Lloyd v McMahon

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE LAWTON,LORD JUSTICE DILLON,LORD JUSTICE WOOLF
Judgment Date31 Jul 1986
Judgment citation (vLex)[1986] EWCA Civ J0731-5
Docket Number86/0720

[1986] EWCA Civ J0731-5

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL

(CIVIL DIVISION)

From: The Divisional

Court (London)

Royal Courts of Justice,

Before:

Lord Justice Lawton,

Lord Justice Dillon

and

Lord Justice Woolf.

86/0720

Lloyd & Ors.
Appellants (Appellants)
and
McMahon
Respondent (Respondent)

MR LOUIS BLOM-COOPER, Q.C., MISS BEVERLEY LANG and MISS HEATHER WILLIAMS (instructed by Messrs Christian Fisher & Co.) appeared on behalf of the Appellants.

MR ANTHONY HIDDEN, Q.C., and MR MARK LOWE (instructed by Messrs Clifford Turner & Co.) appeared on behalf of the Respondent.

MR C. CROSS (instructed by The Solicitor, Liverpool City Council) appeared on behalf of the Liverpool City Council.

LORD JUSTICE LAWTON
1

This is an appeal by forty seven councillors of Liverpool City Council, all being members of the majority party on that council, against the judgment of the Divisional Court (Lord Justice Glidewell, Mr Justice Caulfield and Mr Justice Russell) whereby it was adjudged that a certificate dated 6th September 1985, issued by the respondent (the District Auditor) pursuant to section 20(1) of the Local Government Finance Act 1982 (hereinafter referred to as the 1982 Act) should take effect in law.

2

3

The appeal raises three issues. First, did the District Auditor act fairly in issuing the certificate? Secondly, if he did not, did the appellants' appeal to the Divisional Court cure any unfairness? Thirdly, if any unfairness was cured, did the facts prove that the appellants, and each of them, had been guilty of wilful misconduct.

4

5

Ever since 1979 the central government has wanted to curb local government expenditure. Parliament has passed three Acts which has enabled it to take action towards this end, the Local Government Planning and Land Act 1980, the 1982 Act, and the Rates Act 1984. The way in which these Acts work is set out in the judgment of Lord Justice Glidewell and need not be repeated in this judgment.

6

The central government's policy of curbing local government expenditure has been opposed by many councillors all over the country, and in particular it has been opposed by the majority of the councillors on the Liverpool City Council. The main grounds of opposition have been that the central government was encroaching on the independence of local authorities and that it was preventing them from meeting what they considered to be the needs of their areas. The appellants were, of course, entitled to take such steps as they wished in order to persuade the central government to change its policy. What they were not entitled to do was to allow their political efforts in this respect to interfere with or impede the performance of their statutory duties, which included a duty to make a rate without unreasonable delay. The respondent alleges that for the financial year beginning 1st April 1985, they unlawfully delayed making a rate, with the result that they had, by their wilful misconduct in that respect, caused the City Council to incur a loss of £106,103.

7

In the years before 1984 the City Council had normally made a rate at the end of March or the beginning of April so that rate demands could go out in April. Delays in making rates are likely to cause loss to local authorities. There may be cash flow problems and a need to borrow money on the short term money market.

