R v Secretary of State for Foreign Affairs, ex parte World Development Movement Ltd

JurisdictionEngland & Wales
CourtQueen's Bench Division (Administrative Court)
JudgeLORD JUSTICE ROSE,MR JUSTICE SCOTT BAKER
Judgment Date10 November 1994
Judgment citation (vLex)[1994] EWHC J1110-4
Date10 November 1994
Docket NumberCO 1455/94

[1994] EWHC J1110-4

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

(DIVISIONAL COURT)

Before: Lord Justice Rose and Mr Justice Scott Baker

CO 1455/94

Regina
and
The Secretary of State for Foreign Affairs
Ex Parte The World Development Movement Limited

MR N PLEMING QC and MR O DAVIES (Instructed by Bindman & Partners, London NW1 2SA) appeared on behalf of the Applicants.

MR S RICHARDS (Instructed by the Treasury Solicitor, London SW1H 9JS) appeared on behalf of the Respondent.

1

Thursday, 10th November 1994.

LORD JUSTICE ROSE
2

There is before the court an application by the World Development Movement Ltd for judicial review of two decisions of the Secretary of State for Foreign Affairs in relation to aid to fund the Pergau Dam in Malaysia. The initial decision to grant aid was made on or shortly before 8th July 1991. The application refers to 15th July, which was the date of a press release in relation to the matter, but nothing turns on the precise date.

3

In early 1994 there were proceedings in public before the House of Commons Public Accounts Committee and Foreign Affairs Committee which led the Applicants' solicitors to seek an assurance from the Secretary of State that no further funds would be furnished. On 29th April 1994 the Secretary of State refused to give such an assurance, and that is the second decision which is challenged.

4

By the Notice of Motion the Applicants seek to have both decisions quashed and an Order preventing further payments from being made. But it may be that the Applicants will be content with a declaration that the July 1991 decision to make a grant was unlawful.

5

In the course of the hearing before this court there have been four issues. First, whether the Applicants have standing to make the application; secondly, whether disclosure should be ordered of two minutes from Sir Tim Lankester, Permanent Secretary in the Overseas Development Administration, ("ODA") to Baroness Chalker, the Minister of Overseas Development, dated 5th and 7th February 1991; thirdly, whether the July 1991 decision was lawful; fourthly, what is the appropriate relief, if any, taking delay into account. As to the second issue, the court refused disclosure during the hearing and indicated that reasons would be given later.

6

Before addressing the issues, it is necessary to set them in the context of the relevant legislation and the timetable of material events. Section 1(1) of the Overseas Development and Co-operation Act 1980 is in these terms:

7

"The Secretary of State shall have power, for the purpose of promoting the development or maintaining the economy of a country or territory outside the United Kingdom, or the welfare of its people, to furnish any person or body with assistance, whether financial, technical or of any other nature."

8

The subsection is ungrammatical in that it is unclear what verb is intended to govern "welfare", and it appears that the word "of" has been omitted after the word "development". But that is presently immaterial.

9

The argument before this court has centred on whether the grant in question was "for the purpose of promoting the development" of Malaysia.

10

The relevant history is that, during the 1960s, the Malaysian Government identified on the Pergau River a potential site for a hydro-electric power station. In April 1988 an Australian company carried out a feasibility study for a dam there. In September 1988 two British companies, Balfour Beatty and GEC, indicated to the Department of Trade and Industry their interest in the site. In the autumn of 1988 the Malaysian Electricity Authority identified the Pergau site as a priority. In October 1988 the British consortium told the DTI that they would be seeking, in relation to Pergau, ATP (ie Aid and Trade Provision, which accounts for about five per cent of the overseas aid fund disbursable under section 1 of the Act). In November 1988 the consortium submitted a formal application for ATP and gave "indicative costs" totalling £315 million to the ODA, and in January 1989 produced what was said by the National Audit Office to be a "firm contract proposal" of £316 million, with a United Kingdom content of £195 million.

