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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> R v Secretary of State for Foreign Affairs ex p. The World Development Movement Ltd [1994] EWHC Admin 1 (10 November 1994) URL: http://www.bailii.org/ew/cases/EWHC/Admin/1994/1.html Cite as: [1995] WLR 386, [1995] 1 WLR 386, [1995] 1 All ER 611, [1994] EWHC Admin 1, [1995] COD 211 |
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QUEEN'S BENCH DIVISION
(DIVISIONAL COURT)
London WC2 |
||
B e f o r e :
and
MR JUSTICE SCOTT BAKER
____________________
v | ||
THE SECRETARY OF STATE FOR FOREIGN AFFAIRS | ||
EX PARTE THE WORLD DEVELOPMENT MOVEMENT LIMITED |
____________________
Fax No: 071 404 7443
Official Shorthand Writers to the Court)
MR S RICHARDS (Instructed by the Treasury Solicitor, London SW1H 9JS) appeared on behalf of the Respondent.
____________________
Crown Copyright ©
Thursday, 10th November 1994.
LORD JUSTICE ROSE: There is before the court an application by the World Development Movement Ltd for judicial review of two decisions of the Secretary of State for Foreign Affairs in relation to aid to fund the Pergau Dam
in Malaysia. The initial decision to grant aid was made on or shortly before 8th July 1991. The application refers to 15th July, which was the date of a press release in relation to the matter, but nothing turns on the precise date.
"The Secretary of State shall have power, for the purpose of promoting the development or maintaining the economy of a country or territory outside the United Kingdom, or the welfare of its people, to furnish any person or body with assistance, whether financial, technical or of any other nature."
The relevant history is that, during the 1960s, the Malaysian Government identified on the Pergau
River a potential site for a hydro electric power station. In April 1988 an Australian company carried out a feasibility study for a
dam
there. In September 1988 two British companies, Balfour Beatty and GEC, indicated to the Department of Trade and Industry their interest in the site. In the autumn of 1988 the Malaysian Electricity Authority identified the
Pergau
site as a priority. In October 1988 the British consortium told the DTI that they would be seeking, in relation to
Pergau
, ATP (ie Aid and Trade Provision, which accounts for about five per cent of the overseas aid fund disbursable under section 1 of the Act). In November 1988 the consortium submitted a formal application for ATP and gave "indicative costs" totalling £315 million to the ODA, and in January 1989 produced what was said by the National Audit Office to be a "firm contract proposal" of £316 million, with a United Kingdom content of £195 million.
In early 1989 the DTI advised the ODA to send an appraisal mission to Malaysia. On 6th March 1989 the consortium repeated the figure of £316 million. From 13th to 15 March 1989 an ODA appraisal mission was in Malaysia, the brevity and timing of that mission being described later by Sir Tim Lankester as "a lamentable slip". On 14th March there was a telephone report to London from the appraisal mission. On 15th March the then Prime Minister, Mrs Thatcher, met Dr Mahatir, the Prime Minister of Malaysia, in London and made an oral offer of ATP support of up to £68.25 million for the Pergau
project, conditional on a full economic appraisal. That figure was the OECD minimum figure of 35 per cent of the £195 million portion of the total which was eligible for United Kingdom and European Community official support.
On 20th March the appraisal mission reported that, at the consortium's price of £316 million, the economic viability of the project was "marginal". On 31st March the consortium informed the DTI and ODA that the budgetary estimate of the Pergau
project was £397 million, that is 25 per cent higher than previously stated. On 14th April an ODA economist minuted that in the light of this figure "
Pergau
was no longer a marginal project: clearly it now was uneconomic....."
On 17th April a formal written notice of the Pergau
offer was sent to the Malaysian Government. Sir Tim Lankester described the position then facing the United Kingdom as a "dilemma", presenting four options:
(i) a formal offer of £397 million which was inconceivable on the economic view which had been taken;
(ii) withdrawing the offer, which was politically impossible;
(iii) confirming an offer at £316 million, which was not tenable in view of the price rise; and
(iv) making an offer based on £316 million, but with an indication of willingness to discuss the possibility of further assistance.