8

In the spring of 1984 the majority on the City Council were of the opinion that the central government, under the spending curbs imposed by the three Acts to which I have referred, had deprived Liverpool of large sums and that the rates ought not to be increased to cover the shortfall. On 26th March 1984, the Performance Review and Financial Control Sub-Committee (which was the sub-committee primarily concerned with rate making), under the chairmanship of the appellant, Mr Byrne, proposed that for the rating year starting on 1st April 1984, there should only be a rate increase of 9% notwithstanding that such an increase would not provide for the estimated total expenditure which would be incurred during the coming rating year. A lawful rate would have to provide for such expenditure and it was the duty of the councillors to see that such a rate was made: see section 2 of the General Rate Act 1967, as amended. The Chief Executive, the City Solicitor and the City Treasurer advised this sub-committee that this proposal, if implemented, would produce an unlawful rate. That advice was minuted and ignored by the sub-committee, who sent the resolution forward to the City Council. The City Council considered it at a meeting held on 29th March, 1984. It was again advised to the same effect as the sub-committee had been. Once again the advice was minuted and ignored. The resolution was passed. It was not put into effect because on 13th April 1984 negotiations started between the City Council and the Secretary of State for the Environment with the object of getting more central funds made available to cover the shortfall in the rates. The City Council did get more money from the central government and was able to make a lawful rate on 11th July 1984. The minutes and the reports circulated to all the members of the City Council between March 1984 and 11th July 1984 show that they were told in clear terms that if they delayed making a lawful rate or made an unlawful one they would not be performing their statutory duty and would be likely to cause a loss to the City Council which might lead to their being surcharged for wilful misconduct. The inference to be drawn from what happened in the summer of 1984—and it is a strong one—is that the majority on the Council were using the rate making process to threaten the central government with financial chaos in Liverpool if the shortfall on the rates was not made good from central funds. The delay in making a rate in 1984 almost certainly caused some loss to the City Council, but the then District Auditor took no action against anyone under section 20(1) of the 1982 Act.

9

The history of the making of a rate for the financial year beginning 1st April 1984, is of importance in this case for three reasons. First, the appellants' case has been that the City Council's success in 1984 in persuading the Secretary of State to make more money available from central government funds led them to think that they could repeat that success for the financial year beginning 1st April 1985. The needs which the Secretary of State in 1984 had recognised as needing alleviation still had to be met in 1985. Secondly, the District Auditor's omission to take any action over the delay in making a rate in 1984 led them to think, at least until 16th April 1985, that the making of a rate could be delayed, and after 16th April that it could be delayed until 20th June. 16 April is an important date because on that day Mr Justice Woolf (as he then was) delivered a judgment in the case of The Queen v. London Borough of Hackney, ex parte Fleming. It got considerable publicity. It seems to me likely that many members of the City Council would, about this date, have learnt something of what had been decided. The fact that judgment was going to be given on 16th April 1985 was reported to the Performance Review and Financial Control Sub-Committee by the City Solicitor on that very day. Mr Justice Woolf adjudged that for a local authority not to make a rate by the beginning of the rating year had obvious disadvantages of a financial nature which increased as the time went by. The members of the City Council had been told this by the City Solicitor in 1984. The law, however, said Mr Justice Woolf, did not specify by what date a rate had to be made. He went on as follows:

"No generally applicable period can be laid down as to by when the rate must in any event be made so that an authority can be said to be in breach of its duty by that date. The facts of each case must be examined. However, in the absence of a reasonable explanation, not to make a rate by the beginning of a financial year or within a reasonable time thereafter—I have in mind weeks rather than months—would prima facie be unresonable and, therefore, in breach of duty".

10

11

In November 1984 the District Auditor perceived that the City Council was likely to have difficulty in making a lawful rate for 1985–86 because the Performance Review and Financial Review Control Sub-Committee had forecast that by 31st March 1985 expenditure would exceed the budget provision and a substantial deficiency would arise. He issued a report to the City Council pursuant to section 15(3) of the 1982 Act. It contained the following warning:

"It is opportune for me to remind the Council that they have a duty to levy a rate sufficient to provide for their estimated total expenditure to be incurred during the period covered by the rate together with such amount as is sufficient to cover expenditure previously incurred. The Council does not now have the benefit of being able to levy supplementary rates to restore any shortfall in the original rate levy and it is therefore important that budget predictions are accurate and achievable, if a deficit which will affect the level of the subsequent year's rate is to be avoided…A number of opportunities to secure better value for money which may assist the council in the longer term have been identified in audit work during the current year. These have been discussed with your officers and will shortly be discussed with members. However, some four months only of the current financial year remain in which the council can act to contain expenditure within the original budget. Unless a determined effort is made now to achieve the budget intentions for the current year it is clear that the rate making...

To continue reading

Request your trial
56 cases

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT