(back to preceding text)

    85. I consider that the nature of the proceedings under section 20 of the 1982 Act is compensatory and regulatory, not punitive. Section 20(1) provides that the amount certifiable by the auditor, where it appears to him that a loss has been incurred or deficiency caused by wilful misconduct, is the amount of the loss or deficiency and that both he and the body in question may recover that amount for the benefit of that body. The object of the procedure is to compensate the body concerned, and the measure of the compensation is the amount of the loss suffered. In the present case the amount certified was very large, but the nature of the proceedings does not alter depending on the amount certified. No fine is involved, nor does the section provide for a penalty by way of imprisonment. Section 20(4) provides for the respondents' disqualification from being members of a local authority. But this outcome is similar to that where a trustee is removed after being found to have been in serious breach of trust, or a person is disqualified from acting as a director of a company. In my opinion measures of the kind provided for by section 20, which apply to persons having a special status or responsibility and are compensatory and regulatory rather than penal in character, lie outside the criminal sphere for the purposes of article 6 of the Convention.

    86. For these reasons I would hold that section 20 of the 1982 Act does not involve the making of a criminal charge within the meaning of article 6. But that does not mean that the respondents lack protection. They are entitled to all the protections afforded to them by article 6(1), the first sentence of which provides that in the determination of his civil rights and obligations everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.

The independence and impartiality of the auditor

    87. The protections which article 6(1) lays down are that, in the determination of his civil rights and obligations, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. As I shall explain later when dealing with delay, I consider that this sentence creates a number of rights which, although closely related, can and should be considered separately. The rights to a fair hearing, to a public hearing and to a hearing within a reasonable time are separate and distinct rights from the right to a hearing before an independent and impartial tribunal established by law. This means that a complaint that one of these rights was breached cannot be answered by showing that the other rights were not breached. Although the overriding question is whether there was a fair trial, it is no answer to a complaint that the tribunal was not independent or was not impartial to show that it conducted a fair hearing within a reasonable time and that the hearing took place in public: see Millar v Dickson, 2001 SLT 988, 994D-E per Lord Bingham of Cornhill and my own observations in that case, at p 1003C-F. Under this heading the question is whether the auditor lacked the independence and impartiality which is required by article 6(1).

    88. There is a close relationship between the concept of independence and that of impartiality. In Findlay v United Kingdom (1997) 24 EHRR 221, 244, para 73 the European Court said:

"The Court recalls that in order to establish whether a tribunal can be considered as 'independent', regard must be had inter alia to the manner of appointment of its members and their term of office, the existence of guarantees against outside pressures and the question whether the body presents an appearance of independence.

As to the question of 'impartiality', there are two aspects to this requirement. First, the tribunal must be subjectively free from personal prejudice or bias. Secondly, it must also be impartial from an objective viewpoint, that is, it must offer sufficient guarantees to exclude any legitimate doubt in this respect.

The concepts of independence and objective impartiality are closely linked…"

In both cases the concept requires not only that the tribunal must be truly independent and free from actual bias, proof of which is likely to be very difficult, but also that it must not appear in the objective sense to lack these essential qualities.

    89. I shall leave over to the next heading the question whether the auditor's public statement on 13 January 1994 showed that he lacked the appearance of impartiality for the purposes of the article 6(1) Convention right. At this stage the matter for consideration is the respondents' complaint that the circumstances and nature of his appointment and the investigation which he then conducted were such that the requirements of independence and impartiality in his case were not satisfied. At the heart of the argument is the multiplicity of roles which were being performed by the auditor. The respondents say that the procedure which he adopted on receipt of the objections violated their Convention right because he acted as investigator, prosecutor and judge in the investigation which he carried out. He conducted the investigation, took the decision whether there was a case to answer, tried the case, assessed the loss and then appeared in the Divisional Court to defend his decision and his conduct.

