Lloyd v McMahon [1987] UKHL 5

House of Lords
Between
LloydAppellantMcMahonRespondent
Before
Lord Keith of KinkelDate 31 July 1986
It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled. That the said Order of Her Majesty's Court of Appeal (Civil Division) of 31st July 1986 complained of in the said Appeal be, and the same is hereby, Affirmed and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the unassisted Appellants do each pay or cause to be paid to the said Respondent one forty-seventh of the Costs incurred by him in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments if not agreed between the parties: And it is also further Ordered, That in each of the appeals of the assisted Appellants, one forty-seventh of the costs of the Respondent incurred in respect of the said Appeal be paid out of the Legal Aid Fund pursuant to section 13 of the Legal Aid Act 1974, such Order to be suspended for four weeks to allow the Law Society to object if they wish; And it is also further Ordered, That the costs of the assisted Appellants incurred in respect of the said Appeal be taxed in accordance with Schedule 2 to the Legal Aid Act 1974.Cler: Parliamentor:

Judgment: 12.3.87

HOUSE OF LORDS

LLOYD (A.P.) AND OTHERS (A.P.) (APPELLANTS)

v.

McMAHON (RESPONDENT)

Lord Keith of Kinkel Lord Bridge of Harwich Lord Brandon of Oakbrook Lord Templeman Lord Griffiths

LORD KEITH OF KINKEL

My Lords,The appellants are a group of Liverpool city councillors. The respondent is the district auditor for the city. In respect of the financial year beginning 1 April 1985 the appellants brought it about that a rate for the city was not set until 14 June 1985. The council were advised by their officers that the rate then proposed to be set was an illegal one, in respect that it fell far short, taken along with other sources of income, of meeting the city's expenditure for the year as then estimated. But that is not the point. The point is that the delay in setting the rate led to delay in receiving various items of income, including government contributions in respect of payments in lieu of rates on Crown properties and in respect of rate rebates.There had been trouble over the making of a rate also in respect of the financial year 1984-85, when in the event a rate was made on 10 July 1984. On 19 March 1984 the district auditor's predecessor had sent to the council a report expressing concern at indications that the council might deliberately make a rate for the year which would not be sufficient to meet its outgoings for that year. The report drew attention to possible consequences to individual councillors, both financial and by way of disqualification, if an adequate rate were not made. In the penultimate paragraph it was stated:
"Members would in my view also be at risk if a rate was not made because no vote was taken or there was unreasonable delay in making a rate."
On 10 April 1985 the district auditor's predecessor had sent to the council a report expressing concern at the council's failure to make a valid rate for the year commencing 1 April 1985, drawing attention to his report dated 19 March 1984 and reiterating the duties of councillors and the possible consequences to the city and to individual councillors if these duties were not carried out. The report concluded by urging the council in its own best interests, as well as those of individual members, employees

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and the local community, that a rate should be made at a very early date. On 7 May 1985 the policy and finance committee of the council rejected a motion that the chairman of the committee submit proposals to the next meeting of the council to enable it to fix a rate, and this was approved at a meeting of the councilon 21 May.On 21 May 1985 the district auditor's had made a further report to the council, copies of which he sent to all councillors. In it he referred to earlier reports and gave notice that unless the council made a lawful rate at the earliest opportunity and in any event before the end of May he would forthwith commence action under section 20 of the Local Government Finance Act 1982 to recover any losses occasioned by the failure to make a rate from the members responsible for incurring them.On 6 June 1985 the Audit Commission directed that an extraordinary audit be carried out. On 26 June 1985 the district auditor sent to each of the appellants a notice stating that he had to consider in pursuance of his duty under the Act of 1982 whether he should certify the sum of £106,103, or any other sum, consequent on the failure to make a rate or the delay in making a rate for the financial year 1985-86, as due from the appellants on the ground that a loss of such sum had been incurred or deficiency caused by the appellants' wilful misconduct. The appellants were further notified that they might make representations in writing to the district auditor before he reached a decision, and that any such representations should reach him by 19 July 1985. There was enclosed with the notice a note of the matters to which the district auditor had had regard in deciding to issue it. This note set out the council's duty under section 2(1) of the General Rate Act 1967 to make a rate, and the district auditor's responsibility under section 20(1) of the Act of 1982 which provides:
"Where it appears to the auditor carrying out the audit of any accounts under this Part of this Act - . . . ( b ) that a loss has been incurred or deficiency caused by the wilful misconduct of any person, he shall certify that . . . the amount of the loss or the deficiency is due from that person and . . . both he and the body in question . . . may recover that . . . amount for the benefit of that body; and if the auditor certifies under this section that any . . . amount is due from two or more persons, they shall be jointly and severally liable for that . . . amount."
There were appended to the note copies of earlier reports by the district auditor and his predecessors, including those of 19 March 1984, 10 April 1985 and 21 May 1985, and also a list of minutes of meetings of the council and certain of its committees between March 1984 and June 1985 and of reports by the council's officers between the same dates. The facts gathered from these documents were stated to show that there was no lawful justification for the delay in the making of the rate for the year 1985-86. The note went on to identify certain specific losses resulting from the delay. These were the loss of interest on sums which would, but for the delay, have been paid at an earlier date than was actually the case by the Department of Health and Social Security, in respect of the rate rebates element of housing benefit subsidy and by the Treasury Valuer in respect of

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contributions in lieu of rates on Crown property. The total of such loss was stated to be £106,103. The appellants were identified as persons who by their voting or absence might have failed to discharge their duty as members of the council and might therefore be guilty of wilful misconduct resulting in the losses in question.The appellants chose to make a collective response to the district auditor's notice. This was prepared with the assistance of the chief executive of the council, who was legally qualified and had great experience in local government, and was sent to the district auditor on 19 July 1985. The appellants relied upon various matters which they claimed rebutted the district auditor's provisional view that they had been guilty of wilful misconduct. Their principal contention was that, considering that the relevant legislation laid down no date by which a rate must be set, it was sufficient if they did so within a reasonable time after the start of the financial year, and that the delay until 14 June 1985 had been reasonable because they had hoped or expected to be able to persuade ministers to make larger grants available to Liverpool than ministers had previously expressed themselves as willing to do. In this respect they founded upon the circumstance that in relation to the year 1984-85 their efforts in this direction had met with some success, and that the then district auditor in his report of 7 June 1984 had stressed the importance of 20 June as the latest date for making a rate, in order to permit of ratepayers exercising their statutory right to pay rates by 10 monthly instalments. It was contended that the appellants had been influenced throughout by a sincere desire to maximise the resources available to the people of Liverpool and thus to do their best to alleviate the unsatisfactory conditions prevailing there. There were sent along with the representations various documents to which it was desired that the district auditor should have regard as supporting the appellants' contentions. It is to be observed at this point that the representations did not face up to the circumstance that, whether or not additional funds might be secured from government sources, delay in making a rate must inevitably have an adverse effect upon the city's finances through delay in the receipt of items of income which depended upon a rate having been set. Nor did the representations draw attention to any records, whether of meetings of the council and its committees of meetings of the ruling political group represented by the appellants, describing the reasons for the delay in making a rate.On 6 September 1985 the district auditor issued a certificate under section 20(1) of the Act of 1982 to the effect that a loss of £106,103 had been incurred by the wilful misconduct of the appellants. The certificate was accompanied by a lengthy statement of reasons for its issue setting out the history of the matter and dealing in considerable detail with the appellants' representations before setting out the district auditor's conclusions. These were that the delay in making a rate was deliberate, that the intention of the delay was to use the non-making of the rate as a lever in an attempt to prise additional money from central government, that there was no justifiable reason for supposing that delay would influence central government to increase rate support grant, and that the council knew that to delay unreasonably was a wrongful act or was recklessly indifferent as to whether or not it

