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PART 2

THE DEVELOPMENT OF THE PROJECT

MONETARY REMEDIES IN PUBLIC LAW

2.1      Our initial concern was with the availability of monetary remedies in public law.^[1] It was in this phase that we published (in October 2004) a discussion paper.^[2] The general rule is supposed to be that, on judicial review, damages are not available.^[3] The central argument of the discussion paper was that there was a case for saying that a series of autonomous developments in the law had made that general rule less general, to the point of becoming anomalous. Those developments were in human rights law, European Union law, and in the liability in tort of public bodies (where the impact of the Human Rights Act 1998 and European Union law were themselves having an effect).

The limitations on judicial review

2.2      Since its reformulation with the introduction of Order 53 in 1977, judicial review has been the central procedure for the development of public law in England and Wales.^[4] However, its scope is limited.

2.3      First, the remedies generally available on judicial review are discretionary. Although Lord Bingham has suggested extra-judicially that any discretion should be tightly controlled and carefully exercised,^[5] the fact remains that remedies sought in judicial review actions are not available as of right.

2.4      A second important limitation is the short time limit for claims. A judicial review must be brought promptly and not later than three months after the ground for review first arose.^[6] Although an application within three months may be refused,^[7] there is also scope for the court to extend the three month period.^[8]

2.5      Finally, and crucially for this project, in general the award of damages is not a remedy available on judicial review. Judicial review does not, therefore, provide an avenue for compensation to an applicant who has suffered loss as a result of an unlawful administrative act.

The impact of the Human Rights Act 1998

2.6      Public authorities may now be liable in damages if they are found to have committed breaches of individuals' human rights contrary to section 6 of the Human Rights Act 1998.

2.7      A degree of overlap exists between the liability of public bodies for loss caused by administrative acts and the liability of public authorities for breaching individuals' human rights. The concepts of a "public body" (subject to judicial review) and a "public authority" (subject to section 6 of the Human Rights Act 1998) have been held to be analogous.^[9] Acts of public authorities alleged to breach human rights will usually be acts in the public sphere, and so also subject to judicial review.

2.8      If the Human Rights Act 1998 opened up liability for compensation in respect of administrative acts which were (merely) unlawful in a public law sense, the courts have now strictly limited the amount of damages likely to be awarded. Section 8(3) of the Human Rights Act 1998 states that damages may only be awarded where the court is satisfied that such an award is necessary to afford just satisfaction to the person in whose favour it is made. The award of damages is therefore discretionary, the discretion being exercised by reference to specific criteria. Section 8(3) of the Human Rights Act 1998 states that in determining whether to award damages, or the amount of an award, the court must take into account the principles applied by the European Court of Human Rights in relation to the award of compensation under Article 41 of the European Convention on Human Rights.

2.9      The courts have, as a result, been able to develop a distinct approach to damages. In Anufrijeva v London Borough of Southwark,^[10] the Court of Appeal made it clear that, unlike private law actions where the only remedy claimed was damages, the primary concern in human rights cases was to end the relevant infringement. In such cases, there was a balance to be struck between the interests of the victim and those of the public as a whole; damages are a remedy of "last resort".^[11]

2.10      The court said that the "critical message" is:

that the remedy has to be "just and appropriate" and "necessary" to afford "just satisfaction". The approach is an equitable one… .There have been cases where the seriousness or the manner of the violation has meant that as a matter of fairness, the European Court of Human Rights has awarded compensation consisting of "moral damages". The Law Commission stated in its report that the European Court of Human Rights took account of "a range of factors including the character and conduct of the parties, to an extent which is hitherto unknown in English law".^[12]

2.11      The court observed that there is no difficulty in assessing damages where pecuniary loss has occurred. The difficulty was in assessing loss that is not quantifiable in financial terms, such as suffering anxiety and distress. The court considered the issue of the principled approach to be taken to the quantum of Human Rights Act damages. It concluded that damages awards in this area should generally be modest, since limited resources needed for the public benefit, including primary care, would be depleted by substantial damages awards.^[13]

