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England and Wales Court of Appeal (Civil Division) Decisions

You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Laker Airway Ltd v Department of Trade [1976] EWCA Civ 10 (15 December 1976)
Cite as: [1977] QB 643, [1976] EWCA Civ 10

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Neutral Citation Number:
Case No. 1976 L. No. 885


Royal Courts of Justice.
15th December 1976.

B e f o r e :

(Lord Denning)





(Transcript of the Shorthand Notes of the Association of Official Shorthandwriters Ltd., Room 392, Royal Courts of Justice, and 2 New Square, Lincoln's Inn, London, W.C.2).


MR. A. BATESON, Q.C. and MR. P. BOWSHER (instructed by Messrs. Roney Vincent & Co., Solicitors, London) appeared on behalf of the Plaintiffs (Respondents).
MR. D. EVANS (instructed "by the Treasury Solicitor) appeared on behalf of the Defendants (Appellants;.



Crown Copyright ©

    THE MASTER OF THE ROLLS: Mr. Laker is a man of enterprise. He has an exciting project for travel by air. He wishes to start a new air service across the Atlantic from England to the United States. It is to be quite unlike the conventional air services. It is to be more like a railway service. Passengers are not to reserve their seats in advance. They are to go to the airport, buy their tickets, and board the aircraft - all in one sequence - just as passengers go to a railway station, buy their tickets and join the train. So Mr. Laker calls his project "Skytrain". He hopes to attract a hitherto untapped source of traffic. He is going to cut out all the extravagances and frills which the established airlines provide. He is going to cut out all the travel agents and their expensive commissions. He is going to charge fares much lower than other carriers. He is not going to fly from Heathrow, but from Stansted: so there are no in-transit facilities. By these measures he suggests that he will not take away traffic from the established airlines, but will create new custom. He will carry passengers who would not otherwise have travelled at all.

    In order to get Skytrain into the air, Mr. Laker had, of course, to get permission from the authorities in England and the United States. In England he was completely successful. The Civil Aviation Authority actually granted him a licence for ten years - from 1973 to 1982 inclusive. In the United States he got a long way. The Civil Aeronautics Board decided to issue him a permit, subject to approval by the President of the United States. In anticipation of everything going through, Mr. Laker bought three jumbo jets, and trained crews and staff to run them. He expended £6 million to £7 million on the project. It looked as if all would go well. But then on the 29th July, 1975 the Government of the United Kingdom put a stop to the whole thing. The Secretary of State told the House of Commons that the Skytrain service would not be allowed to start. He followed this in Febraruy 1976 by a White Paper (Command 6400) in which he said that the licence for Skytrain was to be cancelled.

    This conduct of the Secretary of State is challenged by Mr. Laker. He says that the Secretary of State has no right to put an end to Skytrain like this. So Mr. Laker has brought this action in the Courts of Law. On the 30th July, 1976 Mr. Justice Mocatta granted a declaration in his favour. The Secretary of State now appeals to this court.

    To understand the issues, I must describe the legal background.

    "Designation". In order to get Skytrain across the Atlantic, Laker Aiways had to be a "designated" air-carrier. This requirement of "designation" arises out of a treaty between the United Kingdom and the United States of America called the Bermuda Agreement. It was made in 1946 and is still in existence. Under it each government is entitled to "designate" one or more air-carriers for a specified route from one country to the other; and the other government is then bound to accept that carrier so long as it comes up to standard. Suppose the United Kingdom Government "designates" an air-carrier, such as British Airways, for the route from London to New York. The U.S.A. is entitled to satisfy itself as to the credentials of the carrier so designated. Once satisfied, it is the duty of the U.S.A. Government to grant the carrier an operating permit (to fly into and out of the U.S.A.) "without undue delay". But the Treaty does not restrict the U.K. to one carrier only. It is entitled to designate another one - or even two - for the same route, then or later. If each of those "designated" carriers satisfies the requirements, it is the duty of the U.S.A. authorities to grant it an operational permit "without undue delay". It is open, however, to the U.S.A. authorities to impose conditions in the permit as to type of aircraft, fares, and so forth. If the carrier fails to fulfil the conditions, the U.S.A. can revoke the permit.

    Those provisions of the Bermuda Agreement rest on international agreement only. The agreement is no part of the municipal law of either country. But it may have repercussions with which the Courts of Law have to deal. More of this later.

    "Licence". In order to get Skytrain into the air, Laker Airways had also to get a licence from the U.K. authorities. Flights into and out of the United Kingdom are regulated under the Civil Aviation Act, 1971. This sets up a licensing system. Under it any aircraft "beginning or ending its flight in the United Kingdom must have a licence to do so. The licensing body is the Civil Aviation Authority under the chairmanship of Lord Boyd-Carpenter. It is entrusted with the task of granting licences, revoking them, suspending them, or varying them. In doing so, it is under a duty to act judicially. It receives applications and objections. It holds hearings, and takes evidence. It comes to its determination. From its decision a party aggrieved can appeal to the Secretary of State, and he can direct the Authority to reverse or vary the decision.

    The four objectives. In carrying out its functions (including the granting of licences) the Authority has to do its best to satisfy four general objectives. They are set out in section 3(1) of the Act. They lie at the heart of this case. I will summarise them:

    (a) To secure that the British Airlines have their fair share of the market,
    (b) To secure that the British Airways Board has not a monopoly, but that at least one major British airline has the opportunity to compete with it.
    (c) To encourage the air transport industry of the U.K. so as to enable it to help the balance of payments.
    (d) To further the interests of users.

    If the Civil Aviation Authority grant or refuse a licence and there is an appeal to the Secretary of State, he too must have regard to those objectives: see section 24(6).

    "Guidance". Those objectives are expressed in very general terms. In putting them in practice, Parliament thought that some guidance would be desirable for the Authority. So it provided for it in sections 3(2) and 3(3). I must set them out: Section 3(2):

    "The Secretary of State may from time to time, after consultation with the Authority, give guidance to the Authority in writing with respect to the performances of the functions conferred on it: and it shall be the duty of the Authority to perform those functions in such manner as it considers is in accordance with the guidance for the time being given to it".

    Section 3(3):

    "No guidance shall be given to the Authority ... unless a draft has been approved by a resolution of each House of Parliament".

    (Note: In summarising the statutory provisions, I have missed out the words in section 3d) "otherwise than by this section" and in section 3(2) "otherwise than by this subsection". They are the words of a purist intent upon literal accuracy. But, to my mind, they contribute nothing but confusion. The best way of understanding the provisions is to omit those words altogether).

    One of the matters much discussed before us is the scope of the "guidance" authorised by those provisions. In my opinion the Secretary of State can give guidance by way of explanation or amplification of, or supplement to, the general objectives: but not so as to reverse or contradict them.

    "Directions". Section 4 of the Statute confers exceptional powers on the Secretary of State. It enables him to override the statutory requirements as to licences and also to by-pass the general objectives. But only in carefully defined circumstances. Section 4(1) confers large powers in time of war or great national emergency. Section 4(3) confers large powers in respect of international relations. For instance, if the Secretary of State thought that one of our airlines was acting in such a way as to affect our relations with another country, he could direct the Authority to revoke its licence. Or, if diplomatic pressure was brought for the purpose, he could direct the revocation of the licence. And he could do this without any enquiry or hearing at all. The Secretary of State would have to consult the Authority before issuing a direction, but that is all. Once he gave a direction, it could not be challenged in the courts. The only way would be by a question in the House.

    Directions versus guidance. The word "direction" in section 4 is in stark contrast with the word "guidance" in section 3. It is used again in sections 24(2) and 24(6)(b) and 28(2), It denotes an order or command which must be obeyed, even though it may be contrary to the general objectives and provisions of the Statute. But the word "guidance" in section 3 does not denote an order or command. It cannot be used so as to reverse or contradict the general objectives or provisions of the Statute. It can only be used so as to explain, amplify or supplement them. So long as the "guidance" given by the Secretary of State keeps within the due bounds of guidance, the Authority is under a duty to follow his guidance. Even so, the Authority is allowed some degree of flexibility. It is to perform its function "in such a manner as it considers is in accordance with the guidance". So, whilst it is obliged to follow the guidance, the manner of doing so is for the Authority itself. But, if the Secretary of State goes beyond the bounds of "guidance", he exceeds his powers: and the Authority is under no obligation to obey him.

    The events up to July 1975• Those preliminaries enable me to come to the facts of the case.

    On the 5th August, 1971 Parliament passed the Civil Aviation Act, 1971. In February 1972 the Secretary of State issued his first policy "guidance" under it. It is Command 4899. It set out the four general objectives for the air transport industry, and then states quite correctly that it is for the Secretary of State in giving guidance "to amplify and supplement these four objectives". Such amplification and supplement to be expressed "in general terms", leaving "the Authority to work out the detail, and apply it in particular cases". That statement is quite unexceptionable. It does not suggest that the guidance can reverse or contradict the four objectives.

    The Civil Aviation Authority began their work on the 1st April, 1972. One of their early tasks was to consider aa application by Laker Airways to start the Skytrain service. They held a hearing on three days in April 1972. Lord Boyd-Carpenter presided himself. They heard Sections from British Airways and British Caledonian.

    They took evidence. They heard argument. After consideration they gave a reasoned decision which shows that they had the general objectives well in mind. They granted the application. On 18th October, 1972 they issued a licence to Laker Airways for the route Stansted to New York. It was for ten years, starting on 1st January, 1973 and expiring on 31st December, 1982.

    The British Airways Board did not appeal but British Caledonian did. They appealed to the Secretary of State, but their appeal was dismissed. On the 22nd December, 1972, he, the Secretary of State, upheld the licence.

    Everything was now clear for the "designation" of Laker Airways as a designated carrier under the Bermuda Agreement. On the 28th February, 1973 our Ambassador in Washington sent this message to the U.S. Secretary of State:

    "Her Britannic Majesty's Ambassador hereby designates Laker Aiways Limited for operations on United Kingdom Route 2 ... The purpose of the designation is to enable Laker Airways to operate air services between London (Stansted) and New York, and vice versa ... Her Britannic Majesty's Ambassador has the honour to request that processes associated with this designation be expedited to the maximum degree possible".

