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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 >> Waltham Forest NHS Primary Care Trust & Anor v Malik, R (on the application of)  EWCA Civ 265 (28 March 2007)
Cite as:  HRLR 24,  ICR 1101,  UKHRR 1105,  IRLR 529,  EWCA Civ 265,  4 All ER 832,  WLR 2092,  1 WLR 2092,  LS Law Medical 335
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION (ADMINISTRATIVE COURT)
THE HONOURABLE MR JUSTICE COLLINS
Strand, London, WC2A 2LL
B e f o r e :
THE RIGHT HONOURABLE LORD JUSTICE RIX
THE RIGHT HONOURABLE LORD JUSTICE MOSES
| WALTHAM FOREST NHS PRIMARY CARE TRUST
2) SECRETARY OF STATE FOR HEALTH
|- and -
|THE QUEEN ON THE APPLICATION OF ZAFRA IQBAL MALIK
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A Merrill Communications Company
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Mr Philip Engelman (instructed by Edwards Duthie) for the Respondent
Hearing date: 25th October 2006
Crown Copyright ©
Lord Justice Auld :
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided by the law and the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.
The statutory and regulatory background
i) the European Court's judgment in Van Marle v The Netherlands (1986) 8 EHRR 483 showed that the right to practise a profession can be regarded as a "possession";
ii) a licence to carry out an economic activity can be regarded as a "possession", following the Court of Appeal's judgment in Crompton v Department of Transport  EWCA Civ 64 and the Judge's own ruling in R (Quark Fishing) v Secretary of State for Foreign Commonwealth Affairs  EWHC 1743 (Admin), paragraphs 35-37; and
iii) inclusion in a performers list is "akin to the possession of a licence", giving it "an intrinsic value in that it enables the doctor to practise", and "suspension [from which] may well affect the economic value to him of his practice" in its possible effect on his patient numbers and hence his remuneration; see paragraph 38 of Collins J's judgment.
The case for the Secretary of State and the PCT
i) the hope or expectation of earning income in the future is not a "possession";
ii) assets of a business or a profession, including its goodwill, may amount to a possession;
iii) an unmarketable or otherwise un-transferable licence or permission to conduct a business or to follow a profession are personal to the grantee and cannot, therefore, amount to goodwill or hence a possession;
iv) Dr Malik had no goodwill in his patient list because of a statutory rule that NHS doctors have no goodwill in their patient lists, and hence his NHS practice was not a possession, even though withdrawal or suspension of the licence might have adversely affected his professional activity; and
v) in attributing an economic value to inclusion on a performers list, Collins J wrongly relied on the damage to a doctor's practice that suspension could cause, since such damage could only occur by way of future loss of income, which is not capable of being an Article 1 "possession", and, in any event, there was no basis on the facts for inferring damage to Dr Malik's practice.
The case for Dr Malik
(1) future loss of income is loss of a possession if related to a profession, business or some other economic activity;
(2) the other losses of Dr Malik are also losses of possessions;
(3) a licence to practise a profession is a species of possession per se if granted in connection with a particular practice or business;
(4) an entity does not have to be marketable to be an Article 1 possession; and
(5) Collins J correctly held that Dr Malik's suspension was capable of having interfered with the economic value of his practice.
The questions of law raised by the appeal
(1) in what respect may future income be an Article 1 "possession" – goodwill and legitimate expectation?
"41. … the right relied upon by the applicants may be likened to the right of property embodied in Article 1: by dint of their own work, the applicants had built up a clientele: this had in many respects the nature of a private right and constituted an asset and, hence, a possession within the meaning of the first sentence of Article 1. …
42. The refusal to register the applicants as certified accountants radically affected the conditions of their professional activities and the scope of those activities was reduced. Their income fell, as did the value of their clientele and, more generally, their business. Consequently, there was interference with their right to the peaceful enjoyment of their possessions."
"… Article 1 … is not applicable to future earnings, but only to existing possessions, that is to say income once it has been earned or where an enforceable claim to it exists … The applicability of Article 1 however extends to law practices and their clientele as these are entities of a certain worth that have in many respects the nature of a private right and thus constitute assets and therefore possessions within the meaning of the first sentence of Article 1 …
In this context, it does not matter whether the applicants acquired the possessions by taking advantage of favourable position, or solely through their own activities. When dealing with the protection of privileges accorded by law, the Convention is applicable where such privileges lead to a legitimate expectation of acquiring certain possessions. That is the case here."
