Court of Appeal and High Court consider property rights under the Human Rights Act

Two recent judgments have demonstrated the utility of the right to property under Article 1 of the First Protocol of the European Convention on Human Rights (“A1P1”) for companies and the scope for challenges where public decisions have interfered with private contracts. A1P1 is incorporated into English law by way of the Human Rights Act 1998, and provides for a right to peaceful enjoyment of possessions.

In R (Aviva Insurance Limited) v Secretary of State for Work and Pensions [2020] EWHC 3118 (Admin), the High Court found that the Secretary of State’s scheme for the recovery of state benefits from insurers in asbestos-related claims was incompatible with the insurers’ A1P1 rights.

In Solaria Energy UK Limited v Department for Business, Energy and Industrial Strategy [2020] EWCA Civ 1625, the Court of Appeal held that Solaria’s sub-contract with another company was a possession for the purposes of A1P1, despite contractual limits on its assignability.

Key Points

  • When considering whether a contract is a possession for the purposes of A1P1, the starting point is that a concluded and part-performed commercial contract is presumed to be a possession.
  • While assignability is a factor in considering whether a contractual right is a possession, it is not a conclusive factor.
  • Although legislation may not have been unlawful when it was first introduced, incompatibilities with ECHR rights may arise due to subsequent legal developments.

R (Aviva Insurance Limited) v Secretary of State for Work and Pensions

Background

Aviva holds a large book of long-tail employers’ liability insurance (for which Swiss Re provides reinsurance), whereby claims regarding asbestos-related diseases arising in the course of employment are covered by insurance in place at the time exposure occurred, even if the disease does not manifest itself until much later on. Such insurance is compulsory in the UK.

In personal injury litigation against a negligent employer, the claimant’s damages are reduced by the amount of specified state benefits received. The Social Security (Recovery of Benefits) Act 1997 (the “1997 Act”) requires the employer (and by extension its insurer) to then reimburse the Compensation Recovery Unit (“CRU”, part of the Department for Work and Pensions) in respect of those benefits. The 1997 Act retroactively applies to diseases that arise due to exposure prior to 1997, and the insurance policies that were in place at the time of exposure.

There have been a number of developments in the law of tort since 1997 that have greatly increased the number of asbestos-related claims and the amounts recouped by the CRU from insurers. Aviva and Swiss Re (together, the “Claimants”) sought judicial review of the Secretary of State for Work and Pensions (the “SSWP”) on the grounds that, following these legal developments, the CRU’s interpretation and application of the 1997 Act was incompatible with their A1P1 rights. The Claimants alleged that the Defendant breached their A1P1 rights in five respects:

  1. The requirement to repay 100% of the recoverable benefit to the CRU even where the employee’s contributory negligence has reduced the amount of damages payable to them;
  2. The requirement to repay 100% of the recoverable benefit to the CRU even where the employee sustains a divisible disease like asbestosis and the employer is only liable in tort for a small portion of that disease;
  3. The requirement to repay 100% of the recoverable benefit to the CRU even where there would be other defendants that would be liable but they or their insurers can not be traced;
  4. The requirement to repay recoverable benefits even where those benefits do not correspond to any recognised head of loss in tort, for example the repayment of Universal Credit which can include a housing element, whereas housing benefit was previously unrecoverable;
  5. The requirement to repay 100% of the recoverable benefit to the CRU in relation to settled claims, which generally involve an element of compromise and may be settled without admission of liability.

Judgment

Henshaw J considered the context in which the 1997 Act was introduced and the preceding systems for reimbursement of state benefits in tortious claims. Henshaw J found that “what Parliament did not have in contemplation was that, as a result of future developments in the law as between compensators and victims, compensators or their insurers would become liable for the cost of state benefits having no real relationship to the degree of injury or risk that those compensators had inflicted on the injured person”. Henshaw J considered that this amounted to an ongoing interference with the Claimants’ A1P1 rights each time the Claimants incurred a liability under the 1997 Act in respect of a specific claim arising out of a pre-1997 insurance policy.

Under A1P1, any interference with property must be justified. In particular the interference must serve a legitimate interest and be proportionate. Henshaw J considered the proportionality of the five features of the scheme that the Claimants argued were incompatible with their A1P1 rights, using a four stage test:

  1. On the question of whether the scheme had a legitimate aim, it was common ground that the objective of recovering costs attributable to tortious wrongdoing was legitimate.
  2. On whether the interferences were rationally connected to the aim of recovering costs attributable to tortious wrongdoing, Henshaw J considered that the decision to leave contributory negligence out of the 1997 Act was driven by practical concerns and fairness to injured persons. However, the second and third features were not rationally connected to the aim of recovering costs attributable to tortious wrongdoing, as the recovery of 100% of benefits despite only partial responsibility went over and above that aim. On the other hand, Henshaw J found that the fourth and fifth features were rationally connected to the legitimate aim.
  3. On whether the features went no further than necessary to achieve the legitimate aim, Henshaw J looked at similar schemes that had been proposed in Scotland and Wales and found that the first three interferences did go further than was necessary, as schemes could have been constructed so as to reduce the amount of benefits to be repaid in line with the tortious liability in those instances. Henshaw J considered that the fourth and fifth interferences went no further than was necessary to achieve the aim.
  4. On whether the features strike a fair balance between the interests of the community and the rights of the Claimants, Henshaw J concluded that while a fair balance may have been struck at the time the 1997 Act was passed, it did not necessarily follow that there was still a fair balance following subsequent legal developments. He concluded that the first three features did not strike a fair balance, in particular when bearing in mind their retrospective effect.

Henshaw J therefore concluded that the first three features of the operation of the 1997 Act raised in the claim were incompatible with the Claimants’ A1P1 rights. Permission to appeal to the Court of Appeal has been granted to both parties.