    90. The Divisional Court said (1997) 96 LGR 157, 168 E-F that the 1982 Act imposes on the auditor the roles of investigator, prosecutor and judge which might be thought an almost impossible burden, and it referred to the recommendation in paragraph 223 of the Third Report of the Nolan Committee on Standards in Public Life: Standards of Conduct in Local Government in England, Scotland and Wales (1997) (Cm 3702-1), which has now been implemented for England and Wales by Part III of the Local Government Act 2000, that surcharging by an auditor be abolished and replaced by other remedies. At p 169G the court said, after reviewing his conduct of the hearing, that it was not persuaded that the auditor's final conclusions could be impeached on the grounds of unfairness. But, at p172E-F, it said that it appeared to it that the roles which the auditor played would not meet the requirements of independence and apparent impartiality demanded by the Convention.

    91. In my opinion the conduct of the auditor requires to be looked at as a whole and in the context of the procedure which is laid down in the statute. Part III of the 1982 Act starts, as one would expect, by placing the responsibility for auditing the accounts on the auditor. It seeks to ensure his independence from the body whose accounts he is auditing by requiring in sections 12 and 13 that his appointment is to be by the Audit Commission and not by the body itself. His responsibilities include making reports under section 15 on any matter coming to his notice in the course of the audit and dealing with objections made by any local government elector under section 17. Where objections are made, it is his duty to consider under section 17(3) whether they relate to any matter in respect of which he could take action under section 19 (items contrary to law) or section 20 (wilful misconduct) or to any matter in respect of which he could make a report under section 15. The Act does not enable him to pass this responsibility to someone else. It is his duty, as the person in charge of the audit within the context of which the objections are made, to deal with them himself and, if they are well founded, to take such action as he is required to take on them by the statute. The auditing process, which is in his hands, is not complete until this has been done.

    92. That being the structure of the procedure laid down by the statute, there is inevitably some force in the criticism that, where accusations of wilful misconduct are involved, the auditor is being required to act not only as an investigator but also as prosecutor and as judge. But this problem has been recognised and dealt with in section 20(3). It provides not only that any person aggrieved by his decision may appeal against the decision to the court but also that the court "may confirm, vary or quash the decision and give any certificate which the auditor could have given." The solution to the problem which section 20(3) provides is that of a complete rehearing by the Divisional Court. The court can exercise afresh all the powers of decision which were given to the auditor. In Lloyd v McMahon [1987] AC 625, 697F-G Lord Keith of Kinkel said that, while there might be extreme cases where it would be appropriate to quash the auditor's decision, the court has a discretion, where it considers that justice can properly be done by its own investigation of the merits, to follow that course.

    93. In Kingsley v United Kingdom (Application no 35605/97), 7 November 2000, the European Court said in paragraph 51 that, even if an adjudicatory body determining disputes over "civil rights and obligations" does not comply with article 6(1), there is no breach of the article if the proceedings before that body are subject to subsequent control by a judicial body that has full jurisdiction and does provide the guarantees of article 6(1); see also Bryan v United Kingdom (1995) 21 EHRR 342, 360-361, paras 44 and 46. The court went on to say this in Kingsley v United Kingdom, at para 58:

"The court considers that it is generally inherent in the notion of judicial review that, if a ground of challenge is upheld, the reviewing court has power to quash the impugned decision, and that either the decision will be taken by the review court, or the case will be remitted for a fresh decision by the same or a different body. Thus where, as here, complaint is made of a lack of impartiality on the part of the decision-making body, the concept of 'full jurisdiction' involves that the reviewing court not only considers the complaint but has the ability to quash the impugned decision and to remit the case for a new decision by an impartial body."

The powers which the Divisional Court has been given by section 20(3) fully satisfy these requirements. Not only does it have power to quash the decision taken by the auditor. It has power to rehear the case, and to take a fresh decision itself in the exercise of the powers given to the auditor. In R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] 2 WLR 1389, 1407C-D Lord Slynn of Hadley observed that the principle of judicial control did not go so far as to provide for a complete rehearing on the merits of the decision. In the case of the procedure governed by section 20(3) however a rehearing on the merits can be conducted, and that is what was done in this case.

    94. In these circumstances it is not necessary to examine the various grounds on which the procedure adopted by the auditor was criticised. The issue at this stage is whether the Divisional Court satisfied the requirements of article 6(1) in regard to the scope of the jurisdiction which it was entitled to exercise. I would answer this question in the affirmative. There has been no suggestion that the proceedings in that court, which were conducted with conspicuous care and attention to detail, lacked the appearance of independence and impartiality. In my opinion those elements of the respondents' article 6(1) Convention rights were fully protected by the proceedings in the Divisional Court, having regard to the powers which that court was entitled to exercise.

