Westminster City Council v Porter and another
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE HART |
| Judgment Date | 30 July 2002 |
| Neutral Citation | [2002] EWHC 2179 (Ch),[2002] EWHC 1589 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: MC01C05440 |
| Date | 30 July 2002 |
[2002] EWHC 1589 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Royal Courts of Justice
The Strand
London
WC2A 2LL
Mr Justice Hart
Case No: MC01C05440
MR R ANDERSON appeared on behalf of the Claimant
MR S CAKEBREAD appeared on behalf of the Defendant
Tuesday, 16 th July 2002
This is an application by Westminster City Council for summary judgment in relation to its claim against the first defendant, Dame Shirley Porter, for judgment in a sum of some £26,462,621. The history of the matter, so far as relevant to that which I have to decide can be taken from the very brief amended particulars of claim, which support the application.
The claimant is a local authority, to which the provisions of the Local Government Act 1972 and the Local Government Finance Act 1982, as consolidated and amended by the Audit Commission Act 1998 apply. The first defendant was formerly the leader of the claimant, and was a member of the council.
By a certificate or certificates issued by the appointed auditor for the claimant dated 9 th May 1996, under Section 20 sub-section 1 of the Local Government Finance Act 1982 it was certified that in relation to the accounts of the claimant for the years 1987/8 to 1994/5, the sum of £31,677,064 was due from the first defendant being the amount of a loss incurred or caused by her wilful misconduct.
Pursuant to what is now Section 18(8) of the Audit Commission Act 1998, a sum or other amount certified under the Section to be due from any person, is payable within 14 days after the date of the issue of the certificate, or if an appeal is brought within 14 days, after the appeal is finally disposed of or abandoned or fails for non-prosecution.
The first defendant appealed the certificate to the Divisional Court of the Queen's Bench Division, which in January 1998 upheld the certificates, save that the amount due thereunder was reduced to £26,462,621, inclusive of interest up to and including the date of the certificates.
After a reversal by the Court of Appeal on the 30 th April 1999, the orders of the Divisional Court were restored by the House of Lords on the 13 th December 2001, the judgments in the House of Lords being reported at [2002], 2 W.L.R. 37. Accordingly the claimant asserts that the first defendant became liable under Section 18(8) of the Act 14 days after the 13 th December 2001 to pay the sum of £26,462,621.
The first defendant does not contest that liability, although she is currently bringing a claim before the European Court of Human Reports, designed if successful to correct the position so far as her liability is concerned, on the ground that her Convention rights have been interfered with in the process by which the liability was established, and indeed on the ground that the liability itself, even if established lawfully in accordance with her Convention rights, represents a penalty completely disproportionate to the offence of which she was found guilty by the auditor's certificate.
Judgment sought today is accordingly of that sum of £26m odd, to which I have referred, and also with interest on that sum. There are three, possibly four, different ways in which the particulars of claim put the case against the first defendant. The actual judgment sought is a judgment in terms as follows, "that there be judgment for the claimant against the first defendant on that part of his claim set out in paragraphs 1 to 9 and 10 to 12 inclusive of the amended particulars of claim in the sum of £26,462,621, plus accrued interest from 9 th May 1996 to date in the sum of—" and then there is a blank for the purposes of the calculation.
The four distinct ways of putting the case, which are covered by those paragraphs of the amended particulars of claim, are first to assert a liability under the statute; secondly, to plead the case as one of damages for breach of statutory duty the breach being of the duty to pay the sum; thirdly, a claim is put on the basis that the first defendant acted in breach of trust, as a result of which the claimant suffered loss in the sum of £26,462,621, namely £15,476,000 plus interest; and, fourthly, the claim is put on the basis that the first defendant is liable as a constructive trustee to compensate the claimant for the loss. Of those four ways of putting the case the second, breach of statutory duty, has not been argued, and neither has the fourth, namely constructive trusteeship.