Option (iv) was chosen by Ministers.
In February 1990 the ODA completed a further economic appraisal and concluded that the Pergau
project would, at £397 million, be "a very bad buy", and a burden on Malaysian consumers. In April an ODA economist minuted that, on all available estimates, which included a World Bank appraisal,
Pergau
appeared "markedly uneconomic". In October 1990 ODA concluded that
Pergau
would not be an economic proposition until the year 2005 at the earliest, and that Malaysian consumers would pay £100 million more for their electricity over
Pergau
's 35 year life, than if cheaper alternatives were pursued. Sir Tim Lankester was of the view that the
Pergau
project "was unequivocally a bad one in economic terms".
In January 1991 ODA completed a further economic appraisal which priced the Pergau
project at £417 million, which would predicate ATP funding of £108 million and confirmed the conclusion that the project should be postponed. On 5th February 1991 Sir Tim Lankester sent a minute to the ODA Minister advising against proceeding. This minute described the economic case against
Pergau
in the following terms:
"'..... this project should not be implemented for the foreseeable future. There were much cheaper ways of producing electricity in Malaysia for many years to come .....'
.....
'this was not a marginal project such that the economics could be readily set aside in favour of commercial and political consideration. The proposed assistance of £108 million was by any standards very substantial indeed. ODA needed to look in all its projects for a positive return to the recipient country's economy. With such a large amount at stake, it was all the more important not to finance knowingly a bad investment. ImplementingPergau
now would impose a cost penalty to the Malaysian economy of over £100 million, compared with alternative gas turbine projects. Thus, far from aid contributing to the development of Malaysia, it would at best be offsetting the extra cost of choosing
Pergau
.'"
On 7th February a further minute was sent by Sir Tim Lankester requesting a specific Ministerial Direction, if there was to be expenditure on Pergau
. That minute included the following, by reference to Sir Tim Lankester:
"'[He] ... had looked again at the papers to see whether there were any material counter arguments to be set against the clear economic case against the project ...... he saw no serious counter arguments.'"
"'Supporting the project with aid funds would not in his view be consistent with policy statements by Ministers to Parliament about the basic objectives of the aid programme and the way aid funds are managed, which is also the context in which Parliament voted aid monies. Nor did the project meet well established criteria by which public investments should be assessed.....'"
The Accounting Officer's view was that the Pergau
project was "'an abuse of the aid programme in the terms that this is an uneconomic project' and that 'it was not a sound development project.'"
On 26th February the Foreign Secretary, against that advice, took the decision to approve ATP support for the Pergau
project and gave the appropriate direction to Sir Tim Lankester on 4th July. On 8th July the United Kingdom and the Malaysian Governments signed the financial agreement for ATP support for the
Pergau
project. On 12th July the
Pergau
contract was signed by the British consortium and the Malaysian Electricity Authority. On 15th July there was a press release. It was headed: "BRITAIN PROVIDES £306 MILLION SOFT LOAN TO MALAYSIA." It referred to the project "..... to design and construct a 600 MW hydro electric power station on the
Pergau
river". One of the notes for editors was in these terms:
"The soft loan will be part financed from the British Aid and Trade Provision (ATP) which is designed to support development projects which are of interest to British industry."
Later the cost to the United Kingdom rose to £234 million.
"No application for judicial review shall be made unless the leave of the High Court has been obtained in accordance with rules of court; and the court shall not grant leave to make such an application unless it considers that the applicant has a sufficient interest in the matter to which the application relates."
Rules of the Supreme Court, Ord. 53 r 3(7) provides:
"The Court shall not grant leave unless it considers that the applicant has a sufficient interest in the matter to which the application relates."