Apparent bias

    95. I turn now to the question whether the auditor's certificate should have been quashed on the ground of apparent bias. The respondents submit that the way in which the auditor conducted himself when he made his statement on 13 January 1994 indicated an appearance of bias on his part which affected all stages of his investigation both before and after that date. Both the article 6(1) Convention right to an independent and impartial tribunal and the respondents' rights to an unbiased judge at common law as it was understood before the coming into effect of the relevant provisions of the Human Rights Act 1998 are invoked under this heading.

    96. As I have said, the statement which the auditor made on 13 January 1994 received considerable publicity on television and in the newspapers. The Divisional Court saw video recordings of the relevant item on the 1 pm and 9 pm BBC TV news. The following description of the event is given in its judgment (1997) 96 LGR 157, 173G-H:

"A televised announcement was arranged at which the auditor himself appeared and, although he said that his views were provisional, he expressed them in florid language and supported them by reference to the thoroughness of the investigation which he claimed to have carried out. There was a further feature of the event which should have had no place in the middle of a quasi-judicial inquiry. A stack of ring binders on the desk at which the auditor sat bearing the name of his firm for the benefit of the cameras was, ostensibly, under the protection of a security guard: unless it was being implied that the persons under investigation might wish to steal the documents, it is not clear what was the purpose of this posturing."

    97. In the reasons which he gave on 18 October 1994 for deciding not to disqualify himself the auditor said that he was mindful of the serious nature of the allegations made against the respondents, that he had been careful to give them a full opportunity to respond to these allegations and his provisional findings, that he retained an open mind and that he was not biased against any individual or the council. He went on to say:

"114. I am not biased. I have acted fairly and will continue to do so. I will exercise impartial, independent and objective judgment. I will reach a decision on the evidence and submissions before me. I will not reach any decision adverse to the council and/or to any respondent unless I am satisfied on the basis of the evidence that I am under a duty to do so. All parties will get a fair hearing from me.

115. In my consideration of the disqualification application, I have sought to apply the test formulated in R v Gough [1993] AC 646, namely 'whether, in all the circumstances of the case, there appeared to be a real danger of bias…'. In my view, a person having ascertained the relevant circumstances would not consider that I will regard unfairly any person's case with disfavour. It has been suggested that I will find it difficult to depart from my provisional findings and views because of the publicity given to these. I feel no such inhibition. Nor, in my view, is there any ground on which I should reasonably be thought to be so inhibited. I have always made it plain that before reaching any conclusion I will consider any representations made to me. In my view, that is a process which necessarily conveys to any reasonable person the point that my conclusions may not coincide with my provisional findings and views. My view is that no real danger of bias exists and nor is there any other basis on which I should disqualify myself."

    98. The Divisional Court set out its conclusions on this issue in this way (1997) 96 LGR 157, 174A-C:

"In the light of the material before us, including, in particular, the auditor's reasons for declining to recuse himself, we accept that, despite such inferences to the contrary as might have been drawn from the press conference, the auditor did have an open mind and was justified in continuing with the subsequent hearings. We note that he did not confirm his preliminary findings in respect of those who gave evidence at those hearings. The error of judgment which we find he made, in holding the press conference as he did, did not, in our view, demonstrate bias on his part. He was at pains to stress the provisional nature of his findings and it is pertinent that in his final decision he made no finding of wilful misconduct against three people in relation to whom he had, provisionally, been minded so to find. In any event, as with the investigation, any possible unfairness to the appellants has been cured by the hearing before us."

    99. The test for apparent bias which the auditor sought to apply to himself, and was applied in its turn by the Divisional Court, was that which was described in R v Gough [1993] AC 646 by Lord Goff of Chieveley where he said at p 670:

"I think it unnecessary, in formulating the appropriate test, to require that the court should look at the matter through the eyes of a reasonable man, because the court in cases such as these personifies the reasonable man; and in any event the court has first to ascertain the relevant circumstances from the available evidence, knowledge of which would not necessarily have been available to an observer in court at the relevant time. Finally, for the avoidance of doubt, I prefer to state the test in terms of real danger rather than real likelihood, to ensure that the court is thinking of possibility rather than probability of bias. Accordingly, having ascertained the relevant circumstances, the court should ask itself whether, having regard to those circumstances, there was a real danger of bias on the part of the relevant member of the tribunal in question, in the sense that he might unfairly regard (or have unfairly regarded) with favour, or disfavour, the case of a party to the issue under consideration by him…"

