Thursday, 10th November 1994.
LORD JUSTICE ROSE: There is before the court an application by the World Development Movement Ltd for judicial review of two decisions of the Secretary of State for Foreign Affairs in relation to aid to fund the Pergau Dam in Malaysia. The initial decision to grant aid was made on or shortly before 8th July 1991. The application refers to 15th July, which was the date of a press release in relation to the matter, but nothing turns on the precise date.
In early 1994 there were proceedings in public before the House of Commons Public Accounts Committee and Foreign Affairs Committee which led the Applicants' solicitors to seek an assurance from the Secretary of State that no further funds would be furnished. On 29th April 1994 the Secretary of State refused to give such an assurance, and that is the second decision which is challenged.
By the Notice of Motion the Applicants seek to have both decisions quashed and an Order preventing further payments from being made. But it may be that the Applicants will be content with a declaration that the July 1991 decision to make a grant was unlawful.
In the course of the hearing before this court there have been four issues. First, whether the Applicants have standing to make the application; secondly, whether disclosure should be ordered of two minutes from Sir Tim Lankester, Permanent Secretary in the Overseas Development Administration, ("ODA") to Baroness Chalker, the Minister of Overseas Development, dated 5th and 7th February 1991; thirdly, whether the July 1991 decision was lawful; fourthly, what is the appropriate relief, if any, taking delay into account. As to the second issue, the court refused disclosure during the hearing and indicated that reasons would be given later.
Before addressing the issues, it is necessary to set them in the context of the relevant legislation and the timetable of material events. Section 1(1) of the Overseas Development and Co operation Act 1980 is in these terms:
"The Secretary of State shall have power, for the purpose of promoting the development or maintaining the economy of a country or territory outside the United Kingdom, or the welfare of its people, to furnish any person or body with assistance, whether financial, technical or of any other nature."
The subsection is ungrammatical in that it is unclear what verb is intended to govern "welfare", and it appears that the word "of" has been omitted after the word "development". But that is presently immaterial.
The argument before this court has centred on whether the grant in question was "for the purpose of promoting the development" of Malaysia.
The relevant history is that, during the 1960s, the Malaysian Government identified on the Pergau River a potential site for a hydro electric power station. In April 1988 an Australian company carried out a feasibility study for a dam there. In September 1988 two British companies, Balfour Beatty and GEC, indicated to the Department of Trade and Industry their interest in the site. In the autumn of 1988 the Malaysian Electricity Authority identified the Pergau site as a priority. In October 1988 the British consortium told the DTI that they would be seeking, in relation to Pergau, ATP (ie Aid and Trade Provision, which accounts for about five per cent of the overseas aid fund disbursable under section 1 of the Act). In November 1988 the consortium submitted a formal application for ATP and gave "indicative costs" totalling £315 million to the ODA, and in January 1989 produced what was said by the National Audit Office to be a "firm contract proposal" of £316 million, with a United Kingdom content of £195 million.
In early 1989 the DTI advised the ODA to send an appraisal mission to Malaysia. On 6th March 1989 the consortium repeated the figure of £316 million. From 13th to 15 March 1989 an ODA appraisal mission was in Malaysia, the brevity and timing of that mission being described later by Sir Tim Lankester as "a lamentable slip". On 14th March there was a telephone report to London from the appraisal mission. On 15th March the then Prime Minister, Mrs Thatcher, met Dr Mahatir, the Prime Minister of Malaysia, in London and made an oral offer of ATP support of up to £68.25 million for the Pergau project, conditional on a full economic appraisal. That figure was the OECD minimum figure of 35 per cent of the £195 million portion of the total which was eligible for United Kingdom and European Community official support.
On 20th March the appraisal mission reported that, at the consortium's price of £316 million, the economic viability of the project was "marginal". On 31st March the consortium informed the DTI and ODA that the budgetary estimate of the Pergau project was £397 million, that is 25 per cent higher than previously stated. On 14th April an ODA economist minuted that in the light of this figure "Pergau was no longer a marginal project: clearly it now was uneconomic....."
On 17th April a formal written notice of the Pergau offer was sent to the Malaysian Government. Sir Tim Lankester described the position then facing the United Kingdom as a "dilemma", presenting four options:
(i) a formal offer of £397 million which was inconceivable on the economic view which had been taken;
(ii) withdrawing the offer, which was politically impossible;
(iii) confirming an offer at £316 million, which was not tenable in view of the price rise; and
(iv) making an offer based on £316 million, but with an indication of willingness to discuss the possibility of further assistance.
Option (iv) was chosen by Ministers.
In February 1990 the ODA completed a further economic appraisal and concluded that the Pergau project would, at £397 million, be "a very bad buy", and a burden on Malaysian consumers. In April an ODA economist minuted that, on all available estimates, which included a World Bank appraisal, Pergau appeared "markedly uneconomic". In October 1990 ODA concluded that Pergau would not be an economic proposition until the year 2005 at the earliest, and that Malaysian consumers would pay £100 million more for their electricity over Pergau's 35 year life, than if cheaper alternatives were pursued. Sir Tim Lankester was of the view that the Pergau project "was unequivocally a bad one in economic terms".