If the Applicants have no standing, it is said that no person or body would ensure that powers under the 1980 Act are exercised lawfully. For the Applicants, Mr Pleming QC submitted that the Respondent himself, in a written statement of the 2nd March 1994, has expressly accepted that the matter is "..... clearly of public and Parliamentary interest ....." It cannot be said that the Applicants are "busybodies","cranks" or "mischief makers". They are a non partisan pressure group concerned with the misuse of aid money. If there is a public law error, it is difficult to see how else it could be challenged and corrected except by such an Applicant. He referred the court to a number of authorities: R v Inland Revenue Commissioners, ex parte National Federation of Self Employed and Small Businesses Ltd [1982] AC 617; in particular the speech of Lord Wilberforce at page 630E and the speech of Lord Diplock at 644E G, where there appears this passage:
"It would, in my view, be a grave lacuna in our system of public law if a pressure group, like the federation, or even a public spirited taxpayer, were prevented by outdated technical rules of locus standi from bringing the matter to the attention of the court to vindicate the rule of law and get the unlawful conduct stopped. The Attorney General, although he occasionally applies for prerogative orders against public authorities that do not form part of central government, in practice never does so against government departments. It is not, in my view, a sufficient "answer to say that judicial review of the actions of officers or departments of central government is unnecessary because they are accountable to Parliament for the way in which they accountable to Parliament for the way in which they carry out their functions. They are accountable to Parliament for what they do so far as regards efficiency and policy, and of that Parliament is the only judge; they are responsible to a court of justice for the lawfulness of what they do, and of that the court is the only judge."
Mr Pleming also referred to R v Monopolies and Mergers Commission, ex parte Argyll Group Plc [1986] 1 WLR 763. At 773H, Sir John Donaldson, when referring to the provision of Ord. 53 r.3(7) said this:
"The first stage test, which is applied upon the application for leave, will lead to a refusal if the applicant has no interest whatsoever and is, in truth, no more than a meddlesome busybody. If, however, the application appears to be otherwise arguable and there is no other discretionary bar, such as dilatoriness on the part of the applicant, the applicant may expect to get leave to apply, leaving the test of interest or standing to be re applied as a matter of discretion on the hearing of the substantive application. At this second stage, the strength of the applicant's interest is one of the factors to be weighed in the balance."
There is a reference to Professor Wade's work on Administrative Law, to which I shall come later.
Mr Pleming also referred to R v Secretary of State for Social Services and Another, ex parte Child Poverty Action Group and Others [1989] 1 All ER 1047, where that group were held to have a sufficient interest or standing. He referred also to R v Her Majesty's Inspectorate of Pollution and Ministry of Agriculture, Fisheries and Food, ex parte Greenpeace Ltd [1994] 4 All ER 329; in particular to passages in the judgment of Otton J at page 350C H and page 351B D, which it is unnecessary to read. Finally on this aspect, he invited the court's attention to R v Secretary of State for Foreign and Commonwealth Affairs, ex parte Rees Mogg [1994] 1 All ER 457, where at 461J Lloyd LJ, delivering the judgment of the Divisional Court, (comprised of himself, Mann LJ and Auld J) accepted that the Applicant had standing "because of his sincere concern for constitutional issues." The question of lawfulness being for the court, Mr Pleming submitted that the court in its discretion should accept the standing of the Applicants. If they cannot seek relief, he said, who can? Neither a Government nor citizen of a foreign country denied aid is, in practical terms, likely to be able to bring such a challenge.
It is to be observed, in passing, that there are dicta since ex parte National Federation of the Self Employed and Small Businesses Ltd, which are in favour of according standing to a single taxpayer in an appropriate case. (See R v Her Majesty's Treasury, ex parte Smedley [1985] QB 657 at 670B per Slade LJ, and at 667F per Sir John Donaldson MR). There is, submitted Mr Richards, "a certain tension" between what Lloyd LJ said in ex parte Rees Mogg, and what Sir John Donaldson said in ex parte Argyll Group at 774A. The rules of standing should not, submitted Mr Richards, be allowed to evolve further so as to embrace the Applicants.