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was a wrongful act. Finally, it was concluded that a loss of £106,103 was a direct consequence of the delay in making a rate and the appellants were identified as those responsible for thedelay.The appellants appealed to the High Court under section 20(3) of the Act of 1982. The appeal was heard by a Divisional Court consisting of Glidewell L.J., Caulfield and Russell JJ., together with a similar appeal by a number of Lambeth councillors. Counsel then acting for the appellants appear to have concentrated upon the merits of the appeal rather than upon allegations of procedural irregularity on the part of the respondent. Affidavits were lodged by all the appellants and also a considerable amount of documentary evidence which had not been before the district auditor. Though invited to do so by the court, none of the appellants gave any oral evidence. Counsel for the appellants submitted that it would be inappropriate for the court to investigate the proceedings of the political caucus represented by the appellants. The Divisional Court dismissed the appeal, and their decision was affirmed by the Court of Appeal (Lawton, Dillon and Woolf L.JJ.), who gave leave to appeal to your Lordships' House.The argument by counsel for the appellants did not invite your Lordships to enter deeply into the merits of the question whether or not they had been guilty of wilful misconduct, nor was attention drawn to any details of the affidavits and other material placed before the Divisional Court. The substance of the argument was that the district auditor's decision had been vitiated by his failure to offer the appellants an oral hearing before reaching it, and should therefore have been quashed. The argument was supported by an examination of earlier legislation in regard to local government audits, starting with the Poor Law Amendment Act 1844 (7 & 8 Vict. c. 101), where oral hearings were the order of the day, and by reference to the Code of Local Government Audit Practice for England and Wales, made under section 14 of the Act of 1982 and approved by resolution of both Houses of Parliament. The code, by paragraphs 16 to 20, contemplates that an oral hearing will be held where the auditor is dealing with a notice of objection given under section 17(3) of the Act of 1982, which itself refers to the objector attending before the auditor. The code does not deal with the procedure to be followed where the auditor takes action under section 20(1). Counsel produced a list of all instances since 1972 where a district auditor had occasion to consider an issue of wilful misconduct, indicating that in all but one of them an oral hearing had been offered. This had the effect, so it was maintained, of creating a legitimate expectation on the part of the appellants that they would be offered an oral hearing before the district auditor arrived at his decision.My Lords,if the district auditor had reached a decision adverse to the appellants without giving them any opportunity at all of making representations to him, there can be no doubt that his procedure would have been contrary to the rules of natural justice and that, subject to the question whether the defect was capable of being cured on appeal to the Divisional Court, the decision would fall to be quashed. In the event, written representations alone were asked for. These were duly furnished,

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in very considerable detail, and an oral hearing was not requested, though that could very easily have been done, and there is no reason to suppose that the request would not have been granted. None of the appellants stated, in his or her affidavit before the Divisional Court, that they had an expectation that an oral hearing, though not asked for, would be offered. The true question is whether the district auditor acted fairly in all the circumstances. It is easy to envisage cases where an oral hearing would clearly be essential in the interests of fairness, for example where an objector states that he has personal knowledge of some facts indicative of wilful misconduct on the part of a councillor. In that situation justice would demand that the councillor be given an opportunity to depone to his own version of the facts. In the present case the district auditor had arrived at his provisional view upon the basis of the contents of documents, minutes of meetings and reports submitted to the council from the auditor's department and their own officers. All these documents were appended to or referred to in the notice of 26 June sent by the district auditor to the appellants. Their response referred to other documents, which were duly considered by the district auditor, as is shown by his statement of reasons dated 6 September 1985. No facts contradictory of or supplementary to the contents of the documents were or are relied on by either side. If the appellants had attended an oral hearing they would no doubt have reiterated the sincerity of their motives from the point of view of advancing the interests of the inhabitants of Liverpool. It seems unlikely, having regard to the position adopted by their counsel on this matter before the Divisional Court, that they would have been willing to reveal or answer questions about the proceedings of their political caucus. The sincerity of the appellants' motives is not something capable of justifying or excusing failure to carry out a statutory duty, or of making reasonable what is otherwise an unreasonable delay in carrying out such a duty. In all the circumstances I am of opinion that the district auditor did not act unfairly, and that the procedure which he followed did not involve any prejudice to the appellants.It is to be added that counsel for the appellants founded upon certain matters which it was maintained were relied upon by the district auditor in his statement of reasons dated 6 September 1985 without having been included in the notice of 26 June 1985 so as to give the appellants the opportunity of dealing with those matters. In my opinion there is no merit in this point. One of the matters, the alleged unlawfulness of the rate made on 14 June 1985, was not founded on by the district auditor as a ground for issuing his certificate. The statement of reasons does not assert that the rate was unlawful. It does no more than mention that, as was the fact, the city solicitor had advised the council that the proposed rate would be unlawful. The substance of the other matters was broadly covered in the statement which accompanied the notice of 26 June 1985.Upon the view which I take, that the district auditor's decision was not vitiated by procedural unfairness, the question whether such unfairness, had it existed, was capable of being cured by the appeal to the High Court does not arise directly for decision. It is, however, my opinion that the particular appeal mechanism provided for by section 20(3) of the Act of 1982, considered in its context, is apt to enable the court,

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notwithstanding that it finds some procedural defect in the conduct of an audit which has resulted in a certificate based on wilful misconduct, to inquire into the merits of the case and arrive at its own decision thereon. Section 20(3)( b ) empowers the court to "confirm the decision or quash it and give any certificate which the auditor could have given." The relevant rules of court enable a rehearing of the broadest possible scope to take place. Evidence may be given on oath, which is not possible before the auditor, and there is no limit to the further material which may be introduced so as to enable the whole merits to be fully examined. There is no question of the court being confined to a review of the evidence which was available to the auditor. In the circumstances, it would be quite unreasonable and not in accordance with the intendment of the enactment to hold that the court, where an issue is raised as to the fairness of the procedure adopted by the auditor, is confined to a judicial review species of jurisdiction so as to have power only to quash or affirm the auditor's certificate without entering upon its own examination of the merits of the case. No doubt there may be cases where the procedural defect is so gross, and the prejudice suffered by the appellant so extreme, that it would be appropriate to quash the auditor's decision on that ground. But in my opinion the court has a discretion, where it considers that justice can properly be done by its own investigation of the merits, to follow that course. I may add that I agree entirely with all that is said upon this aspect of the appeal in the speech of my noble and learned friend Lord Bridge of Harwich.The final argument for the appellants was that the loss of £106,103 was not shown to have been caused by the wilful misconduct of the appellants. This argument was fully considered and rejected by the Divisional Court and the Court of Appeal. I agree entirely with their reasons for rejecting that argument, to which I find it unnecessary to add.My Lords,for these reasons I would dismiss the appeal. The appellants must pay the district auditor's costs, subject to any protection available to those of them who hold legal aid certificates. This is a suitable case for directing, under section 20(3) of the Act of 1982, that any unrecovered costs shall not be paid by the city of Liverpool.