2.12      This message was underlined in R (Greenfield) v Secretary of State for the Home Department,^[14] where Lord Bingham forcefully asserted the secondary nature of damages in the human rights context:

the 1998 Act is not a tort statute. Its objects are different and broader. Even in a case where a finding of violation is not judged to afford the applicant just satisfaction, such a finding will be an important part of his remedy and an important vindication of the right he has asserted… the purpose of incorporating the Convention in domestic law through the 1998 Act was not to give victims better remedies at home than they could recover in Strasbourg.^[15]

2.13      So damages are available where there has been a breach of a victim's Convention rights, but those damages are discretionary and modest, allowing the court to tailor the remedies to fit the particular circumstances of the case. Although complaints certainly have been made about the limiting of damages in this way, others may see this flexible approach as an appropriate model for damages in a public law context.

The impact of European Union law

2.14      The European Court of Justice has developed a now well established and comprehensive doctrine of state liability in damages. This law must be applied by our domestic courts when a public body has acted under the authority of EU law.

2.15      It has been suggested that the principles established by the European Court of Justice, and in particular the "sufficiently serious breach" test could inform reformed principles for English law on state liability.^[16]

2.16      In the Francovich case, the court held that the principle of state liability for breach of EU law is inherent in the EC Treaty.^[17] In this and the Brasserie du Pêcheur case,^[18] the court set out the test for member state liability for damages. Where an act involved an alleged misuse of discretion, three requirements must be satisfied. First, the rule of EU law concerned must be intended to confer rights on individuals. Secondly, the breach must be sufficiently serious. Thirdly, there must be a direct causal link between the breach and the damage suffered.

2.17      The first test is usually easily satisfied; it has been said that "up to now, no decision of the Court of Justice on member states' liability has found this requirement wanting…It is sufficient that the citizen can derive some benefit from the application of a given provision."^[19] The third test, causation, appears to be broadly similar to the causation requirement in English law. The key element is the second stage of the test, that the breach must be sufficiently serious. The European Court of Justice uses this test as what could be seen as a "control mechanism"^[20] to determine when member states should or should not be liable in damages. The court has stated that, for liability to arise, the state institution must have "manifestly and gravely exceeded the limits of its discretion" and that the breach must be "inexcusable".^[21] It is not necessary to prove fault beyond the sufficiently serious breach of EU law.

2.18      So damages are now available for the citizen wronged by the state, where that wrong is a breach of European Union law, and where the breach is sufficiently serious to justify the payment of compensation.

Developments in tort law

2.19      At the same time, the traditional antipathy of the courts to enquiring into mainstream Governmental activity, and awarding damages when people where harmed by it, was being eroded. For an extended discussion of these developments, see Part 3 below. In the discussion paper, we saw these developments as providing an additional argument for extending some form of

monetary remedy in the public law sphere – it underpinned the potential unfairness of the "gap" identified below – rather than seeing developments in tort law as one of the main focuses of the project.

The gap

2.20      However, not withstanding these important developments, the general rule remains. Set against the backdrop of the current availability of a private negligence action, this means that there remains the key gap in the law that we identified in the discussion paper: where a public authority has acted unlawfully in a public law sense (but not in breach of Convention rights or European Union law) and thereby caused economic loss to the individual, the individual has no claim against the authority. The paradigm case is that of the wrongful non-issuing, or withdrawal, of a licence to engage in a remunerative activity.^[22]

THE SEMINAR: A BROADER REMEDIAL FOCUS

2.21      The discussion paper set the scene for a seminar we convened in November 2005. Presided over by Lord Phillips, Master of the Rolls, the seminar was attended by judges, academics, practising lawyers, ombudsmen, and Government officials.^[23]

2.22      In discussing the seminar, it is important to bear in mind that participants were certainly not all of one mind. However, we drew from the seminar a number of lessons.

2.23      Most of those attending thought that the concentration on monetary remedies was too narrow. The feeling was that it was necessary to consider what kind of remedies against public bodies people wanted – which would certainly not always be damages. The role of ombudsmen in particular was emphasised, while it was accepted that there could be problems with their jurisdiction (in particular, where an allegation of maladministration might also be pursued in the courts).

2.24      There was also a strong emphasis on the importance of recognising the difficulties facing public bodies, as they try to discharge their functions for the public benefit. First, there was the straightforward point that having to divert funds to pay compensation claims and legal fees could have a debilitating effect on public resources.

