Bromley London Borough Council v Greater London Council (R v Greater London Council, Ex parte Bromley London Borough Council)

A statutory local authority must exercise its powers within the purposes, duties and constraints imposed by Parliament. An electoral mandate cannot authorise an ultra vires act or relieve elected members from considering material circumstances.

In exercising transport and rating powers, an authority must balance the interests of service users with its fiduciary duty to ratepayers. Under the Transport (London) Act 1969, anticipated grants could support unavoidable operating losses, but avoidable deficit could not be adopted as an object of social or transport policy. A deliberate fare reduction which disregarded financial discipline and imposed a greatly increased burden on ratepayers was beyond the statutory powers.

The Greater London Council approved proposals by the London Transport Executive to reduce bus and underground fares by 25 per cent. It issued a supplementary precept to the London boroughs to finance the resulting grant. The Council knew that the policy would substantially increase the operating deficit and cause the loss of central government grant, nearly doubling the additional burden on ratepayers.

Bromley London Borough Council sought judicial review. The Divisional Court dismissed the application, but the Court of Appeal allowed Bromley's appeal, quashed the precept and declared it ultra vires, null and void. The Greater London Council and the London Transport Executive brought conjoined appeals.

The central questions were whether the fare proposals and their approval were authorised by the Transport (London) Act 1969 and, alternatively, whether the Council had exercised its discretion unlawfully.

1. Disposition. The House unanimously dismissed both appeals and affirmed the Court of Appeal's order. The supplementary precept was ultra vires and void. The appellants were ordered to pay Bromley's costs.
2. Statutory limits and financial discipline. Lord Wilberforce, Lord Keith, Lord Scarman and Lord Brandon concluded, by somewhat different routes, that the Transport (London) Act 1969 required the Executive to conduct its undertaking on ordinary business principles and, so far as practicable, to avoid an operating deficit. Sections 5 and 7 imposed interlocking financial restraints. Section 3's power to make grants “for any purpose” had to be read as part of the Act as a whole and could not authorise conduct conflicting with those restraints.
3. Lord Wilberforce, Lord Keith and Lord Scarman accepted that actual or anticipated revenue grants could enter the financial planning contemplated by section 7. Such grants could meet unavoidable losses. They could not make a deliberately created, avoidable deficit a permissible object of transport or social policy. Lord Brandon took the stricter view that the consolidated revenue relevant to section 7(3) meant self-generated revenue, with grants available only where compliance from the Executive's own resources was impracticable. Lord Diplock interpreted the financial provisions more broadly, but agreed that the challenged course was beyond the Council's powers.
4. Fiduciary duty to ratepayers. The Council owed duties both to transport users and to ratepayers. Per Lord Wilberforce, Lord Diplock and Lord Scarman, those interests had to be fairly balanced. Lord Diplock held that knowingly forfeiting about £50 million in central government grant, without an equivalent improvement in transport efficiency, was a thriftless use of ratepayers' money and a breach of fiduciary duty. The ratepayers' burden could not lawfully be nearly doubled merely to implement the fare policy.
5. Electoral commitments. Lord Diplock and Lord Brandon further held that elected members could give considerable weight to an election manifesto, but could not regard themselves as irrevocably bound by it regardless of changed circumstances, cost and countervailing considerations. An electoral mandate cannot validate an act outside statutory powers. The Council's treatment of the promised fare reduction as binding was an error of law.
6. The Executive therefore acted beyond its powers in submitting the arbitrary reduction, and the Council acted beyond its powers in approving and financing it. The supplementary precept consequently fell with those unlawful decisions.

1. House of Lords: The conjoined appeals by the Greater London Council and the London Transport Executive were dismissed unanimously. The Court of Appeal's order was affirmed.
2. Court of Appeal (Civil Division): Allowed Bromley's appeal on 10 November 1981, quashed the supplementary precept and declared it ultra vires, null, void and of no effect.
3. High Court, Divisional Court: Dunn LJ and Phillips J dismissed Bromley's application for judicial review on 3 November 1981.