1 Wednesday, 20 March 2019 2 (10.15 am) 3 Submissions by MS HANNETT 4 MS HANNETT: My Lords, I appear on behalf of the Office of 5 Speaker's Counsel to address the court on matters 6 arising from Article IX of the Bill of Rights. 7 The specific concerns are itemised in the schedule 8 that was sent to the court on Monday. 9 LORD JUSTICE HICKINBOTTOM: Yes. 10 MS HANNETT: My Lord, by way of summary, for the most 11 part -- and what I propose to focus my submissions 12 upon -- those concerns arise from the claimant's use of 13 two statements by the Secretary of State for Transport. 14 The first is a statement made to the House of 15 Commons on 25 October 2016. For my Lord's note, you 16 will find that in the supplementary bundles at 17 volume 16, tab 25, page 315. The specific reference is 18 346. I don't propose to turn these up. It is just so 19 that you can see, in due course, the material in 20 question. 21 LORD JUSTICE HICKINBOTTOM: Yes. 22 MS HANNETT: The second is evidence given to the Transport 23 Select Committee on 4 February 2018 and, again for 24 my Lord's note, that is at volume 17, tab 10, page 204. 25 The specific references, my Lords, are 215 and 218. 1 1 (Pause) 2 Would you like the references again? 3 LORD JUSTICE HICKINBOTTOM: No. 4 MR JUSTICE HOLGATE: No, they are on the screen, that is why 5 it is such a wonderful system. 6 MS HANNETT: I'm a newcomer to this particular party and 7 transcripts are not something that usually we joy in the 8 administrative courts. 9 The claimants rely on those particular words as 10 proving that the guarantee was a reason, and indeed an 11 important reason why the Secretary of State rejected the 12 ENR scheme. 13 The Secretary of State, on the other hand, denies 14 the court can draw such an inference from the words. In 15 those circumstances, my Lord, there is therefore 16 a dispute; a dispute as to the meaning and effect of the 17 statements made to Parliament, and the court is being 18 asked to determine that dispute. 19 LORD JUSTICE HICKINBOTTOM: These statements are not the 20 only evidence relied upon by the claimants. 21 MS HANNETT: No, I was going to come to that in due course. 22 LORD JUSTICE HICKINBOTTOM: On this issue. 23 MS HANNETT: My Lords, yes, because in my submission that is 24 a significant matter to which my Lords may wish to give 25 some thought in due course. 2 1 LORD JUSTICE HICKINBOTTOM: Yes. 2 MS HANNETT: But the difficulty of course, for the Speaker, 3 is that the claimants haven't withdrawn their reliance 4 on those statements. 5 LORD JUSTICE HICKINBOTTOM: No, I understand that. 6 MS HANNETT: In those circumstances, the admissibility of 7 those statements is in issue, and thus my attendance 8 here this morning. 9 LORD JUSTICE HICKINBOTTOM: Yes. 10 MS HANNETT: So, by way of summary, my Lord, as to what 11 I propose to say over the next hour, the Speaker's 12 concern is that by being asked to resolve the dispute, 13 and therefore to reach a judgment or an assessment as to 14 the meaning of those in Parliament, that may be a breach 15 of Article IX. 16 LORD JUSTICE HICKINBOTTOM: Looking at the schedule, the two 17 passages you referred to are row 1 of the schedule ... 18 I haven't married these up yet, but -- 19 MS HANNETT: No, it is true, there are what I would call 20 a couple of what I would call additional reliances that 21 aren't encompassed in the two I have just given to you, 22 my Lord. I wasn't proposing to make submission on those 23 in particular. 24 LORD JUSTICE HICKINBOTTOM: Where in the table are the two 25 you did refer to? 3 1 MS HANNETT: Reliance on these two one sees at 1, at 5, 2 at 6, 7, 8, 9, 10 and 11, my Lords. I accept that there 3 are other -- what I would call "rogue references", and 4 I am not going to address each of those. 5 LORD JUSTICE HICKINBOTTOM: But it is the evidence with 6 regard to these passages which are your main concern. 7 MS HANNETT: That's right, my Lord, yes. I think it is fair 8 to say that the other references are relatively 9 peripheral in the grand scheme of things. 10 LORD JUSTICE HICKINBOTTOM: Yes. 11 MS HANNETT: It is not to say that they are not also -- 12 MR JUSTICE HOLGATE: Is it 11? Because 11 relates to the 13 conclusions of the Select Committee; that is the passage 14 about Heathrow having the highest landing charges in the 15 world, et cetera, et cetera. 16 MS HANNETT: You are quite right. I am sorry. 17 MR JUSTICE HOLGATE: So, 11 is the point -- it crops up 18 somewhere else as well. It is one of the other ... 19 MS HANNETT: I think it is either 2 or 3, but I would have 20 to go back to the underlying text to check that. I can 21 certainly do that at the end. 22 MR JUSTICE HOLGATE: 11 is something the claimant wishes to 23 rely upon in any event. 24 For my part, I was wondering whether the other three 25 or four were really central to the grounds. 4 1 MS HANNETT: My Lords will be aware that we have had 2 discussions. I am afraid that the position following 3 those discussions is that those matters are still being 4 relied upon by the claimant. 5 Of course, it is a matter for them. No doubt 6 my Lords can take that point up with them in due course, 7 but to some extent, my Lords, I certainly am where I am 8 in the sense that's where we find ourselves. 9 LORD JUSTICE HICKINBOTTOM: Yes, thank you. 10 MS HANNETT: So, my Lords, just turning back to -- just by 11 way of my stall for today. The Speaker's concern is 12 that being asked to determine those disputes is itself 13 a breach of Article IX. The claimants, in contrast, 14 rely on the decision of the Privy Council in Toussaint 15 for the proposition that a statement of a minister in 16 Parliament may be relied on to explain conduct outside 17 of Parliament. 18 The Speaker's position, in summary, is that 19 Toussaint does not apply on the facts. It isn't 20 a decision that is in any event binding on this court, 21 and ought not to be followed given the difficulties of 22 reconciling it with subsequent cases in the 23 administrative court. 24 So, my Lords, by way of structure of my submissions, 25 the first point, I just want to say something very 5 1 briefly about the use of other evidence. The second 2 part of my submissions, I just want to set out the legal 3 submissions relied on in support of the proposition that 4 a court may not determine the disputed meaning and 5 effect of a statement and, finally, just deal briefly 6 with Toussaint, if I may. 7 By way of housekeeping, my Lords, I put one further 8 authority on your desk this morning. It is a decision 9 of the Supreme Court of Willers v Joyce. I have given 10 that as 59A in your bundle. You don't need to turn it 11 up now, it's just so you know that -- 12 LORD JUSTICE HICKINBOTTOM: I don't think we have it. 13 MS HANNETT: It was put on your desk, I think. It may 14 already have been slotted in. I did tell them where it 15 was to go, so maybe there has been a great level of 16 efficiency that has broken out. 17 Finally, just in terms of the skeletons and the 18 submissions on this, they are slightly dotted around 19 between the Hub bundles and non-Hub bundles. So, the 20 submissions of the Speaker and the Secretary of State 21 are in volume 13, at pages 405 to 444, and those made by 22 the claimants are in volume 18, at page 295 to 357, just 23 so you know where they are because it is not entirely 24 intuitive. 25 My Lords, first of all, briefly if I may, the first 6 1 issue I said I would address is other evidence. In the 2 skeleton argument dated 10 January 2019, which addresses 3 issues of parliamentary privilege, the claimants express 4 agreement with the Speaker that the issue of 5 parliamentary privilege can be circumvented by use of 6 other material. They make reference to their reply 7 submissions at paragraphs 16 to 19, where that material 8 is set out. 9 My Lords, plainly the position of the Speaker is 10 that if the issues arising in respect of parliamentary 11 privilege can be circumvented in that way, that is 12 plainly advantageous and the Speaker would certainly 13 invite the court to consider taking that route. 14 Nevertheless, as I have already indicated, those 15 items are sought to be relied on by the claimants, so 16 I am going to make submissions on them in due course. 17 My Lords may well wish to consider whether what I am 18 about to say really is necessary given that concession 19 by the claimants in their skeleton argument. 20 LORD JUSTICE HICKINBOTTOM: Yes. Your position, the 21 Speaker's position, as I understand it, is the claimant 22 does rely upon statements made outside Parliament, as 23 well as these statements. 24 Now, on the true construction of these statements, 25 whatever we determine that to be, if we determine it, 7 1 they are either consistent or inconsistent. If they are 2 consistent, in a sense the parliamentary statements 3 don't matter because they are the same thing. 4 MS HANNETT: Exactly. 5 LORD JUSTICE HICKINBOTTOM: But if they are inconsistent, 6 you say we should keep them out. So, if the Secretary 7 of State has made an inconsistent statement outside 8 Parliament, to the effect that he didn't take these 9 things into account and inside Parliament he did, we 10 ignore that. 11 MS HANNETT: Your Lordships. 12 MR JUSTICE HOLGATE: Can I ask a question? If the issue 13 arising in relation to Article IX is whether the 14 Secretary of State had taken a particular factor into 15 account at all, would it be permissible to look at the 16 material in order to resolve that issue? 17 MS HANNETT: I accept entirely that in the context of the 18 Planning Act there is a modification of the principle of 19 parliamentary privilege in this way that, of course, the 20 court is entitled to look to see whether the 21 requirements for laying the statement before Parliament, 22 and so on, in section 9, have been complied with. 23 But, my Lords, the Speaker contends that is a very 24 limited exception and the court is entitled to look at 25 that only in a very formulaic and procedural manner, to 8 1 check that the steps that are required to be taken have 2 indeed been taken. 3 My Lords, if and in so far -- 4 MR JUSTICE HOLGATE: So, therefore the answer to the 5 question is? 6 MS HANNETT: No, my Lord, because -- 7 MR JUSTICE HOLGATE: The only reason I asked that question 8 is: in your helpful schedule, you lay emphasis on the 9 fact that there is an inference sought to be drawn as to 10 weight, so I was wondering, innocently, whether you were 11 drawing a distinction between whether the fact had been 12 taken into account at all as opposed to the weight to be 13 given to it; your submission goes further than just 14 weight, does it? 15 MS HANNETT: It is very much dependent, of course, upon 16 whether or not there is a dispute as to what is being 17 said. Of course, there isn't any objection as far as 18 the Speaker is concerned about reliance on matters that 19 are not in dispute and are of historic record, so the 20 Secretary of State said X, Y or Z on a particular day. 21 The difficulty in this case arises because there is 22 a dispute as to the meaning as to what is being said, 23 and you are being asked to determine that dispute. 24 MR JUSTICE HOLGATE: To follow this, if I can, if the 25 Secretary of State says, "I took factors A, B and C into 9 1 account", because that is a matter of historical record, 2 that can be relied upon. 3 MS HANNETT: If it is not in dispute that was said or the 4 meaning that is to be taken from that, yes, that's 5 right. 6 MR JUSTICE HOLGATE: So, equally, if the Secretary of State, 7 or a Secretary of State, says in Parliament, "Not only 8 did I take A, B and C into account, but this is the 9 weight I gave to A, B and C", so long as that's not in 10 dispute the court can have regard to it. 11 MS HANNETT: Yes, my Lord, that's right. Again, on the 12 basis, my Lords, that is a matter of historical record. 13 So, if in this case there was no dispute as between the 14 parties as to what was said and what is to be taken from 15 that, that follows, yes. 16 LORD JUSTICE HICKINBOTTOM: I don't say this pejoratively, 17 but is something in dispute because the Secretary of 18 State and/or the Speaker say it is in dispute, or the 19 Secretary of State really? So, if -- to take my Lord's 20 example -- the Secretary of State said, "I took X, Y and 21 Z into account", can the Secretary of State say, "Well, 22 I actually meant that I didn't take one of those items 23 into account?" Or can the court say: well, he said 24 this, he said this. 25 It is unambiguous. I am not saying that is the case 10 1 in this case -- 2 MS HANNETT: No, I quite understand the difficulty. 3 The difficulty here, my Lord, is that there is 4 a genuine dispute. 5 Whatever the position may be in another case, in 6 this particular case there is a genuine dispute between 7 the parties as to what was meant when something was 8 said. 9 My Lords, I accept entirely there may be shades of 10 grey around the edges and the difficult situations may 11 arise. My Lords, this is not such a difficult 12 situation. The key dispute that you are being asked to 13 determine on the matters that I am making submissions on 14 is: what is the meaning of those words? What was meant? 15 What did the Secretary of State mean when he said those 16 things? 17 The consequences of that -- in my submission, 18 my Lords, that isn't in the grey area that my Lord is 19 alluding to. That is quite clearly -- 20 LORD JUSTICE HICKINBOTTOM: No, I wasn't alluding to a grey 21 area. I was referring to something which the court 22 regards as unambiguous. We haven't come to the words 23 here. I am not saying that is the case here. 24 MS HANNETT: Yes, my Lord. 25 LORD JUSTICE HICKINBOTTOM: But do I take it from your 11 1 submission that if the court considers the words used 2 unambiguous, then that is the end of that? They can be 3 referred to. 4 MS HANNETT: I am so sorry, I don't think I do accept that, 5 because that is the court then being asked to determine 6 the objective meaning of what is said in Parliament. 7 LORD JUSTICE HICKINBOTTOM: I understand that. 8 MS HANNETT: That takes us back into Toussaint territory and 9 I was going to come back to in due course. In my 10 submission, as soon as you are being asked to decide 11 that question, even if the answer to that question might 12 be in your view entirely obvious; but whether it is 13 obvious or difficult, the same issue arises, that it is 14 the court that is being asked to determine the question. 15 LORD JUSTICE HICKINBOTTOM: So, you submit that something is 16 in dispute, something is ambiguous simply because the 17 Secretary of State says it is. 18 MS HANNETT: That must follow, yes. I accept that. 19 MR JUSTICE HOLGATE: And it is not the court's role to 20 decide whether something is ambiguous or clear. 21 MS HANNETT: No. 22 MR JUSTICE HOLGATE: Whereas, normally, points of 23 construction, even of Acts of Parliament or a matter for 24 the court -- 25 LORD JUSTICE HICKINBOTTOM: Not here -- 12 1 MR JUSTICE HOLGATE: -- this interface between the ambit of 2 the court's role is not. It is a bit anomalous. 3 MS HANNETT: My Lord, there is a reason for that. The 4 reason for that, that I will come on to in due course, 5 is that, of course, the Secretary of State, if he, for 6 example, in this case or any other case, wishes to make 7 the submission that what was said was not accurate or 8 was not the true or correct meaning -- in other words, 9 in order to dispute the true meaning that is being put 10 by the claimant -- the Secretary of State is being put 11 in a position where he runs the risk, effectively of 12 breaching Article IX. That is a mischief. 13 LORD JUSTICE HICKINBOTTOM: I see that. 14 MS HANNETT: I see entirely that may on occasion have some 15 surprising results as far as the court is concerned, but 16 that is the constitutional reason for the proposition. 17 LORD JUSTICE HICKINBOTTOM: I see that, and that is made 18 clear in your written submissions. 19 MS HANNETT: Yes. My Lord, I think I was just going to take 20 you through something we may have covered a little bit, 21 but perhaps I'll just take it step by step, in any 22 event. 23 Three propositions of law, my Lord, which to some 24 extent I have canvassed anyway, but I will just set them 25 out so my Lords have them. 13 1 The first is that case law doesn't preclude reliance 2 on statements in Parliament for the purpose of showing 3 an undisputed historic fact. 4 Second -- 5 MR JUSTICE MARCUS SMITH: But you lay great emphasis on the 6 word "disputed"? 7 MS HANNETT: My Lord is exactly right. 8 MR JUSTICE MARCUS SMITH: So, even if it is a matter of 9 historic fact, ie did the Secretary of State say 10 something on 12 December last year? It doesn't matter 11 what he said, did he said something? If he said he 12 didn't, then we can't look at it. 13 MS HANNETT: Just to be absolutely clear, whether or not 14 there is a breach of Article IX will depend entirely on 15 the use to which the reliance is being placed. So, 16 there may be a difference between on the one hand 17 saying, "The Secretary of State said X before 18 a Transport Select Committee", undisputed historic fact, 19 and then seeking to take a meaning from what was said 20 that is disputed. 21 So, in other words, relying on what was said for the 22 truth of the proposition where the meaning of what was 23 said is the subject of dispute between the parties. 24 MR JUSTICE MARCUS SMITH: In that case, I am a little 25 puzzled because what happens if one has a legal question 14 1 which is purely and simply a question of law which turns 2 upon the objective meaning of what was said? 3 In other words, the reason one is deploying the 4 words said in Parliament are divorced from what ever 5 subject and intent there may have been. It is simply is 6 a question of what was said and what is construed; why 7 is that not a question of historic fact that can be 8 looked at? 9 MS HANNETT: My Lord, if it is simply what was said on 10 a particular day, and there isn't any dispute that was 11 said on a particular day in Parliament, then, my Lord, 12 there isn't any difficulty because that falls into the 13 historic fact exception. 14 Where this case departs from that is that a meaning 15 is being sought to be extracted from the language used, 16 which meaning is the subject of dispute as between the 17 parties. In order for the court to decide what that 18 meaning is, or in order -- 19 MR JUSTICE MARCUS SMITH: The distinction I am drawing is 20 between an argument about what the Secretary of State 21 meant and what the words mean objectively. 22 Now, I can quite understand that one doesn't want to 23 get drawn into an argument about what it was on 24 a particular occasion that the Secretary of State said 25 when one is talking about a subjective state of mind, 15 1 but suppose the test of why one is using the words is 2 entirely objective. It is the words on the page, and 3 taking those words away one has simply to construe what 4 they mean. Is that or is that not a question of 5 historic fact? And does it or does it not matter 6 whether the Secretary of State says, "Well, objectively 7 speaking it means Y", and the other side say, 8 "Objectively speaking it means X"? 9 MS HANNETT: My Lord, that does matter and then, in those 10 circumstances, we are shading into Article IX territory 11 because, again, the court is being asked to determine 12 a dispute as to the accuracy or exactly what was said, 13 whether it was -- and the meaning of that. 14 MR JUSTICE MARCUS SMITH: That is -- 15 MS HANNETT: That is questioning proceedings in Parliament, 16 my Lord, because you are being asked to determine the 17 objective meaning, what was meant, however one -- as 18 soon as there is a dispute as to the manner in which 19 those words can be used, in my submission, that's 20 problematic and we are shading into Article IX territory 21 there. 22 MR JUSTICE HOLGATE: I wonder if to some extent this may be 23 affected by the role the court is being asked to 24 perform, because in Pepper v Hart, after all, there was 25 a fundamental discussion about whether it was 16 1 permissible in the teeth in the face of Article IX to 2 have regard to a statement made by a minister as an aid 3 to statutory construction. It is perfectly clear that 4 it is the court's role to construe legislation and what 5 Parliament meant by it, objectively, and we are entitled 6 to look at a statement made by a minister to explain 7 statutory provision if it is clear. There could be 8 a dispute, there often is, as to whether the statement 9 is clear for the relevant purpose, and yet no one would 10 dispute it is the court's function to determine that 11 issue of clarity. 12 MS HANNETT: Yes, exactly. 13 MR JUSTICE HOLGATE: So, maybe this issue depends on the 14 particular role that the court is performing. 15 Here the role the court is performing is to 16 determine whether a particular factor was taken into 17 account in a decision made outside Parliament, and the 18 decision itself is not the subject of parliamentary 19 privilege and, secondly, the weight, which is why I was 20 trying to narrow the issue by asking the question I did 21 earlier on. 22 MS HANNETT: Yes, I mean, I accept entirely weight is 23 a separate question because, of course, assuming that it 24 is a matter that can be taken into account or looked at 25 by the court, there is then a subsequent question as to 17 1 the clarity and the weight to which that evidence might 2 be used. 3 But coming back to my Lord's question, I accept 4 entirely that a statement made by Parliament, in 5 Parliament, that is undisputed may well be used outside 6 Parliament. I have to accept that is the effect of 7 Toussaint. 8 The difference here, between our case and the case 9 in Toussaint, is not that the court is being asked to 10 look at that to explain something outside, where there 11 is no dispute about what was said in Parliament or the 12 meaning to be ascribed to it. Here you are being asked 13 to adjudicate a prior question, in effect: what is the 14 meaning of that statement? 15 MR JUSTICE HOLGATE: The point I am putting to you on the 16 basis of Pepper v Hart: there must be some situations 17 where the fact that it is said that something is unclear 18 does not affect the court's -- 19 MS HANNETT: I accept that Pepper v Hart is a discrete 20 example, my Lord, which arises in the particular context 21 of construing legislation. I think my Lord should be 22 careful about extracting the principles from that to 23 this context. 24 LORD JUSTICE HICKINBOTTOM: No, I think that was my Lord's 25 point. There is a difference, because when we are 18 1 construing a statute, we construe the statute as setting 2 out what Parliament intended -- 3 MS HANNETT: Yes. 4 LORD JUSTICE HICKINBOTTOM: -- but we do it in a restricted 5 way. We look at the words, and then Pepper v Hart, we 6 can look at what Parliament said, if that is clear. 7 My Lord's point is that here we are doing 8 a different thing. We are looking at what a minister 9 said in Parliament. My Lord's point is that it is not 10 the court's function -- this is on the basis of your 11 submissions -- to concern itself about what the minister 12 meant. That is not our function. 13 MS HANNETT: No. 14 LORD JUSTICE HICKINBOTTOM: Your submission is we can't look 15 at anything that goes to what the minister meant, and 16 therefore construing what he said as a statute is the 17 wrong approach. I think that's my Lord's point. 18 MR JUSTICE HOLGATE: Maybe. 19 LORD JUSTICE HICKINBOTTOM: In any event, it is a good 20 point. 21 MR JUSTICE HOLGATE: It is something one is thinking about. 22 One part of the question is: the mere fact that 23 something is unclear in Parliament of itself doesn't 24 rule out the court considering it, and it comes back to 25 my Lord's point as to what is the true function of the 19 1 court. I entirely agree. 2 MS HANNETT: I accept that if the precedent question is 3 answered in the affirmative, it is something the court 4 considers it can look at. The next question is weight, 5 and the clarity or lack of it is something, of course, 6 that go to the use to which it can be made. 7 MR JUSTICE HOLGATE: The distinction between 8 "materiality" -- well, even the word "material" can be 9 used in two senses; is it legally relevant, or material 10 in the sense of how much substance did it add. 11 LORD JUSTICE HICKINBOTTOM: That also explains why, as you 12 say, sometimes Article IX gives rise to a point which 13 appears to a court as a curious result. It is because, 14 on the basis of your submissions, we are doing something 15 which we do not normally do. Normally, we can do things 16 like construe statutes, and we are used to that and we 17 understand what the ground rules are. 18 MS HANNETT: Yes. 19 LORD JUSTICE HICKINBOTTOM: But your submission is that 20 Article IX is a completely different set of ground 21 rules. 22 MS HANNETT: My Lord, that's right, when it applies. 23 LORD JUSTICE HICKINBOTTOM: Yes. 24 MS HANNETT: Yes. 25 My Lords, I think I was just dealing with my three 20 1 propositions and seeking to make a distinction between 2 historical fact and relying on it for its truth. 3 I think we perhaps canvassed that point somewhat. 4 My Lord, then the third point, really, was just to 5 be clear that it is just as objectionable for the court 6 to be asked to rule that a statement is accurate or 7 complete as it is to be asked to rule that it is 8 inaccurate or incomplete, because in both cases the 9 court is being asked to make a finding as to the meaning 10 of the statements in Parliament. 11 So, my Lord, that really goes to the point made by 12 the claimants, that they are simply seeking to rely on 13 what the minister said and that they are not seeking to 14 put it in issue. But the mischief or the difficulty 15 with that, my Lords, is that even to the extent the 16 Secretary of State wished to put it in issue -- and they 17 do in this case -- they risk a breach of Article IX. 18 All of those propositions, I say, can be found in 19 the decision of the High Court in the Office of 20 Government Commerce v Information Commissioner. 21 I wonder if I could just turn that up? It is at 22 bundle F, tab 53. It is F in my bundle. 23 LORD JUSTICE HICKINBOTTOM: 1 to 8. 24 MS HANNETT: That is not very helpful, is it? I am so 25 sorry. Maybe I have an old index. That makes it 5 or 21 1 6. I am so sorry. 