#Constitutionality #JudicialReview: #IRAL’s Missing #Remedy: Compensation for #Unlawfulness!

Jonathan Morgan: IRAL’s Missing Remedy: Compensation for Unlawfulness | UK CONSTITUTIONAL LAW ASSOCIATION | 12 Oct 2021

The current blog post considers the failure of the current judicial review reform process, from IRAL onwards, to give proper consideration to compensation for unlawful government acts.  This has been less discussed than the discretion over the temporal effect of quashing orders (which I considered here). 

It may be that the Realpolitik of this omission is too obvious to need extended discussion (given the notorious failure of the Law Commission’s project on public authority liability in the 2000s).  Even so, IRAL missed a valuable opportunity to consider the question again.  No very good reason was offered for this failure.  It is most regrettable. 

I share the view of (e.g.) Sir Michael Fordham and Lord Carnwath that the absence of a power to award compensation for unlawful actions is a serious gap in our public law remedies.

It is too late for the general problem to be addressed in the Judicial Review and Courts Bill now before Parliament.  But I recommend that an express power to award compensation should be inserted into Clause 1, as an integral part of the reform of quashing orders.  It would further increase the court’s flexibility.  It would, importantly, help answer some of the concerns raised about the potential unfairness of temporal limitations on quashing orders.  Thus the main point of this post, having lamented the failure to consider the general question of compensation in the review process, is to call for such an amendment to the Bill.  Clause 1 currently states that the power to make a time-limited quashing order can be made ‘subject to conditions’.  The legislation should explicitly state that such ‘conditions’ may include ordering compensation for those adversely affected by the postponement or curtailed retrospection.

Compensation for unlawful acts: a missing principle

As many commentators have persuasively argued, the absence of a damages remedy for public law unlawfulness is a significant gap in English administrative law.  The prerogative remedies are unquestionable strong weapons in the judicial arsenal.  Quashing unlawful acts is a powerful remedy, as are mandatory and prohibitory orders.  But often, specific relief of this kind needs to be supplemented by a monetary remedy if full protection, or restoration, is to be achieved.  A brief glance across the ‘public-private divide’ makes the point clear.  Courts routinely grant injunctions to restrain ongoing trespass to land or nuisances, once the claimant has established liability in those torts.  This remedial approach is rightly seen as giving strong protection to landowners’ rights.  But no tort lawyer would suggest that injunctions should be the only remedies.  Courts routinely award damages to a successful nuisance claimant in addition to an injunction.  These damages compensate the loss suffered up to the point when the violation of property rights is actually enjoined.  (It is especially pertinent to note that when an injunction is suspended in nuisance cases, for example to give the defendant the opportunity to modify or relocate their activities, it is standard practice to award the claimant damages in lieu of injunctive relief during the period of suspension.)

It is common enough for a successful applicant for judicial review already to have suffered loss which will not and cannot be redressed by one of the prerogative orders.  Even though quashing takes effect retrospectively in theory, an applicant who has been unlawfully deprived of a permit necessary for them to work, or to reside in the UK, will still have suffered loss in fact.  Hence why it is, to quote Sir Michael Fordham, a ‘recognised injustice’ that the courts have no power to award compensation ‘where unlawfulness by a public authority cries out for a monetary response’: Judicial Review Handbook (7th ed 2020, at 25.3).  (At 25.3.4, Fordham J collects calls for reform by other senior judges, the Council of Europe (1984), and the Justice/All Souls Report (1988)).

The absence of a public law compensation remedy is probably no more than an historical accident. A legacy of path-dependent development within historically separate jurisdictions. Liability for (e.g.) contract and tort historically developed in the courts of common law around the remedy of damages; equity developed in the Court of Chancery around injunctions, declarations and other equitable remedies; and judicial review in the King’s Bench around the prerogative writs.  It is striking that whereas the remedial divide between equity and common law has long since become porous, the absence of damages in the judicial review jurisdiction has hardened into unchallengeable axiom.  But in truth there is no strong reason of principle to perpetuate the absence of a monetary remedy in public law (see Peter Cane, ‘Damages in public law’ (1999) 9 Otago Law Rev 489).

Not only does the absence of compensation lead to clear injustice. It can produce unacceptable anomalies too.  Monetary remedies are (or in the EU example, previously were) available for analogous government failings.  For example, ombudsmen can recommend compensation for loss flowing from maladministration.  Why, as Lord Carnwath asked, should the courts not be able to order compensation when loss is caused by unlawful government action?  (R Carnwath, ‘The Thornton heresy exposed: Financial remedies for breach of public duties’ [1998] PL 407).  Courts can award compensation under the Human Rights Act 1998 and for the final 25 years of EU membership, could and did award damages against the state for breach of EU law, under the Francovich principle.  Private law, too, orders restitution of payment following an ultra vires demand by a public authority (Woolwich BS v IRC [1993] AC 70).  This is widely accepted as an exemplar of unjust enrichment liability.  But there is no equivalent principle requiring compensation for loss caused by an ultra vires act.  Anomalies could easily arise.

