Judgments - Magill v. Porter Magill v. Weeks

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    107. In their overall complaint about delay they have included the time which elapsed from the local government elections on 8 May 1986 and the decision of the housing committee on 8 July 1987. The period that has elapsed since the event in question may be a relevant factor when considering the question whether the delay was unreasonable. But they accept that the obligation under the Convention relates only to the conduct of the proceedings. Time usually begins to run in civil cases for the purposes of article 6(1) from the date when the proceedings in question are initiated: Ausiello v Italy (1996) 24 EHRR 568, 571, para 18. I would hold that time began to run in this case from the date when the objections which gave rise to the investigation were received by the auditor, and that it includes the stage of the appeal to the Divisional Court. The period under review can therefore be divided into four distinct periods: (a) that from the receipt of the original objection on 18 July 1989 to the issuing by the auditor of his provisional views on 13 January 1994; (b) that from 13 January 1994 to the end of the audit hearing on 7 February 1995; (c) that from 7 February 1995 to the issuing by the auditor of his decision and the certificates of surcharge on 9 May 1996; and (d) that from 9 May 1996 to the decision of the Divisional Court, which was given on 19 December 1997. No complaint is made about any delay after that date.

    108. I would also hold that the right in article 6(1) to a determination within a reasonable time is an independent right, and that it is to be distinguished from the article 6(1) right to a fair trial. As I have already indicated, that seems to me to follow from the wording of the first sentence of the article which creates a number of rights which, although closely related, can and should be considered separately. This means that it is no answer to a complaint that one of these rights was breached that the other rights were not. To take a simple example, the fact that the hearing took place in public does not deprive the applicant of his right to a hearing before an independent and impartial tribunal established by law.

    109. I would respectfully follow Lord Steyn's observation in Darmalingum v The State [2000] 1 WLR 2303 about the effect of section 10(1) of the Constitution of Mauritius when he said that the reasonable time requirement is a separate guarantee. It is not to be seen simply as part of the overriding right to a fair trial, nor does it require the person concerned to show that he has been prejudiced by the delay. In Flowers v The Queen [2000] 1 WLR 2396 a differently constituted Board, following Bell v Director of Public Prosecutions [1985] AC 937, held that prejudice was one of four factors to be taken into account in considering the right to a fair hearing within a reasonable time in section 20(1) of the Constitution of Jamaica. In the context of article 6(1) of the Convention however the way this right was construed in Darmalingum v The State seems to me to be preferable. In Crummock (Scotland) Ltd v H M Advocate, 2000 SLT 677, 679A-B, Lord Weir, delivering the opinion of the High Court of Justiciary, said that under article 6(1) it was not necessary for an accused to show that prejudice has been, or is likely to be, caused, as a result of delay. The article 6(1) guarantee of a hearing within a reasonable time is not subject to any words of limitation, nor is this a case where other rights than those expressly stated are being read into the article as implied rights which are capable of modification on grounds of proportionality: see Brown v Stott [2001] 2 WLR 817, 851B-E; R (Pretty) v Director of Public Prosecutions [2001] UKHL 61, para 90. The only question is whether, having regard to all the circumstances of the case, the time taken to determine the person's rights and obligations was unreasonable.

    110. In König v Federal Republic of Germany (1978) 2 EHHR 170, 197, para 99 the European Court gave the following guidance as to the test to be applied in civil proceedings on the question of delay:

    "The reasonableness of the duration of proceedings covered by article 6(1) of the Convention must be assessed in each case according to its circumstances. When inquiring into the reasonableness of the duration of criminal proceedings, the court has had regard, inter alia, to the complexity of the case, to the applicant's conduct and to the manner in which the matter was dealt with by the administrative and judicial authorities. The court, like those appearing before it, considers that the same criteria must serve in the present case as the basis for its examination of the question whether the duration of the proceedings before the administrative courts exceeded the reasonable time stipulated by article 6(1)."