    100. The "reasonable likelihood" and "real danger" tests which Lord Goff described in R v Gough have been criticised by the High Court of Australia on the ground that they tend to emphasise the court's view of the facts and to place inadequate emphasis on the public perception of the irregular incident: Webb v The Queen (1994) 181 CLR 41, 50 per Mason CJ and McHugh J. There is an uneasy tension between these tests and that which was adopted in Scotland by the High Court of Justiciary in Bradford v McLeod, 1986 SLT 244. Following Eve J's reference in Law v Chartered Institute of Patent Agents [1919] 2 Ch 276 (which was not referred to in R v Gough), the High Court of Justiciary adopted a test which looked at the question whether there was suspicion of bias through the eyes of the reasonable man who was aware of the circumstances: see also Millar v Dickson 2001 SLT 988, 1002L-1003B. This approach, which has been described as "the reasonable apprehension of bias" test, is in line with that adopted in most common law jurisdictions. It is also in line with that which the Strasbourg court has adopted, which looks at the question whether there was a risk of bias objectively in the light of the circumstances which the court has identified: Piersack v Belgium (1982) 5 EHRR 169, 179-180, paras 30-31; De Cubber v Belgium (1984) 7 EHRR 236, 246, para 30; Pullar v United Kingdom (1996) 22 EHRR 391, 402-403, para 30. In Hauschildt v Denmark (1989) 12 EHRR 266, 279, para 48 the court also observed that, in considering whether there was a legitimate reason to fear that a judge lacks impartiality, the standpoint of the accused is important but not decisive:

"What is decisive is whether this fear can be held objectively justified."

    101. The English courts have been reluctant, for obvious reasons, to depart from the test which Lord Goff of Chieveley so carefully formulated in R v Gough. In R v Bow Street Metropolitan Stipendiary Magistrate, Ex p Pinochet Ugarte (No 2) [2000] 1 AC 119, 136A-C Lord Browne-Wilkinson said that it was unnecessary in that case to determine whether it needed to be reviewed in the light of subsequent decisions in Canada, New Zealand and Australia. I said, at p 142F-G, that, although the tests in Scotland and England were described differently, their application was likely in practice to lead to results that were so similar as to be indistinguishable. The Court of Appeal, having examined the question whether the "real danger" test might lead to a different result from that which the informed observer would reach on the same facts, concluded in Locabail (UK) Ltd v Bayfield Properties Ltd [2000] QB 451, 477 that in the overwhelming majority of cases the application of the two tests would lead to the same outcome.

    102. In my opinion however it is now possible to set this debate to rest. The Court of Appeal took the opportunity in In re Medicaments and Related Classes of Goods (No 2) [2001] 1 WLR 700 to reconsider the whole question. Lord Phillips of Worth Matravers MR, giving the judgment of the court, observed, at p 711 A-B, that the precise test to be applied when determining whether a decision should be set aside on account of bias had given rise to difficulty, reflected in judicial decisions that had appeared in conflict, and that the attempt to resolve that conflict in R v Gough had not commanded universal approval. At p 711B-C he said that, as the alternative test had been thought to be more closely in line with Strasbourg jurisprudence which since 2 October 2000 the English courts were required to take into account, the occasion should now be taken to review R v Gough to see whether the test it lays down is, indeed, in conflict with Strasbourg jurisprudence. Having conducted that review he summarised the court's conclusions, at pp726H-727C:

"85 When the Strasbourg jurisprudence is taken into account, we believe that a modest adjustment of the test in R v Gough is called for, which makes it plain that it is, in effect, no different from the test applied in most of the Commonwealth and in Scotland. The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility, or a real danger, the two being the same, that the tribunal was biased."