"..... the real question is whether the applicant can show some substantial default or abuse, and not whether his personal rights or interests are involved."
"In the case of R v Secretary of State for Home Affairs, ex parte Harrison ..... this court ..... accepted two submissions of Mr Laws, which are referred to as his 'narrower argument' and his 'wider argument'. The wider argument is stated, at pages 19G to 20B of the transcript, to have been that an applicant is not entitled to go behind an affidavit in order to seek to ascertain whether it is correct or not unless there is some material available outside that contained in the affidavit to suggest that in some material respect the affidavit is not accurate. Without some prima facie case for suggesting that the affidavit is in some respects incorrect it is improper to allow discovery of documents, the only purpose of which would be to act as a challenge to the accuracy of the affidavit. With that I would, in general, agree and indeed the decision binds us. But I would add the qualification that if the affidavit only deals partially, and not sufficiently adequately, with an issue it may be appropriate to order discovery to supplement the affidavit, rather than to challenge its accuracy. That must depend on the nature of the issue."
The narrower argument referred to in that passage is not relevant for present purposes.
At page 16D of the transcript, McCowan LJ said:
"The second matter which emerges from the authorities is that unless the applicant in judicial review is in a position to assert that the evidence relied on by a Minister is false, or at least inaccurate, it is inappropriate to grant discovery in order to allow the applicant to check the accuracy of the evidence in question."
"The Accounting Officer of the Overseas Development Administration told me that, given its price, the project was premature by several years and that the extra cost of building it now could well exceed the value of the large sum of British taxpayers' money which the project required."
Mr Manning's affidavit at paragraph 35 is in these terms:
"..... Sir Tim Lankester advised that the provision of aid funds forPergau
would not be consistent with his responsibility to ensure that aid funds were administered in a prudent and economic manner, and that he would wish to have an instruction from the Minister or from the Secretary of State if ODA were to incur expenditure on the project."
I turn to the merits of the substantive application. Mr Pleming submitted that the power conferred by section 1(1) of the 1980 Act is limited to the purpose imposed by the subsection, namely, in the present circumstances, for promoting development. This, he submitted, is concerned with the authorisation of assistance, not projects. The correct test is: did the Secretary of State decide to furnish the Malaysian Government with financial assistance for the purpose of promoting development? Accordingly, he submitted, if aid is to be granted, projects have to be "sound development projects". The Pergau Dam
was not.
"Statutory powers, however permissive, must be used with scrupulous attention to their true purposes and for reasons which are relevant and proper."
"If it was done for an authorised purpose, it was lawful. If it was done professedly for an authorised purpose, but in fact for a different purpose with an ulterior object, it was unlawful."
In the present case, as Mr Richards rightly points out, there is no "professedly" improper purpose).
"2. ..... In exercising these powers, careful consideration is therefore given to whether a proposal for assistance does indeed promote one or more of these purposes. Subject to this, I also regard it as perfectly proper and indeed essential given my general responsibilities as Secretary of State to take into account other wider political and economic considerations, such as the promotion of regional stability, good government, human rights or British interests.
3. ..... Throughout the decision making process in which I was involved, I considered that I was dealing with a development project, that is to say "a project whose purpose was to help Malaysia to carry out its plans for addressing its energy needs and thus promote the country's economic development. This was fundamental to my thinking.
4. In reaching a decision on the provision of assistance, I also had to take into account two additional considerations. On the one hand, I was aware that formal offers of financial support had already been made and renewed to the Malaysian Government, which clearly regarded this project as a key element of their programme for addressing their substantial power requirements. I took the view that the withdrawal of the offer to provide assistance would affect the United Kingdom's credibility as a reliable friend and trading partner and have adverse and far reaching consequences for our political and commercial relations with Malaysia. On the other hand, the price of the project, on which the initial offer of aid was made, had risen significantly."