    111. Applying this test to the facts, it will be convenient to examine separately the conduct of the auditor and that of the Divisional Court. I start with the Divisional Court. It seems to me that there is no basis whatever for the suggestion that there was an unreasonable delay at this stage. The auditor issued his certificate in May 1996. It was not until December 1996 that the respondents filed their evidence on the main issues. The accounting evidence was not filed until April 1997. A procedural hearing was heard shortly afterwards in May 1997. The case proceeded to a hearing in the Divisional Court in October 1997, which lasted for 23 days. Judgment was given on 19 December 1997. I would conclude without any difficulty, having regard to the complexity of the issues and the volume of evidence that had to be prepared and presented, that the proceedings in that court were concluded within a reasonable time.

    112. As for the conduct of the investigation by the auditor, there is a much more extended timetable. A period of about three and a half years elapsed between the receipt of the first objection in July 1989 and the issuing of the provisional findings in January 1994. A further period of about two years and five months then elapsed before he issued his decision and the certificates of surcharge. But this brief narrative has to be seen in the light of the nature of the exercise on which he was engaged. The Divisional Court, at p 161C-D, described his investigation as vast. It referred, at p 169D to its mammoth nature, bearing in mind that the objections related to 28 individuals. I do not need to go over the details which are set out in the agreed statement of facts. I have already provided my own summary in an earlier part of this judgment, and some further details are given by the Divisional Court at pp 161-162 and at p 168.

    113. In my opinion the most striking feature which emerges from all the facts relating to the conduct of the investigation by the auditor is that, far from causing delay by inaction, he was constantly in action. He was seeking out information wherever it could be found, often with considerable difficulty. He was interviewing and re-interviewing many witnesses, recovering and perusing thousands of documents, calculating amounts of loss and expenditure and then gathering all this information together into a decision which eventually extended to almost 2000 pages including the appendices. It has been suggested that his investigation was over-elaborate. There are comments to that effect in the Divisional Court's judgment at p 161D. But the auditor had to form his own judgment on this matter. He had to take account of the importance of the exercise to all parties, including those who were at risk of being surcharged, and he was entitled to have regard to its obvious political sensitivity. I would attach particular significance to these factors and to the fact that it has not been suggested that the auditor caused delay at any stage by inactivity.

    114. Applying the test described in König v Federal Republic of Germany (1978) 2 EHRR 170, 197, para 99 which directs attention to the complexity of the case, the applicant's conduct and the manner in which the matter was dealt with by the authorities, and leaving aside the question whether the respondents have shown that they were prejudiced, I would hold that the proceedings did not exceed the reasonable time requirement which article 6(1) lays down.

    115. In view of the conclusion which I have reached I do not need to deal with the respondents' submissions about the remedy to which they were entitled if there had been undue delay. Schiemann LJ, said at p 1460F, that it would not have been appropriate in that event to quash the auditor's certificate. He had in mind the remedy which was available in the Divisional Court to ensure that, despite the delay, there was a fair trial and the possibility instead of a remedy in damages. The appellant supported this approach. But these are difficult issues, and I would prefer to reserve my opinion on them.

The Divisional Court

    116. The respondents submit that the Divisional Court made errors of law by applying the wrong tests to their arguments on apparent bias and delay. Their argument is that it dealt with the case as if their complaint was one of actual bias and with their complaint of delay on the basis that it was necessary to establish prejudice. It is true that the Divisional Court took particular account of the auditor's assertions that he was not biased and that, basing itself on the common law authorities, it had regard to the question whether the delay resulted in prejudice. But I do not think that, read as a whole, the judgment is vulnerable to such serious criticism that their decision to uphold the certificates against Dame Shirley Porter and Mr Weeks should, as the respondents assert, have been set aside by the Court of Appeal on that ground alone. Mistakes of law of this kind, if they are made, do not in themselves amount to breaches of the article 6 Convention rights of the kind which must inevitably attract that remedy. They can be corrected on appeal. I have taken full account of the respondents' arguments in my review of their case on unfairness and of their criticisms of this part of the Divisional Court's reasoning.