    Laker Airways then made application to the United States authorities for a permit. This was followed by an enquiry by the Administrative Law Judge Greeg M. Murphy. He held hearings at which all the big airlines were represented. On the 8th March, 1974- he made a long report, in which he recommended to the Civil Aeronautical Board of the United States that "it is in the public interest to issue a foreign air-carrier permit to Laker Airways Limited". The Civil Aeronautical Board accepted this recommendation. They ordered that a permit be issued to Laker Airways Ltd., but said that this was not to become effective until it was approved by the president of the United States. So the Board prepared the permit, completed it in due form, and sent it to the White House for the approval of the President. There it stayed. The U.K. authorities pressed hard for it to be signed, but somehow it did not get done.

    Meanwhile, in England, the British Airways Board tried again to stop Skytrain. They applied to revoke the licence. Their application was made on the 23rd December, 1974. They said that there had been a material change in circumstances since the licence was granted in 1972. The volume of air traffic was falling instead of increasing. The costs, especially for fuel, had risen greatly, so the existing operators were suffering substantial losses. They submitted that the need for low fare traffic was clearly being adequately met.

    In January 1975 the Civil Aviation Authority sat to hear this application to revoke. It was again presided over by the Chairman, Lord Boyd-Carpenter. They heard witnesses. They received representatives from interested parties. On the 5th February, 1975 they refused the application to revoke. They gave a well-reasoned decision in which they again showed that they had the general objectives well in mind. They pointed out that Laker Airways Limited had already expended some £7 million on the strength of the Authority's decisions, and they said:

    "it would be wrong to render nugatory Laker Airways' expenditure so far of up to £7 million by going back on these decisions without the most compelling reasons…We are conscious, also, that the only reason why Skytrain services have not already been in operation for the past two years that the United States authorities have engaged in unconscionable procrastination. Having exhaused long since the procedural opportunities for inaction that the Civil Aeronautics Board has at its disposal, the United States authorities have sought final refuge in silence ... In sum, notwithstanding the weighty and well-argued case advanced by British Airways, we conclude that it would be wrong to revoke the licence, and we decide accordingly ... We regard the 'Skytrain' experiment as one to be launched in propitious circumstances when the operator and the public can have confidence that the experiment will prove successful".

    There was no appeal from that decision of the Authority. British Airways seem to have accepted it at that stage. The position, therefore, in the first six months of 1975 was that Laker Airways Limited were in possession of a good and effective licence for Skytrain from the U.K. authorities for ten years. They had also obtained the necessary permit from the U.S.A. authorities, subject only to the approval of the President. It was on his desk for signature. According to the terms of the Bermuda Agreement, he should have signed it "without undue delay". For some reason or other he had not signed it. But Laker Airways Ltd. were not without hope that he might sign it some day. Even if it was at the bottom of the pile, it might get to the top some time. Laker Airways were prepared to wait. After all, they had spent £7 million on Skytrain and did not want it wasted.

    The complete reversal in July 1975. On the 29th July, 1975 the Secretary of State made an announcement in the House of Commons on future civil aviation policy. He said that it was the result of a review by his Department. It was a complete reveral of the previous policy. He declared that

    "in future it should be our general policy not to permit competition between United Kingdom airlines on long-haul scheduled services, and, therefore, not to license more than one United Kingdom airline on any given long-haul route".

    He added:

    "I have looked carefully at the Skytrain service ... it would divert traffic away from the existing services and, in particular, damage British Airways. I have, accordingly, told LakerAirways Ltd. that in these circumstances the Skytrain service cannot he allowed to start".

    So we have this remarkable position. British Airways had failed to get the licence of Laker Airways revoked by the duly constituted authority - the Civil Aviation Authority. Six months later the licence was rendered useless by the Minister's statement in the House of Commons. The news of the Minister's statement soon reached Washington. The Civil Aeronautics Board there learned that the British Government had decided not to permit Laker Airways to perform its proposed trans-Atlantic service. The Board thereupon acted. They got their permit back from the White House -before it had been signed by the President. In a letter they described what they did:

    "The Board has been advised that the British Government has decided not to permit Laker Airways to perform its proposed trans-Atlantic service. Based upon such circumstances, the Board requested the White House to return the Board' decision in the Laker case since it was apparent that the above-noted circumstance would have & critical bearing upon the Board's action with respect to Laker Airways' application. In response to the Board's request, the White House has returned the Board's decision".

    To come back to England. The Secretary of State considered how to effect here Ms complete reversal of policy. He considered whether an amendment to the Civil Aviation Act, 1971 would be required. He decided it was not necessary. But that it could he done by issuing a new policy "guidance" for the Civil Aviation Authority.

    The new policy guidance. So in February 1976 the Secretary of State issued a Command Paper No. 6400 on "Future Civil Aviation Policy". It was in two parts. The first part stated the new policy. It contained a special section dealing with Skytrain, and said:

    "The Secretary of State has, accordingly, decided that Laker Airways' "designation" as a scheduled services operator under the United Kingdom/United States Air Services Agreement should be cancelled. The Skytrain licence will be dealt with in accordance with paragraph 7 of the Policy Guidance".

    The second paragraph stated the new Policy Guidance. In paragraph 7 it said:

    "In the case of long-haul services ... the Authority should not ... license more than one British Airline to service the same route ... The Authority should review existing licences and exemptions in the light of this paragraph and take appropriate action ...".

    In paragraph 8 there was a qualification saying that:

    "This should not, however, prevent the licensing of another British airline to provide a scheduled service within British Airways sphere of interest provided British Airways has given its consent".

    In paragraph 12 it said that those provisions "should remain substantially unchanged for a considerable number of years".

    This new Policy Guidance had a direct impact on Laker Airways Limited. They were not to be allowed to operate the Skytrain service because it was feared that it would divert passengers from British Airways. So the Authority was to revoke the licence it had granted for Skytrain; or, at any rate not allow it to start without the consent of British Airways. And the Minister would cancel the designation of Laker. It was just as if the Minister had called out:

    "Stop. Skytrain shall not take off from England. Its licence should be revoked. And I will see that it does not land in America. I will cancel the designation".

    The Minister could not, however, do it entirely on his own. He had to get the approval of both Houses of Parliament before he could call upon the Civil Aviation Authority to follow his new policy guidance. He got their approval. The Commons on the 26th February, 1976. The Lords on the 15th March, 1976. (It should be noted, however, that the Lords were not very whole-hearted about giving their approval. They coupled it with a request which showed that they did not much like the policy guidance so far as Skytrain was concerned. They agreed, by a majority of 83 to 68, to a Motion calling upon her Majesty's Government "to withdraw the instruction" to the Civil Aviation Authority to revoke the Laker Airways "Skytrain" Licence. The Minister took careful note of this view, but, nevertheless, decided to keep on his course).

    But, mark you, this approval, even by both Houses, was not the equivalent of an Act of Parliament. It could not override the law of the land: see Hoffmann-La Roche v. Trade Secretary (1975) Appeal Cases at page 365 by Lord Diplock; and at page 372 by Lord Cross of Chelsea. It was to the law that Mr. Laker appealed. On the very next day following the approval of both Houses, Laker Airways issued a writ claiming that the Secretary of State was acting unlawfully. Mr. Justice Mocatta heard the case with expedition. On the 30th July, 1976 he delivered judgment. He found that the Secretary of State had exceeded the powers granted to him "by the State, and was not entitled to withdraw the designation of Laker Airways. The Secretary of State appeals to this court. There are three issues of law.

    Ultra vires. The first is whether the Secretary of State was acting beyond his lawful powers when he gave the new policy guidance to the Civil Aviation Authority.

    In determining this point, I have found much help from the well-reasoned decisions of the Civil Aviation Authorities, not only in 1972, when they granted the licence to Laker Airways, but also in 1975 when they refused to revoke it. It is plain that they applied most conscientiously and sensibly the four general objectives set out in Section 3(1) (a), (b), (c) and (d) of the Statute, as amplified and supplemented by the 1972 policy guidance. The new policy guidance of 1976 cuts right across those statutory objectives. It lays down a new policy altogether. Whereas the statutory objectives made it clear that the British Airways Board was not to have a monopoly - but that at least one other British airline should have an opportunity to participate - the new policy guidance says that the British Airways Board is to have a monopoly. No competition is to be allowed. And no other British airline is to be licensed unless the British Airways had given its consent. This guidance was not a mere temporary measure. It was to last for a considerable period of years.

    Those provisions disclose so complete a reversal of policy that to my mind the White Paper cannot be regarded as giving "guidance" at all. In marching terms it does not say "right incline" or "left incline". It says "right about turn". That is not guidance, "but the reverse of it.

    There is no doubt that the Secretary of State acted with the best of motives in formulating this new policy -and it may well have been the right policy - but I am afraid that he went about it in the wrong way. Seeing that the old policy had been laid down in an Act of Parliament, then, in order to reverse it, he should have introduced an amending bill and got Parliament to sanction it. He was advised, apparently, that it was not necessary, and that it could be done by "guidance". That, I think, was a mistake. And Laker Airways are entitled to complain of it, at any rate in its impact on them. It was in this respect ultra vires and the judge was right so to declare.

    Prerogative. The Attorney-General contended that the power of the Secretary of State "to withdraw" the designation was a prerogative power which could not be examined in the courts. It was a power arising under a Treaty which, he said, was outside the cognizance of the courts. The Attorney-general recognised that, by withdrawing the designation, the Secretary of State would put a stop to Skytrain, but he said that he could do it all the same. No matter that Laker Airways had expended £6 million to £7 million on the faith of the designation, the Secretary of State could withdraw it without paying a penny compensation.