2.25      Secondly, it was considered that liability in damages could distract public bodies from making decisions in the wider public interest. It could distort service provision by giving rise to "defensive administration", in which decisions were taken by risk-averse public bodies to avoid liability rather than necessarily in the best interests of the public. The alternative view, that liability would promote good practice, was viewed with some scepticism. Some participants argued that judicial review was in any event sufficient to secure compliance with the law – the extension of liability for compensation was unnecessary to secure that aim.

2.26      Further, there was a sense that while there was a case for providing useful feed-back to decision makers, and tort-litigation was not well suited to perform such a role, other mechanisms could do so. Ombudsmen may make recommendations for changes in practice, for instance, in a particular public body as a result of an individual complaint, and can also make general recommendations in their annual reports.

2.27      Participants discussed the possibility of fashioning a new remedy in public law, designed to secure monetary redress, calculated in an appropriate way, and taking account of resource implications. Speaking broadly (for again it should be emphasised that not all participants were of one voice), the seminar dismissed tort as a template for a new public law remedy.

2.28      Finally, many participants agreed that reform should be accomplished by legislation rather than primarily by the courts. Any new approach to remedies would, of course, have to be implemented in an indefinite variety of situations by the courts. But the common law was unlikely to have the reach required to make the necessary reforms, and there were advantages in legislation laying down the basic principles.

FURTHER CONSIDERATION: THE IMPORTANCE OF TORTIOUS REMEDIES

2.29      But rejecting the development of tort law (particularly by the courts) does not mean side-lining the importance of tort liability for a substantive project. Further consideration has led us to conclude that the project must concern itself centrally with the liability of public bodies in tort. For us to come to a principled solution to the question of when and how citizens should be able to obtain redress from public bodies that have acted wrongfully requires that we consider both the remedies available in public law and those available in private law.

2.30      Many of the broader considerations that apply to the development of remedies in public law – the particular position of public bodies as actors in the public, rather than a private, interest; the public nature of their resources; the poly-centric nature of decision making, at least in discretionary areas with a high policy content; the standing of the executive in a democracy – apply with equal force to liability in, say, negligence, as they do to public law. If a potential defect of the current law is the divergence of the tests for lawfulness/liability in public and private law (a public body can act unlawfully, but not be liable in negligence, and, in theory, could be liable in negligence when it has not acted unlawfully), then that would only be exacerbated if we were to consider public law remedies in isolation.

2.31      Put another way, there is a danger in identifying a "gap", and thinking of law reform as simply filling that gap. We must also look to see to what extent those parts of the law that constitute the filling between which the gap appears are justified and appropriately configured. To the extent that liability in tort is one of the columns between which the gap identified above appears, it deserves critical scrutiny.

2.32      Nothing in this reconsideration casts doubt on the continuing importance of the other principal conclusions of the seminar – that we must consider alternative remedies, including ombudsmen, mediation, the role of internal reviews and complaints systems and so on; that the particular position of public bodies should be recognised and validated; and the importance of feed-back mechanisms recognised, to ensure that actions for remedies improve the future delivery of public services.

2.33      A recognition of the role of non-court mechanisms does not, however, mean that it would be either practical or desirable for us to attempt to stipulate exactly how such methods should be configured and used by Government. Our central concern must remain the law as implemented by the courts. But the challenge is to ensure that the law is constructed in such a way as to ensure that the advantages of non-court processes are recognised and given the space they need. The law, or the interests of the legal system and those who work it, should not be allowed to over-ride the greater public benefit that could be delivered by these approaches in appropriate cases. We must at least consider how the gravitational pull of litigation for compensation can be neutralised or reversed.

2.34      While we need to consider tort liability, our target is not the ordinary liability of state bodies in circumstances identical to those in which a private citizen or company would be liable. Our concern is with those activities which are of a truly Governmental nature, involving policy making or the implementation of policy involving a significant exercise of discretion. We will later suggest that there are great difficulties in drawing a line on the spectrum of Government activity that clearly distinguishes between this kind of activity and ordinary operations in the context of which the treatment of public authorities as private bodies is unproblematic. The extent to which it will be either possible or desirable to do so will be a fundamental question for the substantive project and will depend on how our proposals develop. Our subject matter, however, is the truly Governmental, not that which is merely incidental to any activity.