2 MR JUSTICE HOLGATE: Do you have the tab number? 3 MS HANNETT: Bundle 3. It is tab 53. Apparently I have the 4 wrong tab number as well, apparently it is 55. No? 5 53, I was right. I am very sorry. 6 My Lords, I don't propose to take you to the 7 decisions of the Privy Council in Prebble and decisions 8 of the House of Lords in Al Fayed, which are 44 and 46 9 respectively, because in this case Mr Justice Stanley 10 Burton, as he then was, summarises the effect of those 11 cases. 12 But, my Lord, this was an appeal by the OGC against 13 two decisions of the Information Tribunal, concerning 14 decisions made by the Information Commissioner as to the 15 disclosure of what's called "gateway reviews", which are 16 essentially reviews of the delivery programme or 17 procurement project. 18 The two particular features of this case are, first, 19 that the refusal to provide the gateway review under the 20 Freedom of Information Act was given by a government 21 minister in Parliament in response to a parliamentary 22 question. 23 Second, that the Information Tribunal based its 24 decision partly on a report of the Select Committee on 25 work and pensions. 22 1 So, parliamentary privilege was potentially in play 2 in two ways. 3 The Speaker attended and made submissions, and we 4 see those submissions are at paragraph 23, which is on 5 page 107 of the decision. 6 It is said that the assumption by the Information 7 Commissioner or Information Tribunal jurisdiction to 8 consider the adequacy of ministerial reply infringed 9 Article IX. 10 Second, that the Tribunal infringed Article IX by 11 relying on the conclusions of the parliamentary Select 12 Committee by examining the extent to which the 13 government had complied with public commitments. 14 The analysis of parliamentary privilege starts at 15 paragraph 30, which is on page 109 of the report. It is 16 a fairly helpful summary, my Lords of Prebble, 17 paragraphs 31 and 32. 18 In paragraph 32, the judge set out section 16.3 of 19 the Parliamentary Privileges Act 1987, which had been 20 enacted in Australia in response to a decision of the 21 Supreme Court. That provided: 22 "For the avoidance of doubt, in proceedings in any 23 court or tribunal it is not lawful for evidence to be 24 tendered or received, questions asked, or statements, 25 submissions or comments made concerning proceedings in 23 1 Parliament, by way of, or for the purpose of, 2 questioning or relying on the truth, motive, intention 3 or good faith, or anything forming part of those 4 proceedings in Parliament, otherwise questioning or 5 establishing the credibility, motive, intention or good 6 faith of any person, or see drawing or inviting 7 a drawing of inferences or conclusions wholly or partly 8 from anything forming part of those proceedings in 9 Parliament." 10 In what followed in the judgment, it was accepted, 11 it was common ground, that (a) and (b) of that provision 12 reflected the state of the common law. The question 13 considered by the judge, looking back at the decisions 14 of the Privy Council in Prebble and the House of Lords 15 in Hamilton v Al Fayed was the extent to which (c) also 16 reflected the common law. 17 He goes on to effectively search for the ratio of 18 those two cases in the paragraphs that follow. 19 Before just taking the court to the conclusion of 20 that analysis -- and I am not going to take your 21 Lordships through all of it given the time -- I just 22 want to flag paragraphs 39 and 40, on page 112, where 23 the judge accepted that voracity included accuracy. So, 24 in other words, parliamentary privilege would be engaged 25 where there were questions raised as to the accuracy of 24 1 what was said, and see also the first sentence of 2 paragraph 40. 3 I said I would take you to his conclusions as to 4 whether (c) reflected the position of the common law. 5 That conclusion is found at paragraph 41, where he 6 noted: 7 "The controversy in the case concerns paragraph (c), 8 which literally applied would prevent any reference to 9 a parliamentary proceeding, notwithstanding there was 10 not any allegation of impropriety or inadequacy or 11 inaccuracy." 12 Then there was a discussion about what was the ratio 13 in those cases. The judge tended to the view that the 14 wider formulation advanced by the Speaker was 15 unnecessary to the decision in Prebble and Hamilton, but 16 the ratio for both decisions was found in the narrower 17 formulation by Lord Browne-Wilkinson. 18 What he then said, at the top of page 113: 19 "The search for that ratio may be academic since it 20 is in any event clear that the formulation in 16(3) 21 receives the authoritative endorsement of both the 22 Privy Council and the House of Lords. However, in 23 Prebble's case itself Lord Browne-Wilkinson narrowed the 24 scope of the rule by limiting it to cases in which there 25 was some questioning of parliamentary proceeding." 25 1 In other words, he accepted that (c) reflected the 2 common law, albeit narrowed to those circumstances in 3 which there is some questioning. 4 MR JUSTICE HOLGATE: Questioning of a parliamentary 5 proceeding? 6 MS HANNETT: Exactly, my Lord, yes, quite. 7 My Lord, he does make reference to Toussaint at 8 paragraph 44. I will come back to the effect of that 9 when I deal with Toussaint in a moment. 10 He then summarises the constitutional reasons for 11 parliamentary privilege at paragraphs 46 to 47. 12 Then the first sentence of 47: 13 "Conflicts between Parliament and the courts are to 14 be avoided. The above principles lead to the conclusion 15 that the courts cannot consider allegations of 16 impropriety or inadequacy or lack of accuracy in the 17 proceedings of Parliament." 18 The judge then considered the first issue raised by 19 the Speaker whether or not the Information Tribunal had 20 jurisdiction to consider the adequacy of a ministerial 21 reply. He reaches a conclusion at paragraph 53 and 22 notes that he endorsed the refusal of the Information 23 Commissioner to parliamentary questions, a valid request 24 for the purpose of the Act. By doing so he rightly 25 avoided having to decide expressly and specifically 26 1 whether the parliamentary answer of Mr Boateng was 2 correct or incorrect and equally avoided the Tribunal 3 having to do so." 4 Then, my Lord, he turns to consider the second 5 submission that had been made by Mr Chamberlain on 6 behalf of the Speaker in paragraphs 58 and 59. This is 7 the use of Select Committee findings. 8 This really is the vice that I contend arises in 9 this case: 10 "If a party to proceedings were before a court or 11 the Information Tribunal seeks to rely on an opinion 12 expressed by a select committee, the other party that 13 wishes to contend for a different result must either 14 contend that the opinion of the committee was wrong and 15 give reasons why, thereby at the very least risking 16 a breach of parliamentary privilege if not committing an 17 actual breach. Or because of the risk of that breach, 18 accept that opinion, notwithstanding that it would 19 otherwise wish to do so. This would be unfair to that 20 party. It indicates that a party to litigation should 21 not seek to rely on the opinion of the parliamentary 22 committee, since it puts the other party at an unfair 23 disadvantage, and if the other party does dispute the 24 correctness of the opinion of the committee, would put 25 the Tribunal in a position of committing a breach of 27 1 parliamentary privilege if it were to accept that the 2 parliamentary committee's opinion was wrong." 3 In paragraph 59, he considers the contrary: 4 "Just as it is wrong to rely on the opinion of 5 a parliamentary committee, it must be equally wrong for 6 the Tribunal itself to seek to rely on it, since it 7 places the party seeking to persuade the Tribunal to 8 adopt an opinion different from that of the select 9 committee in the same unfair position as where it is 10 raised by the opposing party." 11 Finally, at G, he notes: 12 "To put the same point differently, in raising the 13 possibility of its reliance on the opinion of the Select 14 Committee, the Tribunal potentially made it the subject 15 of submission as to its correctness and of inference, 16 which would be a breach of parliamentary privilege. 17 This is also, in my judgment, the kind of submission or 18 inference, to use the words of section 16(3) of the 19 Parliamentary Privileges Act 1987, which is prohibited." 20 My Lords, I accept it is the conclusion of the 21 Select Committee, so it is not exactly the point that is 22 before you, but the mischief or the vice that he 23 identifies in the use of Select Committee conclusions 24 applies, in my submission, equally in this case, where 25 statements of the minister are being used for the truth 28 1 or correctness of those, and there is a dispute about 2 the meaning of that. In those circumstances, you are 3 driven straight into, in my submission, the vice 4 identified by Mr Justice Stanley Burton in those 5 paragraphs. 6 My Lords, I am not going to take you to it, just 7 looking at the time, I just want to deal with Toussaint, 8 if I may, but I would invite my Lords also to look at 9 the decision of Mr Justice Stewart in Kimathi, where the 10 judge held that the questioning -- 11 LORD JUSTICE HICKINBOTTOM: Which tab is that? 12 MS HANNETT: I say it with slight trepidation, but it is 58 13 in my volume. 14 LORD JUSTICE HICKINBOTTOM: Thank you very much. It is, 15 yes. 16 MS HANNETT: Because in that case the court held the 17 questioning of proceedings in Parliament will arise 18 where the court is being asked to make findings as to 19 the accuracy or truth of statements made to Parliament. 20 It was held to be impermissible in that case for the 21 claimants to rely on what had been said in Parliament, 22 to prove facts which the defendant did not admit. To 23 allow them to do that, that would require the court to 24 determine the accuracy of those facts. 25 My Lord, the relevant passages are paragraphs 19 to 29 1 20, and also 24. 2 MR JUSTICE MARCUS SMITH: Ms Hannett, how far are we 3 assisted by the sort of distinction that is drawn by the 4 hearsay rule; that one can't rely on hearsay statements 5 for the truth of what they say, but one can rely upon 6 such statements for the fact that they were made? 7 MS HANNETT: My Lords, I can see that there is an analogy 8 here, in the sense that that rather accords with I think 9 the submission I have been making to you, that it is 10 entirely proper for the court to note that a statement 11 was made to Parliament, because that is of course 12 a matter of undisputed fact, as my Lord said, to look at 13 that for the meaning. Where that meaning is contested 14 or disputed is problematic. I accept that. 15 MR JUSTICE MARCUS SMITH: Yes, so I think you are accepting 16 that the Article IX privilege is to an extent analogous 17 to not being allowed to rely on hearsay rules for the 18 truth of what they say, but -- 19 MS HANNETT: I am not sure that the analogy is entirely apt, 20 but I can see that the same principle applies in both 21 circumstances. 22 MR JUSTICE MARCUS SMITH: No, I am sure they have very 23 different origins, but going to the earlier part of the 24 rule, that one can rely upon statements for the fact 25 that they were made, that there was an utterance, threat 30 1 in hearsay cases. Are you saying, though, for 2 Article IX purposes, if that fact is disputed, one can't 3 even investigate as to whether or not it was made? 4 MS HANNETT: Sorry, my Lord, just so I understand the 5 question: if even the fact that a statement was made at 6 all is the subject of dispute -- 7 MR JUSTICE MARCUS SMITH: Yes, because whenever I raise 8 a question here you always use the word "undisputed" in 9 your answer, and I think what I am wanting to pin you 10 down on is: if it is disputed as a matter of historic 11 fact whether something was said or not. 12 MS HANNETT: It would rather depend on the purpose for which 13 that is sought to be deployed. 14 I am sorry to sort of slightly sidestep the 15 question, but it is difficult and I am trying to sort of 16 conceptualise a circumstance in which that would arise. 17 But, if in determining that question -- the key point, 18 I think, is that in determining that question, if the 19 court was then being invited to resolve a dispute about 20 whether something was said in Parliament and, if so, 21 what was said -- because that rather takes you back, 22 potentially, into accuracy or questioning, so it would 23 very much depend on the facts, but potentially, at 24 least, that may also raise issues under Article IX. It 25 would very much depend on the facts on how that arose. 31 1 LORD JUSTICE HICKINBOTTOM: Also, if there was a dispute as 2 to whether someone in Parliament said X, if there was 3 a dispute as to whether it was said or not the 4 determination of that dispute wouldn't get anybody 5 anywhere in a sense, because you can't question whether 6 X is true, the veracity of X. It doesn't answer 7 my Lord's question, but -- 8 MS HANNETT: No. No, I take that point, my Lord. As I say, 9 what I hope I am at pains to emphasise is that it always 10 depends on the purpose for which reliance is sought to 11 be made, and that is really the critical question. 12 The answer to that question will determine whether 13 the use is sought to be made simply for historical fact 14 purposes or whether it is sought to be made for some 15 other purpose, ie questioning proceedings in Parliament. 16 I said I would just take you finally -- my third 17 area of submissions, to look at Toussaint. 18 MR JUSTICE HOLGATE: You might also just need to tell us 19 which part of Willers v Joyce to look at. 20 MS HANNETT: I am going to deal with that, my Lord, yes, 21 when I deal with Toussaint, if I may. 22 Toussaint is at tab 50. 23 Just before I do dive into the content of Toussaint, 24 I did want to say something about the status of 25 Privy Council decisions, and that's the purpose of 32 1 handing up Willers v Joyce this morning. I am not 2 proposing to turn that back up. But, in that case, the 3 Supreme Court held that a decision of the Privy Council 4 doesn't bind an English court and cannot override 5 a decision of an English court that would otherwise be 6 binding. 7 The court then goes on to say that, of course, the 8 decision of the Privy Council is of great weight and 9 persuasive value, and that an English court would 10 ordinarily be expected to follow it, albeit not because 11 of its precedential value, but because of the weight to 12 be afforded to it. 13 The relevant passages are 12 and 16 for that 14 proposition. 15 LORD JUSTICE HICKINBOTTOM: 12 and 16? 16 MS HANNETT: Yes. 17 LORD JUSTICE HICKINBOTTOM: Thank you. 18 MS HANNETT: Just to be absolutely clear before I start 19 looking at the substance of Toussaint, my primary 20 position is that Toussaint can be distinguished on its 21 facts, but I do think it is important also to be 22 aware -- when I go on to deal with my second 23 submission -- that some of the findings in Toussaint are 24 very difficult to square with what comes next in OGC and 25 Kimathi, to have in mind the status of Toussaint. 33 1 LORD JUSTICE HICKINBOTTOM: You say that undermines its 2 persuasive effect? 3 MS HANNETT: Yes, quite. 4 LORD JUSTICE HICKINBOTTOM: Yes. 5 MS HANNETT: Some of the statements are made obiter, but 6 I will come back to that in a moment. 7 Just in terms of Toussaint itself, this was a claim 8 by Mr Toussaint against the government for 9 constitutional relief in respect of what he says was 10 discriminatory and/or illegitimate expropriation of his 11 property. 12 The decision to acquire that property was announced 13 in the Government Gazette. My Lords can see that at 14 paragraph 5 of the report, on page 2828. The reason 15 given in the announcement in the Gazette was that the 16 land should be acquired for a public purpose to wit 17 a learning resource centre. 18 On the same day, the Prime Minister made a statement 19 to the House of Assembly, in which he said that the land 20 had been acquired because, in effect, it had been sold 21 at an undervalue some years ago in consequence of T's 22 close relationship with the then government. 23 I don't need to turn it up, but you get that from 24 paragraph 22 of the judgment. 25 The way in which the case was put by Mr Toussaint is 34 1 set out at paragraph 6. What Mr Toussaint was saying, 2 he was relying on the statements made in the House of 3 Assembly. So, saying that those were, in effect, the 4 correct reasons, ie political reasons, and that the 5 reasons given in the Gazette, ie to purchase for 6 a learning resource centre, were sham reasons. 7 The relevant constitutional principles are extracted 8 in paragraph 7 and on. The key constitutional provision 9 that was in play is at paragraph 16, which was 10 a provision providing: 11 "No evidence relating to debates and proceedings in 12 Parliament, et cetera, shall be admissible in any 13 proceedings before a court or person authorised by law 14 to take evidence, unless the court or such last 15 mentioned person is satisfied that permission has been 16 given by the Speaker for such evidence to be given." 17 LORD JUSTICE HICKINBOTTOM: Sorry, you are reading from? 18 MS HANNETT: I am reading from the very bottom of page 2829. 19 It is where the Privy Council set out the relevant 20 extracts of the constitution and it goes over the page. 21 MR JUSTICE HOLGATE: That is an insert. 22 MS HANNETT: Yes, it is a bit odd because it is actually 23 paragraph 7, but it goes on for quite some time. 24 The competing arguments are set out in paragraph 8, 25 between letter E to F. 35 1 My Lords, I should have said -- I am so sorry -- 2 that the Court of Appeal held that the statements made 3 in Parliament were not admissible, so it is an appeal 4 against that finding. 5 One can see that the way that the case was set up, 6 as it were, between E and F, that Mr Clayton, who was 7 for Mr Toussaint's response at section 16, that is the 8 provision I have just shown you: 9 "... must yield on the particular facts to 10 Mr Toussaint's constitutional right to access to justice 11 in respect of his complaint of discrimination and/or 12 expropriation." 13 Mr Astaphan, who was for the Attorney General, 14 submitted: 15 "There is not merely an evidential bar under 16 section 16, but also a fundamental constitutional bar to 17 any investigation of or reference to what the 18 Prime Minister may or may not have said based upon 19 Article IX of the Bill of Rights and the wider common 20 law principles." 21 So, that is the way the case set up. 22 The Privy Council then considered -- from 23 paragraph 10 and on -- the principles of Article IX, the 24 decisions in Prebble and the decisions in Al Fayed. 25 At paragraph 16, they refer to what has sometimes 36 1 been called the "judicial review exception": 2 "The House of Lords on a number of occasions stated 3 that use may be made of ministerial statements in 4 Parliament and judicial review proceedings." 5 Then, in paragraph 17, the passage really relied on 6 by the claimants: 7 "In such cases, the minister's statement is relied 8 on to explain the conduct occurring outside Parliament, 9 and the policy and motivation leading to it. This is 10 unobjectionable, although the aim and effect is to show 11 that such conduct involved the improper exercise of 12 a power for an alien purpose or in a wholly unreasonable 13 manner." 14 Paragraph 19, the Privy Council noted: 15 "The present case is concerned with executive action 16 outside the House, of which the Prime Minister gave 17 prior notice to the House in his budget speech. 18 Mr Clayton submits that the Prime Minister's statement 19 in the House is relied upon simply for its explanation 20 of the motivation of the executive's action outside the 21 House. The only allegation of impropriety relates to 22 that action. It is not alleged that the Prime Minister 23 misled the House or acted improperly within the House. 24 The Prime Minister's statement in the House is relied on 25 for what it says, rather than questioned or challenged. 37 1 If Mr Clayton is right in these submissions and the 2 board agrees, in the light of the authorities cited 3 above that the use proposed of the Prime Minister's 4 statement falls squarely within the permissible, though 5 subject still to the need to address the evidential 6 impact of section 16 ..." 7 Paragraph 20, they note that: 8 "Mr Clayton's submissions depend upon the use made 9 of the Prime Minister's statement being limited in the 10 manner indicated in the previous paragraph." 11 They go on to observe, in paragraphs 20 through to 12 22, various interpretations that might have been put on 13 that statement in the House, but note in both cases that 14 no one was making that submission to them. 15 At paragraph 23: 16 "In relation to the points identified in the 17 previous three paragraphs, the board observes that the 18 meaning of the Prime Minister's statement to the House 19 is an objective matter. Mr Clayton accepts that 20 Mr Toussaint can only rely on the statements for their 21 actual meaning, whatever the judge may rule that to be. 22 While no suggestion may be made that the Prime Minister 23 misled the House by his statement, Mr Toussaint also 24 remains free to deploy any evidence available to him on 25 the issue ... the Prime Minister's statement to the 38 1 House is potentially relevant to Mr Toussaint's claim as 2 an admission or explanation of the executive's 3 motivation. If the Prime Minister were to suggest that 4 he expressed himself incorrectly, and did not intend to 5 say what he said, then it would not be Mr Toussaint who 6 was questioning or challenging what was said to the 7 House." 8 The rest of the judgment, my Lords, is concerned 9 with section 16 and the evidential threshold, which the 10 court ultimately held had to be read down. 11 I make two submissions in respect of Toussaint. 12 The first is that Toussaint can be distinguished on 13 its facts. In my submission, it is an essential part of 14 the privy council's reasoning that the meaning of the 15 statement in the House was undisputed and that meaning 16 wasn't the subject of challenge or question or dispute 17 by the minister. 18 My Lords, that is apparent in my submission from 19 paragraphs 20 through to 22, where the court postulates 20 are the meanings that might be put, so those aren't 21 being advanced before us. In other words, it is 22 a critical part, in my submission, of the 23 Privy Council's reasoning that the statements that were 24 sought to be relied on by Mr Toussaint were not being 25 put in issue by the minister. In my submission, that 39 1 takes the case outside of -- just to go back to my 2 section 16(3)(a), (b) and (c) examples that we took from 3 the Australian legislation, takes it outside of those 4 altogether because there isn't any questioning, at all, 5 being made of the statement. 6 The second point I wish to make about Toussaint is 7 that the Privy Council in this case did speculate as to 8 what would happen if the Prime Minister were to suggest 9 he expressed himself incorrectly, and one gets that from 10 paragraph 23. So, it is plain that that wasn't 11 something that arose on the facts of this case. 12 What, with respect, the court didn't do there is to 13 trace out the types of consequences that I have 14 identified in my submissions this morning, that 15 although, say the Privy Council, it wouldn't be 16 Mr Toussaint who was questioning or challenging what was 17 said to the House, what the court fails, with respect, 18 to identify is that of course that would be the 19 Prime Minister who would then be questioning or 20 challenging what was said to the House. 21 In my submission, the court simply fails to deal 22 with that or the difficulties that would arise in those 23 circumstances. 24 My Lords, I quite accept that the Privy Council do 25 nod at the issue of what would happen if these 40 1 statements were put in dispute and say that wouldn't be 2 a problem, but in my submission that's difficult to 3 reconcile with the cases that I have taken you to this 4 morning; OGC and Kimathi. 5 In my submission, the reasoning in Kimathi and OGC 6 is to be preferred is because it avoids the type of 7 breach of Article IX that I have identified. 8 My Lords, that submission is -- the way in which 9 that follows as a matter of principle is that, first of 10 all, I say that part of the court's reasoning is not 11 part of the ratio because, of course, in this case it 12 was undisputed. But further in any event, the decision 13 isn't binding on this court and the weight the court may 14 wish to attribute to it, of course, may well have to be 15 viewed in light of what subsequent cases have said on 16 the same issue. 17 My Lord, on this point, I should say that I accept 18 entirely that Toussaint is cited in both OGC and in 19 Kimathi, but in neither case does the court grapple with 20 the apparent tension between their decision on the one 21 hand and the decision of the Privy Council in Toussaint 22 on the other. They are cited as -- I don't mean this in 23 a pejorative sense, but they are cited as a nod really. 24 There isn't any engagement with what is said in this 25 passage of the court's judgment, in my submission. 41 1 My Lords, I am at my guillotine time. May I just 2 have one moment? 3 LORD JUSTICE HICKINBOTTOM: Yes. 4 MS HANNETT: My Lords, unless I can provide you with any 5 further assistance, those are the submissions on behalf 6 of the Speaker. 7 MR JUSTICE HOLGATE: Just a small point. Sometimes one has 8 to be careful with Privy Council decisions because they 9 are influenced by domestic law. 10 MS HANNETT: Yes. 11 MR JUSTICE HOLGATE: Was this such an authority? 12 MS HANNETT: I think it is difficult, in my submission, to 13 make that submission in this case because they do look 14 at the domestic constitution, but I would have to 15 accept -- 16 MR JUSTICE HOLGATE: That they were looking in Article IX? 17 MS HANNETT: They were viewing it through Article IX lenses, 18 and it was very much -- Article IX was placed in issue 19 in the case by the Attorney General, and one gets that 20 from paragraph 8; that it was part of the 21 Attorney General's response that to allow this statement 22 in would be a breach of not only the evidential 23 provisions in the constitution, but also the provisions 24 in Article IX. I have to accept that. 25 MR JUSTICE HOLGATE: Thank you. Just to summarise, to see 42 1 where you have taken us, as you pointed out there are 2 two potential objectives of Article IX, the second of 3 which goes to the respective functions of Parliament and 4 the court. 