    The Attorney-General relied on Rustoniee v. The Queen (1876) 2 Queen's Bench Division 69; and Civilian War Claimants Association v. The King (1932) Appeal Oases 14: out these were cases where a subject was seeking to enforce obligations arising under a treaty. To my mind they have no application to a discretionary power arising under a treaty, to which I now turn.

    Much of the modern thinking on the prerogative power of the executive stems from John Lock's treatise on the "True End of Civil Government", which I have read again with much profit, especially chapter 14 "Of Prerogative" - 1764- edition, pages 239/348. It was the source from which Sir William Blackstone drew in his Commentaries I page 252; and on which Lord Radcliffe "based his opinion in the Burmah Oil case (1965) Appeal Cases at pages 117/8. The prerogative is a discretionary power exercisable by the executive government for the public good, in certain spheres of governmental activity for which the law has made no provision, such as the war prerogative (of requisitioning property for the defence of the realm), or the treaty prerogative (of making treaties with foreign powers). The law does not interfere with the proper exercise of the discretion by the executive in those situations: but it can set limits by defining the bounds of the activity: and it can intervene if the discretion is exercised improperly or mistakenly. That is a fundamental principle of our constitution. It derives from two of the most respected of our authorities. In 1611 when the King, as the executive government, sought to govern by making proclamations, Sir Edward Coke declared that:

    "The King hath no prerogative but that which the law of the land allows him":

    see the Case of Proclamations (1611) 12 Coke's Reports at page 76. In 1765 Sir William Blackstone added his authority:

    "For prerogative consisting (as Mr. Locke has well defined it) in the discretionary power of acting for the public good, where the positive laws are silent, if the discretionary power be abused to the public detriment, such prerogative is exerted in an unconstitutional manner".

    Quite recently the House of Lords set a limit to the war prerogative when it declared that, even in time of war, the property of a British subject cannot be requisitioned or demolished without making compensation to the owner of it -see the Burmah Oil case (1965) Appeal Cases 75. It has also circumscribed the treaty prerogative by holding that it cannot be used to violate the legal rights of a British subject, except on being liable for any damage he suffered -see Nissan v. Attorney-General (1970) Appeal Cases at page 211E by Lord Reid.

    Seeing that the prerogative is a discretionary power to be exercised for the public good, it follows that its exercise can be examined by the courts just as any other discretionary power which is vested in the executive. At several times in our history, the executive have claimed that a discretion given by the prerogative is unfettered: just as they have claimed that a discretion given by statute or by regulation is unfettered. On some occasions the judges have upheld these claims of the executive - notably in the Ship-money case, and in one or two cases during the Second World War, and soon after it - but the judges have not done so of late. The two outstanding cases are Padfield's case (1968) Appeal Oases 957, and the Tameside case (1976) 3 Weekly Law Reports 641, where the House of Lords have shown that when discretionary powers are entrusted to the executive by Statute, the courts can examine the exercise of those powers, so as to see that they are used properly, and not improperly or mistakenly. By mistakenly, I mean under the influence of a misdirection in fact or in law. Likewise, it seems to me that, when discretionary powers are entrusted to the executive by the prerogative - in pursuance of the treaty-making power - the courts can examine the exercise of them so as to see that they are not used improperly or mistakenly. I turn, therefore, to examine the power in question in this case - the power to withdraw a designation.

    The exercise of the power in this case. In examining the power of the Secretary of State - to withdraw the designation - it is necessary to see just how far Skytrain had got. Laker Airways, after full enquiry, had been granted a licence by the Authorities in England. They had been designated as a carrier for the North Atlantic route. They had been granted a permit by the authorities in the U.S.A. Skytrain was ready to take off. It only awaited clearance from control. The one thing that remained was for the President to sign the U.S.A. permit: but this was little more than a formality, seeing that the President was under a treaty obligation to sign it "without undue delay". He could be expected to do so in the near future. Unless someone intervened, he would do so. The question is: Was it proper for the Secretary of State at that stage to stop it himself? Could he do it by withdrawing the designation, as he said in February 1976 that he intended to do?

    In answering this question, it is important to notice that, if there was a proper case for stopping Skytrain, there were available some perfectly good means of doing it. They were already provided by the Statute. One particular means was provided by section 4 of the Act. Under that section the Secretary of State could himself get the licence revoked. he could direct the Civil Aviation Authority to revoke it and they would have to obey. But this was only in carefully fined circumstances, such as in the interests of national security, or good international relations. For instance, if the Secretary of State thought that it was in the interests of good relations with the U.S.A. that Skytrain should he stopped, he could direct the Civil Aviation Authority to revoke the licence: and they would have to obey without holding any enquiry or hearing Laker Airways at all. But in this case the Secretary of State did not give any direction under Section 4. So, presumably, the circumstances did not exist so as to permit him to do so. Another means of stopping Skytrain would be for the British Airways Board to apply again to the Civil Aviation Authority asking for the licence to be revoked - for instance, on the ground that traffic would be diverted from them. But, in that case, there would have to be a fresh enquiry. There would have to be a hearing at which Laker Airways could state their case. An independent and expert body would make the decision.

    Seeing then that those statutory means were available -for stopping Skytrain if there was a proper case for it -the question is whether the Secretary of State can stop it by other means? Can he do it by withdrawing the designation? Can he do indirectly that which he cannot do directly? Can he displace the statute by invoking a prerogative? If he could do this it would mean that, by a side-wind, Laker Airways Ltd. would be deprived of the protection which the Statute affords them. There would be no enquiry, no hearing, no safeguard against injustice. The Secretary of State could do it of his own head - by withdrawing the designation without a word to anyone. To my mind such a procedure was never contemplated by the Statute. The Secretary of State was mistaken in thinking that he could do it. No doubt he did it with the best of motives. He felt that it was for public good that Skytrain should not he allowed to start. Nevertheless, he went about it, I think, in the wrong way. He misdirected himself as to his powers. And it is well-established law that, if a discretionary power is exercised under the influence of a misdirection, it is not properly exercised, and the court can say so.

    Estoppel. The remaining issue is whether the executive is estopped from withdrawing the designation - a point raised by the judge himself. The Attorney-General concedes that estoppel could in suitable circumstances be raised against the Crown: but he contends this was not a case for it. The law on this subject has developed a good deal lately. The underlying principle is that the Crown cannot be estopped from exercising its powers, whether given in a statute or by common law, when it is doing so in the proper exercise of its duty to act for the public good, even though this may work some injustice or unfairness to a private individual - see Maritime Electric Co. v. General Dairies (1937) Appeal Cases 610 where the Privy Council, unfortunately, I think, reversed the Supreme Court of Canada (1935) S.C.R. 519. It can, however, be estopped when it is not properly exercising its powers, but is misusing them; and it does misuse them if it exercises them in circumstances which work injustice or unfairness to the individual without any countervailing "benefit for the public: see Robertson v. Minister of Pensions (1949) 1 King's Bench 227; Reg. v. Liverpool Corporation (1972) 2 Queen's Bench 299; H.T.V. v. Price Commission (1976) Ind. Court Rep. 170 at pages 185/6.

    In the present case, if the Secretary of State did have Prerogative to withdraw the designation, and properly exercised the prerogative, then there would be no case for estoppel. He would be exercising the prerogative for the public good and would be entitled to do it, even though it did work injustice to some individuals. I would not, therefore, put the case upon estoppel.

    Conclusion. We have considered this case at some length because of its constitutional importance. It is a serious matter for the courts to declare that a Minister of the Crown has exceeded his powers. So serious that we think hard before doing it. But there comes a point when it has to be done. These courts have the authority - and I would add, the duty - in a proper case, when called upon to enquire into the exercise of a discretionary power by a Minister or his Department. If it found that the power has been exercised improperly or mistakenly so as to impinge unjustly on the legitimate rights or interests of the subject - then these courts must so declare. They stand, as ever, between the executive and the subject, alert, as Lord Atkin said in a famous passage - "alert to see that any coercive action is justified in law": see Liversidge v. Anderson (1942) Appeal Cases at page 244. To which I would add alert to see that a discretionary power is not exceeded or misused. In this case the judge has upheld this principle. He has declared that the Minister did exceed his powers. I agree with him. I would dismiss the appeal.

    LORD JUSTICE ROSKILL: The facts which have led to this dispute between the plaintiffs and the Crown are stated so fully both by Mr. Justice Mocatta from whose judgment this appeal is brought and by the Master of the Rolls in the judgment dust delivered, which I have had the advantage of reading draft, that no useful purpose will be served by repeating them or indeed by referring to them, I take leave to borrow as part of this judgment those statements.

    As Mr. Bateson for the plaintiffs and the Attorney-General for the Crown both agreed, there are three questions upon the answers to which the determination of this appeal depends, the ultra vires question, the prerogative question, and the estoppel question. Strictly this last only arises for determination if the Crown succeeds upon the first two. The estoppel question was, we were told, raised for the first time by the learned judge himself at an early stage of the trial. Estoppel against the Crown had not been pleaded by the plaintiffs. The plaintiffs thereupon adopted the learned judge's suggestion that the question should be canvassed. The Crown sought and obtained an adjournment. The pleadings were thereupon amended so as to raise this question.

    The learned judge answered all three questions in favour of the plaintiffs, though recognising that strictly it was unnecessary for him to have decided the third. But helpfully he did so, so that his view upon all three questions might be available in the event of an appeal to a higher court. Adroitly, in the central part of his submissions in this court, the Attorney-General argued this last question - the estoppel question - first, perhaps recognising that this part of his task might be less burdensome than the remainder. I will follow his example and deal with that question first.