After the employment tribunal fee regime was quashed in R (UNISON) v Lord Chancellor [2017] UKSC 51, parties who had previously paid fees at the unlawful level would prima facie have a restitutionary claim to recover the payments.  Yet those who had been unable to afford tribunal fees at the unlawful level would have no compensation for their lost opportunity to bring a claim.

From Law Commission to IRAL: opportunities missed

It is not entirely clear why IRAL did not look at the question of compensation, despite its detailed engagement with remedies (i.e. the limitation of temporal effect of quashing orders).  A plausible speculation is that IRAL, with the failure of the Law Commission’s 2000s project on public authority liability squarely in mind, decided not to risk the same wasted effort.  Given the powerful case of principle favouring a monetary remedy, this is highly regrettable.

The Law Commission proposed sweeping changes to public authority damages liability in its 2008 Consultation Paper.  Notoriously, the government (and some commentators) were so hostile to the proposals that the Law Commission effectively withdrew them in its final Report of 2010.  Is the problem de facto insoluble, given the government’s direct financial interest in and (presumptive) opposition to any expansion of liability?

Sedley LJ thought so.  He commented, just after the Law Commission’s failed project (which he labelled a ‘débâcle’), that the government ‘would frustrate any reform, however wise or necessary, which would make government’s life more difficult’ (Mohammed v Home Office [2011] 1 WLR 2862 at [23]).  This might seem cynical, yet justified.

Some problematic features of the Law Commission project should be noted.  The project began as an examination of monetary remedies in judicial review in the narrow sense.  Perhaps such a limited project could have succeeded.  However, the Law Commission was persuaded to widen its focus to include ‘private law remedies’ following discussions with lawyers, judges and academics.  Those private law proposals proved to be much the most controversial aspect of the Law Commission’s 2008 Consultation Paper. Thus what had started off as a public law compensation project was derailed by the enlarged focus (as the IRAL Report at [6] notes, ‘Judicial review was essentially peripheral to the later [2010] Law Commission study of monetary remedies in public law’).

The Law Commission was unlucky in the coincidence of its proposals with very hard economic times (the 2008 ‘credit crunch’ crash) and retrenchment in government spending (especially by the coalition elected in 2010).  Such a climate was unpromising for any reforms that might increase state liability.  The wide-ranging nature of the Law Commission project, concentrating ultimately on tort liability, would have exacerbated contemporary government concerns about the costs.  A more limited project, confined to judicial review, would be considerably easy to model (by considering what compensation might realistically have been ordered in the (known) numbers of successful judicial review applications in recent years).  It would be harder to block by raising (legitimate) questions about the unquantifiable and potentially enormous cost—the fate of the Law Commission’s grander project. 

The launch of IRAL was an excellent opportunity to revisit this narrower question.  By definition IRAL’s remit would have been limited to judicial review, avoiding the expanding remit and (arguably) the over-ambition that doomed the Law Commission project.  It is puzzling that IRAL defined its own remit to exclude damages.  It is not easy to understand its rationale.  Having interpreted its terms of reference as requiring it to consider whether judicial review ‘should be moderated … (b) by altering the remedies that are available’, there was no discussion of compensation in Chapter 3 of the IRAL Report.  Compensation was mentioned only in the report’s Introduction at para 6: discussing the Law Commission’s abortive project, the IRAL report commented:

Noting that “the current regime had significant gaps in it”, the Law Commission [Report] came down on the side of a new remedy in damages in judicial review proceedings. The gap still remains – but thankfully it is not the task of the [IRAL] Panel to close it.

No actual reason is provided here for IRAL’s avoidance of the question—save the hint that they did not want to engage with a subject that had defeated the skills of the Law Commission.  This is curiously timid given IRAL’s apparent acceptance that the absence of compensation is a ‘significant gap’ in judicial review remedies.  It should be noted that those who responded to the IRAL consultation had certainly construed its remit to include damages.  The IRAL report at C.21 states that ‘On damages, respondents generally argued that damages need to be more freely available, on the basis that other jurisdictions allow damages for maladministration’.  Those respondents deserved a better response than IRAL gave. 

In summary, I believe that English law is seriously defective in not containing a compensatory remedy in judicial review.  It should not be available ‘as of right’ (unless, as at present, a tort, breach of contract etc can also be shown).  Compensation should rather be in the discretion of the court as with other judicial review remedies: declarations, injunctions and the prerogative orders.  (See also M Fordham, ‘Reparation for Maladministration: Public Law’s Final Frontier’ [2003] Judicial Review 104).  It is disappointing that IRAL did not consider the case for such a reform.

Compensation as a condition for postponement of quashing

It would be unrealistic to expect the Judicial Review and Courts Bill now before Parliament to include compensation as a general remedy in judicial review.  It is too late, alas, to revive the debate which IRAL conspicuously avoided.

Nevertheless, compensation should be included in the remedial reforms in Clause 1 (inserting a new s.29A Senior Courts Act 1981).  This is the provision on limiting the temporal effect of quashing orders, analysed in my previous post.  The temporal remedial discretion would be given maximum flexibility if it included a power to award damages in lieu of an immediate / retrospective quashing order.  Such a compensatory power would help address concerns that the new discretion could work harshly against individual applicants, successful in their judicial review but awarded a second-best (postponed or prospective-only) remedy.