In January 1991 ODA completed a further economic appraisal which priced the Pergau project at £417 million, which would predicate ATP funding of £108 million and confirmed the conclusion that the project should be postponed. On 5th February 1991 Sir Tim Lankester sent a minute to the ODA Minister advising against proceeding. This minute described the economic case against Pergau in the following terms:
"'..... this project should not be implemented for the foreseeable future. There were much cheaper ways of producing electricity in Malaysia for many years to come .....'
.....
'this was not a marginal project such that the economics could be readily set aside in favour of commercial and political consideration. The proposed assistance of £108 million was by any standards very substantial indeed. ODA needed to look in all its projects for a positive return to the recipient country's economy. With such a large amount at stake, it was all the more important not to finance knowingly a bad investment. Implementing Pergau now would impose a cost penalty to the Malaysian economy of over £100 million, compared with alternative gas turbine projects. Thus, far from aid contributing to the development of Malaysia, it would at best be offsetting the extra cost of choosing Pergau.'"
On 7th February a further minute was sent by Sir Tim Lankester requesting a specific Ministerial Direction, if there was to be expenditure on Pergau. That minute included the following, by reference to Sir Tim Lankester:
"'[He] ... had looked again at the papers to see whether there were any material counter arguments to be set against the clear economic case against the project ...... he saw no serious counter arguments.'"
He concluded:
"'Supporting the project with aid funds would not in his view be consistent with policy statements by Ministers to Parliament about the basic objectives of the aid programme and the way aid funds are managed, which is also the context in which Parliament voted aid monies. Nor did the project meet well established criteria by which public investments should be assessed.....'"
The Accounting Officer's view was that the Pergau project was "'an abuse of the aid programme in the terms that this is an uneconomic project' and that 'it was not a sound development project.'"
On 26th February the Foreign Secretary, against that advice, took the decision to approve ATP support for the Pergau project and gave the appropriate direction to Sir Tim Lankester on 4th July. On 8th July the United Kingdom and the Malaysian Governments signed the financial agreement for ATP support for the Pergau project. On 12th July the Pergau contract was signed by the British consortium and the Malaysian Electricity Authority. On 15th July there was a press release. It was headed: "BRITAIN PROVIDES £306 MILLION SOFT LOAN TO MALAYSIA." It referred to the project "..... to design and construct a 600 MW hydro electric power station on the Pergau river". One of the notes for editors was in these terms:
"The soft loan will be part financed from the British Aid and Trade Provision (ATP) which is designed to support development projects which are of interest to British industry."
Later the cost to the United Kingdom rose to £234 million.
I turn now to the issues earlier identified. As to standing, the Supreme Court Act 1981, section 31(3) provides:
"No application for judicial review shall be made unless the leave of the High Court has been obtained in accordance with rules of court; and the court shall not grant leave to make such an application unless it considers that the applicant has a sufficient interest in the matter to which the application relates."
Rules of the Supreme Court, Ord. 53 r 3(7) provides:
"The Court shall not grant leave unless it considers that the applicant has a sufficient interest in the matter to which the application relates."
The affidavit of Mr Jackson, the Applicants' Campaign Co ordinator, describes the Applicant company. It is a non partisan pressure group, over 20 years old and limited by guarantee. It has an associated charity which receives financial support from all the main United Kingdom development charities, the churches, the European Community and a range of other trusts. About 60 per cent of its total income comes from members and supporters. The Council of the Applicants has cross political party membership, and, indeed, historically, a Member of Parliament from each of the three main political parties has sat on the Council. There are 7,000 full voting member throughout the United Kingdom with a total supporter base of some 13,000. There are 200 local groups whose supporters actively campaign through letter writing, lobbying and other democratic means to improve the quantity and quality of British aid to other countries. It conducts research and analysis in relation to aid. It is a founder member of the Independent Group on British Aid, which brings academics and campaigners together. It has pressed the British Government, the European Union, the banks and other businesses for better trade access for developing countries. It is in regular contact with the ODA and has regular meetings with the Minister of that department, and it makes written and oral submissions to a range of Select Committees in both Houses of Parliament. It has run all party campaigns against aid cuts in 1987 and 1992.
Internationally, it has official consultative status with UNESCO and has promoted international conferences. It has brought together development groups within the OECD. It tends to attract citizens of the United Kingdom concerned about the role of the United Kingdom Government in relation to the development of countries abroad and the relief of poverty abroad.
Its supporters have a direct interest in ensuring that funds furnished by the United Kingdom are used for genuine purposes, and it seeks to ensure that disbursement of aid budgets is made where that aid is most needed. It seeks, by this application, to represent the interests of people in developing countries who might benefit from funds which otherwise might go elsewhere.