LORD BRIDGE OF HARWICH

My Lords,On 6 June 1985 the Audit Commission exercised its power under section 22(1)( b ) of the Local Government Finance Act 1982 to order an extraordinary audit of the accounts of the Liverpool City Council for the financial year which commenced on 1 April 1985 in so far as they related to the failure to make a rate or the delay in making a rate for that financial year. By notice dated 26 June 1985 the respondent district auditor informed each of the present appellants, who were members of the majority party on the Liverpool City Council, of the extraordinary audit and that

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he intended to consider in pursuance of his duty under section 20(1) of the Act of 1982 whether he should certify the sum of £106,103 or any other sum, consequent upon the failure to make a rate or the delay in making a rate for the financial year commencing on 1 April 1985, as due from him or her on the ground that a loss of such sum had been incurred or a deficiency caused by his or her wilful misconduct. The notice was accompanied by a note referring to the relevant statutory provisions, summarising the history, enclosing a number of reports made to the council by the district auditor and his predecessor, and identifying all relevant minutes of the council and its committees and reports made to the council by the council's own officers. The note indicated that this was the material to which the district auditor had had regard and continued as follows:
"5. The facts show that there was no lawful justification for the delay in the making of the rate. The council has thus disregarded the advice and warnings given by me, my predecessor and its officers. On the evidence the council would appear to be in breach of its statutory duty. 6. To the extent that a breach of statutory duty results from a deliberate failure by any member to discharge his or her own duty then such a member is guilty of wilful misconduct. My predecessor referred to the members' duty in his reports of 19 March 1984 and 10 April 1985."
The note then proceeds to indicate how the district auditor had assessed such losses or deficiencies as he could then identify as caused by the delay in making a rate and concludes:
"11. I have reviewed the resolutions of the council to determine how individual members discharged their duty. It at present seems to me that members listed below by their voting, abstention from voting or absence may have failed to discharge their duty as members and may therefore be guilty of wilful misconduct occasioning the loss or deficiency identified in paragraph 9 above. But I will defer making any decision until I have had the opportunity to consider any representations in writing you may wish to make."
The formal notice indicated that representations in writing should be made not later than 19 July 1985.On 19 July the leader of the city council, Councillor Hamilton, wrote to the district auditor in the following terms:
"The Liverpool Labour Group have held several meetings to discuss their response to your letter of 26 June 1985 regarding the audit of Liverpool City Council's accounts 1985-86. It is the unanimous view of those concerned that our response to you should be a collective one and accordingly the Labour Group's response is attached and signed by those councillors who are in receipt of your letter of 26 June. I would, however, wish to point out, that in the case of Councillor James Hackett, he has been away on holiday for the last three weeks and has not had the opportunity to sign the documents. It would therefore be appreciated if you would allow Councillor Hackett to reply to you upon his return."

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On his return from holiday a few days later Councillor Hackett adopted the response of his fellow councillors.The response enclosed with Councillor Hamilton's letter was a carefully drafted and closely reasoned document of 30 pages accompanied by 349 pages of appendices. A paragraph headed "Conclusion" contained the following:
"In preparing this response, and in assembling the accompanying material, the councillors have sought to comply with the relatively short time allowed in the district auditor's notice. They would wish, however, to reserve the right to add to or develop their response, as appropriate, in the light of events."
Concurrently with the extraordinary audit of the accounts of Liverpool City Council a similar extraordinary audit had been ordered of the accounts of the Lambeth London Borough Council. In the course of that audit a notice similar to the notice dated 26 June 1985 in the Liverpool case had been sent to the Lambeth councillors and they too had made a collective response. On 7 August 1985 Councillor Hamilton wrote again to the district auditor saying:
"The Liverpool councillors would wish, as part of their response to the notices issued to them and in exercise of the right reserved therein, to associate themselves with the legal submissions made by the Lambeth councillors in so far as they have not been explicitly covered in their own response."
No individual Liverpool councillor submitted any separate written representations on his own behalf or asked for the opportunity to make representations orally.On 6 September 1985 the district auditor issued his certificate pursuant to section 20(1)( b ) of the Act of 1982 that £106,103 was due from each of the appellant councillors on the ground that it appeared to him that a loss or deficiency in that amount had been caused by their wilful misconduct, accompanied by a statement in writing of the reasons for his decision to issue the certificate. The appellant councillors all appealed against the decision under section 20(3)( a ). A decision to issue a similar certificate in respect of a number of Lambeth councillors was also under appeal. The appeals were heard together by the Divisional Court (Glidewell L.J., Caulfield and Russell JJ.) over 10 sitting days from 3 to 14 February 1986. As in the written representations to the district auditor, so on the hearing of the appeals the stance adopted by the Liverpool appellants was a united and collective one. They were all represented by the same counsel. Although the affidavit material was voluminous and different appellants deposed in their affidavits to different detailed aspects of the facts, all expressed their agreement with the main affidavit made by Councillor Hamilton, the leader of the council, and neither by affidavit nor through counsel did any individual appellant invite the court to distinguish his responsibility for what the majority group on the city council did or failed to do from that of any other member of the group.

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The main issue canvassed in the Divisional Court was the issue on the merits whether the appellants had been guilty of wilful misconduct and if so whether it had caused any toss. The court took the view urged by counsel for the district auditor and supported by counsel for the Lambeth councillors that, in relation to that issue, the scope of the hearing on appeal was unlimited and that they could consider whatever evidence and arguments were put before them, whether or not they had been before the respective auditors. At an early stage in the hearing, the court raised the question whether any party wished to give oral evidence. None did. Counsel then appearing for the present appellants went further and submitted that it would be inappropriate for the court to hear oral evidence. When invited by the court to disclose when and in what circumstances the rate at a figure representing a 9 per cent, increase over the 1984 rate (which the Liverpool City Council had eventually adopted and which would have left a deficit of £117 million on estimated expenditure) had been decided upon by the' appellants, he submitted that the court was not entitled to investigate the activities of a political caucus. As Glidewell L.J. put it:
"It is clear to me, therefore, that the highly experienced counsel who appeared for the appellants were satisfied that justice could be done by our hearing their clients' appeals on affidavit and documentary evidence."
The judgments in the Divisional Court examined the issue on the merits at length and concluded that wilful misconduct causing the loss certified by the district auditor was fully established.Submissions that the district auditors' certificates against both Liverpool and Lambeth councillors were vitiated by procedural unfairness, in that the councillors had not had a proper opportunity to answer some of the points relied on in the reasons for the respective decisions to certify, were made by counsel for both the Liverpool and the Lambeth appellants after their submissions on the merits. The court took the view that these should have been taken as preliminary points and, if well founded, would lead to the quashing of the auditors' decisions. But they concluded that there had been no procedural unfairness and that the appellants had had a sufficient opportunity to meet the case put against them. The Divisional Court gave judgment dismissing the appellants' appeals on 5 March 1985.The Liverpool councillors appealed. The Lambeth councillors did not. In the Court of Appeal there was both a change of counsel and a change of emphasis. Mr. Louis Blom-Cooper now presented the case for the Liverpool appellants, as he has done before your Lordships. The hearing occupied the court for nine days from 9 to 22 July 1986. The merits were once more fully canvassed and the Court of Appeal (Lawton, Dillon and Woolf L.J.J) unanimously affirmed the view of the Divisional Court that the appellants had been guilty of wilful misconduct causing the certified loss. But my impression is that the procedural complaint by which the decision of the district auditor was sought to be impugned loomed much larger in the Court of Appeal than it had in the Divisional Court. Mr. Blom-Cooper introduced elaborate new arguments based on the history of the legislation relating to the auditing of local government accounts from the Poor Law