    I fully recognise that the judge's view on the estoppel question, if correct, would have far reaching constitutional implications. For example, in the event of a change of government, a new government might, on the judge's view, find itself precluded in the whole or in part from implementing a change of policy which it had included in its election programme if it found upon succeeding to office that private citizens, in the belief that particular policies of a previous government would continue and in reliance upon promises of support and representations by servants of that government made in furtherance of those policies, had made capital investments or incurred other expenditure which would never have been done but for those facts, could thereupon by appropriate legal action prevent that change taking place. The Attorney-General did not dispute that the doctrine of estoppel might in certain circumstances operate against the Crown - that is to say, upon central as well as upon local government. He did not seek to challenge the principles enunciated in cases such as those to which the learned judge referred at pages 568 and 569 of the report of his judgment in (1976) 3 Weekly Law Reports. But he contended that the judge's view would not only have untoward consequences such as those just mentioned, but could even be invoked by the private citizen to prevent a change of policy judged by the advisers of the Crown to be in the public interest or the exercise by the Crown of treaty rights adversely affecting that citizen, which latter rights, as long recognised by our courts, are not there justiciable. Thus estoppel could be relied upon by the subject, if not positively to obtain a remedy, at least negatively to prevent governmental action adverse to that citizen which would not otherwise be justiciable in our courts. I will say at once that with all deference to the judge's view and to Mr. Bateson's argument the conduct, of the Crown in allowing the purchase of the B.C.10 aircraft and in particular their purchase free of duty, in advancing and encouraging the plaintiffs' claim for designation by the United States Government under the Bermuda Agreement 1946 as well as in the other respects to which he referred in argument but which I need not mention in detail, I see no answer to this branch of the Attorney-General's argument. If therefore the ultra vires and the prerogative questions are to be answered as the Attorney-General submits, the plaintiffs cannot in my view fall back upon estoppel as a last line of defence to prevent the revocation of their existing air transport licence or the withdrawal of their extant designation by the Crown under the Bermuda Agreement. As Lord Justice Lawton says at the conclusion of his judgment, the doctrine of estoppel cannot be allowed to hinder the formation of government policy - or one might add the constitutional result of a general election.

    I now turn to consider those other two questions. I will preface that consideration by this observation, commonplace as it may seem. We are in no way concerned in this court whether the policy adumbrated by the previous government in the 1972 White Paper is to be preferred to that adumbrated by the present government in the 1976 White Paper. Those two statements of policy respectively reflect different views as to the right policy to be adopted in relation to civil aviation. Each view has, and has long had, both ardent advocates and equally ardent detractors. Each view can be and has been sincerely and indeed passionately defended both in the economic conditions of the past, widely differing as they did from those of the present, and still to-day finds its supporters. None of that in any way concerns this court. If the present Secretary of State on behalf of the Crown seeks adoption of the policy advanced in the 1976 White Paper, it is his right so to do and to invite Parliament to approve that policy under section 3(3) of the Civil Aviation Act, 1971 > as he has done.

    Our only concern is to determine whether in seeking to implement that policy of which the plaintiffs both sincerely and bitterly disapprove, the Crown has acted illegally. The plaintiffs say that the relevant part of the White Paper which adversely affects them is illegal, in particular because paragraphs 7 and 8 of the guidance therein given to the Civil Aviation Authority under section 3(2) of the 1971 Act is ultra vires and that guidance thus being beyond the powers of the Secretary of State, he is not entitled to require the Authority to review the plaintiffs' existing air transport licence in the light of the considerations mentioned in paragraph 7 and "take appropriate action", a phrase which in the context is clearly but a euphemism for requiring the Authority to revoke that licence. Further, the plaintiffs say that the Crown cannot overcome the barrier which they claim to exist in point of municipal law to bar the implementation of the desired change of policy by securing the revocation of that licence, by invoking the further power, claimed by the Crown to be a prerogative power, of withdrawing the plaintiffs' designation under the Bermuda Agreement. In short, the plaintiffs say that the Crown cannot achieve implementation of their policy either under the municipal law as it now stands or make good what are from the Crown's point of view (if the plaintiffs are right on the ultra vires question) the deficiencies of that municipal law, by invoking a prerogative power and then in the purported exercise of treaty rights claiming that the courts of this country have no right or power to control or interfere with that exercise of those rights.

    The Crown in reply contends first that the policy can be lawfully implemented in the manner proposed in the guidance set out in the 1976 White Paper, that the guidance there given is not ultra vires, and that in any event even if it be ultra vires, the Crown possesses the prerogative right to withdrawn designation of the plaintiffs under the Bermuda Agreement and that the courts have no right or power to control or interfere with the exercise of that prerogative power.

    This then is the ground on which battle is joined. Though the arguments have been elaborate in this court, as they were before Mr. Justice Mocatta, in the ultimate analysis the determination of the two crucial questions depends upon the construction of the 1971 Act, and, as I think, primarily upon the construction of sections 3 and 4- of that Act. It is to the relevant questions of construction that I now turn. I shall deal with the ultra vires question first. The 1971 Act as its short title shows had a number of purposes. First and perhaps foremost was the establishment for the first time of the then new Civil Aviation Authority. On the Authority so established were conferred a number of functions, as section 2 provided, functions which had hitherto been diversely performed. We are principally concerned with the regulation of civil aircraft and we are particularly concerned with sections 21, 22, 23 and 24 regarding the need for and the granting, refusal or revocation of air transport licences - a phrase defined in section 21(1)(a) - all of which are included among the functions transferred to and to be performed by the Authority.

    When Parliament created and conferred upon the Authority these various and other functions it also provided in section 3(1) that it should be the Authority's duty to perform those functions in the manner which the Authority considered was best calculated to achieve the four stated "objectives" specified in paragraphs (a) to (d) (inclusive) of that subsection. I shall return later to consider the precise language in which this duty was cast upon the Authority. Suffice it at this juncture to observe two matters, first, these four "objectives" as I have called them, were called in argument "criteria", though neither that word nor indeed the word "objectives" finds a place in subsection (1). Indeed no generic word is there used. The word "criteria" suffices so long as one remembers that it is not a word used in the statute. Secondly, criterion (c) is stated to be subject to criterion (a) and criterion (b) while criterion (d) is stated to be subject to criteria (a), (b) and (c). This suggests that Parliament regarded criteria (a) and (b) as of paramount, importance. I set out these two criteria in full:

    "3(1) . It shall be the duty of the Authority to perform the functions conferred on it otherwise than by this section in the manner which it considers is best calculated - (a) to secure that British airlines provide air transport services which satisfy all substantial categories of public demand (so far as British airlines may reasonably be expected to provide such services) at the lowest charges consistent with a high standard of safety in operating the services and an economic return to efficient operators on the sums invested in providing the services and with securing the sound development of the civil air transport industry of the United Kingdom; (b) to secure that at least one major British airline which is not controlled by the British Airways Board has opportunities to participate in providing, on charter and other terms ...".

    Clearly it was the intention of the legislature not merely that British airlines, whether State owned or privately owned, should play their full part in providing services sufficient to satisfy all substantial, categories of public demand so far as those airlines might reasonably be expected to do so at the lowest charges consistent both with high standards of safety and with securing an economic return on the capital invested, but that competition with State owned airlines was to be encouraged to the extent of securing that at least one major privately owned British airline should be afforded opportunities to participate in providing the services already mentioned.

    But Parliament did not rest content merely with stating the four criteria which the Authority was to apply. It went further. In section 3(2) it empowered the Secretary of State from time to time to give "guidance" (that word, unlike either "criteria" or "objective", is used in the statute) to the Authority "with respect to the performance of the functions conferred on it otherwise than by this subsection ...". The Authority is then charged with the duty of performing those functions in such manner as it (i.e. the Authority) considers to be in accordance with the guidance so given.

    In summarising the effect of section 3d) and (2) I have mentioned but not otherwise referred to the two controversial, indeed one might call them infamously obscure,,, phrases "conferred on it otherwise than by this section" in section 3(1) and "conferred on it otherwise than by this subsection" in section 3(2), around which, so much debate took place during the argument of the appeal. I shall return to those phrases hereafter. Though they are most relevant to the ultimate issue of construction, they do not affect a description of the broad pattern of the functions of the Authority, its duty to follow the four criteria, its right to be consulted about any guidance to be given and its duty to perform its functions in such manner as it considers to be in accordance with that guidance. I draw attention to but do not consider in detail the provisions of section 24(2) in connection with these various powers and duties and the giving of guidance or the changing of guidance already given. Section 3(3) provides for Parliamentary control over guidance to be given under subsection (2), since subsection (3) prohibits the giving of guidance to the Authority unless and until a draft of the document containing the proposed guidance has been approved by resolution of each House of Parliament.

    It will be convenient next to mention the powers accorded to the Secretary of State by section 4. Section 4(1) confers drastic powers on the Secretary of State to give "directions" - that is the word used in the statute -to the Authority "in time of war whether actual or imminent or of great national emergency ...". These powers are draconian and if any direction conflicts with any requirement of the statute, the direction is to prevail. Section 4(3) confers somewhat less draconian powers upon the Secretary of State to give directions to the Authority to do or to refrain from doing particular things for any one or more of the six reasons specified in paragraphs (a) to (f) inclusive of subsection (3). Here again it is provided that in the event of a conflict between any requirement of the statute and the direction, the latter is to prevail. There is no Parliamentary control over the giving of any direction under section 4. The absence of such control is to be contrasted with the requirements of Parliamentary control in relation to guidance to be given under section 3.

    Thus far the relevant broad pattern of the Act is reasonably plain and may be summarised thus: (1) Licensing functions are conferred upon the Authority. (2) In carrying out those licensing and indeed other functions the Authority is to have regard to the four criteria. (3) One of those criteria is the encouragement of competition with State owned airlines. (4) Subject to prior Parliamentary approval, the Secretary of State may give guidance to the Authority how it shall perform certain of its functions, including its licensing functions. (5) Once such guidance is given it is the duty of the Authority to perform its functions in such a manner as it considers will be in accordance with the current guidance. (6) The Secretary of State has wide powers under section 4 to give directions to the Authority either in time of emergency - see subsection (1) - or for any of the six purposes specified in subsection (3). I should add in order to complete this part of the consideration of the relevant statutory functions of the Secretary of State and of the Authority a reference to the definition of "functions" in section 64(1) of the Act as including "powers and duties".