    117. They also submit that the Divisional Court ought to have quashed the certificates on the ground that the injury done to her public reputation by reason of the auditor's conduct in making his statement at a press conference was so severe that to quash the certificate was the only possible remedy. I would reject this argument also. The question which the Divisional Court had to address was whether the defects in the investigation conducted by the auditor were so prejudicial to the respondents that it should in its discretion quash the certificates or whether it should proceed to a re-hearing on the merits and decide the issue on the evidence presented to the court: see Lloyd v McMahon [1987] AC 625, 716F-G per Lord Templeman. Various factors had to be taken into account in this case, including the inevitable consequence of the passage of time on the recollection of witnesses to which the Divisional Court refers at p 162D-E. But the fact that the press conference gave rise to adverse publicity, albeit that this was severe, would not of itself have justified quashing the certificates. There were other interests to be taken into account, namely those of the objectors and of the council and its electors. The respondents were given the opportunity, to which they were entitled, to raise the issue in the context of their arguments on unfairness. In my opinion their rights were sufficiently protected by the way in which this issue was examined in that court and by the remedies that were available to them by way of appeal.

Conclusion on Unfairness

    118. For these reasons I would hold that the proceedings as a whole did not infringe the respondents' Convention rights and that there was no unfairness at common law on the ground either of apparent bias or of delay.

Quantum

    119. The auditor included in the amount which he certified under section 20(1)(b) of the Local Government Finance Act 1982 as one of the items of loss in consequence of the respondents' wilful misconduct a sum amounting to £15.476m for discounts on the sale of dwellings sold at a discount. He took as the measure of this loss the difference between the open market value of the dwellings with vacant possession, as estimated at the time of the sales by the council's valuers Ellis & Co for the purpose of arriving at a discounted price, and the discounted prices at which they were actually disposed of. Most of the dwellings included in this item were not sold outright but were let on long leases granted in consideration of substantial premiums. For convenience however all the transactions were referred to as sales. The discount was 30 per cent to purchasers who were not already tenants of the council. For existing tenants with the right to buy it was a variable amount, but it was always more than 30 per cent.

    120. As the Divisional Court said (1997) 96 LGR 157, 205B, the question whether this amount was properly certified was by far the most significant issue in terms of quantum. Two main challenges to the auditor's approach to it were advanced in that court. The first, which raised an issue of principle, was whether the auditor was right to use the open market value of the unoccupied dwellings as his starting point. The second was directed to the figures which he used for assessing their market value which, it was said, were unreliable. The Divisional Court upheld the auditors' approach on both points. It concluded, at p 207E, that the loss arising from the sales at a discount was correctly calculated at £15.476m.

    121. The issue whether this amount was correctly calculated was raised again in the Court of Appeal. Robert Walker LJ said [2000] 2 WLR 1420, 1502C that in his judgment the Divisional Court erred in its approach, as it should have accepted the submission that there was no loss if the discounted prices actually received by the council exceeded the value of the dwellings as tenanted social housing. His conclusion on this issue was rendered academic by the decision of the majority to allow the appeals and discharge the certificates. Kennedy LJ said, at p 1429A, that he agreed with that part of the judgment of Robert Walker LJ which dealt with quantum, but Schiemann LJ said, at p 1447D, that he preferred to express no opinion on the point. As your Lordships have decided to allow the appeal, the issue as to quantum is once again a live issue. The auditor submits that the amount which was found to have been correctly calculated by the Divisional Court should be included in the certificates.

    122. It may be convenient for me to set out again the provisions of section 20(1) of the 1982 Act:

    "Where it appears to the auditor carrying out the audit of any accounts under this Part of this Act -

    (a) that any person has failed to bring into account any sum which should have been so included and that the failure has not been sanctioned by the Secretary of State; or

    (b) that a loss has been incurred or deficiency caused by the wilful misconduct of any person,

    he shall certify that the sum or, as the case may be, the amount of the loss or the deficiency is due from that person and, subject to subsections (3) and (5) below, both he and the body in question (or in the case of a parish meeting, the chairman of that meeting) may recover that sum or amount for the benefit of that body…"

    123. The task of the auditor in this case was to certify the amount of the loss or deficiency caused by the wilful misconduct. The loss or deficiency which he identified as due to wilful misconduct fell into two distinct parts. The first part consisted of expenditure incurred in the preparation of papers for the purpose of discussing the promotion of the electoral advantage of the majority party. This part raised no issue of principle. It was simply a matter of arriving at an appropriate figure to restore to the council's account the amount of the expenditure. The auditor made a broad estimate under this heading of £5,000 which, when interest was added, amounted to £10,126. No appeal was taken against the calculation of this amount. By far the greater part of the loss which he identified fell into the second part. This was the result of the resolution of the Housing Committee on 8 July 1987 to extend the programme of designated sales of dwellings from the council's social housing stock. After agreed corrections in the Divisional Court, the total amount of this loss was £26.462m. The figure of £15.476m for losses resulting from sales of dwellings at a discount is included in this figure.