5 MS HANNETT: Yes. 6 MR JUSTICE HOLGATE: Toussaint is a case of judicial review 7 concerned with what we would call compulsory purchase, 8 where the only evidence as to what was said to be the 9 true purpose of the expropriation came from something 10 said in Parliament. There can be no doubt that in that 11 case it was the court's function to rule on the legality 12 of the compulsory purchase, but the only evidence 13 available to enable it to do that, in that case, came 14 from what was said in Parliament. 15 MS HANNETT: Yes. 16 MR JUSTICE HOLGATE: But where you seek to -- and that in 17 itself is not impermissible. Subject to this 18 qualification, depends upon whether the accuracy of what 19 was said in Parliament is disputed, and that comes then 20 back to the questions my Lord was asking earlier on. 21 MS HANNETT: Yes. 22 MR JUSTICE HOLGATE: It may in turn depend on the nature of 23 the points which are raised in order to question the 24 accuracy of what was said in Parliament. 25 MS HANNETT: I accept that, and I accept that, for example, 43 1 in this case, it may be said that this is a B case or 2 a C case -- I am sorry to use that as shorthand. It 3 would rather depend on the way in which the objection is 4 being made in response, and how the objection is put in 5 play. I accept that entirely. I accept entirely that 6 at one end of the spectrum you have accusations of 7 misleading, which is clearly and firmly in -- 8 MR JUSTICE HOLGATE: You might have a dispute raised by the 9 respondent about the objective meaning of what was said. 10 MS HANNETT: My Lord, that, I would -- on my submission 11 would still be in (c) because you are in questioning and 12 that's the difficult -- as soon as one is in 13 questioning. 14 MR JUSTICE HOLGATE: Then it comes back to the first 15 objective of Article IX as opposed to the court's role, 16 because normally determining the objective meaning of 17 things, Pepper v Hart and so on -- anyway, that helps me 18 to follow on. Thank you. 19 MS HANNETT: May I just say, I may not remain for the whole 20 of the rest of these proceedings and I hope that is not 21 of any objection to the court. 22 LORD JUSTICE HICKINBOTTOM: No, not at all. Thank you very 23 much. 24 Normally, we have a transcriber's break at this 25 time, so is now the sensible time to have that? 44 1 MR KINGSTON: Yes, I am sure it is, my Lords, but it would 2 be helpful to know from our point of view whether or not 3 you are expecting that we will immediately respond to 4 the submissions which have been made, bearing in mind we 5 have not heard from the defendant yet, or whether we 6 might proceed, as it were, with the main item, and then 7 I'll come back to take up these submissions and also any 8 submissions made by the defendant, hopefully in reply, 9 using a speaking note in order to aid speed of delivery. 10 LORD JUSTICE HICKINBOTTOM: Can we think about that? 11 MR KINGSTON: Yes, of course. 12 LORD JUSTICE HICKINBOTTOM: It is a very good point. One 13 I had thought about. 14 The second is the more attractive option to me, but 15 let's discuss it and see where it is. To see where we 16 get. Particularly as the Speaker may not be represented 17 throughout the whole of the hearing. 18 MS HANNETT: My Lord, I think the idea is to have someone 19 here, but it may not be me, if that is acceptable to the 20 court. 21 LORD JUSTICE HICKINBOTTOM: Also, there is a transcript, so 22 you'll know what is said. 23 MS HANNETT: Precisely so. 24 LORD JUSTICE HICKINBOTTOM: Thank you very much. 25 (11.20 am) 45 1 (A short break) 2 (11.38 am) 3 LORD JUSTICE HICKINBOTTOM: Mr Kingston, we have talked 4 about how we would like the claimants to make their 5 submissions. We think you should make your submissions 6 in the way you want to make them, and deal with the 7 Article IX issues when you consider it appropriate 8 within that. Hopefully that won't cause any 9 inconvenience with the Speaker being represented and 10 having a transcript. 11 MR KINGSTON: Thank you, my Lord. In that case, I have 12 a speaking note for the first part of the submissions, 13 which I hope will aid the transcription, aid 14 your Lordships, and may even aid my learned friends to 15 understand what I am going to say. 16 I understand the practice may have varied as to what 17 happens with the speaking note. In order to ensure 18 a consistency across the piece, I have copies of the 19 speaking note of course for the shorthand writer, copies 20 for your Lordships and copies for my learned friends, 21 which I hope shows some equality across the piece. So, 22 if we could distribute the first speaking note, then 23 I'll go straight into that, and I hope that will allow 24 me to proceed at pace. If I am going too quickly, 25 I hope your Lordships will tell me, but we would like 46 1 to -- 2 LORD JUSTICE HICKINBOTTOM: Speaking notes over the last 3 couple of weeks have been very helpful in speeding 4 things along. 5 MR KINGSTON: Excellent. It is a full note and I hope will 6 achieve that purpose. 7 LORD JUSTICE HICKINBOTTOM: Thank you very much. 8 MR KINGSTON: I will just pause whilst the distribution goes 9 on so no one feels disadvantaged. 10 Submission by MR KINGSTON 11 MR KINGSTON: My Lords, by way of introduction and in order 12 to provide an order of events, these introductory 13 submissions relates to grounds 1 and 2, issues 3 and 4. 14 They assume that the court has read the matters that 15 I have indicated; the amended statement of facts; the 16 grounds; the detailed grounds of defence; the pleaded 17 cases, including the claimants' reply. The agreed 18 statement, as well as the skeleton argument. We don't 19 repeat all that material. 20 LORD JUSTICE HICKINBOTTOM: Yes. 21 MR KINGSTON: In order to frame the detailed submissions on 22 grounds 1 and 2, it is however important to understand 23 the nature of the process that the defendant established 24 and was then engaged in when designating what I will 25 call, I hope acceptably in the shorthand, the ANPS. 47 1 These submissions address that aspect of the 2 proceedings. 3 So, first the nature of the process. 4 LORD JUSTICE HICKINBOTTOM: This is not to take you out of 5 your stride on your speaking note. We have of course 6 dealt with the nature of the process at great length 7 over the last couple of weeks, but of course your focus 8 is a different one. 9 MR KINGSTON: It is. As I shall explain, and I hope it will 10 become clear why we want to make these introductory 11 submissions and why they are important to both grounds 1 12 and 2, to understand what this claimants' position is, 13 which is a different one to the other claimants. 14 LORD JUSTICE HICKINBOTTOM: Yes. 15 MR KINGSTON: So, the defendant argues -- and I give you the 16 reference -- that the process was not some form of 17 competitive tendering or procurement process, in which 18 the defendant was himself procuring, say, building 19 works. It is argued that he was perhaps merely 20 promulgating national planning policy and has a broad 21 discretion as to how go about that and what to include 22 in such policy. 23 The defendant's point in this regard misses the 24 central issue, however. That if the defendant decides 25 to adopt a process by coming to a decision about what 48 1 his policy is going to be, he must operate that process 2 in a lawful manner, both under domestic law and EU law. 3 In the present case, the defendant decided he was 4 not going to designate an NPS that merely established as 5 a matter of government policy that there was a need for 6 additional airport capacity. Further, he decided the 7 policy was not going to be one that simply provided 8 policy criteria by reference to which schemes would be 9 assessed through the development consent order process 10 as and when they came forward. Instead, the process he 11 decided to engage in was one that would identify 12 a specific scheme to be delivered in a specific location 13 and to declare, through the NPS, that any other scheme 14 that sought to meet the same need would be contrary to 15 national planning policy. 16 That is why the three shortlisted schemes had to 17 commit to so much detail on the schemes, design, cost 18 and the like, before a decision was made. As your 19 Lordships know, in the claimants' case more than 20 £10 million in professional and other services. All of 21 this concerning what has been described as probably the 22 largest privately financed infrastructure project 23 anywhere ever in the world. I give your Lordships the 24 reference for that. 25 The ANPS is not, accordingly, a planning policy 49 1 document like a development plan or the national 2 planning policy framework, which are drafted so as to 3 provide a planning policy framework for assessing a wide 4 variety of development projects, almost all of which are 5 footloose to a greater or lesser degree against a range 6 of policy objectives. The ANPS is a policy document 7 that endorses a specific scheme at a specific, 8 particular location. 9 In simple terms, the government is the enabler of 10 the specific scheme endorsed under the ANPS. It is not 11 just a policy framework. 12 I remind your Lordships of the terms of 104 of the 13 Act: 14 "A development consent order application must be 15 determined in accordance with the NPS ..." 16 Except in the cases there set out. 17 In order to take forward that process, the defendant 18 established the Airports Commission, decided that its 19 work should be to produce an agreed evidence base with 20 material available to support an NPS. That is explicit 21 in the commission's terms of reference. 22 The process was one that necessarily encouraged 23 engagement with a wide spectrum of people. Again, we 24 say this shows that the goal was always to identify a 25 winning specific scheme to then be supported and enabled 50 1 through the planning process. The process was not 2 simply to identify whether there was some generic need 3 for capacity expansion in the South East of England, but 4 to identify the scheme best placed on a fair assessment 5 of the evidence, using a fair and lawful process to meet 6 such need. 7 The nature of the document the defendant decided he 8 wanted to designate as the ANPS necessarily shaped the 9 process that he decided to adopt for formulating the 10 policy. The process was materially and substantially 11 different to the process adopted for national planning 12 policy general application, or the processes adopted by 13 planning authorities for formulating global planning 14 policies. The defendant wanted an NPS that endorsed one 15 specific scheme, and he decided to adopt a process 16 whereby anyone interested in the means in which the 17 nation's need for airport expansion would be invited to 18 put forward their schemes. 19 He, in effect, through the operation of the 20 commission and thereafter, created a competition to find 21 the best scheme. The situation in which schemes which 22 were put forward were described as being rivals -- that 23 in the briefing note of 17 August 2016, a description 24 used by the defendant's own officials -- or as being "in 25 the running" against each other. Another description in 51 1 one of the defendant's internal emails. I give you the 2 document reference. Again, a description, as we see, 3 from the defendant's own officials. 4 The situation was one in which a competitive 5 environment was created so as to give the opportunity to 6 leverage -- is the word used -- that competitive 7 environment for the benefit of the nation as a whole. 8 There, the memorandum of 11 February 2016, also with its 9 reference to "offers being sought". 10 The defendant's predecessor had it explained to him, 11 the reason for commencing engagement with promoters was 12 to seek to leverage competitive tension and inform 13 deliverability. I give you the reference. The cabinet 14 subcommittee papers for 25 October 2016 make the same 15 point about leverage. 16 Once that competitive environment was created, of 17 course, it was necessary to consider what the rules of 18 the competition so created would be and how the process 19 would run. 20 In summary, the defendant established a two-stage 21 process. The first stage was the Airports Commission 22 process, established as an evidence based process, where 23 the terms of reference were very carefully consider to 24 ensure an appropriate outcome. 25 Mr Graham's witness statement deals with that. 52 1 I won't take you to it, but you'll see it is 2 paragraph 11. 3 The Commission's job was to encourage promoters of 4 all kinds, not just airport operators, and to consider 5 all bids and produce a sound evidence based 6 recommendation to the defendant as to which scheme he 7 should choose. 8 In the second stage, the defendant himself assessed 9 the Commission's report, tested its approach in all 10 respects and considered the recommendation in reaching 11 his own decision as to whether to accept the 12 Commission's recommendation or choose a different 13 scheme. 14 We now descend in a little more detail to those two 15 processes. The first, the Airports Commission process. 16 In setting the terms of reference for the 17 Commission, the defendant gave every assurance that 18 a very detailed technical evidence-based approach would 19 be taken, in which all competitors would be treated 20 fairly and equally. The agreed statement, paragraphs 4 21 to 22, deal with the background of the Commission 22 process, in respect of which we make the following 23 points: firstly, it was to be evidence based. Decisions 24 on submitted schemes would emerge from the evidence. 25 See the agreed statement, paragraphs 5 and 23. 53 1 Secondly, the process was explicit in inviting 2 anyone with a scheme to participate in it. The 3 Commission's guidance document 01 was explicit in 4 looking for long-term solutions which had a strong 5 possibility of being financeable and would involve 6 creative thinking, which was welcomed. 7 Thirdly, crucially, it was strongly desired from the 8 outset that there should be a competition for ideas from 9 all interested parties and not just existing airport 10 operators in the South East of England. It was also 11 recognised in this context that non-owner operators 12 should not be discriminated against. In particular, the 13 2013 Commission guidance document states -- and I set 14 out paragraphs 3 in extenso. I am not sure whether your 15 Lordships have had it read before or whether you have 16 seen it before? Perhaps, unless you have, I will read 17 it through. It says: 18 "We are aware that a number of parties, including 19 the owners of existing airports, have an interest in 20 developing options for airport expansion or the 21 construction of new airports. In some cases, parties 22 clearly wish actively to promote options. In others, 23 they might simply wish to explore and test them. We are 24 prepared to cooperate with such parties wherever 25 possible. We are also keen, however, to ensure that 54 1 credible options that lack a properly funded sponsor are 2 not neglected and receive sufficient development to 3 allow them to be assessed fairly alongside the sponsored 4 options. In fact, the Commission received 52 proposed 5 schemes, so the overwhelming majority of entries in the 6 competition were not from owners or operators of 7 airports." 8 You can see that material, Mr Graham's paragraph 31. 9 This shows how critical non-owner schemes were to 10 the success and integrity of the competition. 11 Fourthly, in developing its sifting criteria for the 12 first stage of its work, the Commission was explicit in 13 wishing to adopt an approach which took account of "the 14 full spectrum of relevant issues", where operational 15 viability, including safety considerations and delivery 16 risks, were fully considered, something made explicit in 17 table 1.1, with the Commission specifically considering 18 the delivery risks for each proposal in the fullest 19 possible way. 20 That is evident from paragraph 3.32. 21 The Commission was explicit in encouraging 22 innovative submissions, at paragraph 4.1. 23 Fifthly, accordingly, no one could be in any doubt 24 as to what the Commission thought was relevant with 25 regard to delivery, what their criteria embraced in 55 1 undertaking what was a comprehensive, rigorous, open and 2 inclusive process, something made clear in the forward 3 to the first guidance document. 4 The Commission's processes are helpfully set out in 5 Mr Graham's witness statement at paragraphs 30 to 38, 6 from which we extract the following by way of summary. 7 Firstly, the Commission were considering at this 8 stage deliverability, and would clearly have in mind all 9 that was relevant with regard to it. 10 Secondly, in the sift process eight proposals were 11 taken forward to be subject to the final sift, with what 12 was described as "full additional analysis", including 13 a proposal which was developed by the Commission itself 14 at Heathrow. In other words, not -- if I may call them 15 HAL for short, Heathrow Airport Limited -- a HAL option 16 and not endorsed by them. 17 Thirdly, at the sift three final stage, where 18 further work was carried out, the Commission's own 19 scheme for Heathrow was rejected, but not on any grounds 20 related to any possible difficulty or uncertainty 21 arising from a requirement to obtain HAL's consent to 22 its implementation. 23 Fourthly, in the whole of the sift analysis process, 24 although it was clearly designed to be comprehensive no 25 issue arose with regard to deliverability which related 56 1 to any requirement for a non-airport owner scheme to 2 obtain any guarantee or assurance from the airport 3 operator that a scheme would be implemented. 4 The defendant has an important stakeholder regularly 5 reviewing the Commission's work, made no submission to 6 it that such should be regarded as relevant. Yet, as we 7 shall see, when it came to the claimants's scheme at 8 Heathrow, some four years into the process the absence 9 of a HAL guarantee suddenly became a big, if not the 10 biggest factor. 11 LORD JUSTICE HICKINBOTTOM: Just pausing there. With regard 12 to subparagraph (4), you say that during the whole of 13 this Commission process no issue arose with regard to 14 deliverability which related to any requirement for 15 a non-airport owner scheme to obtain any guarantee or 16 assurance. 17 MR KINGSTON: Yes. 18 LORD JUSTICE HICKINBOTTOM: Was there anything at this 19 stage, the Commission stage, concerning deliverability 20 in the terms of -- 21 MR KINGSTON: Commercial deliverability? 22 LORD JUSTICE HICKINBOTTOM: Yes. 23 MR KINGSTON: Yes. I am going to come to it, and shall draw 24 your attention to it, but both paragraphs -- 25 paragraph 11 of the Commission's finding report dealt 57 1 with deliverability, commercial deliverability and 2 viability. Paragraph 12 dealt with what might be the 3 safety considerations, which would have had an impact on 4 deliverability. So, both of those issues were engaged 5 with and the Commission was very anxious to make sure 6 that it was producing what it regarded as 7 a comprehensive approach to both of them. Without 8 jumping ahead too far, we'll deal with the extent to 9 which the defendant's own review, completed 10 in December 2015, addressed both those issues, said he 11 had no problem with them, and didn't regard the Airports 12 Commissions' work as being in any way deficient. 13 LORD JUSTICE HICKINBOTTOM: That is sort of deliverability 14 on a broader basis than here, which is focused on the 15 need for a guarantee. 16 MR KINGSTON: Deliverability on every relevant matter was 17 considered. 18 LORD JUSTICE HICKINBOTTOM: Yes. 19 MR KINGSTON: So, as my Lord says, yes, that's why 20 I emphasise the words "the full spectrum of relevant 21 issues", in subparagraph 3.14. 22 LORD JUSTICE HICKINBOTTOM: Yes, that is helpful. 23 MR KINGSTON: Thank you. 24 Then at paragraph 3.3, the outcome of the sifting 25 process was a shortlisted scheme in the interim report. 58 1 It is important to appreciate that although the 2 Commission was independent, the defendant was an 3 important stakeholder directly involved at all stages in 4 its work and consulted on the Commission's approach to 5 assessment, including the sift criteria at the interim 6 report stage. The defendant had the opportunity to 7 indicate to the Commission that in undertaking its 8 further work it should have regard to a consideration 9 related to the willingness of HAL to implement the 10 claimant's scheme. The defendant gave no such 11 indication. 12 The second stage of the Commission's work consisted 13 of the assessment of the three shortlisted schemes by 14 way of an appraisal framework. The Commission's 15 processes in this regard dealt with Mr Graham's witness 16 statement at paragraphs 45 and following. The appraisal 17 framework was published in draft, was subject to 18 consultation with every opportunity for the defendant to 19 identify any perceived shortcoming in it. Mr Graham's 20 evidence identifies the following characteristics, which 21 are relevant for our purposes. 22 I give you the paragraph where you can get this 23 from. 24 Firstly, the appraisal framework was significantly 25 more than simply a lit of subject areas on which the 59 1 Commission intended to carry out an assessment. 2 Secondly, the objective was to build a comprehensive 3 evidence base to support future recommendations to 4 government. 5 Thirdly, it was a substantial piece of work in its 6 own right, providing a comprehensive explanation of how 7 the Commission would carry out its assessment, including 8 its objective, the scope of the assessment and the 9 detailed areas of assessment. 10 Fourthly, it was designed to deliver a consistent 11 analysis of each of the three shortlisted options. 12 Fifthly, it incorporated two elements, the 13 Commission's objectives, which options would be 14 assessed -- one of them of course delivery of new 15 capacity by 2030 -- and a set of appraisal modules 16 explaining the methodologies. 17 Again, it is relevant to note that the appraisal 18 framework and the appraisal modules which were developed 19 nowhere identified that there was a relevant requirement 20 relating to the willingness of HAL to implement the 21 claimant scheme, which should be considered in the 22 assessment process, still less a guarantee. The 23 defendant had not contended at that stage, or indeed any 24 earlier stage, that such was a relevant consideration 25 and the Commission should have regard to it. The 60 1 Commission had not regarded it as relevant, although 2 clearly aware that the claimant scheme would be 3 implemented at Heathrow. 4 In the establishment of the Commission and its terms 5 of reference, and his input to the Commission's 6 processes, the defendant's words and conduct at this 7 stage gave an unequivocal message about what was 8 required. The message was that the scheme that 9 performed the best by reference to the evidence should 10 be the preferred scheme. Neither the Commission's sift 11 criteria, nor their appraisal framework, nor any other 12 element of their work identified the evidence of an 13 up-front guarantee or assurance from any relevant 14 airport operator as being a consideration which should 15 be or was being considered. 16 No one, including the defendant and HAL, suggested 17 that such a criteria was appropriate at any stage in the 18 wide ranging and transparent Commission process. 19 Thus, although the defendant seeks in one sense to 20 distance himself from the Commission's work and suggests 21 that it cannot be relied upon by the claimant in support 22 of his case in relation to ground 1 or ground 2, that is 23 manifestly not the case. What the defendant said and 24 did at the Airports Commission stage of the process gave 25 an unequivocal message in his scoping of the 61 1 Commission's work in terms of its terms of reference, 2 his engagement with it and his endorsement of the 3 Commission's approach during the process. The message 4 was clear. 5 Firstly, it endorsed the evidence-based approach. 6 Secondly, it accepted the sifting approach and 7 appraisal framework and modules, and the approach in 8 relation to what were relevant criteria. 9 Thirdly, it made no suggestion that the only 10 non-airport owner operated scheme needed some form of 11 guarantee or assurance from the owner of the airport 12 that it would be delivered if selected. Indeed, the 13 opposite was true. At all stages, the process was 14 intended actively to encourage bids from non-airport 15 owners and acutely aware of the need not to discriminate 16 against them by virtue of not being airport owners. The 17 reason was simple: without this, existing airport 18 operators would have a privileged position and the best 19 scheme in the interests of the nation and consumers was 20 extremely unlikely to emerge because the pitch would 21 have been cleared in favour of airport owners. 22 I turn then to the post Airports Commission process. 23 The post Commission final report process involved 24 essentially two elements. The first, the defendant's 25 review of the Commission's final report, its processes 62 1 and recommendation. The second, the defendant's 2 engagement with promoters. 3 The review process -- your Lordships have it as part 4 of the core bundle -- was completed in December 2015, 5 although not published until 25 October 2016, the date 6 of the announcement of the preference decision. The 7 period between July 2015 and December 2015 gave the 8 defendant ample opportunity to reflect on the 9 Commission's work and to consider as part of the review 10 and ongoing discussions with promoters to what extent 11 any new factor needed to be considered or evidence 12 gathered. 13 The purpose of engagement was to inform the 14 assessment of deliverability, as was explained in the 15 memorandum to the defendant of 13 June 2016. 