Mexico Infrastructure Finance LLC v The Corporation of Hamilton

A statutory public body’s implied power extends only to acts reasonably incidental to an express power. A municipal guarantee must serve an authorised municipal purpose. It cannot be justified merely because it may promote local prosperity or generate revenue. In the context of a rate-levying power, “municipal” is an objective limitation concerning the provision of a service or facility for inhabitants, although the benefit may sometimes be indirect. “Extraordinary nature” describes a purpose outside the normal run of municipal activities, but does not extend the category beyond municipal purposes. Legislative or ministerial approval does not alter the meaning of the statute actually enacted.

Mexico Infrastructure Finance LLC v The Corporation of Hamilton concerned an $18 million guarantee granted by the Corporation to support a private developer’s bridging loan for a proposed hotel and multi-level car park. The developer defaulted, and the appellant sought payment under the guarantee.

The Corporation initially consented to judgment but later obtained an order setting that judgment aside on the basis that it had a viable ultra vires defence. Hellman J held that the guarantee was not for a municipal purpose. The Court of Appeal for Bermuda dismissed the appeal on 12 May 2017. The central issues before the Board were whether the guarantee was reasonably incidental to the development agreement, whether it was a municipal purpose under section 23(1)(f) of the Municipalities Act 1923, and whether legislative approval affected the statutory construction.

1. Disposition. Lady Arden delivered the majority judgment, with Lord Reed and Lord Briggs agreeing. The appeal was dismissed. Lord Sumption, with whom Lord Lloyd-Jones agreed, dissented.
2. Implied incidental power. A statutory public body has an implied power to do what is reasonably incidental to an express power. The question must be examined by reference to the express power exercised. The Corporation’s express power to dispose of an interest in land enabled the development agreement, but the guarantee was not incidental to it. The agreement deliberately separated the Corporation from the hotel development and denied any partnership between the parties. The majority applied the principle in Ashbury Railway Carriage and Iron Co Ltd v Riche (1875) LR 7 HL 653.
3. Municipal purpose. The word “municipal” is a word of limitation and must be construed in the context of the statutory scheme. A municipal purpose is aimed at the provision by the Corporation of a service or facility for the benefit of Hamilton’s inhabitants. The benefit may be indirect, but promoting the city’s prosperity or increasing revenue is not sufficient. The test is objective, and a rate-levying provision must not be strained to cover purposes outside its fair scope. Ministerial approval is an additional safeguard, not a substitute for statutory authority. The words “of an extraordinary nature” refer to purposes outside the normal run of municipal activities, but the purpose must first be municipal. The majority relied on the Corporation’s ordinance-making powers under section 38 of the Municipalities Act 1923 and approved the contextual approach in Arnot v WM McEwan & Co Ltd (1893) 1 SLT 500.
4. Application. The primary purpose of the guarantee was to help the developer obtain credit. The Corporation had no function as banker to a developer. The hotel complex did not provide a service or facility for inhabitants, apart possibly from conferencing facilities, and the wider desire to promote Hamilton’s economic development could not make the guarantee municipal. Section 23(1)(g) did not assist because development of the new car park was not part of the general administration of Hamilton.
5. Legislative approval. The Board stated, obiter, that statutory meaning should not be determined by what the Legislature thought it had enacted. It also declined to use later legislation to interpret the earlier enactment. The parties had 21 days to make submissions on costs, failing which costs would be borne by the appellant.
6. Dissent. Lord Sumption considered that municipal purposes included expenditure promoting the economic development of Hamilton where residents benefited indirectly. He regarded “extraordinary nature” as referring to expenditure outside the ordinary course of municipal functions. In his view, the guarantee was not the kind of free-standing business activity condemned in Hazell v Hammersmith and Fulham London Borough Council [1992] 2 AC 1.

1. Privy Council. In [2019] UKPC 2, the Board dismissed the appeal and held that the guarantee was ultra vires.
2. Court of Appeal for Bermuda. On 12 May 2017, the court dismissed the appeal from Hellman J and upheld the conclusion that the guarantee was not for a municipal purpose.
3. Supreme Court of Bermuda. Hellman J, on 18 November 2016, set aside the judgment entered by consent because the Corporation had a viable ultra vires defence and held that the guarantee was not a service provided to ratepayers or ancillary to such a service.