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Amendment Act 1844 to the Local Government Finance Act 1982 and on the practice followed by district auditors over a long period to support a submission, repeated before your Lordships, that a district auditor, before certifying that a loss or deficiency has been caused by the wilful misconduct of any person under section 20(l)( b ) of the Act of 1982, is obliged, as a matter of law, to offer that person an oral hearing and that, if he does not do so, any certificate issued is a nullity. The Court of Appeal unanimously rejected this submission. They expressed marginally different views, however, on the complaint that there had been a lack of fairness in the proceedings. Put shortly, Lawton L.J. thought that, in so far as the district auditor's reasons for his decision impugned the good faith and credibility of the appellants' response to his notice of 26 June 1985, he ought, before taking the decision, to have given them the opportunity of addressing him orally on that issue. Dillon LJ. inclined to the same view, though he found it unnecessary to reach a final conclusion. Both based their decision on the ground that the full hearing on the merits before the Divisional Court could, as a matter of law, and did, as a matter of fact, remove any ground of complaint arising out of the procedure followed by the district auditor in reaching his decision. Woolf LJ. approached the matter more broadly. He went no further than to say that it would be preferable to have invited representations as to whether there should be an oral hearing. But he concluded that when the proceedings, including the hearing before the Divisional Court, were considered as a whole, the allegation of unfairness was not made out. The Court of Appeal gave judgment dismissing the appeals on 31 July 1986 but granted leave to appeal to your Lordships' House.My Lords,it is appropriate to emphasise at the outset that the conclusion reached by the district auditor, the Divisional Court and the Court of Appeal that the appellants were guilty of wilful misconduct causing the certified loss is no longer the subject of any substantial challenge. I use the qualifying epithet "substantial" for two reasons. First, Mr. Blom-Cooper renewed shortly before your Lordships a submission made below to the effect that, if there was wilful misconduct, it did not cause the relevant loss which the district auditor certified. The point is shortly dealt with in the judgments of Glidewell L.J. in the Divisional Court and Lawton and Woolf LJ.J in the Court of Appeal. They demonstrate clearly that, if there was misconduct, the certified loss was caused by it. I need say no more than that I agree with and adopt their reasons. Secondly, the document headed "The Issues on the Appeal" which Mr. Blom-Cooper helpfully handed in at the opening of his submissions contains a paragraph which reads:
"Did the district auditor and the courts below, in concluding that the appellants were guilty of wilful misconduct in delaying the making of the rate for the financial year 1985- 86, apply the right test in judging the decisions and actions of the appellants?"
Whatever faint argument, in the course of Mr. Blom-Cooper's oral submissions, may have been addressed to this issue, it signally failed to identify any misdirection in law by the courts below in their consideration of the issue of wilful misconduct. It seems to me abundantly clear that they applied the right test and the question whether they came to the right conclusion is one not of

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law but of fact. Your Lordships were never invited by Mr. Blom- Cooper to examine the voluminous material in the affidavits and exhibits on which any challenge to the finding of wilful misconduct must depend and the fact of wilful misconduct, therefore, must be accepted as established.The only challenge which must now be considered is procedural. There are, I think, three facets to the challenge. First, it is said that, as a matter of law, there is an absolute obligation on a district auditor, before issuing a certificate under section 20(1) of the Act of 1982, to ask any person upon whom the certificate will impose a liability whether he wishes to make oral representations. Secondly, in the circumstances of this case, it is said that there were matters of complaint against the appellants relied on by the district auditor in his reasons for decision dated 6 September 1985 of which the appellants were not informed by, and could not have anticipated from, the terms of the notice given to them dated 26 June 1985. Thirdly, it is said that, apart from any general obligation to offer the appellants an oral hearing, the district auditor was under a particular obligation to do so before he could properly reject as unacceptable any explanation of their conduct put forward by the appellants relating to their intention, motivation, or good faith. If any one of these three propositions is established, then it is submitted that there was such a want of natural justice in the proceedings leading to the decision of the district auditor as to invalidate the certificate, with the result that, on appeal, the Divisional Court, irrespective of its view on the merits, was obliged to quash it.My Lords,the so-called rules of natural justice are not engraved on tablets of stone. To use the phrase which better expresses the underlying concept, what the requirements of fairness demand when any body, domestic, administrative or judicial, has to make a decision which will affect the rights of individuals depends on the character of the decision-making body, the kind of decision it has to make and the statutory or other framework in which it operates. In particular, it is well-established that when a statute has conferred on any body the power to make decisions affecting individuals, the courts will not only require the procedure prescribed by the statute to be followed, but will readily imply so much and no more to be introduced by way of additional procedural safeguards as will ensure the attainment of fairness. It follows that the starting-point for the examination of all the appellants' submissions on this aspect of the case is the Act of 1982. It will be convenient here to set out all the provisions which, in my opinion, throw light on the issues to be decided. They are as follows:
"17(1) At each audit by an auditor under this Part of this Act any persons interested may inspect the accounts to be audited and all books, deeds, contracts, bills, vouchers and receipts relating to them and make copies of all or any part of the accounts and those other documents. (2) At the request of a local government elector for any area to which those accounts relate, the auditor shall give the elector, or any representative of his, an opportunity to question the auditor about the accounts. (3) Subject to subsection (4) below, any local government elector for any area to which those accounts relate, or any representative

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of his, may attend before the auditor and make objections - ( a ) as to any matter in respect of which the auditor could take action under section 19 or 20 below; or ... (4) No objection may be made under subsection (3) above by or on behalf of a local government elector unless the auditor has previously received written notice of the proposed objection and of the grounds on which it is to be made. . . .
"19(1) Where it appears to the auditor carrying out the audit of any accounts under this Part of this Act that any item of account is contrary to law he may apply to the court for a declaration that the item is contrary to law except where it is sanctioned by the Secretary of State. (2) On an application under this section the court may make or refuse to make the declaration asked for, and where the court makes that declaration, then, subject to subsection (3) below, it may also - ( a ) order that any person responsible for incurring or authorising any expenditure declared unlawful shall repay it in whole or in part to the body in question and, where two or more persons are found to be responsible, that they shall be jointly and severally liable to repay it as aforesaid; ( b ) if any such expenditure exceeds £2,000 and the person responsible for incurring or authorising it is, or was at the time of his conduct in question, a member of a local authority, order him to be disqualified for being a member of a local authority for a specified period; and ( c ) order rectification of the accounts. (3) The court shall not make an order under subsection (2)( a ) or ( b ) above if the court is satisfied that the person responsible for incurring or authorising any such expenditure acted reasonably or in the belief that the expenditure was authorised by law, and in any other case shall have regard to all the circumstances, including that person's means and ability to repay that expenditure or any part of it. (4) Any person who has made an objection under section 17(3)(a) above and is aggrieved by a decision of an auditor not to apply for a declaration under this section may - ( a ) not later than six weeks after he has been notified of the decision, require the auditor to state in writing the reasons for his decision; and ( b ) appeal against the decision to the court, and on any such appeal the court shall have the like powers in relation to the item of account to which the objection relates as if the auditor had applied for the declaration. ... (6) The court having jurisdiction for the purposes of this section shall be the High Court except that, if the amount of the item of account alleged to be contrary to law does not exceed the amount over which county courts have jurisdiction in actions founded on contract, the county court shall have concurrent jurisdiction with the High Court. . . .
"20(1) Where it appears to the auditor carrying out the audit of any accounts under this Part of this Act - ( a ) that any person has failed to bring into account any sum which should have been so included and that the failure has not been sanctioned by the Secretary of State; or ( b ) that a loss has been incurred or deficiency caused by the wilful misconduct of any person. He shall certify that the sum or, as the case may be, the amount of the loss or the