    In February 1972 the then Secretary of State for Trade and Industry presented a White Paper to Parliament called "Civil Aviation Policy Guidance" (Command Paper 4899). It is worth noting that of that White Paper, the first six paragraphs are called "Introduction". Paragraphs 7 to 29 inclusive are called "Guidance". Paragraph 2 in the introduction quotes the four criteria in section 3d) in full. Paragraph 3 of the White Paper goes on to state that section 3(2) of the Act authorises the Secretary of State to give guidance to the Authority so as to amplify and supplement these four objectives in more detail and so as to cover also the Authority's functions in other areas; he may vary this guidance from time to time". When one comes to the paragraphs prefixed by the rubric "Guidance" that guidance clearly follows the four criteria: see for example paragraphs 12 and 13, but paragraph 15 concludes with the warning that for the reasons there given, the Authority "will need in general to limit, at least for some years to -• come, the grant to other British independent airlines of licences to serve additional international scheduled routes". Paragraph 16 reads:

    "Subject to paragraphs 11 and 12 above and the limitations imposed by the United Kingdom's international relations, the Authority should license more than one British airline to serve the same scheduled service route or traffic points wherever it is satisfied that:

    (a) the traffic is likely to be sufficient to support competing services profitably within a reasonable time,

    (b) the choice and standard of services available to the public are likely to be improved and, in the case of an international route, either

    (c) the aggregate share of total traffic that is secured by the British airlines is likely to be increased to an extent that will more than offset any lasting diseconomies, or

    (d) where the British share of capacity is predetermined, the licensing of a second airline within that share is likely to increase the total traffic secured by British airlines more rapidly than would otherwise he likely".

    Paragraph 17 ends with the words

    "It is not the Government's intention that any preference should he automatic or complete".

    This guidance received Parliamentary approval.

    The statutory position remained as I have stated when on the 29th July, 1975 the then Secretary of State for Trade, Mr. Peter Shore, made the announcement in the House of Commons to which my Lord has referred. I draw attention to hut will not read the terms of that announcement. They will he found in columns 1503 and 1504 of Hansard for that day - Bundle 7 page 148. I must however observe that the Secretary of State then told the House of Commons that he was considering whether an amendment to the 1971 Act would he required. The reversal of policy then announced was something which the Government was fully entitled to decide upon if it so desired, hut which it could only lawfully put into effect if it possessed the requisite powers under the 1971 Act so to do. If it did not, then the objective to be attained could only be attained by amending legislation. Clearly this was realised as the statement in Hansard shows. No amending legislation has been passed. It seems it was decided to attain the objective by means thought to be within the existing legislation. Those means proved to be the guidance announced in the new White Paper (Command 6400) published in February 1976. My Lord has set out the relevant paragraphs of that White Paper and summarised their effect.

    We have to determine whether the Secretary of State can lawfully give guidance to the Authority clearly inconsistent with one or more of the stated criteria in section 3 of the 1971 Act and in that connection "guide" the Authority to the conclusion that the plaintiffs' air transport licence should be revoked notwithstanding that that licence had been long fought for and finally retained following the defeat of the last attack upon it after a very full and careful hearing by the Authority who had declined to revoke it for reasons lucidly explained in its decision less than six months before the Secretary of State's statement on the 29th July, 1975.

    Where two successive sections of an Act of Parliament speak on the one hand of "guidance" and on the other of "direction" it is not unreasonable to think, in spite of certain dictionary definitions of "guidance" to which the Attorney-General referred us, that the draftsman intended a different result to follow according to whether it was guidance or a direction that was to be given. The difference was well put by Mr. Bateson when he submitted that guidance is assistance in reaching a decision proffered to him who has to make that decision, but that guidance does not compel any particular decision. Direction on the other hand, especially in the context of section 4, is compulsive in character. It requires the person to whom the direction is given to decide as directed. It deprives him of any freedom of decision, of any power to make his own decision as opposed to that which he is directed to make.

    I did not understand the Attorney-General to contest that in some contexts there might well be this distinction between the two words which I have gust mentioned. His argument was that whatever the position might be in other contexts, that was not the position in the context of these two sections and it was in that context and in that context alone that we he had to construe these words. He did not shrink from arguing that the Secretary of State could by way of guidance require the Authority not to give effect to all or any of the criteria in section 3(1). He prayed in aid the fact that guidance is always subject to Parliamentary control. He insisted that we in this court had to choose between two possible constructions - that for which he contended, namely the power to override the criteria by the giving of guidance issued subject to Parliamentary control or else holding that the Authority had unfettered control over all licensing matters.

    In the alternative he argued that it was the duty of the Authority to carry out its functions in the manner in which it thought would give effect to the particular guidance and to that end the Authority must interpret that guidance in such a way as it thought would best enable it to comply with the criteria. In answer to a question from the court in this latter connection what the Authority was to do if it thought that the guidance was in conflict with the criteria, he replied that the Authority must construe the guidance benevolently so as to avoid doing violence to the criteria, an answer which with respect does not meet the position where no amount of benevolence on the part of the Authority can avoid such a conflict arising.

    The Attorney-General also argued that the plaintiffs' construction of section 3(1)(b) involved that the Authority would not and could not perform its functions under that paragraph or comply with that criterion unless it licensed a non-State controlled airline to compete on every major route. I only mention this latter submission now to reject it for I do not think that that is the effect of the plaintiffs' submissions. On the contrary, if in relation to any given major route there is an application by a privately owned airline on which a State controlled airline is already operating, it is the duty of the Authority - subject to any fresh guidance which might lawfully be given by the Secretary of State - to consider that application in its entirety on its merits and if for other reasons the Authority thought fit to reject it, the Authority would not thereupon he obliged to grant the application merely because not to do so would leave a State controlled airline with a monopoly on that particular route.

    In his final reply the Attorney-General developed more fully an argument which he had mentioned in opening the appeal but did not then fully elaborate. This argument rested upon what I am afraid I have called earlier in this judgment the two infamously obscure phrases in section 3(1) "conferred otherwise than by this section" and in section 3(2) "conferred otherwise than by this subsection". It was in this connection that he relied upon the definition of "function" in section 64-(1) as including powers and duties. I hope I do no injustice to the argument if I state it thus. Since function includes duty there is no obligation to comply with the criteria in relation to the functions or duty which this section (i.e.. section 3) imposes. The functions and duties which this section imposes embrace the function or duty of complying with the guidelines given under section 3(2). This construction is reinforced by the phrase in that latter subsection "conferred otherwise than by this subsection". This phrase appears in section 3(2) because the guidance must relate to functions other than that conferred by this subsection itself, the subsection being concerned to ensure that one of the functions of the Authority is to comply with guidance for the giving of which and obedience to which the subsection makes provision.

    By this route the Attorney-General sought to persuade us that guidance could override the criteria. My first comment upon this ingenious argument is that this is a most remarkable way of enacting that guidance approved by Parliament can if necessary override the very criteria which Parliament has enjoined should be followed by the Authority. If it had been intended that guidance could so override the criteria, this could have been stated in the simplest terms and does not require to be achieved by this convoluted language. My second comment is that whereas section 4 confers an express power to override, and indeed to override without Parliamentary control, any other provision of the Act but only in the specific circumstances there specified, the Attorney-General's argument introduces a further form of dispensing power (true, subject to Parliamentary control) to override the criteria which the structure of the two sections 3 and 4 does not readily suggest was the intention of Parliament. Guidance overriding criteria and requiring mandatory compliance by the Authority to whom guidance is given is to my mind indistinguishable in principle from direction. Direction is provided for in section 4 but not elsewhere in this part of the statute. I am afraid I am not persuaded that where direction is thus expressly provided for, the power to give guidance is to be interpreted so that, when given, that guidance will in effect be indistinguishable from a direction, even though the latter is immune from Parliamentary control while the former is not.

    The Attorney-General frankly accepted the difficulties of construction which his argument involved. Naturally he laid much stress on the difficulty of giving these two phrases any intelligible construction. He sought to say that he had at least produced an intelligible construction whereas the contrary argument involved ignoring these two phrases altogether. I have of course considered this part of the Attorney-General's argument with great care, but, with respect, I am not persuaded that it is correct.

    When one finds phrases of this kind in a statute, one naturally looks to see what other functions section 3 does confer. In the express terms one finds none. But when one recalls, as the Attorney-General invited us to recall, the definition of "functions" in section 64(1) and the fact that that definition includes duties, I think it may be that the draftsman thought that because there was the duty imposed by the latter part of section 3(2) that duty was by definition also a function - indeed was the only function conferred on the Authority by section 3 itself. That function therefore (being the sole function conferred in any part of section 3 and being in fact conferred by section 3(2)) had to be excluded from the other functions to be performed by the Authority by the two phrases in sections 3(1) and 3(2) respectively, because it was not a function to which the criteria could apply since the guidance itself was to be guidance in the application of the criteria.

    I do not pretend that this or any other possible construction of the two phrases is easy. But whether my suggestion of what may have been in the draftsman's mind be right or wrong, I am afraid that I am quite unable to construe section 3 as enabling guidance to be given which not only dispenses with the necessity of compliance within the terms of the section with the criteria in the performance of the Authority's licensing functions but positively enables those criteria to be overridden by the guidance.

    There is another and to my mind most powerful consideration which militates strongly against the construction for which the Attorney-General contended. Sections 21, 22, 25 and 24 lay down an elaborate code for applications for air transport licences and for the revocation, suspension or variation of those licences and for making regulations in that connection and also in connection with appeals to the Secretary of State from decisions of the Authority. We have looked at some of those regulations though it is not necessary to refer to them. They have already been applied by the Authority in connection with disputes whether the Plaintiffs either should receive their present air transport licence or have that licence revoked. If the Secretary of State can give guidance requiring the Authority to revoke an existing licence, that guidance will prevent the Authority carrying out what I would regard as quasi-judicial functions - to use a familiar but not wholly satisfactory phrase - in this connection from which an appeal lies to the Secretary of State. It will further deprive the person whose licence is sought to be revoked of his statutory right to a full independent hearing before the Authority and in effect also of an appeal to the Secretary of State, for one wonders how if such "guidance" has previously been given, the Secretary of State or his officers could bring a suitably independent mind to the determination of an appeal from a decision of the Authority complying with the guidance.