16 We do not propose to rehearse the totality of the 17 exchanges which took place during this period. They are 18 set out in the amended statement of facts and grounds in 19 the skeleton, but we draw attention to the following 20 important matters: first of all, very early on, 21 9 July 2015, the defendant said he wanted to be fair and 22 to give the same process to all promoters, who would 23 carefully assess whether any new information was 24 material enough to be discussed. 25 We address the defendant's point about the 63 1 difference between the claimant and others when we deal 2 with ground 2. 3 Secondly, the defendant emphasised the need for 4 consistency across each promoter, although clearly aware 5 of the differences between the claimants' case and the 6 others, and that the relationship with HAL featured in 7 that. We draw attention to the meeting of 15 July 2015 8 where it was said that the defendant wanted to be fair 9 and give the same process to all promoters and, at the 10 same time, all understood that Heathrow Hub Limited, it 11 is very different to other promoters. To the same 12 effect, the meeting of 9 September 2015. 13 Thirdly, whilst the defendant was interested in and 14 wanted to understand the discussions the claimant had 15 had with HAL, there was no expectation, let alone 16 requirement for such an agreement to be reached prior to 17 the preference decision. So, the meeting of 18 12 August 2015, the DfT would need time with HAL if it 19 was to be the commercial delivery party. We have not 20 spoken to HAL about the HHL scheme, and will not do so, 21 as we have assumed that HAL won't talk to us about it. 22 Although we have not asked. 23 I pause there parenthetically to say: it is notable 24 at this stage that the defendant understood that HAL 25 would not engage on a guarantee during the competition, 64 1 but as we shall see, a year later a new defendant 2 Secretary of State insisted that the claimant should 3 retain an up-front guarantee during the competition. 4 The clear message at this stage was that the 5 claimant should not be concerned that HAL were focused 6 on their own scheme and not the claimant's scheme. The 7 defendant had not even asked HAL about the claimant's 8 scheme and the delivery of it, such was the lack of 9 concern about agreement with HAL pre the preference 10 decision. 11 We then instanced the ministerial submission of 12 4 September 2015, recognising that HAL would not engage 13 with the claimant scheme during the competition. 14 Moreover, the defendant making it clear that the issue 15 of HAL delivering the claimant's scheme would be 16 addressed if -- the emphasis is ours -- the government 17 chooses to prefer the HHL scheme. 18 Then, the meeting of 30 September 2015. The 19 agreement with HAL post-preference decision, in parallel 20 with the NPS review, the assurance to the claimant that 21 they should not be concerned that HAL is currently 22 focused on its own scheme. 23 Meeting of the 16 September 2015 -- 24 LORD JUSTICE HICKINBOTTOM: Could you just pause for 25 a moment? I think my Lord might be looking at this. In 65 1 (b) I would quite like to look at that document. 2 MR KINGSTON: The ministerial submission? 3 LORD JUSTICE HICKINBOTTOM: Yes, please. 4 MR JUSTICE HOLGATE: It is volume 15, tab 16. 5 MR KINGSTON: This should be 4 September 2015. 6 LORD JUSTICE HICKINBOTTOM: Yes. 7 MR KINGSTON: The paragraph which most directly bears -- 8 perhaps we should note, first of all, it is to the 9 Secretary of State from the airport capacity delivery, 10 and it is headed: 11 "Airport capacity engagement on Heathrow Hub 12 Limited's Heathrow extended northern runway scheme." 13 The issue is set out at paragraph 1. Your Lordships 14 will see it: 15 "Heathrow Hub extended northern runway is intended 16 to be delivered by HAL, which is promoting its own 17 scheme. Consequently, full engagement on the delivery 18 of the extended northern runway is not possible while 19 HAL's scheme is also be being considered. 20 Recommendation: note that a decision to prefer HHL's 21 scheme would require additional time, around 2 months, 22 although the assessment is highly uncertain, while DfT 23 undertakes the engagement with HAL, to bring the HHL 24 scheme to the same level of certainty as the HAL and 25 Gatwick Airport Limited schemes." 66 1 There is then timing, background and considerations. 2 MR JUSTICE HOLGATE: Part of the background in paragraph 4 3 relates to the fact that officials are engaging with the 4 three scheme promoters to come up with statements of 5 principles. It is that which underlies paragraph 2 6 which you have just read out, as we will see in a moment 7 from paragraph 7. 8 MR KINGSTON: Yes. I am just about to go over the page to 9 paragraph 6. Paragraph 6: 10 "DfT has not engaged with HAL on the delivery of 11 HHL's scheme because to do so effectively would not be 12 possible while simultaneously engaging with HAL on 13 delivery of its own scheme. Engagement with HHL is 14 largely limited to scheme design and such. The 15 statement of principles with HHL will cover fewer areas 16 and provide less certainty and clarity about delivery." 17 Then paragraph 9: 18 "The implications of engaging with HAL on delivery 19 of a scheme other than its own do not form part of 20 current considerations, but will be addressed if the 21 government chooses to prefer the HHL scheme." 22 It simply could not, we submit, have been clearer 23 what the position was being taken there in 2015, 24 a position which it has to be said was entirely 25 consistent with the position taken by the defendant 67 1 during the whole of the Airports Commission processes. 2 My Lords, unless there is anything further. 3 LORD JUSTICE HICKINBOTTOM: No, thank you. 4 MR KINGSTON: Thank you. 5 I was at page 13 and (c). In the meeting of 6 30 September, which we have dealt with. Then the 7 meeting of 16 September, its confirmation that agreement 8 with HAL was to come following the preference decision. 9 I have given here your Lordships the references. 10 I hadn't proposed to take you to them unless you would 11 like me to. If you have had not the opportunity to look 12 at them I will highlight them. But in essence, the two 13 references to following are following the preference 14 decision, and you will see that on behalf of the 15 claimant Mr Clake said at page 353: 16 "HAL does not want to endorse something that is not 17 their own proposal." 18 345 and 346. The department recognising that the 19 claimant was not an operator and it wasn't 20 discriminating against it. 21 355. The department recognising that the claimant 22 will have more leverage over HAL following selection. 23 355. The claimant would provide IP transfer 24 information to the department. 25 At 356 the claimant pointing out that HAL preferred 68 1 the larger scheme for reasons related, in its view, to 2 its regulated asset base. 3 Then fourthly, the defendant was also aware that the 4 claimant would licence the rights in its scheme to HAL 5 based on an independent valuation of the payment value 6 plus the payment of costs incurred by the claimant. 7 That was part of the claimant's delivery paper. 8 Your Lordships have the reference. 9 So there was no issue of HAL being ransomed, the 10 licence fee would be objectively determined and moreover 11 the cost of any licence from the claimant was minimal in 12 the claimant's view compared to the £3 billion cost 13 saving in the claimant's scheme compared to HAL's. 14 It was against the background of these discussions 15 that the defendant's review process was taking place. 16 In relation to the review process we make the following 17 points. 18 Firstly, the review was carefully structured and 19 designed to identify any gaps in the Commission's 20 evidence base or any shortcomings in its processes which 21 might have needed supplementing. 22 Again, I give your Lordships the references. I am 23 not proposing to take you to them unless you want me to. 24 Secondly, the review thoroughly considered the 25 Commission's evidence base, its adequacy and whether it 69 1 would be supplemented in the context of a very careful 2 review process which the defendant carefully controlled 3 through a series of procedures. 4 I do invite your Lordships in due course, I won't 5 say at leisure, but in due course to look at the review 6 process at appendix B of the review document. A very 7 thorough process. 8 Thirdly, the review process endorsed the 9 Commission's approach, its evidence base and its use of 10 it, specifically it addressed the question of delivery 11 and safety in its reviews of chapters 11 and 12 of the 12 Commission's work. It had not identified any 13 significant or substantial gaps in the evidence and 14 agreed with the Commission that there were no material 15 distinctions to be drawn between the Heathrow schemes in 16 terms of delivery risk and specifically that there was 17 no reason to doubt that they, that is the Heathrow 18 schemes, could be delivered on time, that is by 2030. 19 Noting that the Commission's Chapter 11 had fully 20 taken account of the novelty aspect of the claimant's 21 proposal in its conclusions, and I give you the 22 references there, likewise on safety and any impact on 23 delivery or capacity in the Airports Commissions' 24 chapter 12 it said no problems, saw no problems and the 25 defendant's review agreed. 70 1 That was the point, my Lord, earlier, chapters 11 2 and 12 and the review process. I shall return to 3 chapter 11 because the defendant's submissions have an 4 unhealthy focus on paragraph 11.42 rather than the 5 concluding paragraphs at 11.51 to 53. 6 In the period following the completion of the review 7 process prior to August 2016 further meetings took place 8 between the claimant and the defendant including 9 a meeting on 3 March 2016 at which the defendant 10 confirmed that the AC had found the scheme, that is the 11 claimant's, to be deliverable and this was not something 12 which DfT had found an issue with. It was in that 13 context that the statement of principles was continuing 14 to be drafted, a process which had been underway, 15 concurrent with the defendant's review of the 16 Commission's reports since August 2015. 17 The statement of principles was a legally 18 non-binding document produced in the period 19 between August 2015 and June 2016. Its relevance in the 20 context of this claim is that it demonstrates beyond any 21 doubt what is evident from the meetings and that is that 22 the claimant and defendant's position prior 23 to August 2016 was that agreement with HAL in relation 24 to taking forward the claimant's scheme was to come 25 after the preference decision. 71 1 I give your Lordships the paragraphs in the 2 statement of principles. 3 The claimant had committed to best endeavours in 4 respect of such agreement 30 days or as soon as possible 5 thereafter. Whilst of course the defendant's officials 6 wanted to understand what the delivery process was for 7 the ENR -- something the meeting notes flag up -- 8 firstly, they already understood it would be a licence 9 arrangement based on an independent valuation of the 10 rights concerned and secondly, there was never any 11 question at any stage prior to August 2016 that the 12 claimant should produce some prior form of agreement, 13 written guarantee or assurance from HAL that they would 14 be willing to implement the ENR if it was selected. 15 Indeed, quite the contrary. As the meeting note of 16 12 August 2015 demonstrates, everyone understood that 17 HAL would not wish to engage during the competition 18 since it would be focusing on its own scheme, a 19 conclusion that is obvious and common sense we submit. 20 My text note about the pages in the bundle, I hope 21 the bundle has now been made good. Your Lordships 22 should find the text I referred to. 23 We can accordingly summarise the position 24 between July 2015 and August 2016 as follows: 25 Firstly, the defendant was not seeking to depart 72 1 from the Airports Commission's evidence based approach 2 in reaching its conclusion. Ms Low's second witness 3 statement, paragraph 100 makes that explicit. 4 Secondly, the claimant was promised fairness, 5 equality and transparency in the defendant's approach. 6 The meeting notes and also the agreed statement. 7 Thirdly, the defendant was not changing the rules of 8 the competition that he had set up in the second stage 9 of it by the introduction of any new criteria for the 10 assessments of schemes and the claimant was not invited 11 to engage with any such new criteria in the period 12 between July 2015 and August 2016. 13 Fourthly, to the extent that new material was 14 produced following the Commission's final report, this 15 was confined to specific issues identified by the 16 defendant and referred to in the ANPS. I suspect your 17 Lordships have looked a little at the ANPS already. 18 Paragraphs 3.3 and 3.4 make explicit what it was that 19 the defendant thought needed to be done. 20 It is noteworthy that the additional work, 21 consistent with the outcome of the review process, did 22 not include any additional work or consideration related 23 to the deliverability or safety considerations. In 24 fact, in the letter from the defendant's predecessor 25 sent to the claimant on 26 January 2016 it was said that 73 1 the key issues on which the defendant wished to engage 2 with the claimant were environmental, community impacts 3 and surface access, nothing about guarantee or 4 deliverability more generally. 5 Fifthly, the defendant's official perfectly 6 understood why in advance of a decision HAL would not 7 wish to engage with what was a competing scheme. That 8 was their own conclusion. I give you the references 9 that you've had earlier. 10 Sixthly, the claimant was explicit in wishing for 11 transparency and equality in relation to the 12 consideration of the scheme as an independent promoter, 13 in respect of which the defendant provided a further 14 explicit assurance in relation to fairness and equal 15 treatment of promoters. That is the letter of 16 18 February. 17 Seventh, the defendant accepts that the statement of 18 principles were, "drafted in a manner that encouraged 19 HAL and RIL, Runway Innovation Limited, to make progress 20 on this issue (that is agreement with HAL) ahead of any 21 preference decision, as well as recognising that an 22 agreement could be sought after any preference 23 decision." 24 That's Ms Low's witness statement at paragraph 571, 25 which is the explicit recognition that the agreement 74 1 with HAL was not required in advance of the preference 2 decision and, consistent with the Commission's approach, 3 was not something that the defendant would be taking 4 into account. 5 Eighth, at the time the statement of principles were 6 finalised the defendant was content with this. The 7 statement of principles "provides assurance that if 8 chosen HHL will seek to transfer their scheme to HAL." 9 That is the ministerial submission again. In other 10 words, the statement of principles made clear firstly, 11 delivery issues would be dealt with post-selection and 12 secondly, pre-selection the claimant had already 13 committed in the statement of principles to transfer its 14 scheme to HAL. 15 Ninth and finally, HAL had explained to the 16 defendant in a meeting of 18 May that its investors were 17 nervous given the length of time and uncertainty around 18 the process on expansion and they "required" feedback 19 and determination by October 2016 and December 2016 20 respectively. 21 We then come to what I have described as the "all 22 change". 23 On 14 July 2016 the new Secretary of State, 24 Mr Grayling, was appointed. He immediately let it be 25 known that the issue of expansion of airport capacity in 75 1 the South East of England was one of two top items on 2 his agenda. A meeting was arranged with promoters, 3 including the claimant, for 17 August 2016. In advance 4 of the meeting the defendant was provided with 5 a briefing note. 6 The briefing note firstly recommended that the 7 meeting was used as a listening brief only. 8 Secondly, provided the defendant with key lines to 9 take the essence of which was that the defendant was 10 there to hear about the scheme which it described as 11 a rival scheme. 12 Thirdly, it advised the defendant that he would want 13 to reassure the claimant that the defendant was 14 committed to a fair and robust process and advised that 15 he should not get drawn into any debate on technical 16 details or discuss the merits of other schemes. 17 Fourthly, it discussed safety where it advised that 18 the line to take was that the defendant fully understood 19 that the CAA informed the Airports Commission that all 20 three shortlisted schemes would be capable of operating 21 with the required level of safety. 22 Fifthly, in relation to any view the claimant might 23 have about being disadvantage it advised that the 24 defendant was running a "fair and robust process" and 25 that was very important and that it recognised the 76 1 claimant was an independent promoter in a different 2 position to Heathrow and Gatwick and the engagement 3 process had taken account of that fairly. 4 The background to that line to take raised no issue 5 or concern in relation to the need for an agreement with 6 HAL or to obtain some form of guarantee from them if the 7 ENR was selected. That they, HAL, would implement it. 8 At that meeting and for the first time in the 9 context of the process which had been going on for 10 nearly four years the defendant sought from the claimant 11 that it should retain a commitment in writing from HAL 12 that they would build the ENR scheme if selected as the 13 preferred option. Although the descriptions of that 14 meeting vary, the substance is the same. The defendant 15 was seeking from the claimant a commitment in writing 16 that it if ENR was selected they would implement it. 17 In essence, what emerges is firstly, it was 18 a "challenge", as it was described in the email, 19 31 August 2016, from the defendant's PPS. The defendant 20 had not been advised of any change in circumstances, any 21 new evidence or further advice which supported such 22 a change in position and the request made. 23 The note of the meeting is somewhat anodyne but both 24 Ms Low and the defendant via his PPS, that is the email 25 I have referred to above, he clearly understood that the 77 1 defendant was presenting a challenge, as it was 2 described, and was indeed seeking a written guarantee 3 from HAL that they would take forward the ENR if it were 4 the preferred scheme. 5 It is of course correct to say that the defendant 6 did not say at that meeting that if there was no written 7 guarantee then the ENR would not be selected. Perhaps 8 he had not even decided as much himself at that stage. 9 But, as I will shortly come to, there is a consistent 10 and overwhelming evidence that certainly by the time the 11 preference decision was made shortly thereafter on 12 25 October 2016, the guarantee from HAL was for the 13 defendant the biggest or one of the big issues. 14 MR JUSTICE HOLGATE: I am just looking at the briefing note 15 to the Secretary of State. There are a couple of 16 paragraphs which may be worth noting in volume 16, 17 tab 6. Because at page 120 under a topic to which you 18 have referred, the feeling of being disadvantaged 19 et cetera and being treated differently, under 20 background, three quarters of the way down the page, 21 there is the third bullet: 22 "As such, HHL cannot give meaningful commitments on 23 certain aspects of delivery ..." 24 The other passage I have also noted, you have drawn 25 our attention to the bottom of 114, the listening brief 78 1 paragraph, at the foot of that page in bold and I have 2 noted also the paragraph immediately above it. 3 MR KINGSTON: Yes. 4 MR JUSTICE HOLGATE: Indicating a degree of sensitivity. 5 MR KINGSTON: Certainly, and that's partly why my speaking 6 note emphasises that when the defendant arrived at that 7 meeting he did not arrive as, if I may say so, a fairly 8 new Secretary of State with a briefing from his 9 officials telling him, "Look we've got these really 10 serious concerns about this. Here is the evidence or 11 here is the material to support this concern. It is 12 a matter you might want to raise."Nothing. Forgive me 13 for the repetition. No new evidence, no new advice. No 14 indication of the need for a new position by any change 15 of circumstances. 16 My Lords, I dealt with the first point under 5.3 of 17 what emerged from the meeting. 18 The second is this: the claimant understood the 19 defendant's requirement to be seeking a guarantee. It 20 was not suggested by the defendant or anyone else that 21 the claimant had got the wrong end of the stick. The 22 claimant immediately emailed HAL on 18 August concerning 23 an important issue raised by new ministers regarding the 24 need for written evidence from HAL that HAL would 25 implement the ENR scheme as soon as possible if 79 1 selected. The claimant also stated to HAL that this 2 arose from requests made at the meeting. It noted its 3 understanding that the defendant had told HAL the same 4 thing in its meeting with the defendant. 5 Thirdly, this request was in the form the claimant 6 says was also HAL's understanding which we say is 7 telling. In his evidence Mr Holland Kaye says that HAL 8 could not evaluate the claimant's ENR during the 9 competition and it was focused on its own scheme and 10 would not do so unless it had already been selected by 11 the government. 12 Secondly, HAL understood it was being asked for 13 a guarantee and rejected giving one on this 14 understanding. Those are the paragraphs I have given 15 your Lordship. 16 Fourthly, and this was how the defendant's own PPS 17 understood it, he noted the defendant's challenge to the 18 claimant to obtain written support that HAL would take 19 the hub scheme forward if that were the preferred 20 scheme. 21 The claimant sought to obtain such a written 22 guarantee through contacts with HAL in the manner 23 described in Mr Clake's evidence. In precisely the way 24 that the claimant had anticipated and Mr Clake, if I may 25 say, in particular as the earlier meeting notes record, 80 1 HAL's response was not a positive one and ultimately no 2 guarantee was forthcoming. Indeed, we say HAL refused 3 to give the guarantee. We refer to Mr Holland Kaye's 4 witness: "Could not give the guarantee sought at this 5 time", and the HAL communication, the reference I give 6 you, "We would not be able to give him a letter of 7 support" and "could not put anything in writing, which 8 is substantially the same as the claimant's note from 9 Mr Clake and his call with HAL. 10 In the context of the claimed unfairness of the 11 defendant's actions it is noteworthy that HAL thought 12 they had been given very little time to consider the 13 matter. That emerges from HAL's skeleton argument, the 14 reference I have given you. 15 Bearing in mind that HAL were complaining as long 16 ago as 17 December 2015 that there were still two 17 schemes, as they put it, in the running this is perhaps 18 not surprising. Indeed, prior to the defendant's 19 appointment it seemed to be perfectly understood that 20 there was no realistic prospect of HAL agreeing to 21 implement the claimant's scheme while the competition 22 was being decided. Not only was HAL understandably 23 focused on its own bid, but it would during the 24 competition have been in an inevitable conflict of 25 interest situation whereby it could grant or refuse the 81 1 green light for the only other competing scheme at 2 Heathrow. 3 So when asked for a guarantee HAL either refused 4 outright which, as indicated, we say they did or they 5 "kicked for touch", knowing that the absence of such 6 a written guarantee would only count against the 7 claimant's bid to the evident benefit of their own. In 8 this way a three-horse race would become a two-horse 9 race at best. 10 By contrast of course, had HAL lost the competition 11 and the claimant's scheme had won, the conflict of 12 interest would have disappeared for practical purposes. 13 HAL had made various public statements that its priority 14 was securing expansion at Heathrow. One of the 15 instances, "If the government says it will be Heathrow 16 Hub we would be happy. But if it is between Heathrow 17 and Gatwick then it has to be Heathrow." In the HAL 18 response to the draft NPS we agree that expansion of 19 Heathrow is decisively the best option and recognise the 20 choice between the ENR and NWR. 21 At that stage, that is post-selection, the interests 22 of the claimant and HAL would have been aligned and 23 having lost the competition, it would have been 24 extremely perverse for HAL to then said it would not 25 implement the claimant's scheme at Heathrow. Of course 82 1 there may have been changes to it but the overall 2 question of implementing it would have answered itself. 3 In practice since the alternative for HAL losing its 4 pre-eminent position to, say, Gatwick would have been 5 unthinkable. About the only thing that the claimant and 6 HAL do agree on is that Heathrow is the right place for 7 expansion. 8 The claimant made the defendant directly aware of 9 these issues. The letter of 17 October, I briefly 10 summarise as follows: 11 Describes the guarantee as written confirmation from 12 HAL as to whether they would implement our scheme. 13 Indicates the claimant's intention to rapidly transfer 14 the IP [intellectual property] to HAL. Reports on the 15 meeting with HAL in August and September. Notes the 16 lack of HAL response and the constructive refusal, 17 shareholders sitting on the issue is how it is 18 described. 19 Fifthly, noted that the HAL regulated asset base 20 perverse incentive was to favour their own much more 21 expensive scheme and finally said that if a definitive 22 guarantee was required pre the government subcommittee 23 it is now down to the government to obtain one itself. 24 The government made its preference decision on 25 25 October 2016. At that point it is quite clear that 83 1 the position on the issue of the guarantee had grown to 2 the point where in the defendant's mind, at least, 3 deliverability, hitherto a non-issue for the Airports 4 Commission and the defendant was the biggest issue, with 5 the absence of the written confirmation from HAL 6 confirming they would adopt the ENR scheme if it was 7 chosen being cited by the defendant in the cabinet 8 subcommittee decision. 