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deficiency is due from that person and, subject to subsections (3) and (5) below, both he and the body in question (or, in the case of a parish meeting, the chairman of the meeting) may recover that sum or amount for the benefit of that body; and if the auditor certifies under this section that any sum or amount is due from two or more persons, they shall be jointly and severally liable for that sum or amount. (2) Any person who - ( a ) has made an objection under section 17(3)( a ) above and is aggrieved by a decision of an auditor not to certify under this section that a sum or amount due from another person; or ( b ) is aggrieved by a decision of an auditor to certify under this section that a sum or amount is due from him, may not later than six weeks after he has been notified of the decision require the auditor to state in writing the reasons for his decision. (3) Any such person who is aggrieved by such a decision may appeal against the decision to the court and - ( a ) in the case of a decision to certify that any sum or amount is due from any person, the court may confirm, vary or quash the decision and give any certificate which the auditor could have given; ( b ) in the case of a decision not to certify that any sum or amount is due from any person, the court may confirm the decision or quash it and give any certificate which the auditor could have given; and any certificate given under this subsection shall be treated for the purposes of subsection (1) above and the following provisions of this section as if it had been given by the auditor under subsection (1) above. (4) If a certificate under this section relates to a loss or deficiency caused by the wilful misconduct of a person who is, or was at the time of such misconduct, a member of a local authority and the amount certified to be due from him exceeds £2,000, that person shall be disqualified for being a member of a local authority for the period of five years beginning on the ordinary date on which the period allowed for bringing an appeal against a decision to give, the certificate expires or, if such an appeal is brought, the date on which the appeal is finally disposed of or abandoned or fails for non- prosecution. (5) A sum or other amount certified under this section to be due from any person shall be payable within 14 days after the date of the issue of the certificate or, if an appeal is brought, within 14 days after the appeal is finally disposed of or abandoned or fails for non- prosecution. (6) In any proceedings for the recovery of any sum or amount due from any person under this section a certificate signed by an auditor appointed by the Commission stating that that sum or amount is due from a person specified in the certificate to a body so specified shall be conclusive evidence of that fact; and any certificate purporting to be so signed shall be taken to have been so signed unless the contrary is proved .... (9) The court having jurisdiction for the purposes of this section shall be the High Court except that, if the sum or amount alleged to be due does not exceed the amount over which county courts have jurisdiction in actions founded on contract, the county court shall have concurrent jurisdiction with the High Court."

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All these provisions except section 17(1) and (2) apply to an extraordinary audit under section 22 as they apply to an ordinary audit.I draw attention at the outset to two striking features of this statutory machinery. The first is that both the exercise of the power to declare items of account unlawful under section 19 and the ultimate power to control the issue of certificates under section 20 are entrusted to the regular courts, the county court if the amount in issue is within the county court's contractual jurisdiction, the High Court if it is not. Under section 19 the auditor can take no effective step without invoking the jurisdiction of the court. Under section 20 the auditor's certificate will be effective unless appealed against. The second striking feature is this. The auditor may act of his own motion either in applying to the court for a declaration under section 19 or in issuing a certificate under section 20. But where, for any reason, he fails or declines to act under either section, after he has been invited to do so by a local government elector exercising his right of objection under section 17(3)( a ), that elector has an unfettered right to invoke the jurisdiction of the court himself. In a case under section 19 the court will in every case be exercising its jurisdiction at first instance, but the auditor may be either seeking or opposing the declaration. In a case under section 20, the auditor may, if he has been invited to act under section 17(3)( a ), be described as the tribunal of first instance, but whichever way he decides, an unfettered right of appeal to the courts lies at the instance either of the aggrieved elector or of the party from whom the relevant loss has been certified to be due. In either case if the court falls into error the error can be corrected by the Court of Appeal or, if necessary, by your Lordships' House.So far as procedure is concerned, section 14 of the Act provides for the issue of a code of audit practice to be approved by each House of Parliament. The code currently in force contains detailed provisions relating to objections under section 17, but none relating to the procedure to be followed when an auditor contemplates the issue of a certificate under section 20 of his own motion. The gravity of the consequences of a certificate for the person from whom the amount of a loss is certified to be due, particularly if he is a member of a local authority and the amount exceeds £2,000, are obvious enough. No one doubts that the auditor must give to such a person adequate notice of the case against him and an adequate opportunity to present to the auditor his defence to that case. I followed with interest Mr. Blom- Cooper's carefully researched review of the history of local government audit legislation, but I did not find that it threw any light on what, in particular, is required to provide such an opportunity in the circumstances of any particular case under the statute presently in force. Still less do I attach any significance to the fact that since 1972, when provisions substantially to the like effect as those which we find in the Act of 1982 first reached the statute book, auditors have, as a matter of practice, always invited oral representations from members of local authorities before certifying the amount of any loss or deficiency as due from them. When a single individual is thought to have failed to bring a sum into account or by his wilful misconduct to have caused a loss or deficiency, it is no doubt a very appropriate practice to invite his explanation orally. But I fail to understand

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how that practice can constrain the courts to construe the statute as requiring an auditor proposing to act under section 20 to invite oral representations as a matter of law in every case. In this case the auditor seems to have intelligently anticipated that the Liverpool councillors who constituted the majority group would want to present a united front in their response to his notice of 26 June 1985 as they had done in their conduct of the city council's affairs during the previous year. Councillor Hamilton's letter of 19 July 1985 amply confirmed his expectation. If any councillor had wanted to put forward his own independent and individual grounds in rebuttal of the charge of wilful misconduct against himself, I have no doubt he would have done so. If any had asked to be heard orally and the auditor had refused, there would have been clear ground for a complaint of unfairness. I suppose it is conceivable that the appellants collectively might have wished to appoint a spokesman to present their case orally rather than in writing, though the case they did present, embracing as it did such a large volume of documentary material, clearly lent itself more aptly to written than oral presentation. It has never been suggested that it was unfair that the auditor did not invite the appellants to address arguments to him through solicitor or counsel. The proposition that it was, per se, in breach of the rules of natural justice not to invite oral representations in this case is quite untenable.The second facet of the complaint of unfairness alleges that the notice of 26 June 1985 did not sufficiently particularise the case which the appellants had to meet and that new matters were relied on by the auditor in the reasons for his decision given on 6 September 1985. This is exhaustively examined in the judgments of the courts below and it would serve no good purpose to re- examine it in detail. The notice dated 26 June was sent with copies of all the previous reports to the council of the district auditor and his predecessor and identified by reference ail the relevant council and committee minutes and reports made to the council by their own officers. I am fully satisfied that this gave adequate notice of the grounds on which the auditor was provisionally minded to proceed against the appellants under section 20 and indeed the character of the response shows that they were in no doubt as to the nature of the case they had to meet. The point that troubled Lawton L.J. and, to a lesser extent, Dillon L.J. was that the auditor in giving the reasons for his decision rejected the protestations of good faith in the appellants' response to his notice of 26 June and did not accept that their motivation in acting as they did was as they claimed. The relevant passage from the judgment of Lawton L.J. reads as follows:
"What the appellants were saying was wholly inconsistent with what was in these minutes and documents. An example is provided by their assertion that they had acted 'in good faith and after taking advice from their officers.' They had not acted on the advice of their officers in March 1984, and again in April 1985 and on 14 June 1985. Their assertion that they believed until 6 June 1985 that the central government would provide further money was so contrary to the facts that no rational person could have believed anything of the kind. The evidence relied on by the district auditor for rejecting the appellants' assertion