11

In early 1989 the DTI advised the ODA to send an appraisal mission to Malaysia. On 6th March 1989 the consortium repeated the figure of £316 million. From 13th to 15 March 1989 an ODA appraisal mission was in Malaysia, the brevity and timing of that mission being described later by Sir Tim Lankester as "a lamentable slip". On 14th March there was a telephone report to London from the appraisal mission. On 15th March the then Prime Minister, Mrs Thatcher, met Dr Mahatir, the Prime Minister of Malaysia, in London and made an oral offer of ATP support of up to £68.25 million for the Pergau project, conditional on a full economic appraisal. That figure was the OECD minimum figure of 35 per cent of the £195 million portion of the total which was eligible for United Kingdom and European Community official support.

12

On 20th March the appraisal mission reported that, at the consortium's price of £316 million, the economic viability of the project was "marginal". On 31st March the consortium informed the DTI and ODA that the budgetary estimate of the Pergau project was £397 million, that is 25 per cent higher than previously stated. On 14th April an ODA economist minuted that in the light of this figure "Pergau was no longer a marginal project: clearly it now was uneconomic….."

13

On 17th April a formal written notice of the Pergau offer was sent to the Malaysian Government. Sir Tim Lankester described the position then facing the United Kingdom as a "dilemma", presenting four options:

14

(i) a formal offer of £397 million which was inconceivable on the economic view which had been taken;

15

(ii) withdrawing the offer, which was politically impossible;

16

(iii) confirming an offer at £316 million, which was not tenable in view of the price rise; and

17

(iv) making an offer based on £316 million, but with an indication of willingness to discuss the possibility of further assistance.

18

Option (iv) was chosen by Ministers.

19

In February 1990 the ODA completed a further economic appraisal and concluded that the Pergau project would, at £397 million, be "a very bad buy", and a burden on Malaysian consumers. In April an ODA economist minuted that, on all available estimates, which included a World Bank appraisal, Pergau appeared "markedly uneconomic". In October 1990 ODA concluded that Pergau would not be an economic proposition until the year 2005 at the earliest, and that Malaysian consumers would pay £100 million more for their electricity over Pergau's 35-year life, than if cheaper alternatives were pursued. Sir Tim Lankester was of the view that the Pergau project "was unequivocally a bad one in economic terms".

20

In January 1991 ODA completed a further economic appraisal which priced the Pergau project at £417 million, which would predicate ATP funding of £108 million and confirmed the conclusion that the project should be postponed. On 5th February 1991 Sir Tim Lankester sent a minute to the ODA Minister advising against proceeding. This minute described the economic case against Pergau in the following terms:

21

"'….. this project should not be implemented for the foreseeable future. There were much cheaper ways of producing electricity in Malaysia for many years to come …..'

22

…..

23

'this was not a marginal project such that the economics could be readily set aside in favour of commercial and political consideration. The proposed assistance of £108 million was by any standards very substantial indeed. ODA needed to look in all its projects for a positive return to the recipient country's economy. With such a large amount at stake, it was all the more important not to finance knowingly a bad investment. Implementing Pergau now would impose a cost penalty to the Malaysian economy of over £100 million, compared with alternative gas turbine projects. Thus, far from aid contributing to the development of Malaysia, it would at best be offsetting the extra cost of choosing Pergau.'"

24

On 7th February a further minute was sent by Sir Tim Lankester requesting a specific Ministerial Direction, if there was to be expenditure on Pergau. That minute included the following, by reference to Sir Tim Lankester:

25

"'[He] … had looked again at the papers to see whether there were any material counter arguments to be set against the clear economic case against the project …… he saw no serious counter arguments.'"

26

He concluded:

27

"'Supporting the project with aid funds would not in his view be consistent with policy statements by Ministers to Parliament about the basic objectives of the aid programme and the way aid funds are managed, which is also the context in which Parliament voted aid monies. Nor did the project meet well established criteria by which public investments should be assessed…..'"

28

The Accounting Officer's view was that the Pergau project was "'an abuse of the aid programme in the terms that this is an uneconomic project' and that 'it was not a sound development project.'"

29

On 26th February the Foreign Secretary, against that advice, took the decision to approve ATP support for the Pergau project and gave the appropriate direction to Sir Tim Lankester on 4th July. On 8th July the United Kingdom and the Malaysian Governments signed the financial agreement for ATP support for the Pergau project. On 12th July the Pergau contract was signed by the British consortium and the Malaysian Electricity Authority. On 15th July there was a press release. It was headed: "BRITAIN...

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