9 I draw your attention to the relevant paragraph of 10 Ms Low's first witness statement. 11 The defendant's position at the meeting is to be 12 starkly contrasted with the advice he had received in 13 the preparation for that subcommittee meeting, which 14 clearly and succinctly advised that although the 15 claimant had not been able to secure an assurance from 16 HAL that its scheme would be taken forward if it were 17 the preferred option, it "seems likely that the owners 18 would ultimately accept were it to be the preferred 19 scheme". 20 It also advised the defendant that neither the 21 Commission's work, the department's further analysis, 22 nor engagement with developers means that the 2030 23 requirement for new capacity is unachievable for any of 24 the schemes. 25 The references are the ones I have given you. 84 1 That, of course, is a position entirely consistent 2 with the defendant's earlier acceptance, albeit 3 a different Secretary of State, of the conclusions of 4 the Airports Commission on deliverability and its 5 approach to the assessment of it, and consistent with 6 the defendant's clear acceptance, in the meeting of 7 3 March 2016, that it had no issue on deliverability 8 with the ENR scheme. 9 Thereafter, everything the defendant said about the 10 position as to why the ENR was not selected confirmed 11 the view he had expressed in the cabinet subcommittee 12 meeting. 13 We note, firstly, the defendant's speaking note for 14 the subcommittee gives three reasons against the 15 claimant's scheme and one for it. One of which is: 16 "I have also had no certainty that the airport would 17 deliver this scheme if we choose it." 18 Secondly, in the parliamentary debate on 19 25 October 2016, the defendant gave "two prime reasons 20 as to why it felt unable to endorse the ENR". The first 21 related to respite and the second the scheme's promoters 22 could not ultimately provide the certainty that it would 23 be built and adopted by Heathrow Airport if the 24 government had opted for it. Those were described by 25 the defendant as two strong reasons. 85 1 Subsequently, over a year later and with plenty of 2 time to reflect, the defendant gave the House of Commons 3 Transport Committee a clear view with regard to why the 4 ENR had not been chosen. He said: 5 "The biggest issue for us was that the promoter of 6 that scheme could not secure from Heathrow a written 7 guarantee that if we picked it they would do it." 8 He went on to say that seemed to be "a fairly 9 fundamental problem for us". He did say that there were 10 a number of issues related to it, that is the ENR, that 11 was not the only one, but there was no guarantee that 12 would be something the owners of Heathrow would be 13 willing to pursue, no guarantee could be secured. 14 We appreciate, of course, that the defendant was 15 speaking in response to questions from the Committee, 16 but the defendant was very careful to review the 17 transcript of the session and wrote to the chairman of 18 the Committee on 23 February 2018, to say that having 19 reviewed the transcript he wished to clarify some of the 20 points made during the discussion, and: 21 "I would like to ensure that the evidence you have 22 available for your deliberations is unambiguous and 23 clear." 24 The changes that he suggested needed to be made did 25 not include anything on the guarantee and its importance 86 1 in the decision-making process. 2 Fourthly, even in the post hoc and, we submit, 3 manifestly self-serving meeting of 5 September 2018, the 4 defendant confirmed, using the same language, that the 5 lack of guarantee was a "big factor" and the biggest 6 reason for him. 7 In short, taking the defendant's words at face value 8 with no necessity to draw any inference from them at 9 all, it is clear that the biggest issue for him in the 10 selection process and ultimately in the rejection of the 11 ENR was the issue he had raised for the first time on 12 17 August 2016, that is the absence of a written 13 guarantee from the claimant's competitor at Heathrow. 14 Certainly, there is no doubt that it was an important 15 overall consideration. 16 In short, we say that the written guarantee was 17 a critical new feature introduced by the defendant for 18 the first time on 17 August and against the background 19 of no such issue having been raised as part of the 20 Airports Commission process and with no advice from any 21 quarter, whether the defendant's officials, HAL or 22 anybody else, that such was necessary or a reasonable 23 requirement on the basis of the available evidence. 24 In circumstances where the defendant had committed 25 himself to a rigorous evidence-based approach to the 87 1 selection process, the introduction of such a new factor 2 at so late a stage in the process was manifestly unfair. 3 It was perfectly obvious to all concerned that the 4 claimant would face enormous difficulties during the 5 competition in being beholden to HAL in this manner. It 6 had been recognised in meetings, was recognised in the 7 statement of principles. As we have noted already, HAL 8 makes the point that the lateness of the request gave 9 very little opportunity to undertake due diligence. 10 For reasons we shall deal with in submissions 11 specifically relating to grounds 1 and 2, it was in 12 breach of EU law on State induced conflicts of interest, 13 as well as the claimant's legitimate expectation. 14 My Lords, I move from those matters, then, to what 15 we understand to be the defendant's current position. 16 The defendant's detailed ground of defence explained 17 in paragraph 8 is that the absence of the guarantee was 18 ultimately academic in light of the judgment that it was 19 the NWR scheme that provided the greatest strategic 20 benefit, and that the reason for choosing the NWR are 21 those in the NPS. That is the explanation, it is said, 22 for the ANPS making no mention of the guarantee at all, 23 and the reason for there being no mention of it in any 24 formal statement or in any draft or proposed version of 25 the ANPS. 88 1 The detailed grounds of defence assert the reasons 2 for preferring the NWR scheme are set out in the ANPS 3 and are reasons -- note not the reasons -- that the 4 defendant at all times did rely on and was entitled to 5 rely on in preferring the NWR scheme. 6 Whilst the defendant accepts that he raised the 7 issue of whether there was any assurance the ENR scheme 8 as chosen would be taken up and delivered by HAL, and 9 that he did take it into account. He asserts that 10 although it was an issue he took into account, it was an 11 important sense check or reinforcing rationale, and that 12 the absence of such a guarantee did not in itself 13 provide positive support for the selection of the NWR 14 provided some additional support to the conclusion that 15 no departure from the conclusions reached by the 16 Commission was appropriate. 17 However, the defendant's skeleton argument now 18 appears to depart from this position. There, the 19 defendant argues, firstly, that the reason as given in 20 the ANPS are the formal reasons -- I am not clear what 21 that means -- pursuant to section 5(7) of the Act and 22 are the reasons for the designation. 23 Secondly, the absence of the guarantee might have 24 been, it is said, more material if the ENR had been 25 preferable or equal on the merits of one aspect of 89 1 deliverability. 2 Thirdly, that the point was entirely academic 3 because the defendant concluded there was no reason to 4 depart from the Commission's recommendations that the 5 NWR's was preferable on its merits. 6 Fourthly, that it was nonetheless reasonable and 7 logical for the defendant to challenge the claimant and 8 ultimately seek an assurance. 9 Fifthly, that the request for a written guarantee 10 was made at a time when the defendant had an open mind 11 as to which scheme should be preferred. 12 Sixth, that deliverability is a central issue, and 13 the issue of the guarantee went to deliverability and 14 deliverability engaged with the issue of whether or not 15 a scheme might be built by 2030. 16 Then, finally, deliverability was a consideration 17 set out in the ANPS. 18 In the light of the way the defendant now puts its 19 case, it seems that so far from the written guarantee 20 not being referred to in the ANPS and being simply 21 a sense check, it was something which was identified in 22 the ANPS under the general deliverability heading, and 23 was accordingly a consideration that the defendant did 24 take into account in the designation decision. 25 Accordingly, and by way of brief summary, the 90 1 defendant has, firstly, established terms of reference 2 as an independent evidence-based body to make 3 recommendations to him based on that carefully prepared 4 evidence. The process is one which plainly and openly, 5 and with no suggestion from the defendant that it was 6 inappropriate, paid no attention and no regard 7 whatsoever to the willingness of an airport operator to 8 provide any guarantee or assurance that it would embrace 9 the scheme at the airport which was not its own. 10 Secondly, the defendant reviewed the work of that 11 independent body, which elsewhere in his submissions he 12 robustly relies upon for its thoroughness and care, 13 including in his review the assessment processes, the 14 evidence available and the conclusions reached, and 15 concluded that in respect of deliverability and safety 16 there were no shortcomings in the Commission's work and 17 the conclusions were reasonable, such that there was no 18 need for any additional work to be done on those issues. 19 Thirdly, following the publication of the 20 Commission's final report, the defendant engaged withth 21 claimant for a period in excess of a year, considering 22 its proposals, including issues related to 23 deliverability, developed the statement of principles 24 without at any stage identifying anything at all in 25 relation to the need for a written guarantee from HAL 91 1 that it would implement the ENR if selected. 2 Fourthly and finally, within a matter of weeks 3 before the announcement of the preference decision, 4 raised with the claimant for the first time, with no 5 additional evidence or further advice to support it, an 6 issue which, on the evidence, became for him the biggest 7 issue, something which was fairly fundamental, regarded 8 as a strong reason or the biggest reason for not 9 preferring the ENR. 10 My Lords, I then turn this -- by way of 11 background -- to other matters, to the relevance of the 12 parliamentary process, which is raised in various ways, 13 and it connects with issue 1 in the list of issues. 14 At a number of points and in a variety of ways, both 15 the defendants and the interested parties' cases rely 16 upon the fact that the ANPS is designated as 17 a consequence of a parliamentary process. In a variety 18 of ways, this is set said to make the ANPS less 19 susceptible to challenge than might be the case if it 20 was simply an executive. 21 In brief, the position can be summarised as 22 follows -- and this is a summary of the Act: the ANPS 23 cannot be designated by the government until 24 parliamentary requirements have been met. 25 Secondly, those requirements are a requirement to 92 1 lay the NPS before Parliament and respond to any 2 resolution or any recommendation of a committee. 3 Thirdly, NPS cannot be designated until the House of 4 Commons has been given the opportunity to resolve. The 5 NPS should not proceed or until it has positively 6 approved it by a resolution to that effect. 7 Fourthly, there is a duty to ensure that the NPS 8 gives reasons for the policy set out in it. 9 In short, an NPS requires the approval of 10 Parliament. If Parliament chooses to approve it, it 11 must be taken to have approved this as a whole, 12 including any reasons given to the policy. 13 However, the existence of this parliamentary 14 approval process cannot be a bar to challenging the 15 lawfulness of an NPS on normal grounds of challenging 16 the executive's decisions related to its preparation 17 simply because the statute expressly confers the power 18 on the court to entertain the proceedings for 19 questioning an NPS or anything done or omitted to be 20 done by the Secretary of State in the course of 21 preparing such a statement by way of judicial review. 22 The grounds of such a challenge are not delimited by 23 the statute, and therefore, we submit, all the usual 24 grounds for judicial review must be available, including 25 that an NPS has been designated relying on an unlawful 93 1 reason. 2 MR JUSTICE HOLGATE: The statute framework provides for 3 Parliament to consider the draft NPS. If Parliament 4 approves by resolution the NPS, the NPS still requires 5 designation by the Secretary of State. 6 MR KINGSTON: It does. 7 MR JUSTICE HOLGATE: It is the Secretary of State's decision 8 at the end of the day. 9 MR KINGSTON: That is a point I am about to make, my Lord. 10 MR JUSTICE HOLGATE: I beg your pardon. 11 MR KINGSTON: Not at all. The designation decision is 12 a decision taken outside Parliament, and we shall enjoy 13 an interesting discourse about the relevance of that, an 14 executive decision outside Parliament, and the reasons 15 for that emerging, we say, powerfully from what the 16 Secretary of State told Parliament. But, my Lord is of 17 course quite right; it is an executive decision, not 18 a parliamentary decision to designate. That's what the 19 Act says. 20 So, paragraph 7.5: 21 "The wording of section 13, taken together with the 22 fact that it is inherent in the process that all NPSs 23 will undergo parliamentary approval, renders it 24 irrelevant that the reasons have been approved by 25 Parliament. That fact does not prevent the NPS from 94 1 being questioned, itself a very wide concept implying 2 that lawfulness can be questioned on the basis of any 3 and all grounds that have the potential to render 4 executive action unlawful. 5 "The Act of designation, it is important to note, is 6 undoubtedly the Act of the executive, not Parliament. 7 Thus the Act of designation is an act which takes place 8 outside Parliament albeit one which follows the 9 parliamentary process." 10 The focus of such 13 is the executive and not 11 Parliament. This is not surprising in these 12 circumstances. It is supported by, firstly, the express 13 stipulation that it is not only the NPS that can be 14 questioned, that is everything in it, including the fact 15 that it has been brought into being by the defendant's 16 act of designation, but also anything done, or omitted 17 to be done, by the Secretary of State in the course of 18 preparing such a statement. 19 Now, I just interpolate in my note there, that is 20 clearly is to avoid anyone saying that once Parliament 21 has approved the document, anything leading up to its 22 approval should be regarded as an irrelevance, and that 23 one is confined to consideration of, therefore, simply 24 what's in the document. 25 My Lord, will be familiar with the approach that's 95 1 taken with regard to statutory development plans, which 2 effectively, by way of, I think, a judgment of 3 Mr Justice Sullivan, as he then was, that what happens 4 before is not relevant. 5 Here, the Act is saying in terms that the processes 6 leading up to designation are not being excluded. 7 Secondly -- 8 MR JUSTICE HOLGATE: Before you move on, section 13 is 9 sometimes the sort of provision which is described as an 10 ouster clause. It provides the sole remedy by which the 11 decision in question can be challenged in the courts, 12 but it has a temporal dimension as well because it can 13 have the effect of preventing challenges by way of 14 judicial review, which relate to some earlier stage 15 until the final designation. This is effectively the 16 decision of Mr Justice Cranston, I think, so it is 17 operating in two ways. 18 MR KINGSTON: I agree. That's why, of course, someone 19 I think -- and I am afraid I can't remember where -- 20 faintly suggested at some stage, or made a point that 21 there had been no challenge to the Commission's work. 22 Given the Commission's remit was to produce material 23 which was to go into the NPS, that is hardly surprising. 24 Likewise, no challenge to the department's review of the 25 Airports Commission process. It is a challenge that 96 1 would have been cut off, I respectfully submit, by the 2 section 13 ouster if not by other means. 3 The second matter we draw attention to in relation 4 to section 13 is the fact that an application for 5 judicial review can be brought only once the Secretary 6 of State has taken the step of designation. No course 7 of action arises as a result of anything that Parliament 8 does or the parliamentary process. The course of action 9 arises as a consequence of an executive decision to 10 designate. 11 In these circumstances, it is not open to the 12 defendant or the interested parties to argue the reasons 13 set out in the NPS cannot be challenged on the basis 14 that they have been approved by Parliament. Such an 15 argument would limit the operation of section 13, limit 16 the court's ability to scrutinise the lawfulness of the 17 NPS as a whole, including everything done or omitted to 18 be done in the course of its preparation and, secondly, 19 its content. It is the "or" in section 13 that supports 20 the proposition that a claimant can question the NPS 21 itself. 22 Against that statutory background, we make the 23 following two broad submissions. Firstly, the 24 parliamentary process did not prevent the defendant from 25 setting up a competitive and necessarily comparative 97 1 bidding exercise to determine which was the best scheme 2 or from endorsing an appraisal framework in the terms he 3 did for assessing the merits of competing schemes. It 4 is, in those circumstances, difficult to see what it is 5 about the parliamentary process that gives him the right 6 to abandon the agreed and relied upon selection criteria 7 retrospectively, to the detriment of those who have 8 relied on the criteria to engage in the bidding process. 9 Those actions by the defendant were actions done in 10 the course of preparing the statement. It was explicit 11 in the Airports Commissions' terms of reference that the 12 output of their work should be material which should be 13 suitable to support an NPS. 14 Secondly, neither the defendant nor HAL take 15 a process point as a basis for resisting the claimant's 16 challenge to the reasons which are set out in the NPS, 17 that is grounds which are originally 4 and 5. 18 On their case, therefore, it would follow that if 19 the defendant has a reason for designating the NPS that 20 is bad in law, he could shield that bad reason from 21 scrutiny by the courts by simply failing to list it in 22 the NPS which is put before Parliament. 23 The defendant is correct that the claimant has nto 24 complained that the defendant's failure to record in the 25 NPS the lack of the guarantee as a reason for his 98 1 decision constitutes a breach of his duty in 2 section 5(7) to give reasons. 3 The claimant's lack of complaint in this regard is 4 not because the failure doesn't amount to a breach of 5 section 5(7), but because of a breach constituting no 6 more than a failure to add another lawful reason to the 7 list of reasons would not be a sufficient basis to seek 8 a quashing of the NPS. 9 The complaint which is made is much more 10 fundamental. It is that the defendant's decision is 11 tainted by an unlawful reason and the unlawfulness of it 12 cannot be cured simply by reciting it in the NPS and 13 getting parliamentary approval for it. As the 14 defendant's case is advance in the skeleton argument, 15 that is an important consideration because the defendant 16 now apparently asserts the delivery reason given in the 17 NPS is a reason which embraces the failure to provide 18 a written guarantee from HAL. 19 To the extent that anything further is required, we 20 make the following submissions: firstly, HAL asserts 21 that the reason for supporting the NWR or articulating 22 the airport's NPS it is not open to the claimants to 23 substitute their own reasons for the defendant's 24 decision and then seek to attack those reasons. 25 This argument relies on the defendant's earlier 99 1 position, that the lack of the guarantee was not any 2 part of the NPS. In the light of the defendant's 3 current position, such an argument could not stand. 4 But, in any event, it is plainly beyond the peradventure 5 that the absence of the guarantee was a reason and an 6 important reason for the defendant deciding to reject 7 the ENR. No one, the defendant included, denies as 8 much. 9 Secondly, once that is accepted HAL's position 10 becomes that if a government minister gives a reason for 11 doing something and accepts that was part of his 12 motivation for the action, it ceases to be a reason for 13 his action. If he then fails to record it expressly and 14 separately in a written list of reasons that he makes 15 public. Such a proposition, we submit, is repugnant to 16 good government because, if accepted, it would mean that 17 the executive could take decisions that were motivated 18 by unlawful reasons and then shield those decisions from 19 the courts through the simple expedient of recording 20 only the lawful reasons and omitting any record of the 21 unlawful reasons. 22 I draw attention -- we don't need to go to it now, 23 because it is an example -- to the unannounced criteria 24 in ex parte Khan. 25 Also, it is referred to in that Bhatt Murphy, 100 1 something we'll shall be coming to later. 2 Thirdly, the duty to give reasons is here properly 3 interpreted as a duty to give all the reasons for the 4 decision in question. Not just a duty to give only 5 those reasons that could withstand judicial scrutiny, 6 whilst keeping hidden those which cannot, otherwise 7 there is the risk of abuse, which is what we have drawn 8 attention to. 9 On HAL's view of the law, the defendant could make 10 his unlawful reason disappear simply by not giving it as 11 a reason for designation. 12 Fourthly, in the instant case there is no 13 opportunity for the defendant to suggest that he changed 14 his mind about the unlawful reason and, indeed, he does 15 not seek to say so much. It is plain on the facts the 16 defendant continued to be motivated by the lack of 17 guarantee from HAL throughout the process, 18 from August 2016 through to 2017 and 2018, up to the 19 points of designation. He had ample opportunity to 20 recant, but chose not to do so. 21 In respect of the defendant's case, the defendant 22 necessarily now accepts that the lack of guarantee was 23 a reason for his decision. He now advances the case 24 that the lack of guarantee was indeed taken into account 25 in the reasons given in the NPS for rejecting the ENR 101 1 under the delivery heading. 2 In those circumstances, it follows that as a matter 3 of public law principles that if it was unlawful for the 4 defendant to have regard to the matter because it 5 breached EU competition law, or the claimant's 6 legitimate expectation, the decision ought to be 7 quashed, subject only to the court's discretion under 8 the Senior Courts Act. The court is -- and I quote here 9 from Lord Woolf in Coughlan. 10 The court is there to ensure that the power to make 11 and alter policy has not been abused by unfairly 12 frustrating, legitimate individual expectations. 13 Parliament cannot make a reason for designation of 14 the NPS unlawful if it is unlawful by the time it got to 15 Parliament. Whilst the courts cannot question the 16 lawfulness of an Act of Parliament. These are not such 17 proceedings. Section 13 of the Act is concerned with 18 questioning the lawfulness of an executive policy 19 statement, albeit one that requires parliamentary 20 approval. It is the function of the Secretary of State 21 to prepare the NPS, including the reasons for it. If 22 those reasons are unlawful, they cannot become lawful 23 simply because Parliament approves them. 24 This is a very different case to the ones cited by 25 the defendant, paragraph 93 and 94 of his skeleton, 102 1 where the court was dealing with a question of moral or 2 political judgment. That was the Countryside Alliance 3 case or where there were questions of economic or 4 political judgment. The defendant adduces no evidence 5 of a consideration by Parliament of the issue of the 6 guarantee. 7 In addition, as we pointed out in this case, 8 section 13 has been deliberately worded with a wide 9 remit to embrace the whole process of the formulation of 10 an NPS, and I invite the court's attention -- I will 11 return to it if necessary at a later stage -- to the 12 Court of Appeal decision in Javed and the court's 13 approach to question their subordinate legislation, 14 including questioning it in circumstances where -- as 15 I'll quote in the next paragraph -- the questioning 16 might be discordant with statements in Parliament. 17 As I say at 7.14, relevant in this regard is the 18 fact that Javed was referred to in paragraph 18 of 19 Toussaint, in which the approach of the Court of Appeal 20 was confirmed that it was the right and duty of the 21 court to review the legality of subordinate legislation, 22 and that the court can review the materials and facts 23 and form its own judgment on the legality, even though 24 the result might be discordant with statements made in 25 parliamentary debate. 103 1 The same must be apply with even greater force to 2 reasons given in a government policy document. Simply 3 because the government persuades Parliament that the 4 reasons are lawful, it should not prevent the courts 5 from declaring they are unlawful if, as a matter of law, 6 that is the case. The lawfulness of executive action is 7 a matter to be determined by the courts, not by 8 Parliament. 9 My Lords, we move now from that perhaps rather 10 lengthy explanation of the background to ground 1. It 11 may be convenient to do that after the short 12 adjournment. 13 LORD JUSTICE HICKINBOTTOM: I think that is probably right. 14 MR JUSTICE HOLGATE: There are a couple of other authorities 15 that I think we were sent by email; have they found 16 their way into the bundles? 17 MR KINGSTON: Yes, they have. 18 MR JUSTICE HOLGATE: At some stage, no doubt, you will be 19 dealing with Ms Low's second witness statement? 20 MR KINGSTON: Yes. 21 LORD JUSTICE HICKINBOTTOM: 2 o'clock. Thank you very much. 22 (1.00 pm) 23 (Luncheon Adjournment) 24 (2.00 pm) 25 104 1 Submissions by MR O'DONOGHUE 2 MR O'DONOGHUE: My Lords, there is a further speaking note 3 that I hope has made its way to your Lordships. 4 LORD JUSTICE HICKINBOTTOM: It hasn't yet. 5 MR O'DONOGHUE: For your delight and delectation. 6 LORD JUSTICE HICKINBOTTOM: The first speaking note was 7 headed "speaking note 1", which I thought might be 8 in terrorem, but promised delights for the future. 9 MR KINGSTON: I am afraid it does presage further delights, 10 and if I have been more technically proficient I might 11 have combined them all. But since I prepared them 12 separately, I am afraid they have all come separately. 13 MR O'DONOGHUE: My Lords, continuing with this avenue of 14 pleasure. I am going to seek to emulate Mr Kingston, by 15 taking this reasonably briskly, subject of course to 16 your Lordship's questions. In terms of a terminus, with 17 a fair wind I hope to be done by 3.30, but we'll have to 18 see how we go. 19 LORD JUSTICE HICKINBOTTOM: Yes, thank you. 20 MR O'DONOGHUE: My Lords, starting with what is common 21 ground, first a very important point: it is common 22 ground that the defendant requested the claimant to 23 obtain a written guarantee from HAL, to the effect that, 24 if C's ENR's scheme was selected by the government, HAL 25 would agree to implement it. 105 1 So, the fact of the guarantee is common ground. 2 It is also common ground in terms of the technical 3 legal conditions that they are threefold. There must be 4 a State measure. It is related to a privileged 5 undertaking. 6 Second and third, the State measure must give rise 7 at least to a risk of abuse of a dominant position or, 8 alternatively, an actual abuse. 9 What I want to do for the next 90 minutes or so is 10 to distill the claimant's positive case on these 11 conditions and respond to the defendant's skeleton. 12 LORD JUSTICE HICKINBOTTOM: Yes. 13 MR O'DONOGHUE: My Lords, condition 1, in my submission, 14 ought to be uncontroversial because it is not contested, 15 as we apprehend it, that the guarantee is a State 16 measure. We make the point that obviously it is an act 17 or decision of a public nature, in this case by a 18 minister of the Crown. As a legal matter, the concept 19 of a State measure must be interpreted broadly. You see 20 the reference there, and an administrative provision or 21 measure suffices. 22 As we understand it, the defendant does take some 23 points about the content of the State measure and, in 24 particular, its nature and importance. In our 25 submission, this is not relevant to the first condition, 106 1 which is the existence in fact of the guarantee, which 2 is indicated is common ground. So, we shall wait to 3 hear from Mr Palmer as to which of these three legal 4 conditions the question of the content of the guarantee 5 is said to go to. 6 MR JUSTICE MARCUS SMITH: You mentioned, Mr O'Donoghue, 7 guarantee, but you are really are using it as shorthand 8 for the request of a guarantee provided by HAL in 9 relation to the scheme. 10 MR O'DONOGHUE: Yes, as a technical matter, that is the 11 measure, but of course the practical implementation of 12 that request as a guarantee is a composite point. 13 MR JUSTICE MARCUS SMITH: Yes. 14 MR O'DONOGHUE: Moving on to the second condition, 15 privileged undertaking, an important preliminary point. 16 In the claimant's submission it is important that the 17 question of privileging is looked at in the round, since 18 it involves a comparison of HAL's overall rights and 19 privileges compared to third parties. 20 We say this is precisely how the defendant himself 21 looked at HAL. There is a March 2018 ministerial 22 submission -- you see the reference there -- in which 23 the following points were noted: 24 In terms of subject matter, the ministerial 25 submission concerned alternative promoters and 107 1 stakeholder handling at Heathrow, and the defendant 2 noted, first, the unique status of HAL with regard to 3 any DCO application at Heathrow. 4 Second, this unique status provides the rationale 5 for engagement with HAL, as opposed to any other 6 promoter. 7 Third, the need to provide wording of comfort to HAL 8 on the question of alternative promoters, and this was 9 because HAL and, in particular, their shareholders 10 sought such comfort. 11 Fourth, the government should continue to engage 12 exclusively with HAL as opposed to any other promoter on 13 aspects relating to the delivery of the preferred 14 scheme. 15 Fifth, independent proposals cannot be realistically 16 taken forward without the support of HAL. 17 Sixth point, the reason to favour HAL was that 18 Heathrow is already an operational airport under one 19 management. 20 Then, in annex D of the same ministerial submission, 21 a series of further points that go to the question of 22 HAL's uniqueness, including: 23 "Other promoters could not deliver the scheme alone. 24 They would have to work in conjunction with HAL. HAL is 25 the owner of the airport and land, placing it in 108 1 a particularly strong position. Difficult for another 2 party to compulsory purchase HAL's assets and land. 3 Would require compelling public interest." 4 The statutory undertaker point to which I will come 5 back. 6 Other promoters would need HAL's acquiescence and 7 collaboration, including for any DCO they would wish to 8 raise, and on noise mitigations and so on. 9 The sixth, and an important point, HAL had already, 10 by that stage, committed to assuming financial 11 responsibility for statutory blight and it lists various 12 other further other considerations, putting HAL in the 13 driving seat. 14 There is then a second document, which is one of the 15 new documents added to the bundle yesterday, which is 16 a relationship framework document between the defendant 17 and HAL. Again, from 2018. 18 The purpose of this document, it states: 19 "This particular relationship is needed given the 20 role and position of Heathrow and the national 21 importance of the NWR at Heathrow." 22 Over the page, that document essentially makes the 23 same points made in the ministerial submission, which is 24 that HAL is the only credible promoter that is able to 25 deliver the scheme in its entirety, either by itself or 109 1 in collaboration with others. Then there is a listing 2 of essentially the same considerations as we saw in the 3 ministerial submission. 4 So, there are two important documents emanating from 5 the sphere of the defendant, attesting to the unique 6 status of HAL at Heathrow. 7 MR JUSTICE HOLGATE: You are relying there on documents in 8 2018, after the ANPS was designated, are you? Are you 9 saying those documents describe what the position was as 10 regards HAL at the time of the -- 11 MR O'DONOGHUE: My Lord, yes. If one looks at each and 12 every one of those considerations -- 13 MR JUSTICE HOLGATE: They pre-existed. 14 MR O'DONOGHUE: -- they are as true in 2016 as 2018. 15 MR JUSTICE HOLGATE: Yes. 16 MR O'DONOGHUE: Then moving on to the legal test for 17 privileging. So, we have the Ambulanz Glockner 18 formulation at paragraph 3.3, which appears in both 19 skeletons. 20 There is a further case in the bundle, the FIFA 21 case, where the General Court of the European Union 22 distinguished at least three categories of special or 23 privileged rights. It is paragraph 177. The court 24 said: 25 "Such rights are at issue, (1) when the public 110 1 authorities are granted a monopoly; (2) when they can 2 prevent the entry of a competitor into the market sphere 3 of the rights holder on grounds relating to potential 4 adverse effects on the operation and profitability of 5 the right holder's activities, and (3) where the rights 6 holders are entitled to influence the terms under which 7 the activity in question may be pursued by his 8 competitors according to his interests or according to 9 the consequences of their activity on that market or 10 even a neighbouring market." 11 I will come back to those technical legal 12 conditions, and particularly the second and third 13 formulations are important in this case. 14 One final point on the legal test. This has been 15 put in other ways, as a formulation of the Advocate 16 General Kokott, which says privileged rights arise where 17 the characteristic feature of such special rights is 18 that they give rise to a special relationship between 19 the State and the favoured undertaking, and accord more 20 favourable treatment to the undertaking than its 21 competitors. 22 So, we say a State measure creating a competitive 23 advantage can give rise to privileging. 24 In terms of the privileging in this case, we rely on 25 four cumulative considerations. Just to list these for 111 1 your Lordships' benefit. We rely on former State 2 monopoly status. 3 Second, we rely on the licensing regime, which 4 involves discretions exercised in HAL's favour. 5 Third, we rely on the State measure itself involving 6 privileging. So, the State measure and the act of 7 privileging in this case are one and the same thing. 8 Fourth, we rely on the statutory undertaker point. 9 Starting with State monopoly. The defendant says 10 that there is no authority for why its former State 11 monopoly affects the analysis under Article 106 and 102. 12 We say, first of all, that is counterintuitive. The 13 raison d'etre of Article 106(1) is concerned with public 14 undertakings and former public undertakings, who retain 15 some privileges because of their State monopoly 16 antecedents. Thus Article 106(1) will in particular 17 apply in sectors that have been liberalised and are 18 former State monopolies. 19 Second, we say, in any event, there is ample 20 authority as to why a former legal monopoly status is of 21 significance. 22 First of all, there is the Connect Austria case. 23 There, at paragraph 86, the Court of Justice noted that 24 Mobilkom's status as a former monopoly: 25 "... which already enjoys a number of advantages 112 1 such as a presence on the markets for analogue mobile 2 ... communication services ... digital telecommunication 3 services and a sizeable number of existing clients." 4 We say, likewise in this case, HAL enjoys advantages 5 as a result of Heathrow's status as a former State owned 6 airport. 7 It acquired an existing monopoly with a ready made 8 multi-million customer base in the form of airlines and 9 airport users. 10 This was already in the tens of millions by the time 11 of privatisation, in 1987. 12 Second, there is the Slovak Telekom case, and 13 there -- the General Court, this time. 14 First of all, I noted the general point that the 15 dominant firm has a special responsibility to the market 16 and the fact that such a position has its origins in 17 a former State monopoly must in that regard be taken 18 into account. 19 Then, over the page, we see the actual taking into 20 account in that case. The bottom of the quotation, the 21 position of Slovak Telekom, which was a State monopoly 22 until the year 2000: 23 "... had been protected by exclusive rights and 24 Slovak Telekom had been able for decades to fund 25 investment costs from monopoly rents from the provisionn 113 1 of voice telephony services and public funds." 2 In our submission, so it is with Heathrow. Heathrow 3 started as a tiny airport in 1929, in an area known at 4 the time for orchards and vegetable allotments. It was 5 partly used as a military airport during the Second 6 World War, and eventually for civilian purposes after 7 the war. 8 The critical point is that prior to privatisation in 9 1987, all of the runways and each of terminal 1, 2, 3 10 and 4 and associated facilities had been constructed 11 using taxpayer funds, serving tens of millions of 12 passengers. That same asset is now producing an annual 13 income of £3 billion for HAL. We make the point that 14 the vegetable garden has become one of the most 15 privileged and valuable assets in the world. 16 Indeed, one might ask rhetorically how HAL can 17 charge the highest aeronautical charges anywhere in the 18 world without benefitting from any privileges. The 19 reality is that Heathrow Airport is the ultimate 20 privilege, a monopoly that has now lasted for more than 21 70 years and is said to expand dramatically, indeed, as 22 we go forward, to HAL's continued benefit. 23 The second point of privileging is the licensing 24 regime. These submissions are in two parts. I want to 25 outline the basic general features of the licensing 114 1 system and the legislation, which I can take very 2 briskly. I then want to focus on the content of HAL's 3 actual licence and, in particular, the regulated asset 4 based component, which is important. 5 In terms of the general features, this time on 6 page 10, starting on paragraph 3.11. 7 So, the basic position is that without a licence HAL 8 could not charge for airport operation services at 9 Heathrow at all. The regime, in terms of its basic 10 components, is contained in the 2012 Act. It works in 11 the following way: under sections 3.1 and 3.2, the 12 person who was an operator of an airport in an area that 13 is a dominant area, at the dominant airport, but does 14 not have a licence may not require any person to pay 15 a relevant charge. We say it is significant that 16 section 3 is headed: 17 "Prohibition." 18 There is a prohibition on charging without 19 a licence. 20 Therefore, the licence confers the right to charge 21 for airport operation services and one sees an express 22 reference to that in section 3.8 and, in particular, 23 subparagraph (c). 24 Then 3.14 -- 25 MR JUSTICE HOLGATE: Was there a statute before the 2012 115 1 Act, which imposed a similar regulatory regime? 2 MR O'DONOGHUE: Essentially, yes. The Airports Act of 1986 3 was the prelude to privatisation, and that had 4 a regulatory licensing and component. 5 MR JUSTICE HOLGATE: That leads to my next question: the 6 imposition of regulation broadly speaking coincided with 7 privatisation. 8 MR O'DONOGHUE: My Lord, yes, yes. 9 MR JUSTICE HOLGATE: You have drawn attention, 3.12, to the 10 dominant area to dominant airport test. This was 11 a point pleaded in the amended statement of facts and 12 grounds, and that was dependent upon the CAA, as 13 I understand it, being satisfied that a market power 14 test was satisfied. That is not mentioned in the 15 speaking note, but is that part of the submission? 16 MR O'DONOGHUE: It is the same point. 17 MR JUSTICE HOLGATE: Could you just, for people like 18 myself -- I am sure my Lords understand this far 19 better -- what is a market power test? 20 MR O'DONOGHUE: It is the regulatory test for establishing 21 a dominant operator in a dominant airport area. So, it 22 is the Civil Aviation Authority going through 23 a consultation process, reviewing the market at 24 Heathrow, and designating Heathrow as being, in this 25 case, a monopolist -- 116 1 MR JUSTICE HOLGATE: That's why I'm asking -- 2 MR O'DONOGHUE: -- of the area at Heathrow, comprising land 3 and buildings. 4 MR JUSTICE HOLGATE: So, would a market power test in 5 statutory form have been applied at the time of 6 privatisation? 7 MR O'DONOGHUE: I think the answer is, essentially, yes. 8 MR JUSTICE HOLGATE: That position, that test has to 9 continue to be satisfied, does it, to justify continued 10 regulation? 11 MR O'DONOGHUE: Yes, there has to be ongoing regulation and 12 ongoing licence. 13 MR JUSTICE MARCUS SMITH: Mr O'Donoghue, is your point then 14 that there is a certain joining of the hip between the 15 privatisation under the Airports Act 1986 and the 16 imposition as a consequence of a State monopoly 17 transiting into private ownership, of there being a need 18 for extante controls, to ensure that the market position 19 that exists by virtue of privatisation is not abused? 20 MR O'DONOGHUE: Yes. 21 MR JUSTICE HOLGATE: The regulation is a consequence of the 22 monopolistic advantage. 23 MR O'DONOGHUE: The privilege, in other words. 24 MR JUSTICE HOLGATE: I was trying to use a neutral word. 25 MR O'DONOGHUE: My Lords, one final point, there is not an 117 1 absolute obligation on the CAA to grant a licence. This 2 time at paragraph 3.14. There are grounds on which 3 a licence can be refused. 4 Under section 14.2, the CA can grant or refuse 5 a licence. 6 Then, at section 16, there are various grounds on 7 which a licence can be refused. For example, a licence 8 had previously been revoked. The person is not an 9 operator, and so on. So, there is a residual discretion 10 not to grant a licence under certain defined 11 circumstances. 12 The critical point is the content of the licence 13 that HAL has, and the starting point is that, under 14 section 18 of the Act, the CA has full discretion as to 15 the terms and conditions of a licence. 16 To my Lord's point, section 18(1)(a): 17 "A licence granted by the CA may include such 18 conditions as the CA considers necessary or expedient, 19 having regard to the risk for the right holder of the 20 licence may engage in conduct that amounts to an abuse 21 of dominance, or abuse of substantial market power in 22 a market for airport operation services." 23 Then section 18(1)(b): 24 "Such other conditions as CA considers necessary, 25 expedient having regard to its overriding duty." 118 1 In this case, the CA has chosen to grant HAL 2 a licence which includes a system of regulated 3 asset-based regulation. You see the reference to the 4 copy of the licence itself. 5 The critical point is that the particular form of 6 regulation adopted by the CAA, the RAB, is not mandated 7 under the Act. There are not objective legal conditions 8 under the Act that inexorably lead to a RAB system of 9 licensing. That is a discretionary choice made by the 10 regulator. 11 In terms of the detailed content of the licence and 12 its privileged nature, we rely in particular on a 2014 13 notice -- 14 MR JUSTICE HOLGATE: What is the legal consequence of that, 15 the fact that it is an exercise of discretion? Does 16 that lead to any point in your analysis? 17 MR O'DONOGHUE: My Lord, yes. So, if there is an exercise 18 of a discretion to confer a benefit on HAL, we say that 19 is a form of privileging. 20 By contrast, if the legislation predetermines in 21 purely objective terms that everyone will inexorably be 22 subject to the RAB, that would be an objective state of 23 affairs and would not be a privileging in that sense. 24 So, the discretionary aspect to the RAB and its 25 content can itself be a form of privileging. 119 1 So, to take an example, suppose there was an auction 2 for spectrum for a telecommunications licence, if the 3 telecoms regulator set objective conditions, whereby the 4 highest bid would be awarded the spectrum, that would 5 not be a privileging. 6 Whereas if there was a discretion to be exercised in 7 favour of one undertaking, according to conditions which 8 are not predetermined and are not objectively mandated 9 by the legislation, that is a form of privileging. 10 We say that the RAB is such a measure, for reasons 11 I will come to. 12 MR JUSTICE MARCUS SMITH: Yes, just to put down a marker 13 when you do come to that. Surely when the CAA is 14 considering what form of price regulation it should 15 impose, it is looking at the very opposite of HAL's 16 interests. It is looking at the interests of the 17 consumers in the market in which HAL is dominant, and 18 one would infer that it has adopted an RAB basis of 19 price control because that is the best way of 20 controlling the dominant undertaking in this market, in 21 this context. 22 MR O'DONOGHUE: My Lord, that is the very point I am coming 23 to. We say it is not quite that simple. Essentially, 24 the answer is no. 25 So, my Lords, the notice copying the licence, 120 1 CAP 1151, and you see the reference to the document in 2 the bundle. So, this is a Companies House licence, and 3 it essentially explains the operation of the RAB 4 mechanism. 5 The important point is paragraph 1.24 of this 6 notice, which is at the bottom of page 12. It says: 7 "The RAB and RPI-X form of control continue the 8 stable regime of economic regulation of the airport, 9 which provides stability for investors and users alike 10 ... the form of regulation adopted for HAL provides an 11 unusually benign climate for investment compared to 12 companies in competitive markets. For instance, the RAB 13 gives a high degree of confidence the investments can be 14 remunerated." 15 Subject to efficient operations. Under the CAA's 16 approach: 17 "Investments are remunerated from when they are 18 made, rather than from when they begin to operate." 19 So, the particular form of discretion exercised as a 20 regulatory licencing matter by the CA in this case is, 21 by their own admission, something which would not 22 pertain under conditions of competitive affairs. It is 23 a discretion and a pro investment privilege conferred on 24 HAL through the exercise of the CAA's discretion. 25 In our submission, a benefit which cannot be 121 1 obtained in competitive markets is, by definition, 2 a privilege. 3 That is the discretion that the CA has exercised in 4 HAL's favour. It is a form of protection. It is not 5 something which was mandated by the legislation. It is 6 a discretion in HAL's favour, in a way that would not be 7 obtained under competitive conditions. 8 We say, at 3.20, the Competition Commission has 9 picked up on exactly the same point in its 2009 reports. 10 So, they say, the RAB "may have the undesirable effect 11 of encouraging inefficient investment by the company. 12 It may also provide incentives for strategic behaviour 13 by the airport operator to inflate the size of the RAB 14 and may discourage the application of charging 15 structures that make efficient use of capital." 16 The RAB provides an incentive for BAA at each 17 regulatory review to make the projected capital 18 expenditure and operating expenditure as large as 19 possible. It incentivises "BAA to play the regulatory 20 game." 21 BAA, in the report, acknowledged these 22 inefficiencies. 23 There is ample public record of the RAB funding very 24 high dividends for HAL's shareholders and investors. 25 The Financial Times article of 12 August 2018, the 122 1 effect of the RAB has allowed Heathrow to operate with 2 almost no equity capital. According to HAL's 2017 3 accounts "investors have been pulling out more in 4 dividends than Heathrow has been earning". There is 5 a second press report referenced there as well. 6 To conclude on the discretion point, for other 7 airport operators who are licensed they do not benefit 8 from the same RAB system of price regulation that HAL 9 does. For example, Gatwick's owners are not licensed in 10 this way. Their licence works on a commitments basis 11 with Gatwick Airport Limited committing to certain 12 specific prices, which are negotiated bilaterally with 13 airlines and then codified in its licence. 14 The privileges and benign effects of the RAB were 15 critical in the context of HAL's own bid in the 16 expansion at Heathrow, and this emerges most clearly 17 from the statement of principles set out at 18 paragraph 3.25. 19 It says HAL is: 20 "A private sector entity with various shareholders 21 pursuing a commercial business opportunity for airport 22 expansion, subject in particular to the economic 23 regulatory system for airport operators." 24 Then part 3, paragraph 15: 25 "HAL and the Secretary of State both acknowledge 123 1 that the following third party support will be critical 2 dependencies for HAL." 3 One of those dependencies is a "determination by the 4 CAA of the regulatory treatment of planning and 5 development costs". 6 Then it says: 7 "In line with the existing regulatory framework, 8 such that costs can be added to the RAB." 9 Then part 4 of the statement of principles, 10 paragraph 1.3: 11 "HAL's position is that its ability to proceed with 12 the scheme is contingent upon the following 13 conditions ..." 14 1.3.1: 15 "A regulatory determination which ensures that all 16 economically and efficiently incurred costs are included 17 in the RAB." 18 And so on. 19 Then, the bottom of the page, part 4, paragraph 1.4: 20 "HAL has assumed for financial and planning purposes 21 that in the event the scheme progresses HAL's planning 22 costs are fully recoverable through the regulatory 23 framework." 24 3: 25 "HAL's financial conditions [which we have just 124 1 seen] will be met. 2 Then paragraph 1.6: 3 "The Secretary of State acknowledges that ... 4 a regulatory settlement that is consistent with HAL's 5 financial conditions is a key component in HAL's 6 commercial decision on whether or not to proceed with 7 investment related to the scheme." 8 Paragraph 17: 9 "HAL has communicated to the Secretary of State that 10 it is engaging with the CAA in respect of a resolution 11 of the treatment of interim costs and that 12 a determination of the CAA on this matter is expected on 13 1 September to enable HAL to meet its key delivery 14 milestones." 15 Then appendix 3 of the statement of principles, 16 a letter from HAL's bank: 17 "We are of the opinion that the scheme is capable of 18 being privately financed with no need for government 19 support within the existing regulatory framework and 20 having regard to part 4 ..." 21 Of the Statement of Principles, which we have just 22 seen. 23 This was also how the defendant had understood HAL's 24 position. There is a ministerial submission, 25 13 June 2016, where the following is noted: first, the 125 1 Statement of Principles were approved on the basis that 2 they provide clarity as to the commercial basis 3 deliverability of the schemes. The Statement of 4 Principles contain important reputational commitments, 5 including on the fact that they are financeable within 6 the regulatory scheme, and the Statement of Principles 7 would provide leverage for HAL for providing or 8 obtaining reasonable regulatory settlement. 9 In fact, the position as of today is that the CAA 10 has taken the positive decision to allow HAL to recover 11 costs it is now incurring in connection with its NWR 12 scheme through the licence. In particular, the CAA has 13 amended the licence to allow HAL to recover up to 14 10 million per annum of its capital operating financing 15 costs of applying for planning permission. You see the 16 reference to the specific condition there. 