There then follows a summary of the advice given to him, and then this:
"This advice raised important questions of the economy and efficiency of public expenditure which I took fully into account in reaching my decision. Neither he, nor any other official, advised me that there would be any impropriety or illegality in providing assistance to the project."
Mr Manning's affidavit deals with the matter in paragraph 32:
"The Principal Finance Officer noted that according to methodology which ODA had developed for assessing projects, one might contest whetherPergau
would contribute to the development of Malaysia, because of cheaper alternatives, and therefore whether the financing of it was ultra vires the Overseas Development and Cooperation Act. He believed however that that would be a difficult position to sustain in legal terms for a power project which was likely to be successfully implemented in producing electricity for which there was expected to be demand. In the view of the Principal Finance Officer, it was important that the Secretary of State, in exercising his powers under the Act, had in mind that the project would benefit Malaysia in terms set out in Section "1 of the Act. The Principal Finance Officer concluded that, provided the Secretary of State did so, he would not advise that expenditure on
Pergau
infringed the requirements of propriety or regularity, so long as Treasury authority were obtained and proper Estimates provision taken."
Paragraph 35 of Mr Manning's affidavit I have already read. Paragraph 36 is in these terms:
"As the Secretary of State informed the Foreign Affairs Committee in February 1994, legal advice was not sought by Sir Tim Lankester or the Principal Finance Officer. Nevertheless, they carefully considered the question of whether finance for the project would offend against propriety and regularity, as well as against prudent and economical administration, and concluded that it would not. No suggestion was made by officials that any illegality would arise if Ministers were to approve the project."
"There is one objective, which is the promotion of development. This is ..... entirely compatible with also serving political, industrial and commercial interests."
"We support activities which are technically sound, financially viable and will bring economic benefits."
"For foreign aid contributing to the development of Malaysia, it would at best be offsetting the extra cost of choosingPergau
."
In the minute of 7th February, Mr Pleming stresses the words:
"The project was an abuse of the aid programme in the terms that this is an uneconomic project."
Mr Richards submitted that the decision to furnish assistance in connection with the Pergau
project fell squarely within the power conferred by section 1(1). In particular: (a) it was furnished for a purpose specified, namely a developmental purpose, and (b) the Secretary of State was entitled to take account of wider political and economic considerations. It is common ground that assistance must be furnished for the relevant purpose. But, submitted Mr Richards, there is no real distinction between "assistance" and "project", because in the absence of exceptional features, if the project is for promoting development, the assistance must be also. It is also, it has to be said, common ground that a decision maker can take into account political and commercial considerations, provided that there is a sufficient substantive power within section 1 of the Act.
Mr Richards submitted that this decision was taken by the Secretary of State personally and his thinking is of decisive importance in determining the purpose for which the assistance was furnished. The Secretary of State plainly considered, from the terms of his affidavit, that the assistance was for a developmental purpose, and he also took into account additional considerations. Mr Richard submitted further that the Applicants' argument that an unsound development cannot furnish a purpose within section 1 should be rejected. First, because the word "sound" does not appear in the Act. What the statute requires is a developmental purpose within the broad terms of section 1(1), and the statutory power cannot be limited by the adoption of "soundness" by an ATP scheme or anything else. Secondly, submitted Mr Richards, the Secretary of State (the decision maker) took the view that the project was for a developmental purpose, and that Sir Tim Lankester's concerns raised "important questions of the economy and efficiency of public expenditure". The project was of undoubted benefit because it met a need for electricity, and it does not negative a purpose within the section that that need could have been met in other ways. He submitted that the Malaysian Government were committed to the project, that the only effect of the grant of aid was to bridge the gap between the cost of Pergau
and other cheaper means of generating electricity, and that this did not give rise to a cost penalty. He referred to paragraph 32 of Mr Manning's affidavit, which I have already read.