Solaria Energy UK Limited v Department for Business, Energy and Industrial Strategy

Background

In October 2011, the Department of Energy and Climate Change (which in 2016 was disbanded and its functions merged to form the Department for Business, Energy and Industrial Strategy, the defendant in this case) published a consultation which included a proposal to reduce certain subsidies in respect of electricity generated by solar panel installations and to bring forward the date for this reduction (the “Proposal”). The Proposal had a substantial impact on the solar energy industry.

In order to establish a successful A1P1 claim, claimants must first prove an unlawful interference by a public body. A significant number of A1P1 claims were brought by manufacturers and suppliers of solar panels which were considered by the Court of Appeal in Breyer Group Plc v Department of Energy and Climate Change [2015] EWCA Civ 408 (“Breyer”). The Court held that in principle the unlawful proposal could amount to a wrongful interference with or deprivation of the claimants’ possessions, namely existing contracts, contrary to A1P1.

Although Solaria had entered into a sub-contract for the supply of solar panels to another company in July 2011, it had not been a claimant in Breyer. Instead, Solaria continued to supply solar panels well into 2012. Eventually, Solaria issued proceedings against BEIS in December 2018, alleging interference with its July 2011 sub-contract contrary to its A1P1 rights. Solaria claimed that as a result of the Proposal, it was forced to renegotiate its sub-contract at a lower rate. However, Solaria’s claim was struck out by the Technology and Construction Court for two reasons. First, the Court found that Solaria’s sub-contract was not a possession for the purposes of A1P1. Although Solaria’s contractual rights under the sub-contract had a value to Solaria, that value was not a readily realisable or marketable value because the sub-contract could not be assigned. Secondly, the judge found Solaria’s claim to be out of time under the one year limitation period for HRA damages claims. Solaria appealed to the Court of Appeal on both grounds.

Judgment

Coulson LJ, who gave the leading judgment, noted that in Breyer a distinction was drawn between existing enforceable contracts and draft contracts which had yet to be concluded. While the former were found to be part of the goodwill of a business and therefore possessions under A1P1, the latter amounted to a loss of future income and were not actionable. Coulson LJ considered that “whilst not all contracts are possessions within the meaning of A1P1, the starting point must be that a signed and part-performed commercial contract is, prima facie, a possession”.

Coulson LJ considered that the judge at first instance was wrong to conclude that Solaria’s sub-contract was not a possession simply because it was not assignable. The sub-contract was in fact assignable, provided that the other party consented to that assignment. While that might affect the value of the sub-contract, it did not prevent the sub-contract from being a possession. Furthermore, even if the contract had contained an absolute bar on assignment, the Court considered that the sub-contract would still be a possession. While assignability was a factor in considering whether a contractual right was a possession, it was not a conclusive factor.

The Court of Appeal unanimously concluded that Solaria’s sub-contract was a possession for the purposes of A1P1. However, the Court upheld the first instance ruling that the claim was out of time and Solaria’s appeal was dismissed.

Conclusion

Property rights which are protected under the Human Rights Act can take many forms. They may involve requirements that property be used in particular ways, as was the case with the requirement on insurers to reimburse state benefits in the event of certain successful claims, or proposed changes to subsidy regimes that affect contracts between two private parties.

The judgment in Aviva demonstrates that the law provides protection for those who find their rights interfered with on the basis that they are disproportionate or do not serve a legitimate purpose. The judgment also indicates that although legislation may not have been unlawful when it was first introduced, incompatibilities with ECHR rights may arise due to subsequent legal developments.

The judgment in Solaria serves as a reminder that the concept of possessions under A1P1 is wider than the concept of property in English law, and that a concluded and part-performed commercial contract can be a possession for the purposes of A1P1.

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Independent Human Rights Act Review launches a public call for evidence

On 13 January 2021, the Independent Human Rights Act Review (the “IHRAR“) published a call for evidence. The IHRAR is a panel of experts appointed by the Government to consider whether there is a need to reform the Human Rights Act (“HRA“) “to ensure it continues to meet the needs of the society it serves”.

The call for evidence is structured to cover two broad themes:

  • The relationship between domestic courts and the European Court of Human Rights (the “ECtHR“) in the context of section 2 of the HRA. Pursuant to section 2, domestic courts and tribunals are required to “take into account” the case law of the ECtHR, albeit they are not bound by that case law under the usual rules of precedent. The Review will consider how section 2 has been operating and whether there is any need for reform.
  • The impact of the HRA on the relationship between the judiciary, the executive and the legislature. In particular, the IHRAR will consider the way the HRA balances those roles, including whether the current approach risks “over-judicialising” public administration and draws domestic courts unduly into questions of policy.

The specific questions on which the IHRAR has invited responses are listed in its terms of reference. See this blog post for further details of the terms of reference and the formation of the IHRAR. The call for evidence closes on 3 March 2021.

Sir Peter Gross, the Chair of the IHRAR, stated upon publication of the call for evidence that the ’review proceeds on the basis that the UK will remain a signatory to’ the European Convention on Human Rights.

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Government launches independent review of the Human Rights Act 1998

The Government has announced that a panel of experts led by former Court of Appeal Judge, Sir Peter Gross, will conduct an Independent Human Rights Act Review (the “IHRAR”). The Human Rights Act 1998 (the “HRA”) incorporates the fundamental rights and freedoms set out in the European Convention on Human Rights (the “Convention”) into domestic British law. The purpose of the review is to consider whether there is a need to reform the HRA. The Panel will take “a fresh look at the [HRA] – how it operates and protects human rights – to ensure it continues to meet the needs of the society it serves”.