"The Court is not entirely persuaded that the Federal Constitutional Court's decision interfered with the applicant's possession within the meaning of Article 1 … the applicants have not submitted any concrete evidence that they depended on other lawyers' recommendations for most of their clientele, e.g. by furnishing the Court with lists of clients or the like. However, the Court is not required to resolve this problem as, even assuming an interference with their property rights, such interference was justified under the second paragraph of Article 1 …"
" … we reject the breadth of the 'claims as to the loss of their "livelihood". Strasbourg case law, while stating that a professional man's clientele may form part of his possessions, as may the goodwill of his business, has very clearly ruled that any element of a claim that relates to loss of future income does not qualify in this respect, unless an enforceable claim to future income already exists. The Divisional Court set out the relevant Strasbourg case law in paras 170-172 of its judgment. We agree with their approach, including their unwillingness to follow the judgment of the Inner House of the Court of Sessions in Adams at para 97, in so far as it may have been suggested that the livelihood of a self-employed person occupies some middle position between marketable goodwill and future income. …."
"… if the claimant can establish that he has suffered recoverable damage he may be entitled to some sums to recompense him for such loss. Since he should have been receiving payment which should have maintained his income, he may have difficulty in establishing any loss. However, I am not in a position to decide that issue."
(2) whether a personal permission, in the form of inclusion on a professional list, or a licence, is an Article 1 "possession"
"37. In Crompton … the Court of Appeal was concerned with the revocation of a licence which enabled the appellant to operate heavy goods vehicles. At paragraph 19, Kennedy LJ, who gave the only reasoned judgment ,said:
'An operator's licence is a possession for the purposes of Article 1P1.
That conclusion did not depend on goodwill. My attention was also drawn to a decision of mine, Quark … in which I decided that a licence to carry out an economic activity could amount to a possession within the meaning of Article 1P1. That is clearly correct: whether it would amount to a possession might depend on the facts of a given case.
38. In this case, inclusion in the list is akin to the possession of a licence. While the goodwill of the practice is not marketable, the inclusion has an intrinsic value in that it enables the doctor to practise. Since the amount of his remuneration will be affected by his patient numbers, suspension may well affect the economic value to him of his practice. Thus inclusion in the list has a present value apart from the right to future income and, as it seems to me, the decision in Van Marle … supports the view that it can and does amount to a possession. The Countryside … case is distinguishable since it was concerned with a self-employed person's livelihood and not with his possession of a licence or its equivalent which enabled him to work. I think the approach of the Court of Appeal in the Crompton case was correct."
"73. The business has a capital value or goodwill only if the entity can be, and is, organised in a way that allows future cash flows to be capitalised. … it is clear on Strasbourg jurisprudence, now confirmed by high domestic authority, that .., [Article 1] protects only 'goodwill', as a form of asset with a monetary value, and does not protect an expected stream of future income which, for mainly organisational reasons cannot be or is not capitalised. In other words, the Convention, differing perhaps in this respect from the law of the European Union, protects assets which have a monetary value not economic interests as such.
How should a licence or permission be treated under … [Article 1]? It seems to me that certain licences or permissions are 'assets', that is, they have a monetary value and can be marketed for consideration, either through outright sale, 'leasing', or sub-licensing. Milk quotas would fall within this category as well as certain spectrum licenses which Ofcom allows to be assigned or sub-licensed for consideration. … "
74. However, there are other licences or permissions that are neither marketable nor have been obtained at a 'market' price, that is, a price representing what is thought to be the value of net discounted future cash flows that the licence might generate. Such a licence in one sense has a value to the holder because, without it, he cannot carry on the licensable activities. However, such licences do not seem to me to be 'assets' having monetary value in the sense required by … [Article 1]. Such licences do not as such represent a distinct asset having monetary value.
75. Furthermore, to treat such licences as 'possessions' would, in my view, risk introducing unjustified distinctions into what is already a fairly complex area of law. Once a 'possession', the licence enjoys a status under … [Article 1]; any interference must be justified as proportionate and damages may be awarded if the interference is not justified. The damages are likely to be substantial because economic interests have been putatively destroyed or impaired. That higher protection would, however, depend solely upon whether the economic activity in question, which has been the subject of interference, was a "licensable" one. But I have difficulty in seeing any rationale for giving a higher protection by reason of that fact alone. … It is true that commentators have often observed that licensing may constitute a barrier to entry and thus raise industry profits above the competitive level, but that could hardly be a good reason for according higher protection under the Convention and HRA to licensable activities. If licensable activities enjoyed higher protection, the result in Countryside Alliance (that the expectation of future earnings was not a possession) could have been different if hunting had first been a licensable activity and the effect of the ban in the Hunting Act 2004 had been to make such licences worthless. However, such a distinction would seem largely fortuitous and I cannot see merit in a system which would treat these two situations differently. …"
(3) The Judge's reliance on damage to the Dr Malik's practice
Lord Justice Rix :
"The Court recalls its case-law that goodwill may be an element in the valuation of a professional practice, but that future income itself is only a "possession" once it has been earned, or an enforceable claim to it exists (no. 37683/97 Ian Edgar [Liverpool] Ltd. v. the United Kingdom, Dec 25.01.00, Section III, see also…Van Marle…The Court considers that the same must apply in the case of a business engaged in commerce. In the present case, the applicants refer to the value of their businesses based upon the means of earning an income from those businesses as "goodwill". The Court considers that the applicants are complaining in substance of loss of future income in addition to loss of goodwill and a diminution in value of their assets. It concludes that the element of the complaint which is based upon the diminution in value of the business assessed by reference to future income, and which amounts in effect to a claim for loss of future income, falls outside the scope of Article 1 of Protocol No. 1."