If the Applicants have no standing, it is said that no person or body would ensure that powers under the 1980 Act are exercised lawfully. For the Applicants, Mr Pleming QC submitted that the Respondent himself, in a written statement of the 2nd March 1994, has expressly accepted that the matter is "..... clearly of public and Parliamentary interest ....." It cannot be said that the Applicants are "busybodies","cranks" or "mischief makers". They are a non partisan pressure group concerned with the misuse of aid money. If there is a public law error, it is difficult to see how else it could be challenged and corrected except by such an Applicant. He referred the court to a number of authorities: R v Inland Revenue Commissioners, ex parte National Federation of Self Employed and Small Businesses Ltd [1982] AC 617; in particular the speech of Lord Wilberforce at page 630E and the speech of Lord Diplock at 644E G, where there appears this passage:
"It would, in my view, be a grave lacuna in our system of public law if a pressure group, like the federation, or even a public spirited taxpayer, were prevented by outdated technical rules of locus standi from bringing the matter to the attention of the court to vindicate the rule of law and get the unlawful conduct stopped. The Attorney General, although he occasionally applies for prerogative orders against public authorities that do not form part of central government, in practice never does so against government departments. It is not, in my view, a sufficient "answer to say that judicial review of the actions of officers or departments of central government is unnecessary because they are accountable to Parliament for the way in which they accountable to Parliament for the way in which they carry out their functions. They are accountable to Parliament for what they do so far as regards efficiency and policy, and of that Parliament is the only judge; they are responsible to a court of justice for the lawfulness of what they do, and of that the court is the only judge."
Mr Pleming also referred to R v Monopolies and Mergers Commission, ex parte Argyll Group Plc [1986] 1 WLR 763. At 773H, Sir John Donaldson, when referring to the provision of Ord. 53 r.3(7) said this:
"The first stage test, which is applied upon the application for leave, will lead to a refusal if the applicant has no interest whatsoever and is, in truth, no more than a meddlesome busybody. If, however, the application appears to be otherwise arguable and there is no other discretionary bar, such as dilatoriness on the part of the applicant, the applicant may expect to get leave to apply, leaving the test of interest or standing to be re applied as a matter of discretion on the hearing of the substantive application. At this second stage, the strength of the applicant's interest is one of the factors to be weighed in the balance."
There is a reference to Professor Wade's work on Administrative Law, to which I shall come later.
Mr Pleming also referred to R v Secretary of State for Social Services and Another, ex parte Child Poverty Action Group and Others [1989] 1 All ER 1047, where that group were held to have a sufficient interest or standing. He referred also to R v Her Majesty's Inspectorate of Pollution and Ministry of Agriculture, Fisheries and Food, ex parte Greenpeace Ltd [1994] 4 All ER 329; in particular to passages in the judgment of Otton J at page 350C H and page 351B D, which it is unnecessary to read. Finally on this aspect, he invited the court's attention to R v Secretary of State for Foreign and Commonwealth Affairs, ex parte Rees Mogg [1994] 1 All ER 457, where at 461J Lloyd LJ, delivering the judgment of the Divisional Court, (comprised of himself, Mann LJ and Auld J) accepted that the Applicant had standing "because of his sincere concern for constitutional issues." The question of lawfulness being for the court, Mr Pleming submitted that the court in its discretion should accept the standing of the Applicants. If they cannot seek relief, he said, who can? Neither a Government nor citizen of a foreign country denied aid is, in practical terms, likely to be able to bring such a challenge.
For the Respondent, there is no evidential challenge to the Applicants' standing. Mr Richards made submissions on sufficiency of interest, not with a view to preventing the court from considering the substantive issue as to the validity of the decision, but because sufficiency of interest goes to the court's jurisdiction. (See per Woolf LJ in ex parte Child Poverty Action Group at page 1056B). The Applicants, Mr Richards submitted, are at the outer limits of standing. He submitted, and indeed Mr Pleming accepted, that neither the Applicants, nor any of its individual members, have any direct personal interest in funding under the Act, but they seek to act in the interest of potential recipients of aid overseas. Mr Richards submitted that this is too remote an interest to be sufficient, and he contrasted Greenpeace members, some of whom, as Otton J pointed out, were liable to be personally directly affected by radioactive discharge.
Mr Richards accepted that the requirements of standing will vary from case to case and that the court may accord standing to someone who would not otherwise qualify, where exceptionally grave or widespread illegality is alleged. He referred in ex parte National Federation of the Self Employed and Small Businesses Ltd to that part of Lord Diplock's speech at 637D, which shows that his comments which I have read at 644E G are obiter. He referred to the speeches of both Lord Wilberforce at 633B, and Lord Fraser at 646G, to the effect that a United Kingdom taxpayer's interest, which is no more than that of taxpayers in general, is insufficient to confer standing, save in an extreme case. If no United Kingdom taxpayer could raise the matter, this not being an exceptional case, the Applicants, submitted Mr Richards, cannot be in a better position.
It is to be observed, in passing, that there are dicta since ex parte National Federation of the Self Employed and Small Businesses Ltd, which are in favour of according standing to a single taxpayer in an appropriate case. (See R v Her Majesty's Treasury, ex parte Smedley [1985] QB 657 at 670B per Slade LJ, and at 667F per Sir John Donaldson MR). There is, submitted Mr Richards, "a certain tension" between what Lloyd LJ said in ex parte Rees Mogg, and what Sir John Donaldson said in ex parte Argyll Group at 774A. The rules of standing should not, submitted Mr Richards, be allowed to evolve further so as to embrace the Applicants.