2.35      Accordingly, our starting point now, while maintaining a broad perspective on the notion of remedies, is to approach the question bi-focally – to maintain a focus on both public law unlawfulness and liability in tort.

2.36      To properly understand this position requires a more detailed consideration of how and when damages may be awarded against public bodies. We turn to this in Part 3.

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Note 1    This concern was particularly prompted by a paper by Michael Fordham, "Reparation for Maladministration: Public Law's Final Frontier", given at the Government Legal Service’s annual conference in March 2003 and subsequently published in (2003) 8(2) Judicial Review 104.    [Back]

Note 2    Law Commission, Public Law Team Discussion Paper, Monetary Remedies in Public Law (October 2004), available at http://www.lawcom.gov.uk/docs/monetary_remedies_disc_paper.pdf     [Back]

Note 3    The Supreme Court Act 1981, s 31(4) provides that damages are only available on an application for judicial review if a claim for damages is joined to the application and the court is satisfied that damages would have been awarded in that action.    [Back]

Note 4    The amended Order 53 of the Rules of the Supreme Court (now replaced by Part 54 of the Civil Procedure Rules) was largely based on the Law Commission Report on Remedies in Administrative Law (1976) Law Com No 73, Cmnd 6407. Much of this reform was subsequently underpinned by the Supreme Court Act 1981, s 31.     [Back]

Note 5    T Bingham, “Should Public Law Remedies be Discretionary?” [1991] Public Law 64.    [Back]

Note 6    Civil Procedure Rules, r 54.5.    [Back]

Note 7    Supreme Court Act 1981, s 31(6) and (7).    [Back]

Note 8    Civil Procedure Rules, r 3.1(2)(a).    [Back]

Note 9    See Poplar Housing and Regeneration Community Association v Donohue [2001] EWCA Civ 595, [2002] QB 48 at [65].    [Back]

Note 10    [2003] EWCA Civ 1406, [2004] 2 QB 1124.    [Back]

Note 11    Above at [56].    [Back]

Note 12    Anufrijeva v London Borough of Southwark [2003] EWCA Civ 1406, [2004] 2 QB 1124 at [66], by Lord Woolf CJ. This referred to our “information” report, Damages under the Human Rights Act 1998 (2000) Law Com No 266; Scot Law Com No 180.    [Back]

Note 13    Above at [75].    [Back]

Note 14    [2005] UKHL 14, [2005] 1 WLR 673.     [Back]

Note 15    Above at [19].    [Back]

Note 16    See for example, P Craig, “The Domestic Liability of Public Authorities in Damages: Lessons from the European Community?” in J Beatson and T Tridimas eds, New Directions in European Public Law (1998); R Carnwath, “The Thornton Heresy Exposed: Financial Remedies for Breach of Public Duties” [1998] Public Law 407. See also para 3.62 below.    [Back]

Note 17    Cases C-6, 9/90 Francovich v Italy [1991] ECR I-5357.    [Back]

Note 18    Cases C-46/93 and C-48/93 Brasserie du Pêcheur SA v Germany; R v Secretary of State for Transport, ex p Factortame Ltd [1996] ECR-I 1029.     [Back]

Note 19    R Caranta, “Public Law Illegality and Governmental Liability” in D Fairgrieve, M Andenas and J Bell (eds), Tort Liability of Public Authorities in Comparative Perspective (2002), p 348.    [Back]

Note 20    See the discussion of “control mechanisms” in Part 3 below.    [Back]

Note 21    Cases C-46/93 and C-48/93 Brasserie du Pêcheur SA v Germany; R v Secretary of State for Transport, ex p Factortame Ltd [1996] ECR-I 1029.    [Back]

Note 22    See Example 11 in Part 3 below (below para 3.16).    [Back]

Note 23    A summary report of the discussion, which was held under the Chatham House rule and is therefore reported anonymously, is available on the Law Commission website: http://www.lawcom.gov.uk/docs/Final_report.pdf (last visited 7 Sept 2006).    [Back]