    Further, the contention of the Crown seems to me to put the Authority in an almost impossible position in this connection. Assume they have received this guidance in the form proposed. Their obligation on a hearing of an application for a licence or for its revocation is to act independently and fairly but with the statutory criteria and the guidance in mind. If the guidance overrides the criteria, how can a truly independent decision be reached? The Attorney-General relied on section 24(2) and in particular upon the right of the Authority to seek guidance from the Secretary of State. But, with respect, I do not see how this subsection or its invocation could afford a solution of this particular problem.

    So far I have dealt only with the proposal in paragraph 7 of the guidance in effect to cause the Authority to revoke the plaintiffs' licence. But paragraph 8(b) cannot be overlooked in this connection. This allows the licensing of "British Caledonian Airways or another British airline to provide a scheduled service within British Airways' sphere of interest as defined by paragraph 7 provided British Airways has given its consent" (my italics). This seems to me wholly inconsistent with the criteria and I can find no power in the statute, which obviously contemplated lessening the monopoly of the State owned airlines, which permits the Secretary of State to allow that particular State owned airline to be the arbiter whether or not in the stated respect it will agree to competition from a privately owned airline.

    In the result I reach the same conclusion on the ultra vires question as did Mr. Justice Mocatta, and have my Lords. I am clearly of the view that paragraphs 7 and 8 of the proposed guidance, so far as they affect the plaintiffs, are ultra vires. I will conclude this part of this judgment by repeating that the policy outlined in the White Paper and the subject of the suggested guidance is clearly a policy which the Secretary of State is entitled to seek to implement if he and Parliament believe it to be the right policy to pursue in the public interest. But the Secretary of State must seek to implement it in accordance with and not in breach of the law. If the policy is to be implemented it seems that there must be new legislation amending the 1971 Act unless, as to which I express no opinion, some other means can be found within the existing legislation of attaining the desired objective. I would only add, subject to the views of my Lords and to hearing counsel further, that it may be that the declarations claimed and granted by the learned judge are somewhat too wide since, as was mentioned during the hearing, it is important that such declarations should not be framed so as adversely to affect any rights which British Caledonian, who are not parties to these proceedings, may have under those paragraphs.

    I now turn to consider the prerogative question. The argument for the Crown runs thus. The Bermuda Agreement 1946 is a bilateral treaty between the Government of the United Kingdom and the Government of the United States of America. Treaty making powers are among the prerogative powers of the Crown. When the Crown in the exercise of those prerogative powers concludes a treaty, the subject gains no personal rights under that treaty enforceable in our courts, unless the treaty becomes part of the municipal law of this country and provides for the subject to acquire certain specified rights thereunder. Some treaties do become part of the municipal law of this country. The Bermuda Agreement did not and has at no time become part of our municipal law. Neither the plaintiffs nor any other airline has any rights thereunder enforceable in our courts. They could not, even if they possess valid air transport licences under our municipal law such as the plaintiffs possess, have obliged the Crown to designate them as a "designated air carrier" so as to attract reciprocal rights from the United States Government under the Bermuda Agreement. Any such act of designation is a prerogative act into the doing or refraining from doing of which neither this court nor any other court in this country has jurisdiction to enquire, still less to interfere with. If therefore the Crown decides to withdraw the plaintiffs' designation under the Bermuda Agreement, it is free so to do. The plaintiffs have no right to object and this court has neither the right nor the power nor indeed the duty to enquire into or to interfere with such withdrawal of designation. The Crown's prerogative in this respect is unfettered by any legislation such as the 1971 Act and can be used as the Crown pleases. If therefore in what the Crown considers to be the public interest of avoiding undue competition on one or more major international routes, the Crown decides to withdraw the designation of a particular airline such as the plaintiffs, previously entitled by the Crown's earlier designation to the reciprocal rights I have mentioned, the Crown is free to withdraw that designation, even though it cannot lawfully (as both Mr. Justice Mocatta held and we hold) revoke their air transport licence without the possession of which the plaintiffs cannot lawfully use their aircraft for carriage for reward on a flight to which section 21(2) of the 1971 Act applies - see section 2l(1) of that Act.

    With much - indeed with most - of the Attorney-General's argument as to the "basic constitutional principles applicable to the use of the prerogative by the Grown, as to the incapacity of the courts of this country to control that use of the prerogative in relation to treaty making powers and the consequences so far as the subject is concerned of treaties concluded in furtherance of prerogative powers, I unhesitatingly agree. A long line of cases puts the position beyond doubt and I do not propose to lengthen this judgment by referring to more than two and these only by name, Rustomjee v. The Queen (1876) 2 Queen's Bench Division 67, and The Civilian War Claimants case (1932) Appeal Cases 14. There is no doubt as to the relevant principles. They are not and cannot be in question in this appeal.

    The sole question is whether the relevant prerogative power has been fettered so as to prevent the Crown seeking by use of the prerogative to withdraw the plaintiffs' designation under the Bermuda Agreement and thus in effect achieve what it is unable lawfully to achieve by securing the revocation by the Authority of the plaintiffs' air transport licence. Put in other words, can the Crown avoid the consequences of its proposal to secure the revocation by the Authority of the plaintiffs' air transport licence being illegal by the municipal law of this country, as we have held, by use of the prerogative power prevent that licence being of any commercial value to the plaintiffs, for without the reciprocal rights attaching to designation under the Bermuda Agreement the plaintiffs' air transport licence to fly between Stansted and New York is for all practical purposes commercially valueless, and then successfully argue that that prerogative act is not justiciable in our courts. Put less kindly and more bluntly, can the Crown, having failed to enter through the front door because the courts have barred that door by holding as they have that the guidance designed to secure the revocation of the plaintiffs' air transport licence is illegal, enter through the back door and in effect achieve the same result by that means of entry because the courts have no jurisdiction to assist the plaintiffs to bar that door as well.

    The strength of the Attorney-General's argument undoubtedly lies in the fact that nowhere in the 1971 Act does one find any express fetter upon the relevant prerogative power of the Crown. Further, as he pointed out, section 19(2)(b) of the Act provides that the Authority shall act on behalf of the Crown "in performing such of its other functions as Her Majesty may by Order in Council require it to perform on behalf of the Crown, as being functions appearing to Her to relate to the exercise of powers or the discharge of obligations of the United Kingdom under an international agreement". Further, section 19(2)(a) refers in terms to the Chicago Convention to which reference is also made in section 8 of the Civil Aviation Act, 1949. How, argued the Attorney-General, can there be any implied fetter on the relevant prerogative powers of the Crown when not only is there no express reference in the 1971 Act to the Bermuda Agreement, but there is in section 19(2)(b) a power - not exercised - to enable the Authority if required to do so to perform certain functions on behalf of the Crown in relation to the exercise of powers and the discharge of obligations of the United Kingdom under international agreements.

    The relevant principles upon which the courts have to determine whether prerogative power has been fettered by statute were exhaustively considered by the House of Lords in Attorney-General v. De Keyser's Royal Hotel (1920) Appeal Oases 508, It will, I think, be of assistance to quote five passages, one from each of the speeches of their Lordships in that case. At page 526 Lord Dunedin said:

    "The prerogative is defined by a learned constitutional writer as "The residue of discretionary or arbitrary authority which at any given time is legally left in the hands of the Crown'. Inasmuch as the Crown is a party to every Act of Parliament it is logical enough to consider that when the Act deals with something which before the Act could be effected by the prerogative, and specially empowers the Crown to do the same thing, but subject to conditions, the Crown assents to that, and by that Act, to the prerogative being curtailed".

    Lord Atkinson at pages 539-540 said:

    "It is quite obvious that it would be useless and meaningless for the Legislature to impose restrictions and limitations upon, and to attach conditions to, the exercise by the Crown of the powers conferred by a statute, if the Crown were free at its pleasure to disregard these conditions, and by virtue of its prerogative do the very thing the statutes empowered it to do. One cannot in the construction of a statute attribute to the Legislature (in the absence of compelling words) an intention so absurd. It was suggested that when a statute is passed empowering the Crown to do a certain thing which it might theretofore have done by virtue of its prerogative, the prerogative is merged in the statute. I confess I do not think the word 'merged' is happily chosen. I should prefer to say that when such a statute, expressing the will and intention of the King and of the three estates of the realm, is passed, it abridges the Royal Prerogative while it is in force to this extent: that the Crown can only do the particular thing under and in accordance with the statutory provisions, and that its prerogative power to do that thing is in abeyance. Whichever mode of expression he used, the result intended to be indicated is, I think, the same - namely, that after the statute has been passed, and while it is in force, the thing it empowers the Crown to do can thenceforth only be done by and under the statute, and subject to all the limitations, restrictions and conditions by it imposed, however unrestricted the Royal Prerogative may theretofore have been".

    Lord Moulton at page 554- said:

    "What effect has this course of legislation upon the Royal Prerogative? I do not think that it can be said to have abrogated that prerogative in any way, but it has given to the Crown statutory powers which render the exercise of that prerogative unnecessary, because the statutory powers that have been conferred upon it are wider and more comprehensive than those of the prerogative itself. But it has done more than this. It has indicated unmistakably that it is the intention of the nation that the powers of the Crown in these respects should be exercised in the equitable manner set forth in the statute, so that the burden shall not fall on the individual, but shall be borne by the community. This being so, when powers covered by this statute are exercised by the Crown it must be presumed that they are so exercised under the statute, and therefore subject to the equitable provision for compensation which is to be found in it. There can be no excuse for reverting to prerogative powers simpliciter -if indeed they ever did exist in such a form as would cover the proposed acquisition, a matter which is far from clear in such, a case as the present - when the Legislature has given to th.e Crown statutory powers which are wider than anyone pretends that it possessed under the prerogative, and which cover all that can he necessary for the defence of the nation, and which are moreover accompanied "by safeguards to the individual which are in agreement with the demands of justice ,..".