For my part, I accept that standing (albeit decided in the exercise of the court's discretion, as Sir John Donaldson said) goes to jurisdiction, as Woolf LJ said. But I find nothing in ex parte National Federation of the Self Employed and Small Businesses Ltd to deny standing to these Applicants. The authorities referred to seem to me to indicate an increasingly liberal approach to standing on the part of the courts during the last 12 years. It is also clear from ex parte National Federation of the Self employed that standing should not be treated as a preliminary issue, but must be taken in the legal and factual context of the whole case. (See per Lord Wilberforce at 630D, Lord Fraser at 649B and Lord Scarman at 653F).
Furthermore, the merits of the challenge are an important, if not dominant, factor when considering standing. In Professor Wade's words in Administrative Law, seventh edition at page 712:
"..... the real question is whether the applicant can show some substantial default or abuse, and not whether his personal rights or interests are involved."
Leaving merits aside for a moment, there seem to me to be a number of factors of significance in the present case: the importance of vindicating the rule of law, as Lord Diplock emphasised at 644E; the importance of the issue raised, as in ex parte Child Poverty Action Group and Others; the likely absence of any other responsible challenger, as in ex parte Child Poverty Action Group and Others and ex parte Greenpeace Ltd; the nature of the breach of duty against which relief is sought (See per Lord Wilberforce at 630D in ex parte National Federation of the Self Employed and Small Businesses Ltd); and the prominent role of these Applicants in giving advice, guidance and assistance with regard to aid (See ex parte Child Poverty Action Group and Others at 1048J). All, in my judgment, point, in the present case, to the conclusion that the Applicants here do have a sufficient interest in the matter to which the application relates within section 31(3) of the Supreme Court Act and Ord. 53 r.3(7).
It seems pertinent to add this, that if the Divisional Court in ex parte Rees Mogg, eight years after ex parte Argyll Group, was able to accept that the Applicant in that case had standing in the light of his "sincere concerns for constitutional issues", a fortiori, it seems to me that the present Applicants, with the national and international expertise and interest in promoting and protecting aid to under developed nations, should have standing in the present application.
As to disclosure of the two minutes in February 1991, it was common ground that in judicial review proceedings general discovery is not available, as it is in a writ action under Ord. 24 r.1 and 2, that an application can be made under Ord. 24 r.3, which by virtue of Ord. 24 r.8 will be refused if discovery is not necessary for disposing of the case fairly, and that the judgments of the Court of Appeal in R v Secretary of State for the Environment, ex parte London Borough of Islington (unreported 19th July 1991) are pertinent. In that case, Dillon LJ said this (page 10E):
"In the case of R v Secretary of State for Home Affairs, ex parte Harrison ..... this court ..... accepted two submissions of Mr Laws, which are referred to as his 'narrower argument' and his 'wider argument'. The wider argument is stated, at pages 19G to 20B of the transcript, to have been that an applicant is not entitled to go behind an affidavit in order to seek to ascertain whether it is correct or not unless there is some material available outside that contained in the affidavit to suggest that in some material respect the affidavit is not accurate. Without some prima facie case for suggesting that the affidavit is in some respects incorrect it is improper to allow discovery of documents, the only purpose of which would be to act as a challenge to the accuracy of the affidavit. With that I would, in general, agree and indeed the decision binds us. But I would add the qualification that if the affidavit only deals partially, and not sufficiently adequately, with an issue it may be appropriate to order discovery to supplement the affidavit, rather than to challenge its accuracy. That must depend on the nature of the issue."
The narrower argument referred to in that passage is not relevant for present purposes.
At page 16D of the transcript, McCowan LJ said:
"The second matter which emerges from the authorities is that unless the applicant in judicial review is in a position to assert that the evidence relied on by a Minister is false, or at least inaccurate, it is inappropriate to grant discovery in order to allow the applicant to check the accuracy of the evidence in question."
Mr Pleming submitted that the evidence for the Respondent in the affidavit of the Respondent himself, and of Mr Manning, demonstrates, particularly when compared with the far fuller summaries of the minutes exhibited elsewhere in the evidence, that the affidavit summaries are at best incomplete, and at worst misleading. The material evidence is, in these terms, in paragraph 4 of the Secretary of State's affidavit:
"The Accounting Officer of the Overseas Development Administration told me that, given its price, the project was premature by several years and that the extra cost of building it now could well exceed the value of the large sum of British taxpayers' money which the project required."
Mr Manning's affidavit at paragraph 35 is in these terms:
"..... Sir Tim Lankester advised that the provision of aid funds for Pergau would not be consistent with his responsibility to ensure that aid funds were administered in a prudent and economic manner, and that he would wish to have an instruction from the Minister or from the Secretary of State if ODA were to incur expenditure on the project."
