) v Inland Revenue Comrs [2011] UKSC 47, [2011] 1 WLR 2625, para 25, Lord Wilson quoted words of Moses LJ to the
same effect (in the judgment under appeal: [2010] STC 860, para 12), and added that
to have legal effect the promise or practice relied on must constitute “a
specific undertaking, directed at a particular individual or group, by which
the relevant policy’s continuance is assured”. In other words the taxpayers
needed evidence of a “practice … 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”
(para 49).
116.
Outside the tax field, of course, published policy or guidance may have
an equally important role, for example in relation to immigration. But there
again the law has moved on since Coughlan. It is no longer necessary to
find all the answers in the law of legitimate expectation. This accords with
the view of Wade & Forsyth (op cit p 456) that -
“where there is no knowledge of
the policy allegedly disregarded, inconsistency in the application of policy
rather than frustration of a legitimate expectation is the appropriate ground
of review.”
In support of their assertion that this view has been
“gathering strength”, they are able to point to Lord Hope’s reference to their
previous edition in R (SK (Zimbabwe)) v Secretary of State for the Home
Department [2011] UKSC 23; [2011] 1 WLR 1299 para 36, where he said:
“Wade and Forsyth, Administrative
Law 10th ed (2009), pp 315-316 states that the principle that policy must
be consistently applied is not in doubt and that the courts now expect
government departments to honour their statements of policy. Policy is not law,
so it may be departed from if a good reason can be shown …”
To similar effect, De Smith (para 12-040) suggests
that in the context of policy statements, use of the term “expectation” may not
add anything to general public law duties, and “may indeed dilute them”. In
retrospect it seems that the court’s understandable concern in Coughlan to
find a rational basis for the early substantive expectation cases, such as
Khan and Ruddock, both of which turned on departure from adopted
policy or practice (para 83 above), could have been addressed in other ways.
117.
Laws LJ was right in Begbie to contrast the narrow basis of the
decision in Coughlan with cases at the opposite end of the spectrum
involving much wider issues such as matters of national economic policy, exemplified
by R v Secretary of State for the Environment, Ex p Hammersmith and Fulham
London Borough Council [1991] 1 AC 521. In such cases, the court will not
intervene outside of “the extremes of bad faith, improper motive or manifest
absurdity” (R v Secretary of State for the Environment, Ex p Hammersmith and
Fulham London Borough Council [1991] 1 AC 521, 596-597 per Lord Bridge of
Harwich; see also Kennedy v Information Comr (Secretary of State for Justice
intervening) [2014] UKSC 20; [2015] AC 455 para 53 per Lord Mance).
118.
Laws LJ’s search for a constitutional foundation for the principle of
legitimate expectation finds an echo in Professor Elliott’s recent article,
where he suggests that “one of the key constitutional values at stake in such
cases is the rule of law principle of legal certainty” (Elliott op cit p
16). He cites the recent judgment of the Supreme Court in Pham v Secretary
of State for the Home Department (Open Society Justice Initiative intervening) [2015] UKSC 19; [2015] 1 WLR 1591, as indicative of “a more subtle understanding”
(compared to the “traditional view” exemplified by R v Secretary of State
for the Home Department, Ex p Brind [1991] 1 AC 696) of the way in which
“constitutional and institutional concerns ought to shape the doctrinal
architecture of substantive judicial review”. There the court accepted that
given the “fundamental” status of the right to citizenship which was in issue
“a strict standard of judicial review” was warranted as a matter of domestic
law, which, for Lord Mance at least, was supplied by explicit adoption of the
proportionality test (see Pham at para 98). On this view, says Elliott -
“… there is nothing anomalous
about deploying the proportionality test (or elements of it) so as to evaluate
a justification offered in support of frustration of a substantive expectation
deriving from a clear and specific promise made to an individual who has relied
upon it.” (Elliott, p 19)
It may, however, be unnecessary to search for deep
constitutional underpinning for a principle, which, on a narrow view of Coughlan,
simply reflects a basic rule of law and human conduct that promises relied on
by others should be kept. This applies in public law as in private law, unless
the authority can show good policy reasons in the public interest for departing
from their promise.
119.
Comparison with the approach adopted in other common law jurisdictions
is also revealing. In De Smith (para 12-081) there is a comparative
review of the approach of the law to legitimate expectation in a number of
countries (Australia, Canada, India, Ireland, New Zealand, South Africa) (para
12-081). None show support for the application of Coughlan or analogous
principles in the context of substantive as opposed to procedural expectations.
In a judgment in the Canadian Supreme Court, given shortly after Coughlan (Mount
Sinai Hospital Center v Quebec (Minister of Health and Social Services)
[2001] 2 SCR 281), Binnie J (in a concurring opinion agreed by McLachlin CJ)
drew attention to the problems of a test based on “fairness”:
“It thus appears that the English
doctrine of legitimate expectation has developed into a comprehensive code that
embraces the full gamut of administrative relief from procedural fairness at
the low end through ‘enhanced’ procedural fairness based on conduct, thence
onwards to estoppel (though it is not to be called that) including substantive
relief at the high end, ie, the end representing the greatest intrusion by the
courts into public administration …
In ranging over such a vast
territory under the banner of ‘fairness’, it is inevitable that
sub-classifications must be made to differentiate the situations which warrant
highly intrusive relief from those which do not …” (paras 26-27)
120.
A narrower approach is also consistent with the Board’s decision in Paponette.
Although the group involved was much larger than in Coughlan, there was
similar mutuality of specific commitments. It involved a clear promise by the
authority, made to a defined group in return for specific action by them within
a defined time scale, and designed to further the authority’s own purposes.
There was no argument that it raised wider political or economic
considerations. The legitimate expectation having been established, it was for
the authority to justify its departure from it, applying an approach which
(although not so described by Lord Dyson) can in its practical effect be
equated with a proportionality test (as proposed by Laws LJ and Professor
Elliott).
121.
In summary, the trend of modern authority, judicial and academic,
favours a narrow interpretation of the Coughlan principle, which can be
simply stated. Where a promise or representation, which is “clear, unambiguous
and devoid of relevant qualification”, has been given to an identifiable
defined person or group by a public authority for its own purposes, either in
return for action by the person or group, or on the basis of which the person
or group has acted to its detriment, the court will require it to be honoured,
unless the authority is able to show good reasons, judged by the court to be
proportionate, to resile from it. In judging proportionality the court will
take into account any conflict with wider policy issues, particularly those of
a “macro-economic” or “macro-political” kind. By that test, for the reasons
given by Lord Neuberger, the present appeal must fail.