    Lord Sumner at page 561 said:

    "The appellant further contended that all that was done could be done, and was done, independently of any statute, by virtue of the Royal Prerogative alone" –

    I should explain that the appellant was the Attorney-General of the day. "I do not think that the precise extent of the prerogative need now he dealt with. The Legislature, "by appropriate enactment, can deal with such a subject-matter as that now in question in such a way as to abate such portions of the prerogative as apply to it. It seems also to be obvious that enactments may have this effect, provided they directly deal with the subject-matter, even though they enact a modus operandi for securing the desired result, which is not the same as that of the prerogative. If a statute merely recorded existing inherent powers, nothing would be gained by the enactment, for nothing would be added to the existing law. There is no object in dealing by statute with the same subject-matter as is already dealt with by the prerogative, unless it be either to limit or at least to vary its exercise or to provide an additional mode of attaining the same object".

    Finally there is this quotation from the speech of Lord Parmoor at page 575:

    "The constitutional principle is that when the power of the Executive to interfere with the property or liberty of subjects has been placed under Parliamentary control, and directly regulated by statute, the Executive no longer derives its authority from the Royal Prerogative of the Crown but from Parliament, and that in exercising such authority the Executive is bound to observe the restrictions which Parliament has imposed in favour of the subject. I think that the statutory provisions applicable to the interference by the Executive with the land and buildings of the respondents, bring the case within the above principle. It would be an untenable proposition to suggest that Courts of law could disregard the protective restrictions imposed by statute law where they are applicable. In this respect the sovereignty of Parliament is supreme. The principles of construction to be applied in deciding whether the Royal Prerogative has been taken away or abridged are well ascertained. It may be taken away or abridged by express words, by necessary implication, or, as stated in Bacon's Abridgement, where an Act of Parliament is made for the public good, the advancement of religion and justice, and to prevent injury and wrong ... I am further of opinion that where a matter has been directly regulated by statute there is a necessary implication that the statutory regulation must be obeyed, and that as far as such regulation is inconsistent with the claim of a Royal Prerogative right, such right can no longer be enforced".

    Thus the principles to be applied are plain and further citation of authority is superfluous. When one looks at the 1971 Act and its elaborate code in relation to licensing and the other matters entrusted to the Authority, can it be said that where the Authority, in pursuance of statutory powers expressly granted by Parliament has granted to the plaintiffs a valuable commercial asset in the form of an air transport licence to operate a service from Stansted to New York (a licence which the Authority can be directed by the Secretary of State to revoke in circumstances falling within section 4 of the Act but not otherwise and certainly not as we have held by the giving of the guidance already considered) a licence granted after a full and careful hearing before the Authority in the express expectation of the obtaining of reciprocal rights from the United States Government under the Bermuda Agreement, a prerogative power nevertheless survives in the Crown to nullify that licence by withdrawing the plaintiffs' designation under the Bermuda Agreement with its attendant advantages the securing of which was one of the avowed purposes of the Authority when it granted the plaintiffs that licence. I accept, as the Attorney-General argued, that the Crown might, under section 19(2)(b) of the 1971 Act, by Order in Council have delegated to the Authority the performance of various of the Crown's functions under the Bermuda Agreement but has not done so. But that of itself is no reason why the statute, containing as it does the express power in the Secretary of State under section 4- to revoke a licence in cases falling within that section, should be construed as leaving vested in the Grown, wholly unfettered and beyond the control of the courts, another power, a prerogative power enabling the Crown in effect to achieve without possibility of challenge in the courts that which it cannot achieve by guidance under section 3 or seemingly by direction under section 4. Mr. Bateson puts the crucial point succinctly in the course of his argument. The municipal law confers on the subject the right to fly, through the machinery established by the Act for the granting of air transport licences. Parliament intended those who gained such licences to have the right to fly on the routes for which that licence was granted. Parliament recognised in many places in the statute that there were already in being and might thereafter be relevant international obligations compliance with which by holders of such licences was essential; See, for example, section 4(3)(b) to (e) (inclusive) and section 19(2)(b). It gave the Secretary of State power to ensure compliance with those international obligations, by direction if necessary. Is it to be said that notwithstanding the absence of any express reference in the Act to the Bermuda Agreement as such or to designation or to withdrawal of designation as such, Parliament nevertheless, having established this elaborate licensing code which section 4 permits to be overridden by direction in the circumstances there specified, also intended to leave vested in the Crown, which means the Secretary of State, an unfettered prerogative power to destroy uncontrolled by the courts the commercial value of that right to fly, a right which it cannot lawfully destroy under the municipal law of this country by giving the guidance in question to the Authority under section 3 and has not sought to destroy and perhaps cannot destroy by giving a direction under section 4. In short, I do not think that the Attorney-General's argument that the prerogative power and the power under the municipal law can march side by side each operating in its own field, is right. The two powers are inextricably interwoven. Where a right to fly is granted by the Authority under the statute by the grant of an air transport licence which has not been lawfully revoked and cannot be lawfully revoked in the manner thus far contemplated by the Secretary of State, I do not see why we should hold that Parliament in 1971 must be taken to have intended that a prerogative power to achieve what is in effect the same result as lawful revocation would achieve, should have survived the passing of the statute unfettered so as to enable the Crown to achieve by what I have called the hack door that which cannot lawfully be achieved by entry through the front. I think Parliament must be taken to have intended to fetter the prerogative of the Crown in this relevant respect.

    I would therefore dismiss this appeal.

    LORD JUSTICE LAWTON: When during the first decade of this century the recently invented flying machines began to cross international frontiers states all over the world were faced with new political, economic and legal problems. Flexible though the common law was, it could not without legislation control and regulate the new development. The framing of legislation would not be easy because the new statutes would not be concerned solely with providing for the regulation of rights between subjects. The public interest generally would have to be taken into account in the political and economic spheres.

    The history of aviation law in the United Kingdom during the past sixty years reveals how Parliament has become aware of and has dealt with the inter-play of the rights of individuals and the needs of the public. Thus, the first statute, the Aerial Navigation Act, 1911, was intended to protect the public against dangers arising from the navigation of aircraft. By 1919 the need for international agreement about aviation had been appreciated. The result was the Paris Convention of that year. The Air Navigation Act, 1920 was passed to give effect to it and to make further provision for controlling and regulating the navigating of aircraft whether British or foreign, within the limits of His Majesty's jurisdiction ... and, in the case of British aircraft, for regulating the navigation thereof both within such jurisdiction and elsewhere": see the long title. This Act enabled the Crown by Order in Council to do many acts which it could not have done at common law. In particular it empowered the Crown to lay down conditions "under which aircraft may pass, or goods, mails or passengers may be conveyed by aircraft, into or from the British Islands ...": see section 3(f). These powers restricted and controlled the common law rights of citizens in times of peace to leave and re-enter the realm as they wished.

    In my judgment the terms of the 1920 Act, and what it sought to do and how it did it are of importance in the construction of the Civil Aviation Act, 1971. Faced in 1920 with the need to control a new development having international ramifications Parliament threw a statutory mantle over every aspect of the problem then known, other than the conduct of international relations. Whatever residual powers of control the Crown may have had at common law which could have been used were to be superseded by statutory powers.

    By 1971 the problems of international civil aviation had become much more complex. Her Majesty's government had to negotiate with foreign governments all over the world for flying rights for British aircraft overseas and for the granting of such rights to foreign aircraft in the United Kingdom. By 1971 about 70 international agreements had been made by the British government to this end. All this was outside the control of Parliament; but if the agreements were to be of any value to British citizens Parliament had to give effect to them. In my judgment the problems of regulating civil aircraft cannot be put into compartments which are isolated from one another. This is shown clearly by the political need for the Government to have powers to intervene in a straightforward international commercial operation if national security, whether in peace or war, or satisfactory international relations, require such intervention.

    There is another side to the problem of the relationship between Government and civil aviation. The running of airlines, whether they operate internally or internationally, is dependent upon the adequate supply of finance, materials and services. In the modern world there are conflicting political and economic theories as to how these supporting resources are to be provided. Some countries have decided that the state itself should be the sole provider of resources and the sole operator of aviation; others that there should be some, if not wholly free, play of market forces and that there should be competition in the running of airlines. Between the extremes of state monopoly and free enterprise there is the possibility of civil aviation being organised on the so-called mixed economy basis. Finally, by 1971 the problem of administration had to be solved. Running civil aviation required the services of staff with knowledge and experience which were not likely to be found amongst civil servants.

    In the United Kingdom aviation policy is determined by ministers within the legal framework set out by Parliament. Judges have nothing to do with either policy making or the carrying out of policy. Their function is to decide whether a minister has acted within the powers given him by statute or the common law. If he is declared by a court, after due process of law, to have acted outside his powers he must stop doing what he has done until such time as Parliament gives him the powers he wants. In a case such as this I regard myself as a referee. I can blow my judicial whistle when the ball goes out of play; hut when the game restarts I must neither take part In it nor tell the players how to play.

    The 1971 Act was designed to grapple with these administrative, economic, political and legal problems. That of administration was dealt with by setting up the Civil Aviation Authority to which I shall refer as the O.A.A. By section 2 the O.A.A. was given wide functions. By section 3(1) it was told what it should aim to do; but the method to be used was left to the Authority. Broadly the aims can be considered as economic. Section 3(1)(b) was an attempt to solve the political-economic problem of competition. There was to be some competition. This was a statutory objective set by Parliament itself. In my judgment Parliament can only get rid of it by statute.

