UK: The Westminster District Audit Case: Generally Applicable Legal Principles

The Westminster City Council district audit case, Porter v Magill [2001] UKHL 67 with its twists and turns has made the headlines on a number of occasions. Most recently the House of Lords has given judgment in favour of the auditor against Dame Shirley Porter and Mr Weeks and certified that a sum of approximately £20 million be paid by them to the Council. The policy of targeting marginal wards for the sale of council housing stock was held by the House of Lords to be unlawful. Lord Bingham stated it was "a deliberate, blatant and dishonest misuse of public power" (para 48). The purpose of this update is to highlight the points of general application for all regulators which emerge from the various judgments.

(1) Powers conferred on a local authority may be exercised for the public purpose for which the powers were conferred and not otherwise; and

(2) Such power are exercised by or on the delegation of councillors. It is misconduct in a councillor to exercise or be party to the exercise of such powers otherwise than for the public purpose for which the powers were conferred.

Looking specifically at the local government audit regime Lord Bingham added that if councillors misconduct themselves knowingly or recklessly it is regarded by the law as wilful misconduct and if this is found to have caused loss to a local authority the councillor is liable to make good such loss to the council. These principles are not new but their application to the facts led to judgment being given against the two councillors.

One particular practical point emerges from the application of the principles in the present case. Lord Bingham referred to the debate about whether the councillors were able to rely on legal advice. He noted that the lawyer concerned had not been given access to all relevant information. He had "received no written instructions and gave no written advice" (para 39). Also, the lawyer had not been asked all the questions which should have been put to him. In this instance he had not been asked whether, if the policy of designating council properties for sale in marginal wards for the purpose of securing electoral advantage was unlawful, would the policy have become lawful if, with the same objective, and in order to conceal the targeting of sales in marginal wards, the designated sales policy was extended across the City of Westminster. Lord Bingham added that no one could have had any doubt what the answer would have been if it had been asked. The message is simple: in order to be able to justify actions by reference to legal advice all the relevant information must be given to the lawyer, it is desirable to have advice in writing and the right questions should be asked.

The Court was faced with an argument that the proceedings were criminal for the purpose of Article 6 of the Convention. However, Lord Hope noted that the court should look at substance rather than form, look behind appearances and investigate the realities of the procedure. He said the nature of the offence and nature and degree of the severity of the sanction must also be taken into account (para 84) (and see Engel v Netherlands (No 1) (1976)1 EHRR 647). In the present case the object of the procedure was to compensate the body concerned and the measure of the compensation was the amount of the loss suffered. There could be no fine or imprisonment although someone could be disqualified from being a member of a local authority (para 85). Lord Hope therefore concluded that the measures available in the present case were "compensatory and regulatory rather than penal in character". Thus it can be seen that where a regime is aimed at restitutionary compensation rather than punishment it should be regarded as civil rather than criminal for the purpose of Article 6 of the Convention. This does not, however, mean that Article 6 will not apply because part of Article 6 (Article 6(1)) also applies to determinations of civil rights.

Article 6 requires determination by an "independent and impartial tribunal". It was pointed out that the local government audit regime effectively imposes on the auditor the role of "investigator, prosecutor and judge". However, Lord Hope said the auditor's conduct must be looked at as a whole and in the context of the procedure which is laid down in the statute. The Strasbourg approach is that even if an adjudicatory body does not comply with Article 6(1) there is no breach of the article if the proceedings before that body are subject to subsequent control by a judicial body that has full jurisdiction and does provide the guarantees of Article 6(1) (para 93) (Bryan v United Kingdom (1995) 21 EHRR 342, Kingsley v United Kingdom App no 35605/97, 7 November 2000). Lord Hope noted that in the present case the Court has not only the power to quash the auditor's decision but it also has power to re-hear the case and to take a fresh decision itself in the exercise of the powers given to the auditor. Crucially, therefore where it is sought to argue that a regulatory regime is compliant with the requirement of independence because of an appellate or review mechanism, whether or not it is compliant will depend (amongst other matters such as the underlying fairness of the administrative decision making stage) on the extent of the appellate or reviewing function see, for example, Preiss v General Dental Council [2001] All ER (D) 239 (considered in our update no. 1).

The auditor at one stage gave a press conference at which he referred to his provisional findings. Lord Hope referred to this as an "error of judgment" but said that it did not amount to apparent bias (para 105). In his discussion of this episode Lord Hope reviewed the law relating to the test for apparent bias. This is an important part of the judgment. The House of Lords in R v Gough [1993] AC 646 had formulated a test whereby "the Court should ask itself whether, having regard to those [relevant] circumstances, there was a real danger of bias on the part of the relevant member of the tribunal in question". This test had been criticised on the ground that it could tend to emphasis the court's view of the facts and to place inadequate emphasise on the public perception of the irregular incident. The Gough test was reviewed by the Court of Appeal in Re Medicaments and Related Classes of Goods (No. 2) [2001] 1 WLR 700 in the light of Strasbourg jurisprudence. Lord Phillips stated:-

In Magill v Porter Lord Hope said that the House of Lords would approve the "modest adjustment" of the test in Gough and would adopt Lord Phillips' text but would delete the reference to "a real danger". Lord Hope said (para 103) "the question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal were biased". Although this adjustment to the test is indeed modest it is very important that when regulatory authorities consider who can take part in the decision making process they address themselves correctly to what is now the current test. A failure to do so could lead to a decision being struck down for apparent bias.

Article 6 requires that a determination of civil rights or of a criminal charge be within "a reasonable time". Someone complaining under this head does not need to show prejudice. (There is also a similar common law right although there is debate as to whether it is necessary to show prejudice in relation to this right.) The reasonableness of the duration of proceedings must be assessed according to its circumstances and includes the complexity of the case, the applicant's conduct and the manner in which the case was dealt with by the administrative and judicial authorities (Konig v Germany (1978) 2 EHRR 170). Lord Hope noted that the Divisional Court had referred to the investigation as "vast" and its "mammoth nature". The auditor had not caused delay by inaction (para 113). In the circumstances there had not been unreasonable delay.

That the House of Lords carefully considered delay in the context of Article 6 serves as a reminder to regulators that inactivity in dealing with a matter could cause them difficulties. Finally, on this point Lord Hope noted the debate as to whether, had there been unreasonable delay, the correct approach would have been to quash the auditor's certificate or to award damages (para 115).

Although Magill v Porter has caught the attention because of its high profile nature, the case has lessons for regulatory authorities more generally. In the main these emerge from the procedural points which were argued and, in particular, the House of Lords has taken the opportunity to modify the test applicable to the law of apparent bias.

© Herbert Smith 2002

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