"In this context, it does not matter whether the applicants acquired the possessions by taking advantage of a favourable position, or solely through their own activities. When dealing with the protection of privileges accorded by law, the Convention is applicable where such privileges lead to a legitimate expectation of acquiring certain possessions. That is the case here."
"166. The defendants accept that the Hunting Act interferes with the peaceful enjoyment of possessions or controls the use of those possessions in as much as it prevents individuals from using land, animals and goods which they own for the purposes of hunting wild mammals with dogs and to the extent that the claimants can establish that the Hunting Act has the consequence of diminishing the value of land or other property or damaging the established goodwill of a business."
To that extent, however, the Divisional Court, upheld by this court, found that the interference, which it accepted was significant, had been justified.
"169. Mr Sales submits that there is a clear distinction in Strasbourg jurisprudence for the purposes of Article 1 between the valuable goodwill of a business and the ability of a person to earn future income. The first is a possession: the second is not. The first is marketable: the second is not. There is no intermediate "possession", being the livelihood of a self-employed person. A self-employed person may or may not have marketable goodwill. If he does, it will be a possession. If the livelihood of a self-employed person is in truth no more than his (unmarketable) personal ability to earn future income, that is not a possession…
174. In our judgment Mr Gordon has no persuasive answer to Mr Sales' analysis that there is no middle position, occupied by the livelihood of a self-employed person, between marketable goodwill and future income. In so far as the Scottish courts may have decided otherwise, we respectfully disagree. Whether individual claimants in the present proceedings who are self-employed have marketable goodwill is beyond our present competence to decide."
The Court of Appeal expressly upheld the Divisional Court's decision in this respect (at para114).
The jurisprudence applied
"38. In this case, inclusion in this list is akin to the possession of a licence. While the goodwill of the practice is not marketable, the inclusion has an intrinsic value in that it enables the doctor to practise. Since the amount of his remuneration will be affected by his patient numbers, suspension may well affect the economic value to him of his practice. Thus inclusion on the list has a present value apart from the right to future income and, as it seems to me, the decision in Van Marle v Netherlands supports the view that it can and does amount to a possession. The Countryside Alliance case is distinguishable since it was concerned with a self-employed person's livelihood and not with his possession of a licence or its equivalent which enabled him to work. I think the approach of the Court of Appeal in the Crompton case was correct.
39. I am therefore persuaded that inclusion in the list is a possession within art 1PI. If the suspension had been properly and lawfully imposed, I have no doubt that the interference in the right of peaceful enjoyment would have been proportionate and so justified. But the suspension was unlawful for the reasons I have given and so the interference was not justified. Thus if the claimant can establish that he has suffered recoverable damage he may be entitled to some sums to recompense him for such loss. Since he should have been receiving payment which should have maintained his income, he may have difficulty in establishing any loss. However, I am not in a position to decide that issue."
"41. In my judgment, the instant case is clearly distinguishable from a case in which a public authority has granted a licence to carry on a particular trade. One can readily see why, in such a case, the economic interests which derive from the grant of such a licence may fall to be treated as, in effect, rights of property. But that element is not present in the instant case. Accordingly I cannot accept that the appellant's right to seek a particular type of employment (assuming such a right can be said to exist) can constitute a 'possession' within the meaning of the Article."
Lord Justice Moses :
"It is the benefit and advantage of the good name, reputation, and connection of a business."
"If the cat metaphor is to be used, I would say that the cat may be attracted away by a gentle stroke on the back and the promise of a bowl of milk. But really there should be a fourth animal, the rabbit, to indicate the customers who come simply from propinquity to the premises…"
Note 1 taken from Brealey & Myers, Principles of Corporate Finance, 7th edition, 2003, sections 4.5 and 19.1 [Back] Note 2 [i.e. the Court of Appeal inCountryside] [Back] Note 3 made by the Secretary of State pursuant to sections 17 and 126(4) of the National Health Service Act 1977 [Back]
Note 1 taken from Brealey & Myers, Principles of Corporate Finance, 7th edition, 2003, sections 4.5 and 19.1 [Back]
Note 2 [i.e. the Court of Appeal inCountryside] [Back]
Note 3 made by the Secretary of State pursuant to sections 17 and 126(4) of the National Health Service Act 1977 [Back]