When invited to make use of the power to limit the temporal effect of a quashing order, the court would need to weigh up the interests of ‘good administration’ favouring such temporal limits against the interest of the applicant (and other individuals) who would be adversely affected by them.  Such interests could clash sharply, with no easy way of striking the balance since individual rights and the public interest may be more or less incommensurable.  A power to order compensation as a condition for limiting the quashing order’s temporal effect could help resolve such dilemmas.  The government would gain the ‘good administration’ benefits of a postponement.  The individual, although the quashing order would be postponed (or made prospective-only), would be compensated for ongoing loss flowing from the preservation in force of the ultra vires act.

Obviously there would be a cash cost for the respondent in such cases.  But before the government rejects the idea out of hand on grounds of cost, as it did with the Law Commission’s (much wider-ranging) proposals in 2008, it should consider.  The court is more likely to exercise the power to limit temporal effect if the costs of that limitation do not fall upon an individual applicant who has successfully brought a claim (at considerable expense) showing that the government acted ultra vires.  In my previous post I argued that the presumption in sub-clause (9) should be deleted during the parliamentary scrutiny of Clause 1.  But if it is enacted as it stands, the court would be considerably more likely to find that the time-limited order gave ‘adequate redress’ if it could be supplemented by an order for compensation.  I criticised the government’s attempt to direct the court’s discretion so as to ‘encourage’ it to use the power to time-limit quashing orders.  A more effective way to encourage the court to do this would be to permit the award of compensation as a condition for postponed relief.

A distant analogy is with the power of courts of equity to award damages in lieu of an injunction or other specific relief (the jurisdiction famously created by Lord Cairns’s Act (Chancery Amendment Act) 1858).  A court will be readier to refuse, limit or postpone specific relief (an injunction in equity, or in administrative law a quashing order) if it can award compensation in lieu.  From the perspective of equitable remedies in private law, administrative law suffers a curious omission.  The prerogative remedies offer strong protection (specific relief) and therefore lie in the discretion of the court.  But unlike a court of equity, the Administrative Court cannot award compensation in place of a prerogative order.  In judicial review the choice is starker: to quash (or make a declaration) or decline all relief entirely.  But why?

Clause 1 as it stands permits the court to make a time-limited quashing order ‘subject to conditions’ (new s.29A(2)).  Could such ‘conditions’ include imposing a condition that compensation be paid to the applicant (or other individuals), as the ‘price’ of denying immediate / retrospective quashing?  As the Bill’s Explanatory Notes say, ‘The clause provides no limit or prescription on the type or nature of the conditions, leaving this determination to the court’ (para [87]).  It is clearly within the ordinary judicial function to require financial payments or undertakings as conditions for particular kinds of relief.  However, against this is the axiomatic unavailability of compensation for ultra vires acts.  It seems implausible to suggest that such compensation has in fact always been available, since the Administrative Court could make payment a condition for refusing or limiting a prerogative order.  As the very full consideration of remedies in Sir Michael Fordham’s Judicial Review Handbook shows, there is no precedent for such a bold approach (and Fordham J is, as seen, a prominent advocate of creating a damages remedy in public law).

Given the misguided ‘axiom’ about damages in public law, it is at least doubtful whether the court could order damages as a ‘condition’ under s.29A(2) as it stands.  I therefore recommend that s.29A(2) should be amended to read ‘… may be made subject to conditions, including the requirement that compensation be paid to the applicant or any other persons who may suffer loss from the impugned act’s being upheld’ (italicised subclause inserted).  This would put beyond doubt the availability of compensation as a supplement to limitations on the temporal effect of a quashing order.

This would improve the reform proposed in Clause 1.  It would allow courts to mitigate hardship to who would otherwise lose out by the postponement of quashing, or the restriction of its retrospective effect.

In an ideal world, I would prefer a more sweeping reform giving a power to award compensation for loss flowing from ultra vires action in all cases.  There is no satisfactory stopping point as a matter of principle.  Yet there is no current prospect of legislation to give effect to that general principle.  The lesson of the Law Commission’s report may be that grand reforms are best left to philosophers in their studies, since they will face stiff opposition from government itself.  What is proposed here would be a significant improvement on the reform proposed in Clause 1 by clarifying what is currently (or so it seems to me) a doubtful point.  It answers some criticisms of Clause 1—that limiting the temporal effect of quashing orders could work (uncompensated) hardship for the successful applicant.  And if it shows that (albeit in one rather specific situation) compensation for ultra vires acts is available in English administrative law, it could be the seed for future useful reforms.

Jonathan Morgan, Reader in English Law, University of Cambridge

(Suggested citation: J. Morgan, ‘IRAL’s Missing Remedy: Compensation for Unlawfulness’, U.K. Const. L. Blog (12th October 2021) (available at https://ukconstitutionallaw.org/))

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source

What is public law? - Public Law Project
The Government's judicial review consultation: Remedies and ouster clauses  - Public Law Project

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