Laker Airways Ltd v Department of Trade

Policy guidance given by a minister to a statutory licensing authority may explain, amplify or supplement the objectives enacted by Parliament. It cannot contradict those objectives, dictate the determination of an individual licensing matter, or remove procedural safeguards governing revocation.

Where Parliament has established a comprehensive statutory scheme for granting and revoking licences, the Crown cannot use a prerogative power to make a subsisting statutory licence commercially useless and thereby achieve indirectly a result which the statutory scheme prevents it from achieving directly. The courts may declare unlawful an executive act based on a mistake about the existence or extent of the relevant power.

The Civil Aviation Authority granted Laker Airways Ltd a ten-year licence to operate its proposed Skytrain service between Stansted and New York. The airline was also designated by the United Kingdom under the Bermuda Agreement. After the Authority rejected an application to revoke the licence, the Secretary of State adopted a policy against competition between British airlines on long-haul routes.

The 1976 policy guidance instructed the Authority to review existing licences and contemplated cancellation of Laker Airways’ designation. Mocatta J declared that the Secretary of State had exceeded his powers. The Department appealed.

The Court of Appeal considered whether the guidance contradicted the statutory objectives in the Civil Aviation Act 1971, whether the treaty prerogative could be used to withdraw designation, and whether estoppel could prevent the proposed action.

1. Appeal dismissed unanimously. Lord Denning MR, Roskill and Lawton LJJ held that the relevant policy guidance was ultra vires and that the Crown could not use its prerogative power to withdraw designation so as to nullify the statutory licence.
2. The distinction between “guidance” under section 3 and “directions” under section 4 of the Civil Aviation Act 1971 was substantive. Guidance could explain, amplify or supplement the objectives in section 3(1), but could not reverse or contradict them. It left the Authority some freedom over the manner in which policy was implemented. A direction was compulsory and could override the Act only in the exceptional circumstances specified by section 4.
3. Paragraphs 7 and 8 of the 1976 guidance contradicted the statutory objective that at least one major British airline independent of the British Airways Board should have opportunities to participate. They purported to establish a long-haul monopoly, subject competition to British Airways’ consent, and procure revocation without the independent hearing required by the statutory licensing scheme. Parliamentary approval of the guidance did not give it the force of an Act.
4. The treaty-making power and the conduct of international relations ordinarily belonged to the Crown, and the Bermuda Agreement did not itself confer enforceable municipal rights. Nevertheless, the 1971 Act established a comprehensive scheme for granting and revoking air transport licences. By necessary implication, it prevented the Crown from withdrawing designation in order to render a valid licence useless when revocation could not lawfully be obtained under the Act. The statutory protections could not be circumvented through the prerogative.
5. Lord Denning MR further stated that courts may examine an executive discretion, including a prerogative discretion, for improper exercise or legal or factual misdirection. Roskill and Lawton LJJ decided the prerogative issue on the narrower ground that Parliament had fettered the relevant power.
6. The court rejected estoppel as an alternative basis for decision. Estoppel cannot prevent the Crown from exercising a lawful power in the proper performance of its public duty merely because a change of policy causes private loss. The declarations and costs order below were varied, but the Department’s appeal was dismissed with costs. Leave to appeal to the House of Lords was granted.

1. Court of Appeal: The Department’s appeal was dismissed unanimously. The declarations and costs order made below were varied, and leave to appeal to the House of Lords was granted.
2. High Court, Queen’s Bench Division, Commercial List: Mocatta J granted Laker Airways a declaration that the Secretary of State had exceeded his powers and was not entitled to withdraw its designation.