Context

The 2019 Conservative Manifesto was not the first Conservative manifesto to make reference to the HRA. The 2017 Conservative Manifesto committed to “consider” the human rights legal framework after Britain had left the European Union, whereas the 2015 Conservative Manifesto promised to “scrap” the HRA, introduce a Bill of Rights and “curtail” the role of the European Court of Human Rights (the “ECtHR”). Therefore, it was foreseeable that a prospective Conservative government in 2019 would also make a commitment in respect of the human rights framework. The 2019 Conservative Manifesto promised to “update” the HRA.

Terms of Reference

The Terms of Reference of the IHRAR refer to the United Kingdom’s contribution to human rights law, which it states is founded in the common law tradition and continued with the drafting of the Convention. Citing the impact which the HRA has had on relations between the judiciary, the legislature and the executive and the “perception” that, under the HRA, the courts have increasingly been presented with questions of policy as well as law, the Government considers that it is timely to review the operation of the HRA.

There are two overarching themes that the IHRAR will consider:

  1. The relationship between the domestic courts and the ECtHR: Domestic courts and tribunals are not bound by the jurisprudence of the ECtHR. However, pursuant to section 2 of the HRA, in so far as relevant, domestic courts and tribunals must “take into account” that jurisprudence when determining a question that has arisen in connection with a Convention right. The Panel will consider (among other questions):
    1. How the duty under section 2 has been applied in practice?
    2. How have domestic courts and tribunals dealt with issues falling within the margin of appreciation? When applied, this legal doctrine gives a public authority a degree of discretion when making decisions.
    3. Does the current approach to ‘judicial dialogue’ between domestic courts and the ECtHR satisfactorily allow domestic courts to raise concerns as to the application of ECtHR jurisprudence, having regard to the circumstances of the United Kingdom?
  2. The impact of the HRA on the relationship between the judiciary, the executive and the legislature: The Panel will consider whether the HRA balances those roles, including whether there is “over-judicialising” of public administration, drawing domestic courts unduly into questions of policy. By way of illustration, these are examples of questions that the Panel will consider:
    1. Section 3 of the HRA requires the courts to read and give effect to primary and subordinate legislation in a way which is compatible with Convention rights. Should any changes be made to this framework?
    2. Should any change be made to the framework of the section 4 HRA duty i.e. that if the court is satisfied that a provision is incompatible with a Convention right, it may make a declaration of that incompatibility?
    3. How have courts and tribunals dealt with provisions of subordinate legislation that are incompatible with the HRA Convention rights?
    4. In what circumstances does the HRA apply to acts of public authorities taking place outside the territory of the United Kingdom?
    5. Section 10 of and Schedule 2 of the HRA provide ministers with the power to make remedial orders, i.e. to amend legislation that has been found incompatible with the Convention. Should this be modified, for example by enhancing the role of Parliament?

The IHRAR will not consider potential changes to the operation of the Convention or the ECtHR, which are not within the scope of this Review.

Next steps

The Panel is expected to report its recommendations in Summer 2021, after which the Government will respond to the report.

A further point to note is that the 2019 Conservative Manifesto also promised to review the constitution and administrative law, including the relationship between the Government, Parliament and the courts; the functioning of the Royal Prerogative; the role of the House of Lords; access to justice and judicial review. The 2019 Conservative Manifesto undertook to establish a Constitution, Democracy and Rights Commission to consider these issues, as well as the HRA, in depth.

On 31 July 2020, the Government established the Independent Review of Administrative Law (the “IRAL”) to consider options for reform to judicial review. In its latest announcement the Government has stated that the IRAL and the IHRAR, together with other workstreams which will be announced in due course, will deliver the Commission on Constitution, Democracy and Rights. Therefore, it is likely that we will see further reviews taking place to address remaining constitutional issues referred to in the 2019 Manifesto.

To read more about the IRAL, please see the following blog posts:

 

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Parliamentary Committee considers remit of the proposed Constitution, Democracy and Rights Commission

The House of Commons’ Public Administration and Constitutional Affairs Committee (the “PACAC”) is conducting a Call for Evidence as part of its inquiry (the “Inquiry”) in relation to the commitment in the 2019 Conservative Party manifesto (at page 48) that the Government would establish a Constitution, Democracy and Rights Commission (the “Commission”).

Background

According to the manifesto commitment, the Commission’s purpose would be to make proposals “to restore trust in our institutions and in how our democracy operates”. The manifesto stated that the role of the Commission would be to examine: the relationship between the Government, Parliament and the courts; the functioning of the Royal Prerogative; the role of the House of Lords; and access to justice for ordinary people. It appears the intention was that the Commission would also “update” the Human Rights Act and administrative law, as well as ensure that judicial review is “available to protect the rights of the individuals against an overbearing state, while ensuring that it is not abused to conduct politics by another means or to create needless delays”.

The Government subsequently announced that it had appointed a panel of experts to examine whether there is a need to reform the judicial review process and there was a Call for Evidence by the Government’s Independent Review of Administrative Law (the “IRAL”; see Public Law Notes updates of 3 August 2020 and 27 October 2020). As regards the remaining commitments, the Government has made no announcements about the form or timing of the Commission except in the Queen’s Speech.

The Call for Evidence seeks submissions on the form which the Commission should take, its main purpose and output, and any particular issues which should be a priority for the Government. This Call for Evidence gives members of the public the opportunity to have their say and influence the findings of the Inquiry.

Evidence to the Inquiry

Oral evidence has been given to the Inquiry by a number of individuals including Lord Sumption, former Justice of the Supreme Court, and academics.

The focus of the oral evidence given so far has been on what should be the priorities for the Commission. The suggestions covered a broad array of topics including (among others):

  • The context of the reforms that the Commission would consider in that Brexit is “affecting the relationships between the different institutions in the Constitution” in any case and so it may be sensible to consider significant constitutional issues at this juncture;
  • The opportunity to “rebuild public trust” in the institutions following the divisive Brexit debates;
  • The electoral system;
  • The House of Commons’ ability to control the legislative agenda;
  • The implications of the Human Rights Act 1998;
  • The separation of powers;
  • The role of the public and how the public might be engaged with the Commission;
  • Whether the Government is approaching the issues which the Commission will consider with an open mind.