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that they believed that more money would be forthcoming was strong; but it is a matter of human experience that political zealots, as some of the appellants seem to have been, can so delude themselves about reality that lying is unnecessary for them. The courts are chary, however, about disbelieving people and attributing bad faith to them without an oral hearing: see In re Smith and Fawcett Ltd. [1942] Ch. 304, per Lord Greene M.R., at p. 308, and Jeffs v. New Zealand Dairy Production and Marketing Board [1967] 1 A.C. 551, per Viscount Dilhorne, at p. 568. Had the appellants been given an opportunity of commenting on the adverse opinion of their conduct which the respondent had formed they, or some of them, might have been able to persuade him of their good faith and credibility. Maybe on the facts of this case they would have had difficulty in so doing; but, in my judgment, they should have been given a chance of doing so. It was unfair not to have given them that chance."With respect, I cannot agree that the authorities referred to had any relevance to the circumstances of the instant case. There was here no room for dispute as to what the council, for whose action or inaction the appellants were responsible, had done or failed to do. There was no room for dispute as to the factual information and legal advice which had at all material times been available to the appellants. It was never claimed on behalf of the appellants that they acted under any misapprehension. In so far as there was an issue as to whether the course on which the appellants quite deliberately embarked was one in which they acted "in good faith" or as to the motives which underlay their action or inaction, it was in essence a matter for argument rather than for evidence. When a group of 49 people act collectively they may, of course, have different subjective reasons for acting. But if they assert that their collective action was prompted by a single collective state of mind, this is inevitably to some extent a fiction. A group can have no single subjective mind. On the other hand, the objective state of mind of the group can only be inferred from what the group concurred in doing or omitting to do in given circumstances. In this case it would not have advanced the appellants' case at all if each appellant had appeared in person before the auditor and asserted his sincere belief in what had been said in the collective written response. On the other hand, if each had given his own explanation and volunteered to submit to questioning as to his own individual state of mind in relation to the council's proceedings, this would have been a departure from the collective stance which the appellants had deliberately adopted and to which they have throughout resolutely adhered. For these reasons I think the auditor was fully entitled to draw inferences from the undisputed facts which involved a rejection of the appellants' protestations of good faith and purity of motive and that his doing so without further reference to the appellants after he received their response dated 19 July 1985 involved no unfairness to them.These conclusions would be sufficient to dispose of the appeals. But I return to the question of more general importance whether if there had been any unfairness in the procedure followed by the auditor, this would necessarily have led, as the Divisional Court thought, to the quashing of the certificate or

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whether, as the Court of Appeal concluded, the full hearing of the appeal to the court on the merits was in law able to make good any deficiency in the auditor's procedure. It was in order to set this question in its proper context that I thought it necessary, earlier in this opinion, to set out the relevant statutory provisions in extenso. The question how far in domestic and administrative two-tier adjudicatory systems a procedural failure at the level of the first tier can be remedied at the level of the second tier was considered by the Privy Council in Calvin v. Carr [1980] AC 574 in which all the relevant previous authorities on the subject are reviewed. I do not find it necessary in this case to examine the general principles there discussed, nor would I think it appropriate in this case to seek to lay down any principles of general application. This is because the question arising in the instant case must be answered by considering the particular statutory provisions here applicable which establish an adjudicatory system in many respects quite unlike any that has come under examination in any of the decided cases to which we were referred. We are concerned with a point of statutory construction and nothing else.As I have pointed out, the court acts at first instance under section 19 in deciding whether or not to make a declaration and so acts either on the application of the auditor or at the instance of an objector against the auditor's opposition. Under section 20, although the auditor acts at first instance in deciding whether or not to certify, either of his own motion or at the instance of an objector, the jurisdiction of the court may be invoked by a person aggrieved by either an affirmative or a negative decision. Once issued a certificate is valid until it is quashed or varied. This clearly follows from the provisions of section 20(6) making the certificate conclusive evidence in proceedings for recovery of the certified sum or amount of the loss. Apart from the provisions for appeal in section 20(3) a certificate could, no doubt, be the subject of an application to the High Court for judicial review. But I cannot see any reason why it should be necessary to seek leave to invoke the supervisory jurisdiction of the court when any party aggrieved by the certificate is entitled as of right to invoke the much more ample appellate jurisdiction which the statute confers. It is the very amplitude of the jurisdiction which, to my mind, is all-important. Whether the auditor has decided to certify or not to certify, the court is empowered to confirm or quash the decision, to vary the decision if a certificate has been issued by the auditor, and in any case to give any certificate which the auditor could have given. The language describing the court's powers could not possibly be any wider. Procedurally there is nothing either in the statute or in the relevant rules of court to limit in any way the evidence which may be put before the court on either side. In the light of these considerations I can find no reason whatever to construe the statute in such a way as to limit the discretion of the court as to the action it will take to provide an appropriate remedy where the matter of complaint, or one of them, is of unfairness in the procedure followed by the auditor. I can well see that, if the auditor has certified of his own motion without giving any proper notice to the person against whom the certificate operates, the court would probably decide to quash it without entering upon the merits. But if, on the other hand, a local government elector had objected under section 17(3)( a ) seeking a certificate against a councillor whom he accused of wilful misconduct causing loss and the auditor had improperly

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dismissed his objection out of hand, it might well be that the most expeditious and appropriate remedy would be for the court, on appeal by the objector, to determine the issue itself. If the court decided to proceed in that way, it would be effectively determining at first instance the issue whether the councillor had been guilty of wilful misconduct causing loss or deficiency. The councillor might, in such circumstances, have heard nothing of the matter until the proceedings before the court, but, if the objector could prove the case against him, the councillor would have no ground of complaint on that score.In every case it must be for the court, as a matter of discretion, to decide how in all the circumstances its jurisdiction under section 20(3) can best be exercised to meet the justice of the case. But I am clearly of opinion that when the court has, as here, in fact conducted a full hearing on the merits and reached a conclusion that the issue of a certificate was justified, it would be an erroneous exercise of discretion nevertheless to quash the certificate on the ground that, before the matter reached the court, there had been some defect in the procedure followed.I would dismiss the appeals and make orders for costs as proposed by my noble and learned friend Lord Templeman.

LORD BRANDON OF OAKBROOK

My Lords,I have had the advantage of reading in draft the speeches prepared by my noble and learned friends, Lord Keith of Kinkel, Lord Bridge of Harwich and Lord Templeman. I agree with all of them, and for the reasons which they give I would dismiss the appeal.

LORD TEMPLEMAN

My Lords,This appeal is the culmination of a conflict between a local authority and Parliament. In 1985 the will of the local authority, Liverpool City Council, was exercised by the appellants, an united majority of elected councillors. The will of Parliament was exercised by ministers supported by an united majority of elected members of the House of Commons. Liverpool's revenues mainly consisted of grants from national taxes controlled by the ministers and the products of local rates controlled by the councillors. The councillors asked that Liverpool's grants from national taxes be made at a level which the ministers declined to accept. The ministers asked that Liverpool's expenditure be maintained and Liverpool's budget balanced at levels which the councillors declined to accept. The ministers could lawfully make grants from national taxes at the level decided by the ministers with the approval of Parliament. The councillors could not lawfully maintain Liverpool's

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expenditure at a level which exceeded Liverpool's income derived from grants, rates and other sources of revenue. A local authority is created by Parliament; must perform the duties imposed Parliament; and can only exercise powers conferred by Parliament in the manner and for the purposes intended by Parliament. If a majority of councillors who control the local authority procure the local authority to reject or neglect its statutory duty, each councillor is guilty of misconduct, even though the councillor may have been democratically elected to oppose the performance of that duty. If a councillor is advised or is otherwise conscious that action contemplated by him will amount to misconduct, he is guilty of wilful misconduct and is liable to statutory penalties if he persists. In the present case the appellants appeal against a finding of wilful misconduct.By section 2(1) of the General Rate Act 1967:
"Every rating authority shall . . . make such rates as will be sufficient to provide for such part of the total estimated expenditure to be incurred by the authority during the period in respect of which the rate is made as is not to be met by other means . . ."
By section 1 of the Local Government Finance Act 1982 a rating authority shall not have power "(b) to make a rate for any period other than a financial year," and by section 7(1) of the same Act "financial year" means a period of 12 months beginning with 1 April. Liverpool was a rating authority and was therefore under a duty to make a rate for each year beginning with 1 April sufficient to meet its expenditure for that year. Collection of rates and payment of other revenues begin as soon as the rate is made and notified. The rates should be made by or soon after 1 April in order to facilitate collection and payment. Any delay in making the rate involves a loss to the authority of interest or borrowing charges by imposing a delay on collection and payment.The Act of 1982 established the Audit Commission charged with appointing auditors to audit the accounts of local authorities. Each auditor must be a professionally qualified accountant. By section 20(1) where it appears to the auditor carrying out an audit that "( b ) that a loss has been incurred or deficiency caused by the wilful misconduct of any person" the auditor is to certify the amount involved and the Act provides for the recovery of that amount from the person guilty of wilful misconduct. If a local authority does not make an adequate rate or delays in making a rate, then the resultant loss of revenue or of interest or borrowing charges may be investigated by the auditor. If a councillor does not support the making of an adequate rate or shares responsibility for delay in making a rate, he shares responsibility for the loss thereby inflicted on the local authority and the auditor may find the councillor guilty of misconduct. If the councillor knows that he is failing in his duty to ensure that the local authority receives as much revenue from rates as is necessary and as soon as possible, the auditor may find that the councillor is guilty of wilful misconduct.In March 1984, the Liverpool City Council was under a duty to consider making a rate for the financial year beginning 1 April 1984. In a report dated 19 March 1984, sent to all councillors,

