Bromley London Borough Council v Greater London Council

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Wilberforce,Lord Diplock,Lord Keith of Kinkel,Lord Scarman,Lord Brandon of Oakbrook
Judgment Date17 December 1981
Judgment citation (vLex)[1981] UKHL J1217-1

[1981] UKHL J1217-1

House of Lords

Lord Wilberforce

Lord Diplock

Lord Keith of Kinkel

Lord Scarman

Lord Brandon of Oakbrook

In re the Council of the London Borough of Bromley (Greater London Council Appeal)
In re the Council of the London Borough of Bromley (London Transport Executive Appeal)
[Conjoined Appeals]
Lord Wilberforce

My Lords,


This case concerns the validity of a supplementary precept issued by the Greater London Council to the London Borough of Bromley for the levying of a rate of 6.1p. in the £ in respect of the period 1st October 1981 to 31st March 1982. The precept was issued pursuant to a resolution of the G.L.C. dated 21st July 1981. This resolution, in turn, was passed by way of implementation of a commitment, contained in an election manifesto for the election in May 1979, upon which the present majority in the G.L.C. was elected.


The supplementary precept went to all London boroughs. Bromley applied to the High Court for judicial review of the action of the G.L.C. by way of certiorari. They failed in the High Court but the Court of Appeal granted their application, quashed the supplementary precept and declared that it was ultra vires, null, void and of no effect.


The London Transport Executive is a party to the proceedings because the precept was issued in order to enable the G.L.C. to finance, by grant to the L.T.E., the cost of reducing L.T.E. fares overall by 25 per cent and of introducing a simplified zonal system. If the precept is set aside, L.T.E. will not be able to maintain these changes, and to reverse them will cause considerable dislocation.


The precept is attacked on two main grounds:

1. That it is beyond the powers of the G.L.C. as defined by the Transport (London) Act 1969.

2. That even if the G.L.C. has the necessary statutory powers, the issuance of the precept was an invalid exercise of its discretion under the Act. This ground itself may be divisible into two contentions (a) that the exercise of the G.L.C.'s discretion was unreasonable, or (b) that the G.L.C. when deciding to issue the precept did not take relevant considerations into account, or did take into account irrelevant considerations or misdirected itself as to the law.


Both of these grounds depend upon the fact, which it is right to emphasise at the start, that the G.L.C, though a powerful body, with an electorate larger and a budget more considerable than those of many nation states, is the creation of statute and only has powers given to it by statute. The courts will give full recognition to the wide discretion conferred upon the Council by Parliament and will not lightly interfere with its exercise. But its actions, unlike those of Parliament, are examinable by the courts, whether on grounds of vires, or on principles of administrative law (those two may overlap). It makes no difference on the question of legality (as opposed to reasonableness—see Secretary of State for Education v. Tameside B.C. [1977] A.C. 1014), whether the impugned action was or was not submitted to or approved by the relevant electorate: that cannot confer validity upon ultra vires action. Indeed, it forms part of Bromley's argument, that the G.L.C. in so far as it considered that it has a commitment to bring about the reduction in fares, regardless of other considerations, misdirected itself in law.


The first ground of attack involves a question of construction of the 1969 Act. Before 1970, transport in London was governed by the Transport Act 1962, as amended by the Transport Finances Act 1966. Under the Act of 1962, the London Passenger Transport Board (the responsible body and the predecessor of the L.T.E.) had, under a standard provisions (section 18(1)), to balance its revenue account taking one year with another; the Act of 1966 allowed a limited deficit to be accumulated over a period of six years. The same Act of 1966 allowed grants to meet deficits on revenue account to be made by the Minister (i.e. out of national revenue) during the same period.


The Transport Act 1968 set up Passenger Transport Authorities (P.T.A.) in various parts of the country. So far as London was concerned, the 1962 provision as to finance (i.e. balance taking one year with another) was continued by section 41(2). There were separate provisions relating to financing of the P.T.As., involving precepts for rates, to which I shall have to return. The Act of 1969 created a new system for London, forming the L.T.E. and putting it under the control of the G.L.C. which replaced central government as a grant-making body.