The PACAC has not yet stated when the findings of the Inquiry will be published.

Selecting a tactical or strategic approach to constitutional reform

The New Labour Government’s constitutional reform programme in the 1990’s and 2000’s took what some have described as a “piecemeal” approach as it introduced devolution, enacted the Human Rights Act 1998; established a freedom of information regime and reformed the House of Lords. Given the pressure of COVID-19, the Government may find that it does not now have the time to consider constitutional reforms in the round. Therefore, there is a real possibility that this Government could replicate New Labour’s approach, by thinking about issues tactically and thus leaving some dissatisfied.

Evidence given to the Inquiry by Professor Russell, Director of the Constitution Unit at University College London, suggested that there has been a “sort of scattergun” approach by Government, including proposals such as moving the House of Lords to York; abolishing certain regulators or weakening their powers; and establishment of the IRAL. Further, there have been reports over the weekend that the Government is backing plans to reform the Supreme Court by reducing the number of Justices and renaming the institution. Lord Lisvane, a Member of the Constitutional Reform Group Steering Committee, has also suggested that the overlap between the Commission and the IRAL is “a recipe for unconstructive confusion”.

Lord Lisvane has rightly pointed out to the Inquiry the potential scale of the Commission’s remit:

The daunting thing about what is proposed is the sheer size of the canvas. As soon as you start unpacking the individual elements they expand further. For example, how do you do Government and Parliament relations without looking at the devolution settlements? How do you do access to justice for—in the condescending phrase—ordinary people without looking at the structure and resourcing of the justice system and legal aid? As soon as you start looking in more detail, the sheer size of the task starts to increase. I think that that is going to be a major challenge…

The Call for Evidence closes on 16 November. It will be interesting to see how the Committee’s findings fit with the remit of and any recommendations made by IRAL, which is due to report back later this year.

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Supreme Court confirms broader scope for challenging deportation under Article 3 of the European Convention on Human Rights

The Supreme Court this week handed down judgment in AM (Zimbabwe) v Secretary of State for the Home Department [2020] UKSC 17, clarifying the scope for resisting deportation from the UK on grounds of ill-health. Herbert Smith Freehills acted for the intervener, the AIRE Centre, who successfully supported the appellant . In light of the recent caselaw of the European Court of Human Rights (“ECtHR”), the Supreme Court considered the proper application of the prohibition of inhuman treatment under article 3 of the European Convention on Human Rights (“the Convention”) in the context of resisting deportation.

Background

The appellant, a Zimbabwean citizen, challenged the refusal to revoke the order for his deportation from the UK to Zimbabwe. The Secretary of State had ordered his deportation as a result of crimes he had committed whilst lawfully resident in the UK. The appellant is HIV positive and receives medical treatment in this country which prevents his relapse into AIDS. He argued that it was doubtful whether his current medication would be available in Zimbabwe, without which he was prone to infection and faced a reduction in life expectancy.

However, in the First-Tier and Upper Tribunals the appellant had resisted deportation on the basis only of his right to respect for private and family life under article 8 of the Convention. Indeed the appellant conceded that his appeal could not succeed on grounds of his ill-health under article 3, given the narrow interpretation established by the House of Lords in N v Secretary of State for the Home Department (Terrence Higgins Trust intervening) [2005] UKHL 31, [2005] 2 AC 296. In that case article 3 was held to prohibit the deportation only of those of facing imminent death, whose return would deprive them of access to the care needed to die in dignity. The appellant’s risk of a significant reduction in life expectancy fell short of this standard.

Before the appellant’s case reached the Court of Appeal, the Grand Chamber of the ECtHR gave judgment in Paposhvili v Belgium [2017] Imm AR 867 in which it stated that it was clarifying the approach, and that article 3 may cover “situations involving the removal of a seriously ill person in which substantial grounds have been shown for believing that he or she, although not at imminent risk of dying, would face a real risk, on account of the absence of appropriate treatment in the receiving country or the lack of access to such treatment, of being exposed to a serious, rapid and irreversible decline in his or her state of health resulting in intense suffering or to a significant reduction in life expectancy”.

Considering this decision to provide an expanded interpretation of article 3 in circumstances similar to his own, the appellant abandoned his reliance on article 8 before the Court of Appeal. He sought instead to reformulate his claim by reference to article 3 and requested that the case be reheard accordingly at tribunal level.

The Court of Appeal dismissed the appeal, holding that Paposhvili had not expanded the application of article 3 as broadly as the appellant claimed. Even if it had, both parties acknowledged that the Court of Appeal would be obliged to dismiss the appellant’s case in any event. Bound by the domestic authority of N, the court was powerless to adopt a wider interpretation of article 3.

The appellant therefore asked the Supreme Court to do what the courts below could not: depart from the narrow interpretation of article 3 and remit the case for rehearing.

Judgment

The Supreme Court accepted the appellant’s and intervener’s submissions on the interpretation recently adopted by the Grand Chamber. In its view Paposhvili had not merely clarified the application of article 3, it had extended it (and Lord Wilson commented on the confusion that could be caused by the ECtHR describing itself as clarifying when it is in fact going further). Previous cases, including N, had held that the seriously ill would be spared deportation only if the absence of appropriate treatment in the receiving state would result in imminent death. Following Paposhvili, article 3 could now also prohibit the deportation of those who faced a real risk of a “significant reduction in life expectancy” or a “serious, rapid and irreversible decline” in health resulting in intense suffering. Significant in this context must mean “substantial” to attain the level of severity required by article 3, but it was acknowledged that this would have to be applied in light of the particular facts. To illustrate this Lord Wilson gave the example of a reduction in life expectancy to two years for a 74 year old compared with a reduction in life expectancy to two years for a 24 year old.