As I have indicated, under the first method of putting the case it is admitted by the first defendant that she is liable. The controversy is as to the third method of putting the case, namely the liability on the footing that she was a trustee, and has caused the loss claimed by a breach of trust. The significance of the controversy relates to the question of interest. Under Section 18(8) of the 1998 Act, she only became liable to pay the sum claimed 14 days after the final resolution of her appeals by the House of Lords, i.e. a date in late December of last year.
The claimant concedes that if liability were put solely on that ground, there would be no jurisdiction for the court to award any interest prior to that date. Moreover any interest awarded under Section 35A of the Supreme Court act 1981 would be simple interest. However, the claimant says that in addition to liability under the 1998 Act, the first defendant is liable as a trustee, and for that purpose pleads in paragraph 2 of the amended particulars of claim that the first defendant was a trustee of the assets of the council for the benefit of the claimant. That pleading is picked up again in paragraph 9 where the allegation of breach of trust, based on the items of misconduct found by the auditor and upheld by the House of Lords, is set out.
In relation to that liability the claimant invokes the jurisdiction of the Court of Equity to award interest from the earlier date i.e. the date of the certificate, 9 th May 1996, and, as an afterthought in the course of argument, by asserting a claim that the court should order that some, or all, of the interest should be compounded.
For the defendant Mr Cakebread has submitted that there is no jurisdiction for the court to hold the first defendant liable as a trustee. In summary, his submission is that Section 18 of the 1998 Act provides an exhaustive code for the determination of the liability of a member or officer of a council for the loss, and that the detailed provisions for appeals by necessary implication exclude the jurisdiction which the court might otherwise have.
This is an attractive submission and one, which has a good deal of intuitive merit to it. The boundaries between public and private law are in this jurisdiction frequently blurred. It seems odd however that Parliament, having enacted the code which it has, and in particular having now lighted on wilful misconduct as the touchstone of liability in contrast to earlier legislation which employed a wider concept, should have left untouched the wider jurisdiction, which undoubtedly existed in the early nineteenth century, whereby a corporate local authority could sue its own members for abuse of their powers.
I have not been addressed in any detail at all on the history of the development of that jurisdiction. But it appears from the few authorities to which have been referred or to which I have been taken, that the jurisdiction was originally based on the concept of the corporation's property being held in trust, and indeed held on a charitable trust. That appears perhaps most clearly from the case of Attorney General v Aspinall, reported in 2 Milne and Craig at page 612, which was a decision in 1837 based on the then recently enacted Municipal Corporations Act, Section 92 of which directed, in relation to the funds of the corporation, that the new council should, after defraying certain expenses, apply the surplus under its direction "for the public benefit of the inhabitants and the improvement of the borough."
In relation to that Lord Cottenham, Lord Chancellor said, at page 622
"In my opinion the 92 nd Section did not require the aid of the others, and in particular the 97 th Section. But taking them all together I cannot doubt that a clear trust was created by this Act for public, and therefore in the legal sense of the term, charitable purposes of all the property belonging to the corporation at the time of the passing of the Act, and that the corporation in its former state, holding as it did the corporate property until the election of the new council and treasurer, were in the situation of trustees for these purposes, subject to the restrictions specifically imposed by the Act, and subject to the general obligations and duties of persons in whom such property is vested."
On that basis it was held that the information brought by the Attorney General in relation to an alleged misappropriation of funds was competent.
That decision was referred to with approval by the House of Lords in Parr v The Attorney General [1842] 8 C.L. & F. 409, to which I was taken. In that case, which concerned a different Act but one in similar terms, Lord Lyndhurst LC's judgment is reported as follows at p. 431:
"I believe Mr Solicitor General we are all of the opinion that this is a public trust; that these funds are held by the corporation subject to a trust, so as to give a Court of Equity jurisdiction over the subject matter."
And Lord Campbell to like effect at p. 432 said:
"Before the Municipal Corporations Regulation Act passed, certainly the corporation property was not subject to any trust: the corporations might do with it...
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