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the district auditor explained the duty of the local authority and the duty of the councillors, indicated the liability of the councillors for breach of duty and warned that
"I should find it difficult to see how the deliberate making of an inadequate rate could be anything other than wilful misconduct .... Members would in my view also be at risk if a rate was not made because no vote was taken or there was unreasonable delay in making a rate."
In the event, negotiations between the central government and the local authority for an increase in government grant continued long after 1 April and no action was taken to challenge the conduct of councillors, notwithstanding that no rate was fixed until July 1984. A copy of the report dated 19 March 1984 was subsequently sent to all councillors elected after that date in order that they too should be aware of their responsibilities and liabilities.

In December 1984 the council endorsed

"the policies upon which the people of Liverpool elected the Labour Party to power, viz. (inter alia) to refuse to impose increases in rates, rents and charges to compensate for government cuts in grants"
and called for the reinstatement of cuts in grants said to amount to some £216m.On 27 February 1985 the council rejected the proposal that a meeting of the council be arranged in order to set a rate for 1985-86. On 7 March 1985 the council resolved that''this council requires a budget of £265.4m. but, with a target of only £222.1m. - representing another £90m. stolen from the city in grant penalty - this council considers it will be impossible to make a rate."On 14 March 1985 in a Parliamentary answer which was drawn to the attention of the council, the Secretary of State for the Environment made it clear that no more government money would be provided, that "no rating authority can now have any excuse for delay in carrying out its duty to make a lawful rate," and that government grants for 1985-86 would not be paid until a rate had been fixed. The minister reminded
"all councillors that if a failure to rate leads to a loss or deficiency and the auditor considers that this results from wilful misconduct, then those responsible may be surcharged."
On 10 April 1985 the district auditor, in a report to the council, expressed his concern at "the council's failure to make a valid rate for the financial year which commenced on 1 April 1985." He advised that "failure to make a lawful rate would be a clear breach of duty and that deliberate failure to do so would be wilful misconduct." He concluded by urging

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"the council in its own best interests, as well as those of individual members, employees and the local community, that a rate should be made at a very early date. That rate needs to be matched with plans to operate within available resources."
In May the council again declined to consider making a budget or a rate. On 21 May 1985 the auditor made a further report to the council and sent a copy of his report to each councillor. After referring to the reports dated 19 March 1984 and 10 April 1985, the auditor continued:
"By its continued failure to make a rate the council and individual members have placed themselves seriously at risk .... I must now give the council notice that unless it makes a lawful rate at the earliest opportunity and in any event before the end of May I shall forthwith commence action under section 20 to recover any losses occasioned by the failure to make a rate from the members responsible for incurring them .... Yet again and for the last time I urge the council most strongly to comply with its statutory duty to make a lawful rate and to do so with the utmost speed."
On 6 June 1985 the Audit Commission directed an extraordinary audit to be carried out.On 14 June 1985 the council considered a resolution that, inter alia:

"A rate increase of 9 per cent, be approved and the

difference of £29m. be made up by the return of grant

moneys stolen from the people of Liverpool by the Tory government since 1979."

It appears from the revised budget summary, however, that the difference between budgeted revenue and budgeted expenditure on the basis of the increased rate proposed would amount to £117m. The rate proposed to be fixed was therefore inadequate and the city solicitor advised the council before they passed the resolution that the resolution would be contrary to law. The resolution fixing a rate based on a 9 per cent, increase was however passed with the support of the appellants.The respondent auditor was appointed auditor for the purpose of the extraordinary audit and on 26 June 1985 gave notice to each of the appellants that he was considering certifying that the appellants had been guilty of wilful misconduct. The auditor asserted that the documentary evidence which he particularised and which consisted of the relevant minutes of the meetings of the council and its committees and the relevant reports of its officers including the reports of the district auditor
"show that there was no lawful justification for the delay in the making of the rate. The council has thus disregarded the advice and warnings given by me, my predecessors and its officers."

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The auditor invited representations in writing by 19 July 1985 and intimated that he would defer making a decision until he had considered the appellants' representations.On 19 July 1985 the appellants submitted detailed and careful representations which had been drafted with the assistance of the chief executive of Liverpool. The facts to which the auditor had drawn attention could not be and were not disputed. The appellants denied wilful misconduct on three grounds. First they said that at all times they had acted in what they sincerely believed to be the best interests of the ratepayers and citizens of Liverpool. My Lords, political leaders from Robespierre, the sea- green incorruptible, to Gandhi, the prophet of non-violence, have acted in the sincere belief that it was necessary to break the nation's laws in the interests of the nation's citizens. Only Gandhi, who broke the salt laws, acknowledged in a celebrated exchange of courtesies with the British magistrate the correctness of his conviction and the appropriate imposition of a sentence of imprisonment which, however, hastened the repeal of the salt tax and the dawn of independence for India. The sincerity of the appellants provides no defence to a charge that they deliberately delayed after they had been warned that it was wrong of them to do so. Secondly, the appellants contended that they were entitled to delay in the hope and expectation that the government would thereby be compelled or persuaded to provide more money for Liverpool. But the government in March 1985 had made it quite clear that the councillors would be responsible if they did not make a rate based on current government grants. The appellants' belief that the government did not mean that which the government stated does not justify a delay which was bound to cause loss to Liverpool whatever the government might do. Thirdly, the appellants contended that they had delayed in 1984 without dire consequences to themselves, and were entitled to believe that they would escape from the consequences of delay in 1985. But both the government and the officers of Liverpool, at an early stage, made plain to the council that 1985 circumstances were different from 1984 circumstances, and that delay in 1985 would not be tolerated or excused. An offender cannot successfully plead by way of defence that he was not prosecuted for a similar offence on a previous occasion.The appellants did not ask the auditor for an oral hearing but it is now said that the auditor should have invited the appellants to make oral representations before he ultimately made up his mind. My Lords, a councillor might have persuaded the auditor, if he was not already persuaded, that the councillor was sincere in his belief that he could not sacrifice the policy for which he had been elected and sincere in the belief that a rigid adherence to the policy would enure for the benefit of the citizens of Liverpool even if it entailed a breach of the councillor's duty promptly to make an adequate rate to provide for the year's expenditure. But the councillor's beliefs could not alter the councillor's duty or excuse a deliberate breach of that duty. In the voluminous evidence and in the addresses of counsel I have been unable to discern any grounds for the assertion that the oral representations of a councillor could have supplied a defence which was lacking from the written representations of the appellants or could have validated or reinforced possible defences foreshadowed in those written representations. The facts disclosed by the