The provisions of the Act of 1969 were examined in great detail by Oliver L.J. in his valuable judgment. Since I broadly agree with his analysis, I shall only refer to the relevant provisions and confine argument to the essential points.


The general duty of the G.L.C. is stated, in section 1, as being to develop and encourage measures which will promote the provision of "integrated, efficient and economic transport facilities and services for Greater London."


There has been a good deal of argument as to the meaning of these words, particularly of "economic": no doubt they are vague, possibly with design. It has been strongly argued that the word means something like "on business principle" but for present purposes I will take it to mean "cost-effective", or "making the most effective use of resources in the context of an integrated system"—the meaning most favourable to the G.L.C.


Section 3 gives the G.L.C. power to make grants to the Executive "for any purpose" and no doubt these words are wide enough to cover grants to revenue as well as for capital purposes. The section cannot, however, be read in isolation, and it is necessary to examine the rest of the Act in order to ascertain the framework in which this power is exercisable. Its extent and the manner in which it is to be exercised must be controlled by the fact that the G.L.C. owes a duty to two different classes. First, under its responsibility for meeting the needs of Greater London, it must provide for transport users: these include not only the residents of London, but persons travelling to and in London from outside (e.g. commuters) and tourists. Most of these will not pay rates to the G.L.C. Secondly, it owes a duty of a fiduciary character to its ratepayers who have to provide the money. These, it is said, represent 40 per cent only of the electorate and probably a smaller proportion of the travelling public: they would themselves, most likely, also be travellers. Most of the rates (62 per cent) have to be found from commercial ratepayers. For the extent of this fiduciary duty see Prescott v. Birmingham Corporation [1955] Ch. 210, a decision which remains valid in principle although free travel for selected categories has since been authorised by statute.


These duties must be fairly balanced one against the other—see Roberts v. Hopwood [1925] A.C. 578 and Luby v. Newcastle-under-Lyme Corporation [1964] 2 O.B. 64, 72. Roberts v. Hopwood, which also remains authoritative as to principle although social considerations may have changed since 1925, was concerned with a case where there had been an election which, it was claimed, gave a mandate to the council to pay the wages in question, but Lord Atkinson emphatically rejected the proposition that however excessive or illegal their scale of wages might be, they were bound to put it into force—against the interests of ratepayers—because their constituents gave them a mandate so to do (l.c. p.596)—see also per Lord Sumner at pp.607, 609 and Lord Wrenbury p.613.


Part II of this Act, containing sections 4–15 is headed "The London Transport Executive". The Executive is set up by section 4 "for the purpose of implementing the policies which it is the duty of the Council under section 1 to develop". Sections 5 and 7 are critical for present purposes so I quote the relevant parts.

"5. (1) Subject always to the requirements of section 7(3) of this Act, it shall be the general duty of the Executive to exercise and perform their functions, in accordance with principles from time to time laid down or approved by the Council, in such manner as, in conjunction with the Railways Board and the Bus Company, and with due regard to efficiency, economy and safety of operation, to provide or secure the provision of such public passenger transport services as best meet the needs for the time being of Greater London."


Here we find another triad of words with "economy" instead of "economic". Again, much fine argument has been given to them. If it makes any difference, I would read the words "of operation" as related only to "safety", but in any case I think that the triad must be taken as a whole. They seem to me to point rather more clearly than does section 1 in the direction of running on business-like or commercial lines, but it would be reading "economy" too narrowly to treat it as requiring the Executive to make, or try to make, a profit. It does, on the other hand prevent the L.T.E. from conducting its undertakings on other than economic considerations. The initial words are important as drawing attention to the paramount financing provisions of section 7(3)—see below.

"7(1) In respect of each accounting period of the Executive, the Executive shall charge to revenue account, and secure that any subsidiary of theirs so charges, all charges which are proper to be made to revenue account, including, in particular, proper provision for the depreciation or renewal of assets.

(2) [Duty to establish reserves.]

(3) The Executive shall so perform their functions as to ensure so far as practicable—

( a) that at the end of each such period as may from time to time be agreed for the purpose of this paragraph between the Executive and the Council the aggregate of the net balance of the consolidated revenue account of the Executive and any...

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