With the effect of the Grand Chamber’s decision understood in this way, the Supreme Court made clear that it would depart from N and follow Paposhvili. It noted that it would only be appropriate to refuse to follow a decision of the Grand Chamber in “highly unusual circumstances”.

Given the now broadened scope of article 3, the Supreme Court remitted the appellant’s case to the Upper Tribunal for rehearing.

Comment

The Supreme Court’s decision brings domestic law into step with the ECtHR in relation to how deportations can be challenged under article 3 of the Convention. No longer is the prospect of imminent death required. Both substantial reductions in life expectancy and intense suffering due to declining health may now be invoked to resist return.

This case also draws attention to the broader relationship between the domestic and Strasbourg courts. As the Supreme Court recognised, the Convention is a “living instrument”. Its growth occurs through the interpretations given to it by the ECtHR. Where domestic interpretations lag behind, catching up can require the Supreme Court to depart from its own previous decisions.

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COVID-19 Pressure Points: The Right to Property

The current pandemic has led to an extraordinary level of state action. In many cases this has involved interference with the private rights of businesses and individuals. While states are undoubtedly seeking to balance health and economic concerns of the utmost importance, their actions nevertheless must comply with rules of domestic and international law.

In this short article we consider one particular form of state action, namely interference with private property, and the domestic protections available to those who find that their right to property has been infringed. This builds on our Arbitration Notes piece which considered the international law obligations relevant in this context.

The Right to Property

The right to peaceful enjoyment of property is protected by both the common law and Article 1 of the First Protocol (“A1P1”) of the European Convention on Human Rights (the “ECHR”), as incorporated into UK law by the Human Rights Act 1998 (the “HRA”).

Under the HRA, legislation must be read compatibly with the ECHR and the courts can issue a declaration of incompatibility in the event that primary legislation contravenes the ECHR. The courts can also strike down secondary legislation (such as regulations) which is incompatible with the ECHR. The HRA allows “victims” whose ECHR rights have been infringed to bring claims against public authorities, including claims for damages where appropriate. Claims can be brought against governmental organisations and other public bodies such as regulators.

Under A1P1, any interference with property must be justified. In particular the interference must serve a legitimate interest and be proportionate. This means that compensation can be payable if a lack of compensation would make the measure disproportionate in the circumstances. Compensation is ordinarily payable in cases of deprivation (or expropriation) of property but is rather less likely to be available where actions instead amount to a “control on use” of property.

Coronavirus legislation

There are a number of provisions in the Coronavirus Act 2020 (the “Act”) and the other coronavirus-related regulations which could result in interference with the right to the peaceful enjoyment of property. Indeed the Department of Health and Social Care’s assessment of the Coronavirus Bill 2020 in its memorandum to the Joint Committee on Human Rights (the “Memorandum”) identifies a number of clauses which may engage A1P1.

Legislative provisions which appear likely to lead to interference with property rights include:

  • Closure of various businesses: Actions taken under the various legislative provisions which operate to close (or restrict the opening of) premises and businesses are likely to interfere with the right to peaceful enjoyment of property. One such provision is section 52 of the Act (together with Schedule 22), which the Memorandum accepts may engage A1P1. While these directions may amount to a “control on use” rather than a deprivation, they can still be challenged through the courts if the use of the powers is disproportionate or does not appear to pursue a legitimate aim.
  • Directions in relation to schools and childcare providers: The Act (sections 37 and 38, together with Schedules 16 and 17) contains various powers in relation to education and childcare. This includes powers to direct the closure of facilities and to direct that they remain open to provide education, training or childcare. Given that such powers apply to private organisations (in addition to state facilities), the directions contemplated by these provisions are likely to engage A1P1. Directions that particular facilities must close (or indeed remain open) may amount to a “control on use” of property and may be challenged through the courts.
  • Directions in relation to ports: Section 50 of the Act (together with Schedule 20) gives the Secretary of State power to direct the closure of ports (including airports) and make consequential directions requiring operators to take specified steps. Notably the Memorandum does not consider the compatibility of these provisions with the ECHR but instead says that this analysis will be undertaken at the point when the Secretary of State decides to make a direction. Again any such direction may engage A1P1 as a “control on use” of property and entities which are affected by a direction may be able to challenge it in the courts.
  • Directions given in relation to bodies: While this issue is not addressed in the Memorandum, the powers in the Act in relation to the transportation, storage, and disposal of dead bodies are likely to engage A1P1. Under these provisions (in particular paragraph 5 of Schedule 28) local or national authorities may “give a direction requiring a person to do anything calculated to facilitate the transportation, storage or disposal of dead bodies or other human remains”. Such a direction can involve a requirement to provide services or property (including “facilities, premises, vehicles, equipment or anything else within the person’s possession or under the person’s control”). Paragraph 8 of Schedule 28 then requires the establishment of a scheme to provide compensation to those to whom a direction under paragraph 5 is given. While we are not aware that such a direction has yet been given, it seems likely that directions would engage A1P1 and may either amount to a “deprivation” or “control on use” of property. As contemplated by the legislation, compensation may be payable in order to make any such direction proportionate.

The circumstances of the COVID-19 pandemic also raise concerns about the peaceful enjoyment of property beyond those currently set out in legislation. For example questions may arise in relation to requisitioning private medical supplies or in relation to consumer credit, whereby firms may be forced to forego income or use their property in a particular manner. In all such circumstances public authorities and private organisations alike need to be alive to possible infringements of the right to property.

Comment

There is a general acceptance of the need for the curtailment of private rights, including the right to peaceful enjoyment of property, as a result of the COVID-19 pandemic. Interference with property rights can take many forms – it may involve directions (whether by the government or other public authorities such as regulators) that property cannot be used or indeed requirements that property must be used in particular ways. However, even in these extreme circumstances, the law does provide protection for those who find their rights interfered with. Those who find that their property rights have been infringed may be able to challenge actions which are disproportionate or do not serve a legitimate purpose. In such circumstances, the courts could quash unlawful decisions or require compensation to be payable.