As to Mr Richards' submission that the dam
was of undoubted benefit because it met the need for electricity, this, as it seems to me, begs the question of whether there was a need for energy generated at substantially greater cost than by any other means, and the Malaysian Government's determination to go ahead with the scheme does not, as it seems to me, advance the argument. Such a determination is no doubt a necessary prerequisite for the granting of any overseas aid.
MR JUSTICE SCOTT BAKER: I agree that in making the grant, the Secretary of State acted unlawfully and that this application should succeed for the reasons given by my Lord.
When the decision was made in July 1991, there was nothing in aid terms to justify the use of public money for the Pergau project. The Secretary of State's power to provide financial assistance under section 1(1) of the 1980 Act was not triggered. Had it been, that would have brought into play the opportunity for the Secretary of State to take into account political and wider economic considerations, such as British commercial interests. But it was not.
MR PLEMING: My Lords, on the question of relief, may I take you to page 2 of the court documents? What I formally ask for, on behalf of the Applicants, are relief in terms 1, 3 and 4. My Lords, could I merely make the request and then leave it, as your Lordships have indicated, for further submissions, if it is necessary to go beyond the declaration. However, I would be asking for certiorari and prohibition to stop further
LORD JUSTICE ROSE: You did not say term 3. You said terms 1, 2 and 4, which are certiorari and the declaration.
MR PLEMING: Terms 1, 3 and 4 are to stop further funds from going out of the aid and budget, because it has not been depleted. The other application is for costs.
MR RICHARDS: My Lords, on relief, I would submit that the declaration of the kind that my Lord, Rose LJ, intimated at the end of his judgment is wholly sufficient for the Applicants' purposes. The consequence, of course, is that payments out of the funds, made available by Parliament under section 1 of the Act, are themselves unlawful, and the effect of the declaration will be that measures will then have to be taken to deal with the unravelling of the consequences of the unlawfulness of the decision, as your Lordships have held. I submit nothing further is required, and the most obvious thing, prohibition, is not required or appropriate in this case, and in every other case the Secretary of State will take account of the court's view as to the lawfulness of the original decision, and no more, in my submission, is required.
LORD JUSTICE ROSE: An appeal in this matter would go to the Court of Appeal, would it, if we or they were to grant leave?
MR RICHARDS: and in the ordinary civil procedure, whereby leave is required in judicial review applications.
LORD JUSTICE ROSE: This will be amended.
MR RICHARDS: Another significant point is that, when dealing with the merits and when turning to my submissions, your Lordship said: "It was common ground that assistance must be furnished, not that the project must be furnished." I think your Lordship meant that it would be "common ground that assistance must be furnished for the relevant purpose" and not that the "project must be for the relevant purpose". No doubt that will be amended also.
LORD JUSTICE ROSE: That will be amended in the transcript.
MR RICHARDS: Those are the matters that I wish to draw to your Lordships' attention.
LORD JUSTICE ROSE: Thank you very much. Mr Pleming, there is no problem about costs. So far as relief is concerned, what is going through my mind, and I have not discussed with my Lord, is that liberty to apply might be an appropriate Order. I should have canvassed that with you, Mr Richards, when you were on your feet.
MR RICHARDS: My Lord, I could not object to that.
LORD JUSTICE ROSE: So far as relief is concerned, we shall give liberty to apply. You will get your costs. Do you want to say anything about leave to appeal?
MR PLEMING: My Lord, the only point that I make is the question of my clients' position as a small charity, compared with a small company with limited funds. We have brought the case so far and brought it successfully. I have no submissions to make on whether or not leave should be granted. That is entirely for your Lordships, but whether it should be granted on terms as to the future funding of litigation, I leave that to your Lordships.
LORD JUSTICE ROSE: Mr Richards, we shall not give you leave. You may renew your application elsewhere, if you think it appropriate.
© Crown Copyright