    124. The auditor's approach, as explained by him in paragraph 43 of his report, was a simple one. He said that the sale of property such as housing accommodation at less than its market value involves a loss or deficiency to the authority which is equal to the difference between the market value of the asset and the proceeds of sale. In his view, the amount of this difference was the amount that should be certified as due from any person by whose wilful misconduct that loss or deficiency has been incurred. It is this approach that the respondents have challenged as being wrong in principle.

    125. I agree that the sale of a dwelling which is unoccupied at less than its open market value with vacant possession can be regarded as producing a loss or deficiency for the purposes of section 20(1)(b) of the 1982 Act. This assumes that those who were responsible for the sale were under a duty to obtain a full price for it, measured by its value with vacant possession in the open market. But I do not think that this can be regarded as a universal rule. The proper starting point is to identify the act of wilful misconduct. The next step is to determine what items of loss, if any, were caused by it. In the case of the designated dwellings, the act of wilful misconduct for which the respondents must be held accountable was the promotion of the policy which the Housing Committee adopted on 8 July 1987. The effect of its resolution was to remove the designated dwellings from the council's social housing stock as they became vacant. What the council lost as a result of the adoption of the policy were 618 dwellings from its social housing stock. Its capacity to perform its obligation to house the homeless under Part III of the Housing Act 1985 was correspondingly reduced.

    126. Nevertheless, when these dwellings became vacant they could have been sold with vacant possession on the open market. Robert Walker LJ said at p 1502C that there was no loss to the council so long as the discounted prices actually received by it exceeded the value of the dwellings as tenanted social housing. They exceeded this value in all cases, so he was of the view that the auditor ought to have found that their sale did not result in any loss or deficiency. But I agree with Lord Bingham that the principle which underlies the statutory procedure is one of compensation. What the auditor is directed by section 20(1) to certify is the amount of the loss or deficiency, and it is for the benefit of the body that the amount certified is recoverable. The aim of the procedure is to put the body in the same position that it would have been in but for the wilful misconduct. Applying this approach, the loss to the council due to the sales for which it ought to be compensated was the difference between the full market price of the dwellings and the discounted prices which were received for them.

    127. That however does not conclude the argument. This is because the auditor included in his calculation of this amount a sum amounting to £4.237m for extra homelessness costs. These costs were directly attributable to the removal of the designated dwellings from the social housing stock. Robert Walker LJ said, at p 1502D, that to include this figure in the amount of the loss or deficiency as well as a figure for loss on the sale of the dwellings at a discount would result in double counting. In his view it would be inconsistent with the auditor's decision to include an amount for homelessness costs due to the depletion of the council's social housing stock to assume that those dwellings would have been sold with vacant possession at their full value on the open market.

    128. I think that there is considerable force in the point which Robert Walker LJ made on this issue in his careful judgment. It seems to me that these two items were arrived at by the auditor on two different and arguably inconsistent assumptions. On the one hand the figure of £15.476m representing the loss arising from sales at a discount assumes that the council would, but for the unlawful policy, have obtained full value for dwellings as they no longer required to be treated as part of the social housing stock when they were sold. On the other hand the figure of £4.237m for extra homelessness costs is based upon costs for which it is assumed the council should be compensated on the ground that the dwellings ought to have been retained for social housing purposes. The principle of compensation requires that the council should be fully compensated, but it does not permit the council to be overcompensated. An auditor who seeks to apply this principle must guard against the risk of double counting. The effect of doing so would be to penalise the person from whom the amount was due, which is not the object of the procedure. It would also enable the body to recover more than was needed to make good the loss or deficiency.