17 Second, it has allowed costs above 10 million to be 18 capitalised and recovered by way of HAL's existing RAB, 19 and there is a reference to a CAA document there as 20 well. 21 So, in our submission, there is a continued link 22 between the privilege, ie the protection afforded by the 23 RAB, and the State measure. The guarantee permitted HAL 24 to add the much higher capital costs of its own scheme 25 to the RAB. This also explains why HAL was put in 126 1 a conflict of interest position when it was asked to 2 guarantee the claimant's cheaper ENR scheme. 3 It is notable in this regard that the HAL scheme had 4 by far the biggest adverse impact on aeronautical 5 charges. There is a reference to the AC report, 6 £3 billion higher costs. 7 Then, at table 11.4 in the final report, there is 8 a list of the impact of the scheme costs on aeronautical 9 charges, and the HAL scheme had the highest impact on 10 charges. 11 Then we see from HAL's own documents that they 12 assume an air charge increase from £20, which is the 13 current level, to £24 on average, but peaking at £27.50, 14 which is a 40 per cent increase, than flattening. So, 15 the financing of HAL's scheme through the RAB will 16 involve substantial increases in aeronautical charges. 17 MR JUSTICE HOLGATE: I am sorry, just to follow, in 3.28, 18 line 2: 19 "The guarantee permitted HAL to add the much higher 20 capital costs." 21 Which guarantee is that? 22 MR O'DONOGHUE: My Lord, I will come on to this. This is 23 the effect of the State measure because the State 24 measure, we say, effectively allowed HAL to veto 25 a competing cheaper scheme and therefore ensure that its 127 1 more expensive scheme at Heathrow would have -- 2 MR JUSTICE HOLGATE: This is a consequence of the guarantee? 3 MR O'DONOGHUE: Yes. 4 MR JUSTICE HOLGATE: Right, okay. 5 MR O'DONOGHUE: The third privilege is that the State 6 privilege can itself be the privilege. We say that from 7 a number of cases the State measure and the privilege 8 can be one and the same. 9 In the MOTOE case, the Greek motorcycling case, it 10 was the right to consent to the authorisation of 11 competitors' motorcycling events that was both the 12 privilege -- that is paragraph 43 of the judgment -- and 13 the State measure which gave rise to the risk of an 14 abuse of a dominant position. That is at paragraphs 49 15 to 51. 16 The same approach was taken by the Court of 17 Justice in Ambulanz Glockner. In that case, the same 18 provision of national law was said to confer special or 19 exclusive rights; that is paragraph 24 of the judgment. 20 Also to give an unfair advantage to the two incumbent 21 organisations by allowing them to provide such services 22 exclusively and therefore limiting the market to the 23 prejudice of consumers. That is at paragraph 43. 24 We say, in the present case, there was a competition 25 and within that competition the defendant permitted HAL 128 1 effectively to veto the claimant's competing scheme by 2 refusing to give the written guarantee. That tilted the 3 playing field firmly in favour of HAL's scheme. Or put 4 another way, the measure gave HAL a uniquely privileged 5 position within the competitive bidding, which then HAL 6 proceeded to benefit from by refusing the guarantee. 7 MR JUSTICE HOLGATE: Can we just understand what you mean by 8 "veto" because that again is implying a consequence, is 9 it not? A consequence which flows from the way HAL 10 reacted to the request for the guarantee. Just simply 11 to say either nothing in response to that question or to 12 answer it by saying "I will not ..." 13 MR O'DONOGHUE: As Mr Kingston has shown you, we say that 14 HAL actually refused to provide the guarantee. So, 15 there was a case of actual refusal. 16 MR JUSTICE HOLGATE: Sorry, what I am struggling to say is 17 the effect of even that positive statement depends on 18 the reaction of the audience, the person asking the 19 question. What were they going to do with that? 20 MR O'DONOGHUE: My Lord, yes, it is a composite point. So, 21 stage one is there was an actual refusal and, stage two, 22 we say that the refusal, the lack of a written 23 guarantee, had a decisive adverse effect in terms of the 24 decision-making of the claimant's bid. 25 MR JUSTICE MARCUS SMITH: It is only veto if the absence or 129 1 failure to give a written guarantee is so unfundamental 2 to the Secretary of State's consideration that he would 3 not allow the ENR scheme to go forward without the 4 provision of that guarantee. 5 MR O'DONOGHUE: My Lord, that would be a clear case, but, in 6 our submission, the materiality of that factor would be 7 sufficient. 8 MR JUSTICE HOLGATE: Do you need to put it as high as 9 a veto? 10 MR O'DONOGHUE: No. My Lords, as I will come to, we say 11 that the tilting of the playing field, inequality of 12 opportunity and conflict of interest is itself 13 a structural problem within the competition that is 14 inherently distorted. 15 MR JUSTICE HOLGATE: That is a risk based approach. 16 MR O'DONOGHUE: It is a preventative question. 17 MR JUSTICE MARCUS SMITH: Suppose we lose the language of 18 "veto" and simply use the language of "material 19 consideration", and let's suppose that the presence or 20 absence of a written guarantee from HAL was a material 21 consideration no higher than that for the decision as to 22 which scheme to prefer; does that make any difference to 23 your analysis? 24 MR O'DONOGHUE: My Lord, on the structural point, no, 25 because the vice is that while the competition is 130 1 pending there have to be conditions of equality of 2 opportunity. The second you give a competing bidder any 3 say in the fate of the other bid, that is an inherently 4 distortive event within that competition. So, we say 5 that once that structural feature is present -- and 6 I will show your Lordships the cases, there are about 7 half a dozen which make that good -- that is 8 a sufficient risk to constitute a distortion of 9 competition. If it rises to the level of a complete 10 veto, so much the better. 11 But we are talking about a distortion of 12 competition, and it is the giving of a say by one bidder 13 in the fate of another bid, while the competition is 14 pending, that is the vice. 15 MR JUSTICE MARCUS SMITH: So, what you are saying, I think, 16 is that in requesting the guarantee the Secretary of 17 State, as it were, handed control of a material factor 18 to HAL, which then fed back into the decision-making 19 process, but it makes no difference to your argument as 20 to whether the fact in question was a decisive 21 sine qua non or merely a material factor in the 22 decision. 23 MR O'DONOGHUE: My Lord, yes. Once the equality of 24 opportunity in the bidding is distorted, that is 25 sufficient for my purposes. 131 1 MR JUSTICE MARCUS SMITH: Yes. 2 LORD JUSTICE HICKINBOTTOM: If that analysis is correct, 3 then leaving strict competition points aside -- which 4 you are dealing with -- there is a public law point 5 about material considerations. It is a different legal 6 basis upon which the matter could be put. I think it is 7 the same point, but it is just a different analysis. 8 But if you start having material considerations 9 which aren't taken into account, then you have, from 10 a public law point of view, a pretty straightforward 11 public law point. 12 MR O'DONOGHUE: I think Mr Kingston will come back to that 13 point in more detail. 14 To make it crystal clear where I am coming from, if 15 my submission is correct, that this structural defect in 16 the competition is distortive, then that is an unlawful 17 reason in and of itself. 18 MR JUSTICE MARCUS SMITH: Yes, I am grateful. It is just 19 I wanted to understand whether we had to go so far as to 20 find a veto, in the way you have put it, in order for 21 you to succeed or not because that obviously affects how 22 we have to consider the various matters. 23 MR O'DONOGHUE: Just to give you one obvious example -- 24 I will come to this, but the Ambulanz Glockner case, the 25 two incumbents were simply asked whether they consented 132 1 to the independent competitor. They were not the 2 decision-makers. There was no statutory criterion 3 whereby their lack of consent was decisive. So, the 4 structural vice was the mere fact that you were asking 5 people with a self-interest in the competition whether 6 a new competitor should be admitted is sufficient. So, 7 that was a case where they were asked for their consent 8 and the actual decision was taken by a public authority. 9 So, it is the interference with the integrity and 10 inequality of opportunity in the competition that is the 11 distortion. 12 LORD JUSTICE HICKINBOTTOM: Just to narrow this point down. 13 In terms of veto, which suggests a refusal or even 14 a failure to give the guarantee requested would simply 15 put an end to the hub proposal as an alternative; that's 16 what I would call a veto. But for the competition 17 analysis, which you have given -- and I think also for 18 the public law analysis, which I think Mr Kingston is 19 going to come on to -- it doesn't matter, does it, 20 whether it is a veto in that sense or whether it is 21 simply a material consideration which, as it were, goes 22 into some balancing exercise? 23 MR O'DONOGHUE: My Lord, yes. 24 LORD JUSTICE HICKINBOTTOM: Mr Kingston can probably answer 25 on the point. It doesn't matter from your point of 133 1 view. 2 MR O'DONOGHUE: No, that is absolutely right. 3 LORD JUSTICE HICKINBOTTOM: Although as a matter of fact in 4 this case you say your primary position is that it was 5 requested on a veto basis. 6 MR O'DONOGHUE: My Lord -- 7 LORD JUSTICE HICKINBOTTOM: That is your primary position. 8 MR O'DONOGHUE: It ties in with the points Mr Kingston went 9 through, which is it is plain as a pikestaff this was 10 the biggest reason, the fundamental reason, and so on. 11 So, as a matter of plain English, subject to 12 parliamentary privilege, we say this was a veto. 13 MR JUSTICE HOLGATE: It may not depend on parliamentary 14 privilege at all, which I think is why we were asking 15 you about low 2. 16 LORD JUSTICE HICKINBOTTOM: It could be a decisive factor 17 without being a veto in the -- decisive factor in 18 a balancing exercise as opposed, as it were, to a silver 19 bullet point. That is all. 20 MR O'DONOGHUE: Just to reiterate my primary position, the 21 fact of distorting the playing field is enough for my 22 purposes. 23 LORD JUSTICE HICKINBOTTOM: I have it, yes. Thank you. 24 MR O'DONOGHUE: At 333, there is one final important point. 25 In our submission an important and aggravating feature 134 1 is that the defendant's decision that the claimant 2 should obtain a written guarantee from HAL was not 3 subject to any restrictions, obligations or controls. 4 It was put in entirely open-ended terms, which 5 essentially left unconstrained HAL's discretion to 6 refuse to provide a guarantee. This very point has come 7 up in the Greek motorcycling case -- you have the 8 references there -- where the open-ended nature and 9 discretionary nature of the consent or authorisation was 10 an aggravating factor in the context of the distortion. 11 We say the same applies here. 12 The final point if I can take it very briskly 13 because a number of your Lordships will be extremely 14 familiar with the statutory undertaking framework. 15 MR JUSTICE HOLGATE: This is not essential to your argument, 16 is it? This is an alternative way of dealing with 17 privilege, by bringing HAL within the concept of 18 a public undertaking. 19 MR O'DONOGHUE: My Lord, we do say it is a composite point. 20 MR JUSTICE HOLGATE: I will come back to my question. As 21 I have understood the skeleton so far, if we decide 22 against you on this point, that doesn't cause your 23 argument to fall to the ground. It is not essential. 24 MR O'DONOGHUE: I need to get home on privileging. How 25 I get home, whether it is 1, 2, 3 or 4, or a combination 135 1 of all four, it doesn't matter. But, in terms of the 2 privileging condition, this is one of my four points. 3 Your Lordship is right, if I don't succeed on four, 4 I have three others. 5 MR JUSTICE HOLGATE: That is what I am asking. 6 MR O'DONOGHUE: To that extent, yes, that is clearly 7 correct. 8 I can take this very rapidly. We say there are 9 three privileges inherent in the statutory undertaker. 10 First, at 3.361, the statutory undertaker, they are 11 exempted from a number of planning permission 12 requirements. 13 The second and third privileges we say are more on 14 point. 3.36.2, they are given special protection from 15 having their land compulsorily purchased and, third, 16 there may be authorisation for any relevant airport 17 operator to acquire other people's land through a CPO. 18 So, there are a series of privileges which are inherent 19 in the undertaker concept, which give HAL rights that 20 other undertakings simply do not have. 21 MR JUSTICE HOLGATE: The second and third characteristics 22 are well-known and, at first, I was struggling to see 23 how that was relevant in this case, but I suppose, and 24 this might be, some might say, a far fetched example, 25 but the DCO process includes power to acquire land 136 1 compulsorily. 2 MR O'DONOGHUE: My Lord, yes, so -- 3 MR JUSTICE HOLGATE: So, this touches upon an alternative 4 approach, which involves, hypothetically, an alternative 5 scheme which government prefers, but notionally the 6 owner of the land says, "I am not willing to go down 7 that road", and yet it's in the public interest that 8 that alternative scheme be promoted and, ultimately, 9 there is this power of compulsory purchase. 10 MR O'DONOGHUE: Yes, but it is potentially very significant 11 to the present case because, of course, we have 12 Mr Arora, and much of his land is comprised within the 13 contours of the NWR scheme. So, that's a very practical 14 example of a situation where, as we move forward, HAL 15 would have a unique privilege, as statutory undertaker, 16 to advance its scheme in a way that someone who is not 17 a statutory undertaker would not. 18 My Lords, turning to the third condition, risk of 19 abuse of dominance. There are three points we wish to 20 make and I will then deal with the defendant's counter 21 arguments. 22 Firstly, a legal point. In terms of the case law, 23 there is a clear and distinct line of case law which is 24 concerned with a State measure that results in 25 inequality of opportunity, gives rise to a conflict of 137 1 interest for the beneficiary of the measure, or 2 otherwise gives rise to a competitive advantage for the 3 beneficiary of the State measure. 4 There are numerous examples of conflict of interest, 5 inequality of opportunity in the case law. In fact, 6 a majority of the Article 106 cases are concerned with 7 conflict of interest and inequality of opportunity. 8 We can take these reasonably quickly. We'll come 9 back to some of the details. 10 MR JUSTICE MARCUS SMITH: Mr O'Donoghue, I don't want to 11 take you out of order, but you have jumped to abuse 12 without defining the market in which HAL is said to be 13 dominant; is that something you are going to come to? 14 MR O'DONOGHUE: That is a point I will come to in some 15 detail because the -- 16 MR JUSTICE MARCUS SMITH: Because -- 17 MR O'DONOGHUE: -- economic market point is something which 18 is taken against me, and I will deal with that in some 19 detail. So, that is part of the response to the counter 20 arguments. Your Lordship is quite right. 21 My Lords, what I am trying to do before we get to 22 that point is to understand, in terms of a distortion of 23 competition, what is the legal test? 24 So, there are a couple of telecoms cases, one of 25 which is called RTT. This is at paragraph 5.5.1. There 138 1 was a parallel French case. 2 So, this concerned a situation where the incumbent 3 telecoms operator was given a role through a State 4 measure of testing competitors' equipments' compliance 5 with technical standards. This was found to involve 6 a conflict of interest since a company with a dominant 7 position would not be temperamentally inclined to take 8 a benign view of competitors' equipments quality. That 9 is at paragraph 25 of the RTT judgment. 10 Then the Greek motorcycling case. This was a case 11 where an entity which itself organised and commercially 12 exploited motorcycling events was given by State measure 13 the task of consenting to third parties' applications 14 for authorisations to organise such events. The Court 15 of Justice said at follows, at paragraph 51: 16 "A system of undistorted competition can be 17 guaranteed only if equality of opportunity is secured as 18 between various economic operators. To entrust a legal 19 person, such as the ELPA, which itself organises and 20 commercially exploits motorcycling events, the task of 21 giving competent administration its consent to 22 applications for authorisation to organise such events 23 is tantamount de facto to conferring upon it the power 24 to designate the persons authorised to organise those 25 events and to set the conditions in which those events 139 1 are organised and thereby placing that entity at an 2 obvious advantage over its competitors ... such a right 3 may therefore lead the undertaking, which possesses it 4 to deny others access to the relevant market. That 5 situation of unequal conditions of competition is also 6 highlighted by the fact that when the ELPA organises and 7 participates in the organisation of motorcycling events, 8 it is not required to obtain any consent in order that 9 the competent administration grant it the required 10 authorisation." 11 A third example of conflict of interest is the 12 Ambulanz Glockner case. This is a German case in which 13 two undertakings together had an exclusive right to 14 provide urgent medical transportation services. There 15 was then a further State measure which required the same 16 undertakings to be consulted in respect of any 17 application made by an independent operator for 18 authorisation. 19 We see, at paragraphs 12 and 13 of the judgment, 20 that the State invited the two incumbents to express 21 their views on the competitors' application for 22 authorisation and, unsurprisingly, they objected saying 23 that the new competition would affect their own existing 24 operations and the State consequently refused. 25 The Court of Justice held, at paragraph 43, that the 140 1 State measure gave "an advantage to those 2 organisations", which already had an exclusive right, by 3 also allowing them to provide services exclusively. The 4 application of the State measure therefore has the 5 effect of limiting markets to the prejudice of consumers 6 by reserving to these medical aid organisations an 7 ancillary transport activity, which could be carried on 8 by independent operators. In other words, the right to 9 be consulted and to object to new competition from 10 independent operators risked creating a de facto 11 monopoly. 12 This was true, even though the ultimate decision was 13 taken by a public body in the form of the State. 14 We say it is important in this context that the 15 Court of Justice overruled the Advocate General on the 16 following points. So, the Advocate General concluded at 17 paragraph 160 of his opinion that there was no violation 18 since there was only a right of consultation and not 19 a right of decision making. The ECJ disagreed, which -- 20 as your Lordships will know -- is a rare event in the 21 context of Advocate General opinions. They disagreed 22 and they held it was sufficient that the prior 23 consultation gave the two incumbents an advantage. They 24 did not need to have decision-making power. 25 A second related point, we also submit that the 141 1 legal position is clear that once inequality of 2 opportunity or conflict of interest, or competitive 3 advantage, arises through a State measure, that in 4 itself creates a sufficient structural problem in the 5 market or creates a sufficient risk of the beneficiary 6 acting upon it that Article 106(1) and 102 is 7 necessarily violated in these circumstances. 8 We say this is clear beyond question from multiple 9 cases. 10 Starting with RTT, again, we say it is significant 11 to note that the Court of Justice overruled the Advocate 12 General in the following respect. The Advocate General 13 said that giving an approval function is not itself 14 contrary to Article 106(1) and 102, even if it is 15 possible that it might lead to abuses. 16 That is paragraph 42 of his opinion. 17 The Court of Justice said this was wrong and it 18 noted paragraph 23. The referring court raised the 19 issue that no actual abuse had taken place and queried 20 whether the mere possibility of discriminatory treatment 21 sufficed. The Court of Justice said that this mere 22 possibility sufficed, since first a system of 23 undistorted competition can be guaranteed only if 24 equality of opportunity is secured and, second, it 25 created an obvious advantage for one undertaking over 142 1 the others. That is paragraph 25. 2 A third example, the Greek lignite case, DEI, the 3 court said at paragraph 44, it follows that if 4 inequality of opportunity and thus distorted competition 5 is the result of a State measure, such a measure 6 constitutes an infringement of Article 106(1) read in 7 conjunction with Article 102. 8 The fourth example, the Raso case, concerned a State 9 measure which granted a dock working company the right 10 to supply temporary labour to operators on various 11 markets for dock work services with whom it competed. 12 The Court of Justice found this created a conflict of 13 interest. Paragraph 28. This structure was in itself 14 contrary to Article 106(1) and 102. That is 15 paragraph 31. That it was immaterial that no particular 16 abuse was identified. 17 We submit the reason is obvious. Because the 18 beneficiary of the measure was supplying labour to its 19 competitors, there was an inherent risk that it would 20 seek to disadvantage them by, for example, charging them 21 more or giving them less suitable labour. 22 A fourth example is the Connect Austria case, 23 paragraph 84 of the judgment. The court says: 24 "If inequality between economic operators and 25 therefore distorted competition results from a State 143 1 measure, such a State measure constitutes an 2 infringement of 106(1) and 102." 3 That is essentially the same as the Greek lignite 4 case. 5 At paragraph 87 -- an important point -- it held 6 that: 7 "Distorted competition would therefore result from 8 a State measure which creates a situation where equality 9 of opportunity cannot be ensured and that amounts to 10 a breach." 11 So, if equality of opportunity cannot be ensured 12 there is, we say, a breach. If the State measure is 13 liable to amount to competitive advantage, that is 14 sufficient. 15 So, in a sense, the analysis, we submit, works the 16 other way round. If it is not clear as a structural 17 matter that there is equality of opportunity, it cannot 18 be guaranteed, that is in itself a sufficient distortion 19 for purposes of Article 106(1) and 102. So, the 20 objective is to guarantee equality of opportunity, and 21 if that cannot be guaranteed, that is ipso facto an 22 infringement of 106(1) and 102. 23 A final important point, this is the TNT Traco case. 24 This time the Advocate General, paragraph 65. He said 25 that: 144 1 "Reading Articles 102 and 106 together leads to the 2 conclusion that not all the requirements of Article 102 3 must be satisfied in the person of the dominant 4 undertaking. Specifically, there is also abuse if 5 a national measure results in a competition situation 6 that is an abuse by reason of its very structure." 7 The State measure risks inducing abuses by virtue of 8 its very structure and the word "structure" you will see 9 is used in other cases as well. 10 So, if as a matter of analysis the structure of 11 competition on the market has been affected by a form of 12 inequality of opportunity, in this case we say the 13 request for guarantee, that is sufficient for our 14 purposes because of the risk that it gives rise to. 15 We say that what the case law demonstrates very 16 clearly is there are certain State measures that have an 17 inherent propensity to give rise to a conflict of 18 interest or inequality of opportunity, such that from 19 their structure alone it is clear that distortion 20 arises. 21 Where this is the case, the State measure will be 22 contrary to 106 in conjunction with 102. 23 We give an example then at 5(8) of a situation where 24 there would be an inherent structural problem and one 25 where there would not be. 145 1 So, we say suppose a State grants a company an 2 exclusive right over a gas pipeline and the pipeline 3 operator is not itself active either upstream in the 4 production of gas or downstream in the supply of gas to 5 end users, it is just a transport operator, such 6 a structure does not itself lead to a distortion of 7 competition, since the company would be incentivised to 8 offer transport to all customers because that would 9 maximise its revenues. But now suppose that in addition 10 to being the exclusive operator of the pipeline the 11 company also sells in competition with others and 12 downstream market, here its incentives have 13 fundamentally changed because it would now have an 14 incentive not to offer transport to its competitors or 15 to do so on less good terms. It has a conflict of 16 interest because it is now competing with its customers 17 on the transit market, and we say this would be 18 a structure in which the distortion is essentially 19 inherent and therefore would be a distortion of 20 competition within the meaning of 106(1) and 102. 21 Now, tying all this -- 22 MR JUSTICE HOLGATE: What happens in a situation like that 23 as a matter of interest? Is the problem cured by 24 regulation? 25 MR O'DONOGHUE: My Lord, typically, yes. There would be an 146 1 obligation on the pipeline owner to -- 2 MR JUSTICE HOLGATE: Like interconnect charges? 3 MR O'DONOGHUE: Yes, fair and reasonable nondiscriminatory 4 terms. 