If you have any questions on the Coronavirus Act 2020 or other COVID-19 developments, please contact Andrew Lidbetter, Nusrat Zar, Jasveer Randhawa, James Wood or Sahil Kher. Please also visit our client COVID-19 hub here for more insight from Herbert Smith Freehills on the legal issues surrounding the current outbreak.

 

Andrew Lidbetter
Andrew Lidbetter
Partner
+44 20 7466 2066
Nusrat Zar
Nusrat Zar
Partner
+44 20 7466 2465
Jasveer Randhawa
Jasveer Randhawa
Of Counsel
+44 20 7466 2998
James Wood
James Wood
Senior Associate
+44 20 7466 2306
Sahil Kher
Sahil Kher
Associate
+44 20 7466 6440

High Court finds that the suspension of pension benefits breaches the Human Rights Act

In R (on the application of British Medical Association) v Secretary of State for Health and Social Care [2020] EWHC 64 (Admin) the British Medical Association (the “Claimant”), a trade union and professional body for doctors, successfully challenged the National Health Service Pension Schemes, Additional Voluntary Contributions and Injury Benefits (Amendment) Regulations 2019 (the “Regulations”). These brought in a new power of the Secretary of State (the “Defendant”) to suspend the payment of benefits under the NHS Pension Scheme where a member of the scheme was charged with certain offences.

The court found that the Regulations breached Article 14 of the European Convention on Human Rights (the “ECHR”), the right against discrimination, when read with Article 1, Protocol 1 (“A1P1”) ECHR, the right to property. In addition, it was found that there was an absence of appropriate procedural safeguards as required by Article 6(1) of the ECHR, the right to a fair trial, and the principles of natural justice.

Key points

  • Public bodies must ensure that during the development of policy they have due regard to any fundamental rights which they might be engaging to ensure that their actions are appropriately justified.
  • Decision makers must properly consider all the outcomes and consequences of their proposed decisions including any unintended consequences.
  • Although there is often a wide margin of appreciation afforded to the State, and procedural flaws can sometimes be cured, where a measure is manifestly without reasonable foundation the court will usually have no option but to quash the relevant measure.

Background

This claim challenged the lawfulness of certain provisions of the Regulations by which amendments were made to the terms of the NHS Pension Scheme.

Before the Regulations were brought in, the Defendant had the power to forfeit a pension after a member or beneficiary of the pension scheme had been convicted of a prescribed criminal offence which was committed before the benefit became payable. Most, if not all, public sector pension schemes contain similar provisions. However, the hiatus between the conviction and the certification and forfeiture decisions, even if short, gave rise to the risk of the individual concerned using an accrued entitlement to a lump sum drawdown as a means of circumventing the effects of forfeiture. The aim of the Regulations was to reduce this risk by conferring upon the Defendant an additional power to suspend payment of pension benefits where a person was charged with certain serious offences.

There was nothing in the Regulations that entitled a person affected to appeal the decision to suspend their benefits. Suspension did not terminate automatically upon acquittal or in other circumstances in which forfeiture could no longer take place. Also, there was no limit in terms of time or amount, except that in most cases the guaranteed minimum pension could not be forfeited or suspended.

Most of the Claimant’s members belong to the NHS Pension Scheme. The Claimant had serious concerns about the potential impact on its members of the introduction of the suspension power.

Judgment

Mrs Justice Andrews held that the Claimant was entitled to declaratory relief and to a quashing order on the basis of a number of grounds of challenge.

Article 14 and A1P1 of the ECHR: Interestingly, for the purposes of the discrimination test, it was found that there was a sufficient analogy between the position of a current NHS employee and that of a retired NHS employee for a comparison to be made between them for the purposes of Article 14 read with A1P1. The suspension power subjected retired NHS employees to an immediate financial detriment which was not imposed on NHS employees who faced similar criminal charges.

The court considered it unnecessary to decide what the appropriate standard of review was for a case of this kind, because whichever of the tests was applied and however wide the margin of appreciation afforded to the State, the result was the same: this measure was found to be manifestly without reasonable foundation. It was not simply capable of causing hardship in individual cases; it was inherently unfair. This was because it offended against the presumption of innocence, which could not be put right. There was no objective rational justification for it. This finding was all the more forceful given that there was no evidence that anyone had turned their mind to how this new power might impact upon the presumption of innocence.

Article 6(1) of the ECHR: The court acknowledged that the power to suspend following charge was expressed in extremely broad terms, such that it would be difficult to challenge by way of judicial review. Therefore, the court took the view that nothing less than a full right of appeal to a court on the merits would suffice to satisfy the requirements of Article 6(1) and the principles of natural justice.

It was notable that in determining whether the discriminatory effect of the suspension power was justified and assessing the lawfulness of the measure challenged, the court stated that it must take a holistic view by considering the presence or absence of procedural safeguards. Nonetheless, it found that the introduction of a full right of appeal to a court would be insufficient to cure the breach of Article 14 read with A1P1. The breaches of Article 6(1) simply made an inherently unfair measure even more unfair.

Comment

The High Court found that the development of the new power had not taken into account serious consequences on individuals’ rights. Some issues might have been curable, for example by providing appropriate procedural safeguards. Nonetheless, the cornerstone of this judgment was the lack of consideration of the presumption of innocence which rendered the Regulations “manifestly without reasonable foundation”. The judgment also found that the justifications advanced by the Secretary of State for this were “woefully inadequate”. This case is therefore a reminder of the need for decision makers to think through all the consequences of their actions, including any unintended consequences, and appropriately assess those consequences before finalising their decisions.

