Porter v Magill

The House of Lords held that the auditor was entitled under section 20 of the Local Government Finance Act 1982 to certify sums as due from two leading councillors. The court applied established public law principles that public powers must be exercised for the public purpose for which they were conferred and not for the electoral advantage of a political party, and that a councillor who knowingly or recklessly participates in such a misuse commits "wilful misconduct" for the purposes of section 20. The House accepted the findings of fact of the auditor and the Divisional Court that the council's designated-sales policy was implemented to secure electoral advantage in key wards, that Dame Shirley Porter and Mr Weeks were instrumental in framing and promoting that policy and knew (or were recklessly indifferent to the fact) that the policy was unlawful. Reliance on legal advice was rejected because the critical question whether city-wide adoption would render the localised electoral targeting lawful was not put to counsel. On quantum the House restored the Divisional Court's computation of loss (measuring loss by the deficit between open-market vacant-possession value and discounted sale price, with other losses added) and rejected the Court of Appeal majority. Allegations of auditor bias, unfairness and excessive delay were considered and dismissed: the Divisional Court provided the required independent rehearing under section 20(3) and the article 6 and common-law fairness requirements were satisfied.

This appeal concerned whether the auditor should have certified sums as due under section 20 of the Local Government Finance Act 1982 against Dame Shirley Porter and Mr David Weeks in respect of an alleged unlawful policy of designating council housing for sale to secure electoral advantage.

Background and procedural history.

• The auditor, appointed by the Audit Commission, investigated objections by local electors and issued provisional findings and ultimately certificates under section 20 certifying losses of about 31.67m attributable (in part) to wilful misconduct by a number of councillors and officers.
• Dame Shirley Porter and Mr Weeks appealed to the Divisional Court which upheld findings of liability against them (but quashed certificates in respect of some other individuals); the Court of Appeal by majority allowed the appeals of Dame Shirley Porter and Mr Weeks on liability and quashed the certificates; the auditor appealed to the House of Lords.

Nature of the claim / relief sought.

• The auditor sought to certify amounts due under section 20(1)(b) (loss caused by wilful misconduct) and to recover them for the benefit of Westminster City Council.

Issues before the House.

1. Whether the designated-sales policy was unlawfully adopted and implemented for the electoral advantage of the majority party and thus not a proper exercise of powers (notably powers under section 32 of the Housing Act 1985);
2. Whether Dame Shirley Porter and Mr Weeks were parties to and knew the unlawfulness of that policy so as to be guilty of "wilful misconduct" (deliberately doing something known to be wrong or with reckless indifference);
3. Whether reliance on legal advice cured or justified their conduct;
4. Whether the conduct of the auditor (public statement, length and process) or delay rendered the proceedings unfair or showed apparent bias in breach of article 6 or common-law standards; and
5. If liability existed, the correct measure and computation of loss (quantum) to be certified.

Court's reasoning and disposition.

• The House accepted the detailed factual findings of the auditor and the Divisional Court that the policy was directed to electoral advantage in eight "key" wards and that both appellants played central roles in forming and promoting it.
• The court applied the accepted definition of wilful misconduct and concluded the appellants knew or were recklessly indifferent to the unlawfulness of the targeting policy. The Court rejected that subsequent adoption of an ostensibly city-wide programme (after limited counsel's consultation) made the underlying targeting lawful because the crucial follow-up question was never put to counsel and the city-wide device was used as a cloak.
• On causation the House held that the leadership's misconduct was causative of the losses: the party leadership had designed and directed a policy which the committee then adopted in the form presented to it, and the Divisional Court's conclusion that the committee decision was substantially influenced by the unlawful purpose was accepted; the court rejected the argument that the committee's vote broke the causal chain.
• On quantum the House restored the Divisional Court's approach measuring loss by reference to the difference between open market vacant-possession value and the discounted sale prices together with related costs; arguments of double counting and alternative valuation were considered but not held to displace the Divisional Court's figure.
• On procedural fairness the House held that the auditor's investigatory, prosecutorial and certifying roles were permissible because section 20(3) provides a full rehearing before the court; the press statement did not create an objectively justifiable appearance of bias sufficient to quash the certificate; and the time taken, while lengthy, was not so unreasonable as to breach article 6.

Appeal allowed. The House restored the Divisional Court's certificate and sum. The court held that the designated-sales policy was unlawfully adopted to secure electoral advantage, that Dame Shirley Porter and Mr Weeks were party to and knew (or were recklessly indifferent to) the unlawfulness and so committed wilful misconduct under section 20, that reliance on the reported legal advice did not excuse them, that the auditor's procedural conduct did not invalidate the process because a full rehearing was available in the Divisional Court, and that the Divisional Court's quantification of loss was correct.

Auditor's certificate issued (Audit Commission appointment under Local Government Finance Act 1982); appeals to Queen's Bench Divisional Court (Rose LJ, Latham and Keene JJ) which upheld findings against Dame Shirley Porter and Mr Weeks (1997) 96 LGR 157; appeal to Court of Appeal allowed by majority (Kennedy and Schiemann LJJ majority, Robert Walker LJ dissenting) [2000] 2 WLR 1420; appeal to House of Lords allowed restoring the Divisional Court's certificate [2001] UKHL 67.