Mr Pleming submitted that it is no sufficient answer to a claim for discovery to make a bare assertion that the summaries provided are accurate and complete. The court should exercise its power, which is not enjoyed by House of Commons Committees, to compel disclosure. This, he submitted, was not a fishing exercise or a "Micawber" application and discovery was sought in relation to only two documents. If the summary of the minutes provided to the Foreign Affairs Committee was accurate and complete, there was no reason why the minutes should not be disclosed. If it was inaccurate, the minutes should be disclosed.
Mr Richards, at the outset of his submissions, drew the court's attention to the terms of a letter dated 11th May 1994, sent by the Respondent personally to the Foreign Affairs Committee, which contained the unambiguous assurance that the summaries of the minutes which had been provided to that Committee and which are, or will be exhibited, to affidavits before this court, are "full and accurate." He submitted that, in the light of ex parte London Borough of Islington, there was no basis for going behind the evidence or the summaries and looking at the minutes themselves.
In my judgment, although the affidavits of the Respondent and of Mr Manning give manifestly incomplete summaries of the minutes (to which indeed neither of them refers) and of the advice tendered to the Secretary of State, the Respondent's letter of 11th May 1994 provided, in the circumstances of this case, an effective answer to the claim for discovery when taken in conjunction with the summaries of the minutes exhibited elsewhere in the evidence. There appeared no basis, looking at this total picture, for questioning the accuracy of those summaries, which, in the light of ex parte London Borough of Islington, seems to be a necessary prerequisite for granting discovery of original documents. Furthermore, the summaries, in my view, provided the Applicants with highly valuable ammunition to which it seemed unlikely that the minutes themselves would materially add. I was, therefore, wholly unpersuaded that disclosure of these minutes was necessary for the fair disposal of the issues in this case. It was for these reasons that we indicated at an earlier stage that disclosure would not be ordered.
I turn to the merits of the substantive application. Mr Pleming submitted that the power conferred by section 1(1) of the 1980 Act is limited to the purpose imposed by the subsection, namely, in the present circumstances, for promoting development. This, he submitted, is concerned with the authorisation of assistance, not projects. The correct test is: did the Secretary of State decide to furnish the Malaysian Government with financial assistance for the purpose of promoting development? Accordingly, he submitted, if aid is to be granted, projects have to be "sound development projects". The Pergau Dam was not.
It is common ground that a power exercised outside the statutory power is unlawful. This may be the consequence of an error of law in misconstruing the limits of the exercise of the power, or because the exercise is ultra vires, or because irrelevant factors were taken into account.
In the present case Mr Pleming submitted that the power to furnish assistance is not absolute or unfettered, but could only be exercised to advance the purposes for which it was conferred. The principle is correctly summarised by Professor Wade in his previously cited work at page 413:
"Statutory powers, however permissive, must be used with scrupulous attention to their true purposes and for reasons which are relevant and proper."
A political purpose can taint a decision with impropriety. (See per Glidewell J in R v Inner London Education Authority, ex parte Westminster City Council [1986] 1 All ER 19, and R v Governor of Brixton Prison, ex parte Soblen [1963] 2 QB 243, where at page 302 Lord Denning MR said, in relation to the decision to deport:
"If it was done for an authorised purpose, it was lawful. If it was done professedly for an authorised purpose, but in fact for a different purpose with an ulterior object, it was unlawful."
In the present case, as Mr Richards rightly points out, there is no "professedly" improper purpose).
Before considering the way in which Mr Pleming developed his argument, it is convenient to set out the material parts of the Respondent's evidence on which he relied. The Secretary of State's affidavit deals with matters in the second half of paragraph 2 and paragraphs 3 and 4, all of which I will read:
"2. ..... In exercising these powers, careful consideration is therefore given to whether a proposal for assistance does indeed promote one or more of these purposes. Subject to this, I also regard it as perfectly proper and indeed essential given my general responsibilities as Secretary of State to take into account other wider political and economic considerations, such as the promotion of regional stability, good government, human rights or British interests.
3. ..... Throughout the decision making process in which I was involved, I considered that I was dealing with a development project, that is to say "a project whose purpose was to help Malaysia to carry out its plans for addressing its energy needs and thus promote the country's economic development. This was fundamental to my thinking.
4. In reaching a decision on the provision of assistance, I also had to take into account two additional considerations. On the one hand, I was aware that formal offers of financial support had already been made and renewed to the Malaysian Government, which clearly regarded this project as a key element of their programme for addressing their substantial power requirements. I took the view that the withdrawal of the offer to provide assistance would affect the United Kingdom's credibility as a reliable friend and trading partner and have adverse and far reaching consequences for our political and commercial relations with Malaysia. On the other hand, the price of the project, on which the initial offer of aid was made, had risen significantly."
There then follows a summary of the advice given to him, and then this:
"This advice raised important questions of the economy and efficiency of public expenditure which I took fully into account in reaching my decision. Neither he, nor any other official, advised me that there would be any impropriety or illegality in providing assistance to the project."