In terms of the case’s wider application, the Defendant raised the issue of how the court should approach a challenge to the legality of a measure of general application which permits, but does not compel, a breach of the common law or the ECHR. While the court accepted that it is obliged to interpret legislation compatibly with the ECHR insofar as that is possible, it must also focus on whether there is something inherent in that measure that makes it incompatible with a fundamental right. If a measure appears to be incompatible there are limits to how far the court will be able to use its powers to read in provisions to make it compatible.

Andrew Lidbetter
Andrew Lidbetter
Partner
+44 20 7466 2066
Nusrat Zar
Nusrat Zar
Partner
+44 20 7466 2465
Jasveer Randhawa
Jasveer Randhawa
Of Counsel
+44 20 7466 2998
Shameem Ahmad
Shameem Ahmad
Associate
+44 20 7466 2621

Labour’s plans for energy and medicines – public law analysis

We have published two papers which consider the impact of the Labour Party’s recently announced policies on two heavily regulated sectors, namely the energy and pharmaceutical industries. The policies proposed in relation to both sectors, which are similar to those now also proposed in other industries (such as the water industry and in relation to Royal Mail) are central aspects of Labour’s nationalisation agenda. Taking forward such policies would engage key public law principles and would give rise to likely challenges on the basis of the level of compensation payable, amongst other things.

In Labour’s recent report entitled “Medicines for the Many”, Labour has proposed using existing powers of “Crown Use” and “compulsory licenses” to acquire patented information for the state’s purposes. Labour’s report also suggests that a future Labour government would seek to limit the basis on which compensation would be payable to holders of such patents. In addition to concerns which these proposals raise under intellectual property and investment treaty law, they give rise to questions about the compatibility of such measures with the right to property, which is protected by the common law, the EU Charter, and the European Convention on Human Rights (as incorporated into domestic law by the Human Rights Act 1998). For more information please see our briefing paper here.

Similarly, in its manifesto, the Labour Party has set out in more detail the measures which it proposes in relation to the energy industry. Broadly these measures would involve the nationalisation of significant parts of the energy sector (including the network companies and the energy supply businesses of the Big Six). As with its medicines proposals, if a future Labour government sought to implement these policies, we envisage challenges being brought on public law and human rights grounds given that they would involve interference with the companies’ and investors’ property. For more information on these issues, including in relation to steps that can be taken to protect property rights, please see our briefing paper here.

Andrew Lidbetter
Andrew Lidbetter
Partner
+44 20 7466 2066
Nusrat Zar
Nusrat Zar
Partner
+44 20 7466 2465
Jasveer Randhawa
Jasveer Randhawa
Of Counsel
+44 20 7466 2998
James Wood
James Wood
Senior Associate
+44 20 7466 2306

Practice head receives award for pro bono contribution

The public law team is delighted that Andrew Lidbetter, practice head, has won the Best Contribution by an Individual Award at the LawWorks Annual Pro Bono Awards 2019. This category considers pro bono lawyers as well as senior partners who have championed pro bono legal work in a firm. The award was presented by the Rt Hon. The Baroness Hale of Richmond DBE at an event on 3 December 2019 attended by over 260 finalists and guests from across the pro bono, advice, legal aid and charity sectors.

For well over a decade, Andrew has been leading teams of lawyers at Herbert Smith Freehills acting pro bono on numerous high-profile strategic interventions in cases, particularly in the Supreme Court, for NGO clients, using the same public law skillset that he deploys for his commercial clients. Providing pro bono legal support to charities through this work increases the organisations’ capacity to take part in strategic interventions and allows them to focus their resources during such interventions on marshalling their expert knowledge or experience in the relevant area.

Andrew has long standing links with the NGOs concerned, for example Andrew has been a JUSTICE Council member since 2013 and was part of JUSTICE’s working party that reported on Delivering Justice in the Age of Austerity (2015). Andrew leads the firm’s collaboration with the Public Law Project, who have held their annual conference at Herbert Smith Freehills for more than 10 years. He has championed rolling trainee secondments to Liberty and (more recently) the AIRE Centre for over 15 years.

This award follows the public law team’s success in winning the pro bono award at the LexisNexis awards 2019. The firm was also highly commended in the Best Contribution by a Large Firm category for its work with charity Steel Warriors and in the Most Effective Pro Bono Partnership for the firm’s partnership with the Asylum Support Appeals Project. Maryam Oghanna (Associate, Disputes) was also highly commended in the Junior Lawyers Division Pro Bono Award category.

Andrew Lidbetter
Andrew Lidbetter
Partner
+44 20 7466 2066
Nusrat Zar
Nusrat Zar
Partner
+44 20 7466 2465
Jasveer Randhawa
Jasveer Randhawa
Of Counsel
+44 20 7466 2998
Marion Edge
Marion Edge
Senior Associate Pro Bono Lead
+44 20 7466 3316

 

Supreme Court holds that public authorities may disapply secondary legislation in cases of incompatibility with the Human Rights Act

In RR v Secretary of State for Work and Pensions [2019] UKSC 52, the Supreme Court has dealt with an important constitutional question on the powers of public authorities and tribunals. In its judgment handed down today, it held that a public authority, court or tribunal can disapply a provision of subordinate legislation which would otherwise result in their acting incompatibly with rights under the European Convention on Human Rights where this is necessary to comply with the Human Rights Act (“HRA”).

HSF acted for three charities – Liberty, Child Poverty Action Group, and Public Law Project – who jointly intervened before the Supreme Court.

Key points

  • Secondary legislation is subordinate to the requirements of an Act of Parliament. Consequently, where provisions in secondary legislation produce outcomes that are contrary to the requirements of an Act of Parliament, a public authority, court, or tribunal can disapply such a provision.
  • In a human rights context, as a general rule, a provision of subordinate legislation which results in a breach of a Convention right must be disregarded.

