Judgments - Three Rivers District Council and Others (Original Appellants and Cross-Respondents) v. Governor and Company of The Bank of England (Original Respondents and Cross-Appellants)

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Conclusion

    When properly understood, the scheme of the Directive makes sound regulatory sense. A member state must withhold authorisation from an institution wishing to commence business in the member state unless the criteria prescribed by article 3(2) are met. A member state is, however, free to select its own criteria for allowing an institution to continue to carry on an existing business. A member state may not withdraw authorisation or prohibit an institution from carrying on an existing business except in prescribed circumstances. Where those circumstances exist it is left to the member state to have regard to any countervailing considerations in exercising its own discretion whether to withdraw authorisation or close down an existing business.

    It follows that the appellants are unable to allege any breach of article 3 (which does not apply to B.C.C.I.) or article 8 (which does not impose a relevant obligation), while neither article 6 nor 7 confers rights on individuals.

2. Misfeasance in public office

    I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Steyn and Lord Hutton with which I am in full agreement. It may, however, be helpful if I set out in my own words what I consider to be the elements of the tort of misfeasance in public office.

    The tort is an intentional tort which can be committed only by a public official. From this two things follow. First, the tort cannot be committed negligently or inadvertently. Secondly, the core concept is abuse of power. This in turn involves other concepts, such as dishonesty, bad faith, and improper purpose. These expressions are often used interchangeably; in some contexts one will be more appropriate, in other contexts another. They are all subjective states of mind.

    It is important to bear in mind that excess of power is not the same as abuse of power. Nor is breach of duty the same as abuse of power. The two must be kept distinct if the tort is to be kept separate from breach of statutory duty, which does not necessarily found a cause of action. Even a deliberate excess of power is not necessarily an abuse of power. Just as a deliberate breach of trust is not dishonest if it is committed by the trustee in good faith and in the honest belief that it is for the benefit of those in whose interests he is bound to act, so a conscious excess of official power is not necessarily dishonest. The analogy is closer than may appear because many of the old cases emphasise that the tort is concerned with the abuse of a power granted for the benefit of and therefore held in trust for the general public.

    The tort is generally regarded as having two limbs. The first limb, traditionally described as "targeted malice," covers the case where the official acts with intent to harm the plaintiff or a class of which the plaintiff is a member. The second is said to cover the case where the official acts without such intention but in the knowledge that his conduct will harm the plaintiff or such a class. I do not agree with this formulation. In my view the two limbs are merely different ways in which the necessary element of intention is established. In the first limb it is established by evidence; in the second by inference.

    The rationale underlying the first limb is straightforward. Every power granted to a public official is granted for a public purpose. For him to exercise it for his own private purposes, whether out of spite, malice, revenge, or merely self-advancement, is an abuse of the power. It is immaterial in such a case whether the official exceeds his powers or acts according to the letter of the power: see Jones v. Swansea City Council [1990] 1 W.L.R. 1453 C.A. His deliberate use of the power of his office to injure the plaintiff takes his conduct outside the power, constitutes an abuse of the power, and satisfies any possible requirements of proximity and causation.

    The rationale of the second limb is not so transparent. The element of knowledge which it involves is, in my opinion, a means of establishing the necessary intention, not a substitute for it. But intention does not have to be proved by positive evidence. It can be inferred. Proof that the official concerned knew that he had no power to act as he did and that his conduct would injure the plaintiff is only the first step in establishing the tort. But it may and will usually be enough for the necessary intention, and therefore of the requisite state of mind, to be inferred. The question is: why did the official act as he did if he knew or suspected that he had no power to do so and that his conduct would injure the plaintiff? As Oliver L.J. said in Bourgoin S.A. v. Ministry of Agriculture, Fisheries and Food [1986] Q.B. 716, 777M:

    "If an act is done deliberately and with knowledge of its consequences, I do not think that the actor can sensibly say that he did not 'intend' the consequences or that the act was not 'aimed' at the person who, it is known, will suffer loss."

As that case demonstrates, the inference cannot be rebutted by showing that the official acted not for his own personal purposes but for the benefit of other members of the public. An official must not knowingly exceed his powers in order to promote some public benefit at the expense of the plaintiff.

    It will be seen from this that the real difference between the two limbs lies in the starting point. If the plaintiff can establish the official's subjective intention to exercise the power of his office in order to cause him injury, he does not need to establish that the official exceeded the terms of the powers conferred upon him. If, on the other hand, the plaintiff can establish that the official appreciated that he was acting in excess of the powers conferred upon him and that his conduct would cause injury to the plaintiff, the inference that he acted dishonestly or for an improper purpose will be exceedingly difficult and usually impossible to rebut. Moreover, as Blanchard J. pointed out in Garrett v Attorney-General. [1997] 2 N.Z.L.R. 332, 350, the consequences of his actions will usually be obvious enough to the official concerned, who can then be taken to have intended the damage he caused. I also agree with him that intention includes subjective recklessness, that is to say (to adopt his words at p. 349) "a conscious disregard for the interests of those who will be affected by" the exercise of the power.

    It is not, of course, necessary that the official should foresee that his conduct will certainly harm the plaintiff. Nothing in life is certain. Equally, however, I do not think that it is sufficient that he should foresee that it will probably do so. The principle in play is that a man is presumed to intend the natural and probable consequences of his actions. This is the test laid down by Mason C.J. writing for the majority of the Hugh Court of Australia and Brennan J. in Northern Territory v. Mengel (1995) 69 A.J.L.R. 527, viz. that it should be calculated (in the sense of likely) in the ordinary course of events to cause injury. But the inference cannot be drawn unless the official did foresee the consequences. It is not enough that he ought to have foreseen them if he did not do so in fact.

    In the present case most (and perhaps all) of the complaints made by the appellants are of the Bank's failure to act. Even their complaint that the Bank of England ought not to have granted B.C.C.I. initial authorisation is essentially a complaint that officials of the Bank failed to exercise an independent judgment and to apply the relevant criteria.

    The parties are agreed that there is no conceptual difference between sins of omission and sins of commission. This may be so; but factually there is a great difference between them. It is no accident that the tort is misfeasance in public office, not nonfeasance in public office. The failure to exercise a power is not in itself wrongful. It cannot be equated with acting in excess of power. The tort is concerned with preventing public officials from acting beyond their powers to the injury of the citizen, not with compelling them to exercise the powers they do have, particularly when they have a discretion whether to exercise them or not. There seems to be only one case in the books where a failure to exercise a power gave rise to the tort: Reg. v. Dytham [1979] 1 Q.B. 722, 727G C.A., where Lord Widgery C.J. said in terms that the neglect must be "wilful and not merely inadvertent." Ferguson v. Earl of Kinnoull (1842) 9 Cl. & Fin. 251 and the cases there cited were all cases of wilful breach of duty. Henly v. Mayor & Burgesses of Lyme (1828) 5 Bing. 91 was in my opinion a case of breach of statutory duty, not of misfeasance in public office.

 
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