Mr Manning's affidavit deals with the matter in paragraph 32:
"The Principal Finance Officer noted that according to methodology which ODA had developed for assessing projects, one might contest whether Pergau would contribute to the development of Malaysia, because of cheaper alternatives, and therefore whether the financing of it was ultra vires the Overseas Development and Cooperation Act. He believed however that that would be a difficult position to sustain in legal terms for a power project which was likely to be successfully implemented in producing electricity for which there was expected to be demand. In the view of the Principal Finance Officer, it was important that the Secretary of State, in exercising his powers under the Act, had in mind that the project would benefit Malaysia in terms set out in Section "1 of the Act. The Principal Finance Officer concluded that, provided the Secretary of State did so, he would not advise that expenditure on Pergau infringed the requirements of propriety or regularity, so long as Treasury authority were obtained and proper Estimates provision taken."
Paragraph 35 of Mr Manning's affidavit I have already read. Paragraph 36 is in these terms:
"As the Secretary of State informed the Foreign Affairs Committee in February 1994, legal advice was not sought by Sir Tim Lankester or the Principal Finance Officer. Nevertheless, they carefully considered the question of whether finance for the project would offend against propriety and regularity, as well as against prudent and economical administration, and concluded that it would not. No suggestion was made by officials that any illegality would arise if Ministers were to approve the project."
Mr Pleming submitted that, in the light of that material, the Secretary of State was motivated by purposes which were not permitted by the statute, that his decision was made in reliance upon irrelevant facts and matters and in defiance of relevant considerations and advice, in particular to the effect that the project was not sound economic development and was not made for a purpose within section 1. The crucial question, as it seems to me, is whether there was, indeed, a purpose within the Act.
Mr Pleming drew attention to the rationale of the Aid and Trade Provision since its inception in 1977, which has apparently been to provide finance for sound development projects, which are also of commercial and industrial importance to Britain. He submitted that it has not been suggested by the Government, until this case, that financial aid can lawfully be given in support of a project which does not satisfy the test of being sound economic development. He drew attention to the statement by the Minister for Overseas Aid to Parliament of February 1988, which refers to "sound developmental projects"; to the Aid and Trade Provision Guidelines (applicable in 1991), which refer to sound investments which are financially viable and likely to bring economic benefits to the recipient country; and to the Observations by Government in the second report of the Foreign Affairs Committee 1986 to 1987, where in paragraph 4 appears this:
"There is one objective, which is the promotion of development. This is ..... entirely compatible with also serving political, industrial and commercial interests."
In paragraph 7 appears this:
"We support activities which are technically sound, financially viable and will bring economic benefits."
He referred also to the 1987 Public Expenditure White Paper which referred to ATP as being used to "help finance projects that are economically, financially and technically sound and are also of industrial and commercial importance to the United Kingdom". He referred to Sir Tim Lankester's evidence to the Public Affairs Committee, that the purpose of the ATP programme is to support sound developmental projects.
Financial assistance, submitted Mr Pleming, does not promote development if it is known to be a contribution to a project which does not satisfy the test of sound economic development. The provision of economic goods, such as energy, regardless of cost and economic soundness, is not by itself enough to constitute financial assistance for "the purpose of promoting development". That this was Sir Tim Lankester's view, is, he submitted, supported by passages in the minutes of 5th and 7th February, which I have already read out. In particular, Mr Pleming placed emphasis on the words of the minute of 5th February, which reads:
"For foreign aid contributing to the development of Malaysia, it would at best be offsetting the extra cost of choosing Pergau."
In the minute of 7th February, Mr Pleming stresses the words:
"The project was an abuse of the aid programme in the terms that this is an uneconomic project."
It is not suggested, points out Mr Pleming, by the Respondent in his affidavit, that Sir Tim Lankester's opinion and advice were other than correct. The provision of ATP for a purpose known by the Government not to be "sound economic development", submitted Mr Pleming, could not be within section 1, and in the absence of any evidence that financial assistance would be likely to promote development, there is no room for any wider perspective, such as that which the Secretary of State refers to having taken into consideration. The reason or motive, submitted Mr Pleming, was political or diplomatic, namely that the Prime Minister had given an undertaking in March 1989 that Britain would provide ATP support, and to go back on that word would be detrimental to the interests of Britain, British companies and British workers. Section 1, submitted Mr Pleming, confers no power to make decisions on such a basis.
Mr Richards submitted that the decision to furnish assistance in connection with the Pergau project fell squarely within the power conferred by section 1(1). In particular: (a) it was furnished for a purpose specified, namely a developmental purpose, and (b) the Secretary of State was entitled to take account of wider political and economic considerations. It is common ground that assistance must be furnished for the relevant purpose. But, submitted Mr Richards, there is no real distinction between "assistance" and "project", because in the absence of exceptional features, if the project is for promoting development, the assistance must be also. It is also, it has to be said, common ground that a decision maker can take into account political and commercial considerations, provided that there is a sufficient substantive power within section 1 of the Act.