    Parliament appreciated, however, that government policy might, indeed should be taken into account by the G.A.A. when performing its functions. This was provided for by section 3(2), The Secretary of State was empowered to give guidance with respect to the performance of its functions. The O.A.A. had a statutory duty to perform its functions in such manner as it considered was in accordance with the guidance for the time being given to it. The statutory word is "guidance", not "direction". The Secretary of State can point out the way to be followed. He can tell the O.A.A. what policy is to be applied in the performance of its functions. The C.A.A. is left to decide how to carry out the policy. In my judgment the guidance must take heed of the statutory objectives set out in section 3(1) . I can find no words in section 3(2) supporting the Attorney-General's submission that "guidance" should be construed as having the same meaning as "direction" and that the guidance given under section 3(2) can provide for setting aside any of the statutory objectives in section 3(1) . The two words are so different. The word "guidance" has the implication of leading, pointing the way, whereas "direction" even to-day echoes its Latin root of regere, to rule. When the Secretary of State exercises his statutory powers to direct he does indeed rule. He is in command: he is more than a guide. Further, for the reasons given by Lord Justice Roskill, I cannot accept that the words "conferred otherwise than by this sub-section" in section 3(2) have the effect by a tortuous verbal route of enabling the Secretary of State to do that which he has no express power to do. Parliament cannot have intended by the use of draftsman's jargon to give him power to override what Parliament had stated expressly should be one of the aims of the O.A.A. in performings its functions.

    Section 3(2) is in sharp contrast to section 4. Parliament appreciated that the national interest on occasions called for more than guidance. What might be wanted was action directed by the Secretary of State. He was then in command. Section 4- gave him the powers to take action but it enacted in what circumstances he could do so. He was not given a general dispensing or suspending power. He might take action under section 4 in four kinds of cases; in time of war, for the safeguarding of national security, in the sphere of international relations and for the preservation of the environment.

    There were, however, no express words in the Act controlling the rights of the Crown in the conduct of international relations. This being the structure of the Act, it is now necessary to consider whether the Secretary of State acted within its terms.

    Between 1972 and 1975 the C.A.A. performed its statutory functions in relation to Laker Airways Ltd. In doing so it had to keep in mind the statutory objectives set out in section 5(1) . The Attorney-General did not suggest that it had not done so. When it decided to grant Laker Airways Ltd, a licence to operate a scheduled route to the U.S.A. and not to revoke it when British Airways objected, it was doing, and doing properly, what Parliament had authorised it to do. When Laker Airways Ltd. were granted a licence they acquired a right. This right was derived from a statute. Ever since the early days of civil aviation statutes had controlled and regulated the common law right of citizens to leave and enter the realm by air. Now rights given by statute can only be taken away by statute. The 1971 Act by section 23 empowered the O.A.A. to revoke licences and when it was considering whether to do so it had to follow the procedure set out in the statutory regulations (1972 S.I.178). This procedure gave the licensee a right to be heard. It follows that under the 1971 Act the Secretary of State has no power to direct the C.A.A. to revoke licences save when he is acting under section 4. He can then give directions.

    In February 1976 the Secretary of State purported to give guidance in writing to the C.A.A. It was contained in Command Paper 6400. In paragraph 7 it purported to direct the C.A.A. not to allow more than one British airline to serve the same route. This was a direction to the G.A.A. to disregard the plain words of section 3(1)(b). It was not a direction given under section 4. This same paragraph ends with these words: "The Authority should review existing licences and exemptions in the light of this paragraph and take appropriate action (my italics)". This can only mean that the Secretary of State was purporting to direct the O.A.A. to revoke any existing licence which did not come within the terms of his "guidance". Paragraph 8 purported to be a saving clause. There could be competition with British Airways hut only with its consent. This was not what Parliament had intended when it provided in section 3(1) (b) for competition between British Airways and at least one major British airline.

    In acting as he did the Secretary of State purported to exercise powers of direction which he did not have and to procure the O.A.A. to revoke Laker Airways Ltd.'s licence in a way which was not authorised by law. He acted ultra vires. Until Parliament repeals section 3(1)(b) the G.A.A. must keep it in mind when performing its functions and must follow the statutory procedure for revoking licences.

    The next problem to be considered is whether the Secretary of State by the exercise of the Crown's prerogative rights in the sphere of international relations can stop Laker Airways Ltd. from doing what the C.A.A. has licensed them to do, namely to operate a scheduled route to the U.S.A. He can only take a step towards this end by withdrawing their designation as carriers for the purposes of the Bermuda Agreement made between the United Kingdom and the U.S.A. in 1945. The act of withdrawing designation by itself has no effect in our municipal law. A licensee from whom designation has been withdrawn cannot be restrained from flying planes out of the United Kingdom and commits no criminal offence in doing so. If the U.S.A. government saw fit to disregard the withdrawal of designation the licensee could continue to operate the scheduled route. These are, however, theoretical possibilities. When the Secretary of State issued his "guidance" Laker Airways Ltd. were about to be given by the U.S.A. government permission to operate a scheduled route to that country. The permit had been sent to the President for his signature. When the Secretary of State's decision about Laker Airways Ltd. became known the draft permit was withdrawn from the White House. They have no permit to operate in the U.S.A. and are not likely to get one if they are no longer British designated carriers. That which the Secretary of State could not lawfully do in the way he purported to do it, the Attorney-General submitted he could do through the prerogative powers and that when he had done so his act was not cognisable by the courts. Put in other words, the Attorney-General was submitting that a licence to operate a scheduled route which had been granted under statute and after full enquiry by the O.A.A. and which had been made effective internationally by designation could be rendered useless by a decision of the Secretary of State made without the holder being given any opportunity of being heard or appealing to the courts. Now getting a licence takes time and is an expensive process. Once an applicant for a licence has been granted one and been designated a British carrier for the purpose of the Bermuda Agreement he is entitled to expect the U.S.A. government to grant a permit in that country without delay. The Agreement says this should be so. When Laker Airways Ltd. were in this position they spent large sums in getting ready to operate the scheduled route. The Secretary of State must have expected them to do so and knew they had. Yet, submitted the Attorney-General, the Secretary of State could still withdraw the designation.

    The Attorney-General based his submission on the well-known and well-founded proposition that the courts cannot take cognisance of Her Majesty's government's conduct of international relations. Lake Airway's designation as a British carrier for the purpose of the Bermuda Agreement was an act done in the course of conducting international relations. The Civil Aviation Act, 1971 did not apply. That Act nowhere refers to designated carriers. An airline might be granted a licence to operate a scheduled route but not become a designated carrier. It could not by any legal process compel the Secretary of State to designate it as a British carrier. It followed, submitted the Attorney-General, that the withdrawal of designation must be within the prerogative powers exercisable by the Secretary of State on behalf of the Grown. Although the Bermuda Agreement does not provide in terms for the withdrawal of designation both High Contracting parties to it must by necessary implication have power to do so. The Agreement might not be effective if this were not so. For example, the Secretary of State might have designated as a British carrier an airline which had a licence to operate a scheduled route but for reasons of its own decided not to do so. The airline's decision not to operate might not affect in any way the United Kingdom's relations with the United States so that the Secretary of State could not act under section 4(3)(b). The withdrawal of designation and the designating of another carrier would be the sensible course for the Secretary of State to take. The act of withdrawing designation must come within the prerogative powers exercisable by the Secretary of State on behalf of the Grown. The problem, however, is whether the power to withdraw the designation can be exercised when the carrier still has a licence to operate granted in accordance with statute. Should not such a licence first be revoked in the way provided by the Act and the regulations made under it? Even in a case outside section 4 if there is good reason for the Secretary of State to want a licence revoked he can bring that reason to the attention of the C.A.A. If that Authority considers it appropriate to do so it can revoke the licence: see section 23(2). Before doing so, however, it must listen to what the licence holder has to say and to any witnesses he may call. This would be a fair procedure. If the C.A.A. revoked the licence, the Secretary of State could at once withdraw the designation; but, if after full investigation the Authority was not satisfied that the reason for revocation put forward by the Secretary of State was a good one, why should he be allowed, by withdrawing the designation, to stop the licence holder from using a licence which the statutory body entrusted by Parliament to control the grant of licences had decided he should continue to have.

    The Attorney-General's answer to that question was that the Secretary of State was empowered to act in this way because there was nothing in the 1971 Act which curbed the prerogative rights of the Crown in the sphere of international relations. Far from curbing these powers, by section 19(2)(b) Parliament recognised that the Crown had them. This is so; but the Secretary of State cannot use the Crown's powers in this sphere in such a way as to take away the rights of citizens: see Walker v.Baird (1892) Appeal Oases 40. By withdrawing designation this is what in reality, if not in form, he is doing. A licence to operate a scheduled route is useless without designation. In my judgment the 1971 Act was intended by Parliament to govern the rights and duties of British citizens in all aspects of civil aviation and to indicate what the Secretary of State could and should do. An applicant for a licence to operate a scheduled route has to satisfy the O.A.A. that he is experienced and has the financial resources to do what he wants to do: see section 22(2). Even then the O.A.A. in its discretion can refuse a licence: see section 22(4). Licences are hard to get; and, when granted, easy to lose if the attached conditions are not met: see section 23. The Act made provision for revocation by the O.A.A. under section 23 and by the Secretary of State under section 4. These provisions regulate all aspects of the revocation of licences. By necessary implication the Act, in my judgment, should be construed so as to prevent the Secretary of State from rendering licences useless by the withdrawal of designation when he could not procure the O.A.A. to revoke them nor lawfully do so himself.

    My conclusions on the issues of the legality of the Secretary of State's guidance and the use of the Crown's prerogative powers mean that I would dismiss the appeal. I add only a short comment on the issue of estoppel. Whatever representations the Secretary of State in office between 1972 and 1974 may have made to Laker Airways Ltd. he made them pursuant to his public duty and in good faith. If in 1976 his successor was of the opinion that the public interest required him to go back on those representations, he was in duty bound to go back on them. The fact that Laker Airways Ltd. suffered loss as a result of the change is unfortunate: they have been the victims of a change of government policy. This often happens. Estoppel cannot be allowed to hinder the formation of government policy.

    (Order: Appeal dismissed with costs. Variation in court below as to costs and declarations. Leave to appeal to the House of Lords granted).

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