Background

This case is the latest in a line of decisions relating to the judicial review of the regulations governing the removal of the spare room subsidy for people in social housing (colloquially known as the “bedroom tax”). The bedroom tax is effectively a percentage reduction in the eligible rent if the number of bedrooms in social sector properties exceeds a certain defined number calculated in line with regulation B13(5) and (6) of the Housing Benefit Regulations 2006 (“the Regulations”). In 2016, the Supreme Court in R (Carmichael) v Secretary of State for Work and Pensions [2016] UKSC 58 held that regulations B13(5) and (6) led to unjustified discrimination on the ground of disability to the extent that they did not cater for a “a transparent medical need for an additional bedroom” (“Carmichael SC”). The relief granted was a declaration that the claimant had suffered discrimination contrary to article 14 of the Convention.

In response to the decision, the Respondent introduced the Housing Benefit and Universal Credit (Size Criteria) (Miscellaneous Amendments) Regulations 2017 (SI 2017/213) which were intended to cater for the instances in which the Supreme Court had held that the previous version of regulation B13(5) and (6) led to violations of a ECHR (the “Amended Regulations”). They came into effect on 1 April 2017 and were not retrospective.

However, there remained a number of cases before local authorities and tribunals that related to the period between the relevant provisions of the Regulations coming into force in 2013 and the Amended Regulations coming into force in 2017.

Facts

The initial claim leading up to today’s decision was also brought by the Carmichaels. They argued that they needed a second bedroom due to Mrs Carmichael’s medical condition. This was not a situation contemplated by the Regulations. The local authority in question, Sefton Borough Council, applied regulation B13 and decided that, because they were a couple, they were only entitled to one bedroom and consequently applied the 14% reduction contemplated in the Regulations.

The Carmichaels successfully challenged this decision in the First-tier Tribunal (FTT) in 2014. The FTT’s rationale was that in light of the interpretative obligation under section 3(1) of the HRA, regulation B13(5)(a) should be read so as to apply either to a couple or to one member of a couple who could not share a bedroom because of the disability of one of them.

The government pressed on with its challenge to the FTT decision, notwithstanding the fact that by this time the Supreme Court in Carmichael SC had found that the Regulations as applied in cases such as that of the Carmichaels led to a breach of Convention rights. The Upper Tribunal (UT) confirmed the decision of the FTT, albeit for slightly different reasons (“Carmichael UT”). Even though it concluded that the FTT’s reading of the Regulations (i.e. to effectively read in wording that was not present in the legislation) was impermissible, it found that the Carmichaels’ housing benefit was to be calculated without applying the reduction because to do so would be a clear breach of Convention rights contrary to section 6(1) of the HRA. The Court of Appeal overturned this decision and found that adopting the UT’s approach would amount to an impermissible rewording of the Regulations (SSWP v Carmichael and Anr [2018] EWCA Civ 548, “Carmichael CA”). The majority in the Court of Appeal concluded (with Leggatt LJ dissenting) that lower tribunals would have to apply the Regulations in their original form, with the only remedy available being a claim for damages under section 8(2) of the HRA.

RR had similar proceedings ongoing in parallel, and the FTT had reached the same conclusion in that claim as it had with the Carmichaels. Following the decision in Carmichael CA in 2018, the UT was bound to allow the government’s appeal. However, it also granted RR a ‘leapfrog’ certificate to appeal directly to the Supreme Court.

Judgment

The key question before the Supreme Court was the effect of the Court’s decision in Carmichael SC on local authorities and tribunals hearing claims relating to periods before the Amended Regulations were introduced in 2017. In such cases, local authorities and tribunals were faced with two options: (1) to apply the Regulations in their original form despite the fact that doing so would result in a breach of convention rights; or (2) to calculate the housing benefit without applying the reduction as the tribunals had done with both the Carmichaels (in the FTT and UT) and RR (in the FTT). The Court termed this an “important constitutional question”.

Lady Hale’s judgment (with which all the other judges concurred) rejected the reasoning of the majority in Carmichael CA. It found that there is “nothing unconstitutional about a public authority, court or tribunal disapplying a provision of subordinate legislation which would otherwise result in their acting incompatibly with a Convention right, where this is necessary in order to comply with the HRA. In doing so, the decision has reaffirmed the primacy of Acts of Parliament, and specifically, the clear requirements of the HRA. The Court, does, however acknowledge that there may be situations where the statutory scheme cannot work without the offending provision, but does not go on to explain how such a situation should be dealt with.

The Court relied upon the distinction between primary and secondary legislation in the context of the HRA. While it is unlawful for a public authority to act in a way which is incompatible with a convention right (section 6(1) of the HRA), there is an exception in section 6(2) if the public authority is compelled to act in a certain way as a result of a provision of primary legislation. The Court observed that no such exception exists when it comes to secondary legislation such as the Regulations. The Court also pointed to a number of cases where the English courts have held that a provision of subordinate legislation which results in the breach of a Convention Right must be disregarded.

Comment

This decision is a significant judgment on the constitutional status of the HRA. It is also likely to have implications well beyond the welfare benefits context in so far as it clearly sets out how local authorities and tribunals can deal with situations in which secondary legislation is incompatible with Convention rights.

In particular, with the raft of Statutory Instruments required from the government in advance of Britain’s exit from the European Union (often with minimal legislative oversight), this judgment is likely to act as an important safeguard against any new regulations that produce an outcome which is incompatible with Convention rights and the HRA.

 

Andrew Lidbetter
Andrew Lidbetter
Partner
+44 20 7466 2066
Nusrat Zar
Nusrat Zar
Partner
+44 20 7466 2465
Jasveer Randhawa
Jasveer Randhawa
Of Counsel
+44 20 7466 2998
Sahil Kher
Sahil Kher
Associate
+44 20 7466 6440