Mr Richards submitted that this decision was taken by the Secretary of State personally and his thinking is of decisive importance in determining the purpose for which the assistance was furnished. The Secretary of State plainly considered, from the terms of his affidavit, that the assistance was for a developmental purpose, and he also took into account additional considerations. Mr Richard submitted further that the Applicants' argument that an unsound development cannot furnish a purpose within section 1 should be rejected. First, because the word "sound" does not appear in the Act. What the statute requires is a developmental purpose within the broad terms of section 1(1), and the statutory power cannot be limited by the adoption of "soundness" by an ATP scheme or anything else. Secondly, submitted Mr Richards, the Secretary of State (the decision maker) took the view that the project was for a developmental purpose, and that Sir Tim Lankester's concerns raised "important questions of the economy and efficiency of public expenditure". The project was of undoubted benefit because it met a need for electricity, and it does not negative a purpose within the section that that need could have been met in other ways. He submitted that the Malaysian Government were committed to the project, that the only effect of the grant of aid was to bridge the gap between the cost of Pergau and other cheaper means of generating electricity, and that this did not give rise to a cost penalty. He referred to paragraph 32 of Mr Manning's affidavit, which I have already read.
Mr Richards further submitted that the sole purpose for which assistance was furnished was the developmental purpose. The wider political and economic considerations taken into account by the Secretary of State were not "purposes" for which assistance was furnished, but were "considerations" that the Secretary of State was entitled to take into account. Alternatively, if the wider "considerations" are to be regarded as "purposes" for which assistance was furnished, the existence of subsidiary purposes does not invalidate the decision, provided that those subsidiary purposes are not themselves irrelevant considerations. As to this part of Mr Richards' submission, which, as he accepted, does not avail him unless he succeeds in showing that there was a development purpose within section 1, I confess to experiencing the same difficulty over semantics, which obviously troubled Megaw J in Hanks and Others v Minister of Housing and Local Government [1963] 1 QB 999 at 1020, and Glidewell J in R v Inner London Education Authority, ex parte Westminster City Council [1986] 1 WLR 28. However, it is not disputed that the weight of competing factors (or whatever noun is applied to them) is a matter for the Secretary of State, once there is a purpose within section 1 of the Act.
For my part, I am unable to accept Mr Richards' submission that it is the Secretary of State's thinking which is determinative of whether the purpose was within the statute and that therefore paragraph 3 of his affidavit is conclusive. Whatever the Secretary of State's intention or purpose may have been, it is, as it seems to me, a matter for the courts and not for the Secretary of State to determine whether, on the evidence before the court, the particular conduct was, or was not, within the statutory purpose.
As to the absence of the word "sound" from section 1(1), it seems to me that if Parliament had intended to confer a power to disburse money for unsound developmental purposes, it could have been expected to say so expressly. And I am comforted in this view by the way in which the successive Ministers, Guidelines, Governments and White Papers, identified by Mr Pleming, have, over the years and without exception, construed the power as relating to economically sound development. That also, judging from his minutes, was the view of Sir Tim Lankester in 1991, when he alone advised the Secretary of State. I add, parenthetically, that I do not overlook paragraph 36 of Mr Manning's affidavit, but there is no affidavit before this court from Sir Tim Lankester.
As to Mr Richards' submission that the dam was of undoubted benefit because it met the need for electricity, this, as it seems to me, begs the question of whether there was a need for energy generated at substantially greater cost than by any other means, and the Malaysian Government's determination to go ahead with the scheme does not, as it seems to me, advance the argument. Such a determination is no doubt a necessary prerequisite for the granting of any overseas aid.
Accordingly, where, as here, the contemplated development is, on the evidence, so economically unsound that there is no economic argument in favour of the case, it is not, in my judgment, possible to draw any material distinction between questions of propriety and regularity on the one hand and questions of economy and efficiency of public expenditure on the other. It may not be surprising that no suggestion of illegality was made by any official, or that the Secretary of State was not advised that there would, or might be, any illegality. No legal advice was ever sought.
The Secretary of State is, of course, generally speaking, fully entitled, when making decisions, to take into account political and economic considerations such as the promotion of regional stability, good government, human rights and British commercial interests. In the present case, the political impossibility of withdrawing the 1989 offer has been recognised since mid April of that year, and had there, in 1991, been a developmental promotion purpose within section 1 of the Act, it would have been entirely proper for the Secretary of State to have taken into account, also, the impact which withdrawing the 1989 offer would have had, both on the United Kingdom's credibility as a reliable friend and trading partner and on political and commercial relations with Malaysia. But for the reasons given, I am of the view, on the evidence before this court, that there was, in July 1991, no such purpose within the section. It follows that the July 1991 decision was, in my judgment, unlawful. This, of course, serves to reinforce the conclusion already indicated, that the Applicants have standing.
The final question is as to relief. It is not suggested by Mr Richards that delay is a bar. That is unsurprising, as no press release was issued, as is apparent, until after the relevant agreements had been signed. It was not until earlier this year that material matters could be known to the Applicants: Sir Tim Lankester gave evidence to the House of Commons Public Accounts Committee on 17th January; the Secretary of State gave evidence to the Foreign Affairs Committee on 2nd March, and the proceedings were instituted in April. In any event, the general importance of the matter may itself be a reason for resolving the substantive issues, even where there has been delay. (See per Taylor J, as he then was, in R v Secretary of State for the Home Department, ex parte Ruddock and Others [1987] 1 WLR 1482).
