Laker Airways Ltd v Department of Trade

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
Judgment Date15 Dec 1976
Judgment citation (vLex)[1976] EWCA Civ J1215-4
Docket Number1976 L. No. 883

[1976] EWCA Civ J1215-4

In The Supreme Court of Judicature

Court of Appeal

On Appeal From The High Court of Justice

Queen's Bench Division

Commercial List (Mr. Justice Mocatta)


The Master of the Rolls (Lord Denning)

Lord Justice Roskill and

Lord Justice Lawton

1976 L. No. 883
Laker Airway Limited
Plaintiffs (Respondents)
Department of Trade
Defendants (Appellants)

MR. A. BATESON. Q.C. and MR. P. BOWSHER (instructed by Messrs. Roney Vincent & Co., Solicitors, London) appeared on behalf of the Plaintiffs (Respondents).

MR. S. SILKIN, Q.C., MR. M. EASTHAM. Q.C., MR. H. WOOLF and MR.D EVANS (instructed by the treasury Solicitor) appeared on behalf of the Defendants (Appellants).


Mr. Laker is a man of enterprise. He has an exciting project for travel by air. He wishes to start a new air service across the Atlantic from England to the United States. It is to be quite unlike the conventional air services. It is to be more like a railway service. Passengers are not to reserve their seats in advance. They are to go to the airport, buy their tickets, and board the aircraft — all in one sequence — just as passengers go to a railway station, buy their tickets and join the train. So Mr. Laker calls his project "Skytrain". He hopes to attract a. hitherto untapped source of traffic He is going to cut out all the extravagances and frills which the established airlines provide. He is going to cut out all the travel agents and their expensive commissions: He is going to charge fares much lower than other carriers. He is not going to fly from Heathrow, but from Stansted; so there are no in-transit facilities. By these measures he suggests that he will not take away traffic from the established airlines, but will create new custom. He will carry passengers who would not otherwise have travelled at all.


In order to get Skytrain into the air, Mr. Laker had, of course, to get permission from the authorities in England and the United States. In England he was completely successful. The Civil Aviation Authority actually granted him a licence for ten years — from 1973 to 1982 inclusive. In the United States he got a long way. The Civil Aeronautics Board decided to issue him a permit, subject to approval by the President of the United States. In anticipation of everything going through, Mr. Laker bought three jumbo jets, and trained crews and staff to run them. He expended £6 million to £7 million on the project. It looked as if all would go well. But thenon the 29th July, 1975 the Government of the United Kingdom put a stop to the whole thing. The Secretary of State told the House of Commons that the Skytrain service would not he allowed to start. He followed this in February 1976 by a White Paper (Command 6400) in which he said that the licence for Skytrain was to he cancelled.


This conduct of the Secretary of State is challenged by Mr. Laker. He says that the Secretary of State has no right to put an end to Skytrain like this. So Mr. Laker has brought this action in the Courts of Law. On the 30th July, 1976 Mr. Justice Mocatta granted a declaration in his favour. The Secretary of State now appeals to this court.


To understand the issues, I must describe the legal background.


"Designation". In order to get Skytrain across the Atlantic, Laker Always had to be a "designated" air-carrier. This requirement of "designation" arises out of a treaty between the United Kingdom and the United States of America called the Bermuda Agreement. It was made in 1946 and is still in existence. Under it each government is entitled to "designate" one or more air-carriers for a specified route from one country to the other: and the other government is then bound to accept that carrier so long as it comes up to standard. Suppose the United Kingdom Government "designates" an air-carrier, such as British Airways, for the route from London to New York. The U.S.A. is entitled to satisfy itself as to the credentials of the carrier so designated. Once satisfied, it is the duty of the U.S.A. Government to grant the carrier an operating permit (to fly into and out of the U.S.A.) "without undue delay". But the Treaty does not restrict the U.K. to one carrier only. It is entitledto designate another one — or even two — for the same route, then or later. If each of those "designated" carriers satisfies the requirements, it is the duty of the U.S.A. authorities to grant it an operational permit "without undue delay". It is open, however, to the U.S.A. authorities to impose conditions in the permit as to type of aircraft, fares, and so forth. If the carrier fails to fulfil the conditions, the U.S.A. can revoke the permit.