    129. In my opinion however the point about double counting is not free from difficulty. The principles are clear enough, but they depend for their application on the facts. It seems to me that the point ought to have been raised when the facts about the extra costs of homelessness were being inquired into by the auditor or by the Divisional Court. That was not done, with the result that your Lordships do not have the findings of fact which would be needed to disturb the calculations made by the auditor on this issue. With some hesitation therefore I have come to the conclusion, in agreement with your Lordships, that it would not be right to hold that the auditor fell into the obvious trap of double counting and that the sum upheld by the Divisional Court should not be departed from.

Conclusion

    130. I too would allow the auditor's appeal and restore his certificate in the sum upheld by the Divisional Court.

LORD HOBHOUSE OF WOODBOROUGH

My Lords,

    131. I agree that the appeal should be allowed and the judgment of the Divisional Court restored as proposed by my noble and learned friends Lord Bingham of Cornhill and Lord Hope of Craighead and for the reasons which they have given. The question of quantum referred to in the penultimate section of Lord Bingham's speech gave me some anxiety but was effectively concluded by the limited way in which the arguments of the respondents were put. The respondents (no doubt for some good reason) did not deploy or support by evidence the arguments which might have displaced the valid primary measure of the Council's capital account loss. I agree that what Robert Walker LJ said in his judgment at p 1502 did not, on examination, suffice to displace the primary measure nor did it show that there had been any double counting.

LORD SCOTT OF FOSCOTE

My Lords,

    132. This is a case about political corruption. The corruption was not money corruption. No one took a bribe. No one sought or received money for political favours. But there are other forms of corruption, often less easily detectable and therefore more insidious. Gerrymandering, the manipulation of constituency boundaries for party political advantage, is a clear form of political corruption. So, too, would be any misuse of municipal powers, intended for use in the general public interest but used instead for party political advantage. Who can doubt that the selective use of municipal powers in order to obtain party political advantage represents political corruption? Political corruption, if unchecked, engenders cynicism about elections, about politicians and their motives and damages the reputation of democratic government. Like Viola's "worm i' the bud" it feeds upon democratic institutions from within (Twelfth Night).

    133. When detected and exposed it must be expected, or at least it must be hoped, that political corruption will receive its just deserts at the polls. Detection and exposure is, however, often difficult and, where it happens, is usually attributable to determined efforts by political opponents or by investigative journalists or by both in tandem. But, where local government is concerned, there is an additional very important bulwark guarding against misconduct. The Local Government Finance Act 1982 (now repealed but in force until 11 September 1998) required the annual accounts of a local authority to be audited by an independent auditor appointed by the Audit Commission (sections 12 and 13). The auditor had to satisfy himself that the local authority's accounts were in order (section 15(1) and (2)) and, also, had to "consider whether, in the public interest, he should make a report on any matter coming to his notice in the course of the audit in order that it may be considered by the [local authority] concerned or brought to the attention of the public … " (section 15(3)).

    134. If, in the course of the audit, it came to the attention of the auditor that municipal powers had been used not in the general public interest but, selectively, for party political advantage, it was plainly right that the political corruption in question should be exposed in a report under section 15(3).

    135. Section 16 of the Act gave the auditor extensive powers to obtain documents and information for the purposes of the statutory functions. These included the power to require any officer or member of the local authority "to give him such information or explanation as he thinks necessary . . . " (section 16(2)). Any report made by the auditor under section 15(3) became a public document open to inspection by any member of the public (section 18A).

    136. The statutory provisions to which I have referred provided an institutional means whereby political corruption consisting of the use of municipal powers for party political advantage might be detected and cauterized by public exposure. These provisions were repealed by the Audit Commission Act 1998 but replaced by provisions in Part II of that Act which are to much the same effect (see, in particular, section 8 of the 1998 Act).

    137. In addition, however, where the misconduct in question had caused loss to the local authority, section 20 of the 1982 Act enabled the auditor to require those responsible to make good the loss. Section 20(1) provided:

    "(1)  Where it appears to the auditor carrying out the audit of any accounts under this Part of this Act …

    (a)  … , or

    (b)  that a loss has been incurred or deficiency caused by the wilful misconduct of any person,

    he shall certify that … the amount of the loss or the deficiency is due from that person and, subject to subsections (3) and (5) below, both he and the [local authority] in question … may recover that … amount for the benefit of that [local authority] …"

 
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