For my part, I am entirely satisfied that there was good reason within Ord. 53 r.4 for extending time, and that the delay here provides no basis in itself for refusing relief under section 31(6) of the Supreme Court Act 1981. As I indicated at the outset, the Applicants would apparently be content with a declaration if the Respondent agreed to take appropriate steps to make good the deficiency in the overseas aid budget. It is common ground, if my Lord agrees with my reasoning and conclusions that, unravelling of some sort will be necessary, but the precise form of that unravelling is not a matter for the court. It was therefore agreed, in the course of submissions, that discussions would take place between parties and that further argument might be necessary as to the form of relief.
For the moment, I content myself with saying that, for the reasons given, I would grant a declaration that the challenged decision of the Secretary of State for Foreign Affairs in July 1991 was unlawful.
MR JUSTICE SCOTT BAKER: I agree that in making the grant, the Secretary of State acted unlawfully and that this application should succeed for the reasons given by my Lord.
When the decision was made in July 1991, there was nothing in aid terms to justify the use of public money for the Pergau project. The Secretary of State's power to provide financial assistance under section 1(1) of the 1980 Act was not triggered. Had it been, that would have brought into play the opportunity for the Secretary of State to take into account political and wider economic considerations, such as British commercial interests. But it was not.
On the question of standing, I have had no difficulty in concluding that the World Development Movement Limited has established a sufficient interest to clothe the court with jurisdiction to hear this application.
MR PLEMING: My Lords, on the question of relief, may I take you to page 2 of the court documents? What I formally ask for, on behalf of the Applicants, are relief in terms 1, 3 and 4. My Lords, could I merely make the request and then leave it, as your Lordships have indicated, for further submissions, if it is necessary to go beyond the declaration. However, I would be asking for certiorari and prohibition to stop further
LORD JUSTICE ROSE: You did not say term 3. You said terms 1, 2 and 4, which are certiorari and the declaration.
MR PLEMING: Terms 1, 3 and 4 are to stop further funds from going out of the aid and budget, because it has not been depleted. The other application is for costs.
MR RICHARDS: My Lords, on relief, I would submit that the declaration of the kind that my Lord, Rose LJ, intimated at the end of his judgment is wholly sufficient for the Applicants' purposes. The consequence, of course, is that payments out of the funds, made available by Parliament under section 1 of the Act, are themselves unlawful, and the effect of the declaration will be that measures will then have to be taken to deal with the unravelling of the consequences of the unlawfulness of the decision, as your Lordships have held. I submit nothing further is required, and the most obvious thing, prohibition, is not required or appropriate in this case, and in every other case the Secretary of State will take account of the court's view as to the lawfulness of the original decision, and no more, in my submission, is required.
As to costs, I cannot resist the application. I, myself, have an application for leave to appeal, having regard to the undoubted importance of the issue in this case, to which my Lord, Rose LJ, himself referred in the course of his judgment when dealing with, amongst other things, the question of standing. I would submit that the questions that have been raised, albeit at the end of the day, fairly narrow questions, on the construction of section 1 of the 1980 Act, are, having regard to the circumstances of this case, of obvious importance and merit consideration.
LORD JUSTICE ROSE: An appeal in this matter would go to the Court of Appeal, would it, if we or they were to grant leave?
MR RICHARDS: and in the ordinary civil procedure, whereby leave is required in judicial review applications.
The other thing I was going to mention were two slips of the tongue, when your Lordships were dealing with the judgment. At the very end you were talking about a declaration. Your Lordship referred to the "Secretary of State for Home Affairs". No doubt in the transcript it will be corrected to the "Secretary for the Foreign Affairs".
LORD JUSTICE ROSE: This will be amended.
MR RICHARDS: Another significant point is that, when dealing with the merits and when turning to my submissions, your Lordship said: "It was common ground that assistance must be furnished, not that the project must be furnished." I think your Lordship meant that it would be "common ground that assistance must be furnished for the relevant purpose" and not that the "project must be for the relevant purpose". No doubt that will be amended also.
LORD JUSTICE ROSE: That will be amended in the transcript.
MR RICHARDS: Those are the matters that I wish to draw to your Lordships' attention.
LORD JUSTICE ROSE: Thank you very much. Mr Pleming, there is no problem about costs. So far as relief is concerned, what is going through my mind, and I have not discussed with my Lord, is that liberty to apply might be an appropriate Order. I should have canvassed that with you, Mr Richards, when you were on your feet.
MR RICHARDS: My Lord, I could not object to that.
LORD JUSTICE ROSE: So far as relief is concerned, we shall give liberty to apply. You will get your costs. Do you want to say anything about leave to appeal?
MR PLEMING: My Lord, the only point that I make is the question of my clients' position as a small charity, compared with a small company with limited funds. We have brought the case so far and brought it successfully. I have no submissions to make on whether or not leave should be granted. That is entirely for your Lordships, but whether it should be granted on terms as to the future funding of litigation, I leave that to your Lordships.
LORD JUSTICE ROSE: Mr Richards, we shall not give you leave. You may renew your application elsewhere, if you think it appropriate.
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