Those provisions of the Bermuda Agreement rest on international agreement only. The agreement is no part of the municipal law of either country. But it may have repercussions with which the Courts of Law have to deal. More of this later.


"Licence". In order to get Skytrain into the air, Laker Airways had also to get a licence from the U.K. authorities. Flights into and out of the United Kingdom are regulated under the Civil Aviation Act, 1971- This sets up a licensing system. Under it any aircraft "beginning or ending its flight in the United Kingdom must have a licence to do so. The licensing body is the Civil Aviation Authority under the chairmanship of Lord Boyd-Carpenter. It is entrusted with the task of granting licences, revoking them, suspending them, or varying them. In doing so, it is under a duty to act judicially. It receives applications and objections. It holds hearings, and takes evidence. It comes to its determination. From its decision a party aggrieved can app~ to the Secretary of State, and he can direct the Authority to reverse or vary the decision.


The four objectives. In carrying out its functions (including the granting of licences) the Authority has to do its best to satisfy four general objectives. They are set out in section 3(1) of the Act. They he at the heart of this case. I will summarise them: (a) To secure that theBritish Airlines have their fair share of the market, (b) To secure that the British Airways Board has not a monopoly, but that at least one major British airline has the opportunity to compete with it. (c) To encourage the air transport industry of the U.K. so as to enable it to help the balance of payments, (d) To further the interests of users. If the Civil Aviation Authority grant or refuse a licence and there is an appeal to the Secretary of State, he too must have regard to those objectives: see section 24(6).


"Guidance". Those objectives are expressed in very general terms. In putting them in practice, Parliament thought that some guidance would be desirable for the Authority. So it provided for it in sections 3(2) and 3(3) I must set them out: Section 3(2): "The Secretary of State may from time to time, after consultation with the Authority, give guidance to the Authority in writing with respect to the performances of the functions conferred on it: and it shall be the duty of the Authority to perform those functions in such manner as it considers is in accordance with the guidance for the time being given to it". Section 3(3): "No guidance shall be given to the Authority … unless a draft has been approved by a resolution of each House of Parliament". (Note: In summarising the statutory provisions, I have missed out the words in section 3(l) "otherwise than by this section" and in section 3(2) "otherwise than by this subsection". They are the words of a purist intent upon literal accuracy. But, to my mind, they contribute nothing but confusion. The best way of understanding the provisions is to omit those words altogether).


One of the matters much discussed before us is the scope of the "guidance" authorised by those provisions. In myopinion the Secretary of State can give guidance by way of explanation or amplification of, or supplement to, the general objectives: but not so as to reverse or contradict them.


"Directions", Section 4 of the Statute confers exceptional powers on the Secretary of State. It enables him to override the statutory requirements as to licences and also to by-pass the general objectives. But only in carefully defined circumstances. Section 4(l) confers large powers in time of war or great national emergency. Section 4(3) confers large powers in respect of international relations. For instance, if the Secretary of State thought that one of our airlines was acting in such a way as to affect our relations with another country, he could direct the Authority to revoke its licence. Or, if diplomatic pressure was brought for the purpose, he could direct the revocation of the licence. And he could do this without any enquiry or hearing at all. The Secretary of State would have to consult the Authority before issuing a direction, but that is all. Once he gave a direction, it could not be challenged in the courts. The only way would be by a question in the House.


Directions versus guidance. The word "dir3ction" in section 4 is in stark contrast with the word "guidance" in section 3. It is used again in sections 24(2) and 24(6)(b) and 28(2). It denotes an order or command which must be obeyed, even though it may be contrary to the general objectives and provisions of the Statute. But the word "guidance" in section 3 does not denote an order or command. It cannot be used so as to reverse or contradict the general objectives or provisions of the Statute. It canonly be used so as to explain, amplify or supplement them. So long as the "guidance" given by the Secretary of State keeps within the due bounds of guidance, the Authority is under a duty to follow his guidance. Even so, the Authority is allowed some degree of flexibility. It is to perform its function "in such a manner as it considers is in accordance with the guidance". So, whilst it is obliged to follow the...

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