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documents were incontrovertible and damning. The auditor had no choice but to find the appellants guilty of wilful misconduct, He certified on 6 September 1985 that the loss for which the appellants were liable amounted to £106,103.Mr. Blom-Cooper, who appeared for the appellants, urged that the auditor should have invited the appellants to make oral representations before he reached the decision based on the written material. If any appellant had requested an oral hearing, I think that it would have been desirable for the auditor to have granted that request, first, so that the appellant could reiterate the sincerity of his motives and, secondly, so that the appellant might satisfy himself as to the judicial and impartial quality of the auditor. But sincerity is no excuse. An oral hearing could not detract from the force of the documentary evidence or supplement the written defence of the appellants in any material respects. I do not consider that the auditor was bound to follow a procedure which the appellants, acting under competent advice, did not suggest. The judicial and impartial qualities of the auditor are not in question.Mr. Blom-Cooper urged that although the appellants did not request an oral hearing, they were deprived of a "legitimate expectation" of being invited to an oral hearing. Mr. Blom-Cooper does not allege that the appellants in fact expected to be invited to an oral hearing and does not speculate whether they would have accepted an invitation. Mr. Blom-Cooper submits that a legitimate expectation of being invited to an oral hearing is an objective fundamental right which, if not afforded, results in a breach of law or breach of natural justice which invalidates any decision based on written material. This extravagant language does not tempt me to elevate a catch-phrase into a principle. The true principle is that the auditor, like any other decision-maker, must act fairly. It was not unfair for the auditor to reach a decision on the basis of the written material served on and submitted by the appellants. In Council of Civil Service Unions v. Minister for the Civil Service [1985] AC 374 it was unfair for the government to decide to deprive a civil servant of his right to belong to a trade union without first consulting the civil servant or his union; this House would have quashed the decision but for the overriding interests of national security which justified the government's decision. My noble and learned friend, Lord Roskill, pointed out, at p. 415, that "legitimate expectation" is a manifestation of the duty to act fairly. A decision may be unfair if the decision-maker deprives himself of the views of persons who will be affected by the decision. In the present case the appellants were afforded ample opportunity to express their views, and the auditor was enabled to reach a decision in the light of every defence which it was possible for the appellants to urge.The certificate of the auditor that a loss of £106,103 had been incurred by the wilful misconduct of the appellant was given pursuant to section 20(1) of the Local Government Finance Act 1982 which provides:
"Where it appears to the auditor . . . ( b ) that a loss has been incurred or deficiency caused by the wilful misconduct of any person, he shall certify that ... the amount of the Joss or the deficiency is due from that person and . . . may

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recover that . . . amount for the benefit [of the relevant authority]; and if the auditor certifies . . . that any . . . amount is due from two or more persons, they shall be jointly and severally liable for that . . . amount."By section 20(3) any person who is aggrieved by a decision of an auditor to certify that an amount is due from him may appeal against the decision to the court and "the court may confirm, vary or quash the decision and give any certificate which the auditor could have given," and any certificate given by the court "shall be treated ... as if it had been given by the auditor ..."On 6 October 1985 the appellants appealed under section 20(3) to the High Court. By R.S.C., Ord. 98 the appeal was brought by notice of motion supported by an affidavit setting out the facts on which the appellants intended to rely at the hearing. Order 98, r. 4(2) provides that evidence at the hearing shall be given by affidavit, except in so far as the court directs that the evidence shall be given orally. The appellants filed numerous affidavits and there were exhibited all the relevant documents which were considered by the auditor or to which the appellants wished to refer. The appeal was heard by a Divisional Court (Glidewell L.J . and Caulfield and Russell JJ.). The appellants asked that the certificate given by the auditor be set aside and discharged. The appellants were invited to give oral evidence but declined the invitation. After a hearing lasting 10 days the appellants' applications were dismissed. The appellants appealed to the Court of Appeal (Lawton, Dillon and Woolf L.JJ.). The appeal was dismissed and, with leave of the Court of Appeal, this present appeal has been brought to this House. Any oral evidence which could have been given by the appellants to the auditor could have been given on affidavit or orally to the Divisional Court. In these circumstances, Mr. Blom-Cooper did not urge the merits of the appellants' case. Having submitted that the procedure of the auditor was defective because he did not invite the appellants to give oral evidence, he next submitted that in those circumstances the Divisional Court had no power to affirm the decision of the auditor.My Lords,in reaching a decision an auditor may make mistakes of fact, law, or procedure. The auditor does not take evidence on oath and the information available to him may be incomplete. On an appeal from his decision, the court is entitled to consider any evidence from any appellant or from any auditor or other expert. Such evidence is given on oath, either in the form of an affidavit or in the form of oral testimony. Evidence may be produced before the court which was never available to the auditor. The judges will draw their own conclusion from the evidence before the court, will apply the law as judicially construed, and will adhere to court procedure. If the Divisional Court errs in law a further appeal lies. In my opinion, the court hearing an appeal under section 20 of the Act of 1982 is not powerless to confirm or vary the decision of an auditor merely because the decision of the auditor was defective, whether the defect relates to a matter of evidence, law or procedure. It is for the court to consider a certificate under section 20(3) in substitution for the certificate of the auditor.

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Mr. Blom-Cooper relied on the dictum of Megarry J. in Learv v. National Union of Vehicle Builders [1971] Ch. 34, 49 that "a failure of natural justice in the trial body cannot be cured by a sufficiency of natural justice in an appellate body."This dictum was enunciated in connection with an appeal from one domestic tribunal to an appellate domestic tribunal. In Calvin v. Carr [1980] AC 574 , 593, Lord Wilberforce, delivering the advice of the Board, demurred to this dictum as being "too broadly stated" and at p. 592 recognised and asserted
"that no clear and absolute rule can be laid down on the question whether defects in natural justice appearing at an original hearing, whether administrative or quasi-judicial, can be 'cured' through appeal proceedings."
My Lords,when by statute an appeal lies from a tribunal to a court of law, the statute must be construed to determine whether the court is free to determine the appeal on the basis of the evidence before the court or is bound by the evidence or information laid before the tribunal. In the present case I have no doubt that it was for the court of law to consider whether "wilful misconduct" was proved and for that purpose to consider the evidence laid before the court. The task of the court was to "give any certificate which the auditor could have given" (Section 20(3) of the Act of 1982). The court was not concerned with any defects in the procedure adopted by the auditor because those defects (if any) did not hamper the prosecution or conduct of the appeal. Different considerations apply if a statute only allows an appeal to a court of law on a question of law, or entitles or obliges the court of law to rely on the facts found by the tribunal. And the defects in the inquiry conducted by the tribunal may be so prejudicial to the aggrieved person that the court in its discretion may decide to quash the decision and not to proceed with an appeal on the merits in the absence of the views of the tribunal after a proper inquiry. In the present case the Divisional Court was entitled to consider the appeal on its merits and on the basis of the evidence presented to the court.The auditor on the basis of the information available to him came to the conclusion that the appellants were guilty of wilful misconduct. The Divisional Court on the basis of that information supplemented by the additional evidence put forward by the appellants affirmed the decision of the auditor. I would dismiss this appeal. As regards costs there are technically 47 appeals before this House. Some appellants are legally aided, some are not. I would order each appellant to pay one forty-seventh of the auditor's costs of the appeal to this House, subject to the usual protection afforded by the legal aid certificates. If and so far as the auditor does not recover a due proportion from a legally aided appellant and subject to any application of The Law Society, the auditor should be entitled to recover from the legal aid fund pursuant to section 13 the Legal Aid Act 1973.

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LORD GRIFFITHS

My Lords,I have had the advantage of reading in draft the speeches prepared by my noble and learned friends, Lord Keith of Kinkel, Lord Bridge of Harwich and Lord Templem,an. For the reasons they give I too would dismiss the appeal.

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