    103. I respectfully suggest that your Lordships should now approve the modest adjustment of the test in R v Gough set out in that paragraph. It expresses in clear and simple language a test which is in harmony with the objective test which the Strasbourg court applies when it is considering whether the circumstances give rise to a reasonable apprehension of bias. It removes any possible conflict with the test which is now applied in most Commonwealth countries and in Scotland. I would however delete from it the reference to "a real danger". Those words no longer serve a useful purpose here, and they are not used in the jurisprudence of the Strasbourg court. The question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.

    104. Turning to the facts, there are two points that need to be made at the outset. The first relates to the auditor's own assertion that he was not biased. The Divisional Court said, at p 174A-B, that it had had particular regard to his reasons for declining to recuse himself in reaching its conclusion that he had an open mind and was justified in continuing with the subsequent hearings. I would agree that the reasons that he gave were relevant, but an examination of them shows that they consisted largely of assertions that he was unbiased. Looking at the matter from the standpoint of the fair-minded and informed observer, protestations of that kind are unlikely to be helpful. I think that Schiemann LJ adopted the right approach in the Court of Appeal when he said that he would give no weight to the auditor's reasons: [2000] 2 WLR 1420, 1457H. The second point relates to the emphasis which the respondents place on how the auditor's conduct appeared from the standpoint of the complainer. There is, as I have said, some support in the jurisprudence of the Strasbourg court for the proposition that the standpoint of the complainer is important. But in Hauschildt v Denmark (1989) 12 EHRR 266, 279, para 48 the court emphasised that what is decisive is whether any fears expressed by the complainer are objectively justified. The complainer's fears are clearly relevant at the initial stage when the court has to decide whether the complaint is one that should be investigated. But they lose their importance once the stage is reached of looking at the matter objectively.

    105. I think that it is plain, as the Divisional Court observed, at p 174B, that the auditor made an error of judgment when he decided to make his statement in public at a press conference. The main impression which this would have conveyed to the fair-minded observer was that the purpose of this exercise was to attract publicity to himself, and perhaps also to his firm. It was an exercise in self-promotion in which he should not have indulged. But it is quite another matter to conclude from this that there was a real possibility that he was biased. Schiemann LJ said, at p 1457D-E, that there was room for a casual observer to form the view after the press conference that the auditor might be biased. Nevertheless he concluded, at p 1457H, having examined the facts more closely, that there was no real danger that this was so. I would take the same view. The question is what the fair-minded and informed observer would have thought, and whether his conclusion would have been that there was real possibility of bias. The auditor's conduct must be seen in the context of the investigation which he was carrying out, which had generated a great deal of public interest. A statement as to his progress would not have been inappropriate. His error was to make it at a press conference. This created the risk of unfair reporting, but there was nothing in the words he used to indicate that there was a real possibility that he was biased. He was at pains to point out to the press that his findings were provisional. There is no reason to doubt his word on this point, as his subsequent conduct demonstrates. I would hold, looking at the matter objectively, that a real possibility that he was biased has not been demonstrated.

Unreasonable Delay

    106. The respondents' argument under this heading is directed to their article 6(1) Convention right to the determination of their civil rights and obligations within a reasonable time. They contend that the auditor was guilty of inordinate delay in breach of the article 6(1) requirement and that they were at an unfair disadvantage due to delay when they were giving evidence before the Divisional Court. They also submit, under reference to constitutional provisions considered by the Privy Council, that they had a right to a determination within a reasonable time at common law which did not require them to demonstrate actual prejudice: Bell v Director of Public Prosecutions [1985] 1 AC 937; Director of Public Prosecutions v Tokai [1996] AC 856. The Divisional Court held, at p 169D-E, that the test at common law was whether delay had given rise to such prejudice that no fair trial could be held: Tan v Cameron [1992] 2 AC 205, 222-224, per Lord Mustill. In its judgment no such prejudice was shown, and in the Court of Appeal Schiemann LJ was of the same opinion: [2000] 2 WLR 1420, 1459A-B. The respondents say that the approach taken by these courts was wrong in law, as there was no requirement to show actual prejudice. The nature of the common law right which they asserted in your Lordships' House appeared to me to be virtually indistinguishable in this respect from the right under article 6(1), so I do not need to dwell on this part of their argument. I shall deal with the issue of delay on the assumption that the test which they must satisfy is that which requires to be satisfied to demonstrate that there was a breach of the Convention right and that prejudice, while relevant if it exists, does not require to be demonstrated.