5 My Lords, tying this to the facts of our case, we 6 say it is actually quite straightforward. For reasons 7 I have adverted to, HAL is a privileged undertaking at 8 Heathrow. There is a competition to expand the airport 9 in which HAL and the claimant are the final two bidders 10 at Heathrow. The defendant asked the claimant to obtain 11 a written guarantee from HAL that HAL would implement 12 the claimant scheme if selected as a winner. HAL 13 unsurprisingly refuses to give the guarantee because it 14 has its own competing bid. 15 Then, my Lords, you see the reference to the actual 16 refusal, that is a reference to Mr Holland Kaye's note 17 of 20 September and the corresponding note from 18 Mr Clake, so we do say there was an actually refusal. 19 MR JUSTICE MARCUS SMITH: Mr O'Donoghue, just to work out 20 the bar, do you say it is a necessary point for you to 21 establish that there was an actually refusal or is it 22 simply enough for HAL not to have responded and to allow 23 the request to vanish into the ether, as it were? 24 MR O'DONOGHUE: My Lord, that is the very point I am coming 25 to. The latter would suffice because there is a well 147 1 recognised concept under the case law of a constructive 2 refusal to supply or to agree. We have a reference to 3 Slovak Telekom, which your Lordships can see, but in 4 fact in the Greek motorcycling case, there wasn't an 5 actually refusal. What happened was the competitor put 6 in its application for authorisation and it simply sat 7 there, and the Advocate General, in paragraph 19, said 8 that it was a tacit rejection of the authorisation. So, 9 it was simply a nonresponse. 10 So, we do say that sitting on the request, or 11 running down the clock, or coming up with a multitude of 12 further information requests, that would be sufficient 13 for our purposes, but we say in any event there is an 14 actual refusal and that is the evidence of 15 Mr Holland Kaye. 16 MR JUSTICE MARCUS SMITH: It may not matter, but suppose HAL 17 had given the guarantee in writing, would that also have 18 been a distortion in the market? 19 MR O'DONOGHUE: My Lord, if I am right that the structural 20 component is sufficient for a distortion, then whether 21 or not it is actually granted doesn't affect the 22 analysis. If it is refused, my point is a fortiori, but 23 I don't need it. 24 As a matter of public law decision-making, the 25 illegality would have been introduced at an anterior 148 1 stage. 2 MR JUSTICE MARCUS SMITH: By the making of the request? 3 MR O'DONOGHUE: By the making of the request. 4 MR JUSTICE HOLGATE: It may be the person complaining would 5 be different. 6 MR O'DONOGHUE: My Lord, yes. 7 So, we say this is a classic conflict of interest 8 created by a State measure. It created an obvious risk 9 that HAL could favour its own bid and give HAL a clear 10 run at winning the competition at Heathrow. We say that 11 Heathrow is an extremely valuable monopoly market. The 12 expansion in volume terms will double the passenger 13 intake, and the impact on aeronautical charges is 14 highest under HAL's scheme, but our essential point is 15 that the State measure giving HAL a clean run at 16 maintaining and strengthening its position is more than 17 sufficient. 18 We say this conflict of interest is, in substance, 19 no different to the conflicts identified in a whole 20 series of Article 106 cases. For example, if one takes 21 the telecoms cases, the State measure allowed the 22 incumbents to say whether a competitor's equipment was 23 compliant with public standards. So, it was giving 24 a regulatory type role to a competitor. 25 In the present case, HAL, having been put in the 149 1 position of having to offer a written guarantee, they 2 also raised various issues to do with the scheme that 3 were akin to a public decision-maker or regulator. 4 We set out for example, Mr Holland Kaye, he says 5 that there were issues to do with noise, respite, 6 resilience and so on, with the claimant's scheme. 7 The short answer to all of this is that it is -- it 8 should not be entrusted to a competitor in a bidding 9 competition to step into the shoes of the public body or 10 the safety regulator. By entrusting a public 11 decision-making or public safety or public interest role 12 to HAL, that is a further conflict of interest and it 13 comes back to my point that the guarantee was expressed 14 in entirely open-ended terms and did not limit the basis 15 of which the guarantee could be refused by HAL. They 16 essentially had a full discretion to raise each and 17 every issue, including public interest issues that, with 18 respect, are none of their business. 19 As a matter of law -- so the Hilti case, my Lord, is 20 one of the new cases added to the bundle. There the 21 Court of Justice made very clear -- it's at 5.13.2: 22 "... it is clearly not the task of an undertaking 23 dominant position to take steps on its own initiative to 24 eliminate products which, rightly or wrongly, it regards 25 as dangerous or at least as inferior in quality to its 150 1 own products." 2 It makes the point, further up in the quote, that 3 there are health and safety laws and public bodies in 4 the United Kingdom. 5 So, that was a case where Hilti's defence was, "My 6 competitors' nails need to work in my nail guns, 7 therefore it is within my sphere to suggest that the 8 products are unsafe and to unilaterally seek to control 9 for that risk". 10 The court of justice said: no, you are not a public 11 authority. It is not within your sphere of interest and 12 influence to object to a competitors' products on public 13 interest, safety or other grounds. 14 That is exactly what HAL was doing in 15 Mr Holland Kaye's evidence. 16 MR JUSTICE HOLGATE: Sorry, are you submitting that insofar 17 as HAL made submissions about the intrinsic merits of 18 the Hub scheme that would infringe competition law? 19 MR O'DONOGHUE: My Lord, it is a slightly different point. 20 MR JUSTICE HOLGATE: I am sorry. 21 MR O'DONOGHUE: My primary point is the fact of the 22 guarantee is enough for my purposes. What I am now 23 doing is responding to a suggestion made by HAL that 24 there were safety or other issues with the claimant's 25 scheme. 151 1 MR JUSTICE HOLGATE: That is really what I am asking about. 2 MR O'DONOGHUE: My response to that is, with respect, it is 3 none of their business. The entire point of the 4 decision-making and the process is that these decisions 5 are taken by the public bodies, by the competent 6 regulators and, in this case, by the Secretary of State. 7 MR JUSTICE HOLGATE: The decisions, yes, but surely -- 8 I would be astonished if competition law would prevent 9 a body with the expertise of the actual airport operator 10 from making submissions relevant to the taking of the 11 decision. 12 MR O'DONOGHUE: My Lord, of course, but my point here is 13 that where someone is a competitor in the bidding 14 process there is a competent regulator in the form of 15 a public body, the Civil Aviation Authority, who makes 16 those decisions. 17 But the essential point is that all of these factors 18 were part of the decision-making by the Secretary of 19 State, and it simply was not within the sphere of HAL to 20 object to the claimant's bid on that basis. 21 MR JUSTICE MARCUS SMITH: Let's park or leave on one side 22 the request for the written guarantee and suppose that 23 request was never made. 24 But let us suppose that the request was made of HAL 25 for a critique of the rival scheme. No more than that. 152 1 The Secretary of State simply sought the opinion of HAL 2 as to why it was that they were continuing to press 3 their scheme in preference to the other scheme, and they 4 asked for a paper dealing with this. HAL comes up with 5 a list of 101 reasons why their scheme is better than 6 the rival. 7 Are you suggesting that would be in some way an 8 infringement of 102/106? 9 MR O'DONOGHUE: My Lord, no. I am responding to the point 10 that if, as Mr Holland Kaye says, the reason the 11 guarantee was refused -- 12 MR JUSTICE HOLGATE: I see, sorry. 13 MR O'DONOGHUE: -- was noise, et cetera, these were not 14 legitimate reasons for him to raise in the context of 15 the guarantee because your Lordship is quite right, of 16 course, Hub made comments on the HAL scheme. HAL made 17 comments on the Hub scheme, and many, many people made 18 comments on every scheme. That's the nature of the 19 process. 20 MR JUSTICE MARCUS SMITH: That is the nature of the process, 21 indeed. So, Hilti, in a sense, is a case where, whether 22 the reasons are good, bad or indifferent, the dominant 23 undertaking is saying: we have safety concerns. As 24 a result of those safety concerns we are not going to 25 allow our competitor's nails in the nail gun. 153 1 It is that second stage which is the problem. So, 2 had in this case the Secretary of State said, "We'd 3 like, HAL, for you to critique the rival schemes, and 4 then I'll buy into those critiques whatever they say, 5 without applying an independent consideration", that 6 would be an issue. 7 MR O'DONOGHUE: My Lord, yes. 8 LORD JUSTICE HICKINBOTTOM: Or if HAL refused the guarantee 9 on the basis of safety concerns. 10 MR O'DONOGHUE: My Lord, that is the point I am responding 11 to. We will have to hear from Mr Humphries, but if that 12 is HAL's real reason for refusing the guarantee -- 13 LORD JUSTICE HICKINBOTTOM: This is the response. 14 MR O'DONOGHUE: It is a bad reason, in my submission. 15 I said I would come back to the economic market 16 point, so I am now at 5.17. 17 There are essentially three main points made against 18 the claimant's argument. The first point is 19 anti-competitive effects. 20 The defendant says that the claimant has not made 21 out a viable case on anti-competitive effects under 22 Article 102. There are three responses to this. 23 First of all, the defendant is really addressing the 24 wrong question because the case law it relies on, 25 Hoffmann La Roche, is concerned with a standalone breach 154 1 of Article 102. 2 Whereas, in this case, we are concerned with 3 a breach of Article 106(1) read in conjunction with 4 Article 102. As I have shown your Lordships in 5 connection with this Article 106 claim, it is sufficient 6 that the risk of an abuse of a dominant position arises. 7 The claimant does not need to show anti-competitive 8 effects, still less any actual abuse. Again, we repeat 9 the quotation from TNT Traco: 10 "Not all of the requirements of 102 must be 11 satisfied in the context of a 106(1) claim." 12 The second point, which really is my main point -- 13 I mean, we do not shirk from the position that if there 14 is inequality of opportunity or conflict of interest 15 created by State measure, that is in itself contrary to 16 Article 106(1) and 102. So, to the extent there is any 17 requirement to show some risk of anti-competitive 18 effect, we say to the conflict of interest more than 19 satisfies any such requirement. 20 This is because it creates an inherent or 21 unavoidable risk of the conflict of interest being used 22 by the beneficiary to the detriment of others. It is 23 the denial of equality of opportunity that matters. 24 In other words, if there is such a State measure, 25 the market structure is deemed to be distorted by the 155 1 presence of a conflict of interest. It is an inherent 2 effect which creates potential for conflict of interest. 3 MR JUSTICE MARCUS SMITH: But assuming always that there is 4 an undertaking in a position of dominance. That is the 5 unspoken assumption there. 6 MR O'DONOGHUE: My Lord, of course. 7 The second and third points are the economic market 8 points. Just to tee up the point. So, the defendant 9 says that the claimant and HAL do not compete head to 10 head in any economic market. They say that the measure 11 does not distort competition in any economic market in 12 which HAL is competing. They make a related point which 13 is this is not a leveraging case. 14 There are a number of responses to that. So, the 15 first response is as follows: we say the defendant is 16 looking at the wrong end of the telescope. So, the 17 starting point is that it is common ground that HAL is 18 a monopolist and a market defined as Heathrow. That is 19 a matter of public record from the MPT determinations of 20 the CAA and it was determined by the High Court in the 21 Purple Parking case. So, HAL is a monopolist at 22 a market defined at Heathrow, comprising land, buildings 23 and other facilities at the airport. 24 The claimant and HAL bids are competing schemes to 25 expand the market at Heathrow, and they can be viewed as 156 1 competing inputs into the related market at Heathrow. 2 The State measure, the guarantee, has distorted 3 competition for competing schemes to expand the related 4 market at Heathrow since one bidder, HAL, was able, 5 during the competition, effectively to veto, certainly 6 affect adversely the other competing bid to the benefit 7 of its own. We say this is a clear distortion of 8 competition because HAL, through the State measure, can 9 effectively knock out the only other competing bid at 10 Heathrow and these competing bids are inputs into the 11 expansion of the monopoly market at Heathrow, and the 12 competition to expand that market, Heathrow, was 13 therefore distorted by the State measure. 14 The critical legal point, which I think responds to 15 your Lordship's question, is it is not a legal 16 requirement that the input into the downstream market 17 should itself be an economic market. Although we do say 18 HAL is wrong on that count as well. 19 All that matters is that they are inputs into 20 a market in which there is dominance. That is what 21 leverage means: two related activities. We say this 22 emerges very clearly from two cases. The first case is 23 IMS Health, an Article 102 case. Perhaps, my Lord, we 24 might quickly turn that up because it is important. It 25 is in authorities bundle 7. It is at tab 160. 157 1 This was a preliminary reference from the German 2 courts. We can start at paragraph 4. The input in this 3 case was effectively a map of Germany divided up into 4 1,860 bricks or geographic areas, and that was protected 5 by copyright. Then, at paragraph 10, by database 6 rights. 7 IMS was a pharmaceutical sales data company and it 8 presented its data in the format of this 1,860 brick 9 structure. 10 We see, at paragraph 7, last sentence, a company 11 called PII, they started using the IMS brick structure 12 and it was found to be a -- or, at paragraph 9, they 13 were subject to an injunction under copyright 14 infringement. 15 The legal point of interest is further on at 16 paragraph 41 of the judgment, because one of the 17 arguments raised by IMS is: there is no market for the 18 brick structure. It is part and parcel of our 19 pharmaceutical sales data offering. 20 So, the argument was for leveraging you need two 21 distinct economic markets, and IMS argued: in this case 22 there is only one. The brick structure is not a market. 23 Then, at 41, the Court of Justice picks up on this 24 point. 25 Sorry, it is dealing with the Bronner case, so it is 158 1 starting at paragraph 41. Then, over the page at 43, it 2 says: 3 "The fact that the home delivery service [in 4 Bronner] was not marketed separately, was not regarded 5 as precluding from the outset the possibility of 6 identifying a separate market." 7 Then, at 44 and 45, the critical points: 8 "It is sufficient that a potential market or even 9 hypothetical market can be identified. Such as a case 10 where products or services are indispensable in order to 11 carry on a particular business or where there is demand 12 for them on the part of undertakings which seek to carry 13 on the business." 14 Then they say: 15 "It is determinative that two different stages of 16 production may be identified and that they are 17 interconnected, in as much as the upstream product is 18 indispensable for the supply of the downstream product." 19 Then, at 46: 20 "The 1,860 brick structure constitutes, upstream, an 21 indispensable factor in the downstream supply of German 22 regional sales data ..." 23 So, we say, based on IMS Health in a leveraging 24 case, it is sufficient if there is an input which may or 25 may not itself be an economic market and, second, 159 1 a dominated market, which obviously does need to be an 2 economic market. We say that the analogy between IMS 3 and the present case is actually quite a strong one 4 because the input in IMS Health was a licence to the 5 brick structure and, in this case, both schemes at 6 Heathrow were protected by intellectual property. C was 7 intending to licence its scheme to HAL had it been 8 selected. 9 There was a second authority, a new authority in the 10 bundle, Mitteldeutsche Flughafen, and I can take this 11 from the note. This was a State aid case, where one of 12 the issues was the concept of undertaking. Then there 13 was a question as to whether the construction of an 14 airport was an economic activity. 15 Then, at 5.24, the Court of Justice made two 16 findings. First of all, it said, unsurprisingly, that 17 constructing an airport is an economic activity. 18 The second finding is of more interest for the 19 present case. It held: 20 "The construction of the new southern runway was an 21 activity that could be directly linked with the 22 operation of the airport which is an economic activity." 23 Again, we say one gets from this that there doesn't 24 need to be two economic markets. It is sufficient if 25 there is an input or something which is directly linked 160 1 to an economic market. So, in the present case, we say 2 that the schemes are inputs. Doesn't matter whether or 3 not they are markets in their own right, and there is 4 a downstream market, comprised of Heathrow, in which HAL 5 is dominant. 6 Now, we do say on a secondary basis that there is an 7 economic activity, in any event, in at least two related 8 respects. 9 First of all, we say that the definition of an 10 "economic activity" is offering goods and services on 11 a given market, even if it is not for profit, and we 12 give the citation to the Greek motorcycling case. 13 In the present case, the claimant was licensing its 14 scheme to HAL, a fee of £5 million a year over 20 years. 15 HAL was buying this intellectual property licence. We 16 say that one of the curiosities of the defendant's 17 position is they accuse the claimant, they say: 18 "We stood to gain a substantial commercial benefit 19 had the NPS supported the ENR and had HAL then agreed to 20 purchase the rights necessary to build the scheme." 21 We say buying and selling valuable intellectual 22 property rights is an inherently economic activity. 23 The HAL statement of principle reiterates that 24 point. It says that HAL is a private sector entity with 25 various shareholders "pursuing a commercial business 161 1 opportunity for airport expansion, subject in particular 2 to the economic regulatory system for airport 3 operators". 4 Then, over the page, we say of course one has to 5 remember the RAB because the main way in which HAL gains 6 revenues is by imposing charges on airlines using the 7 airport. This is a big business for HAL of £3 billion 8 annual revenues. 1.75 billion come from aeronautical 9 charges. 10 As I indicated, HAL can only impose these charges 11 because of its regulatory licence conditions. That the 12 CAA in its discretion has allowed it to do so. In other 13 words, by allowing a return on assets in the form of 14 charges set by a regulator, HAL makes profits. 15 So, one way to look at the issue of economic 16 activity in the present case is to say that HAL was 17 acquiring an asset in the form of an intellectual 18 property licence and it intended to use that asset as 19 a means to generate aeronautical charges for the use of 20 the airport, which clearly is an economic activity and 21 a market in which HAL is dominant, and the purchase of 22 C's scheme and the promotion of HAL's own scheme are 23 simply therefore one of the ways in which HAL conducts 24 its economic activity, which is buying or developing 25 assets on which it can make a regulatory return. 162 1 My Lords, there were a couple of other points which 2 the defendants had raised. With your Lordship's 3 permission, I will, to the extent I need to, deal with 4 those in reply. Subject to your Lordships' questions, 5 those are the submissions on ground 1. 6 MR JUSTICE MARCUS SMITH: Mr O'Donoghue, your case on the 7 market in which HAL is dominant is the market comprising 8 the provision of airport services at Heathrow Airport? 9 MR O'DONOGHUE: My Lord, yes. 10 MR JUSTICE MARCUS SMITH: It isn't any wider than that? 11 MR O'DONOGHUE: There is obviously a related market for the 12 expansion of the existing monopoly. 13 MR JUSTICE MARCUS SMITH: Well, you could call it that. In 14 a sense, the brief of the Airports Commission was to 15 explore the provision of new airport capacity in the 16 South East of England whilst maintaining the UK's hub 17 status; does that provide us with some sort of indicator 18 as to what the relevant market is? 19 MR O'DONOGHUE: My Lord, yes, because of course one has to 20 bear in mind with leveraging that it is the maintenance 21 of a dominant position or its strengthening. So, the 22 existing market today at Heathrow will be expanded and 23 that is both an expansion and effectively 24 a consolidation of the existing hub position, because 25 Heathrow will be the only hub airport in the country. 163 1 So, the actual market is Heathrow, but of course one 2 cannot forget that the effect of this decision will be 3 to dramatically expand the existing Heathrow. 4 So, we make two points. Our primary position is 5 Heathrow is the market, and it will be strengthened and 6 that is sufficient for leveraging. The schemes are 7 inputs into that market. It doesn't matter if they are 8 not markets themselves. 9 Our second position is, to the extent that we need 10 to, the buying and selling of these schemes and 11 licensing is an economic activity. 12 So, those are the two ways in which we put our case. 13 MR JUSTICE MARCUS SMITH: Yes. So, looking at the provision 14 of airport capacity in the South East of England, at the 15 moment we have the finding that there is a dominant 16 market in Heathrow, but part of that finding was that 17 Heathrow, looking at rival airports, was itself 18 dominant. There wasn't an alternative airport to 19 Heathrow, certainly in the South East of England. 20 MR O'DONOGHUE: Yes, it is the only hub. 21 MR JUSTICE MARCUS SMITH: It is the only hub. Now, the 22 question of future development of the market is one 23 which, in its present dominant position, HAL needs to be 24 quite careful about how it influences because, as you 25 say, a decision regarding the future expansion of an 164 1 airport, if you skew it towards Heathrow, as the 2 response or nonresponse to the request for a guarantee 3 may have done, that is, as it were, the abuse in the 4 market in which Heathrow is dominant. That is the nub 5 of it, isn't it? 6 MR O'DONOGHUE: Yes. 7 MR JUSTICE MARCUS SMITH: I have correctly understood your 8 case. We may debate the precise definition of the 9 market, but I have that right, have I? 10 MR O'DONOGHUE: Yes. 11 MR JUSTICE MARCUS SMITH: I saw in the submissions of the 12 Secretary of State, a definition for the market of the 13 provision of airport runway schemes as being the 14 relevant market. I think the suggestion was that HAL 15 was not dominant in that market. Are you going to 16 reserve your position on that, to see what needs to be 17 said in reply? 18 MR O'DONOGHUE: I will see what they say. In my submission, 19 I don't need that for the reasons I have given you. We 20 will have to see what they say. 21 I do find it surprising, because in a short list of 22 two at Heathrow -- I mean, this was described as an 23 international market and, certainly, by the time of 24 shortlisting that seems a pretty artificial point to 25 make, but we'll see how they put it. 165 1 MR JUSTICE HOLGATE: Even if one does look at it that way, 2 you would have to then analyse the nature of the 3 measure. The measure you are relying upon is the 4 guarantee point which relates to a choice between, 5 amongst other things, between those two schemes, because 6 you would simply on that argument move the position at 7 which a privilege was conferred to that point. 8 MR O'DONOGHUE: Your Lordship is right. What I need is 9 dominance on one market. I have that at Heathrow. 10 However one defines the markets for these inputs, your 11 Lordship is quite right. It doesn't change the 12 fundamental issue, which is the person who was dominant 13 at Heathrow gets to potentially veto. 14 MR JUSTICE HOLGATE: It is dominance relative to that 15 differently defined market conferred more directly, in a 16 sense, by the measure itself. Irrespective of what had 17 gone on before. 18 MR O'DONOGHUE: My Lord, yes. It is a fortiori. 19 MR JUSTICE MARCUS SMITH: That, works, I suppose, if one is 20 defining the market for runway schemes as the market, as 21 it were, being run by the Secretary of State. Namely, 22 the three schemes under consideration. There one has 23 Heathrow's influence as the operator of the relevant 24 airport in two of those schemes plus -- as my Lord has 25 just indicated -- the beneficiary -- if you want to call 166 1 it that -- of the request to provide a guarantee. 2 MR O'DONOGHUE: My Lord, yes. 3 MR JUSTICE MARCUS SMITH: You would say -- and you don't 4 have to respond now -- that you can't define the runway 5 scheme market any wider to the provision of runway 6 solutions in Hong Kong or anywhere else? 7 MR O'DONOGHUE: By the time of shortlisting, it was a two or 8 three horse race. 9 MR JUSTICE MARCUS SMITH: A three horse race. Yes, 10 thank you. 11 MR O'DONOGHUE: But the critical point, of course, is that 12 in a leveraging case the dominance in the abuse can 13 occur on different markets. So, it is sufficient for my 14 purposes that I have Heathrow where, as a matter of 15 public record, they are dominant. Then if the abuse 16 occurs in relation to the guarantee or that structure, 17 that is sufficient for my purposes. I do not need 18 a second market in which they are also dominant. 19 MR JUSTICE MARCUS SMITH: No, indeed. The abuse is simply 20 the fact that in a market in which an undertaking is 21 dominant that undertaking has failed in its 22 responsibility to behave properly. All one needs to 23 show is the dominance and the abuse, and that is it. 24 MR O'DONOGHUE: They have a special responsibility. 25 MR JUSTICE MARCUS SMITH: Yes. 167 1 MR O'DONOGHUE: My Lord, those are our submissions. 2 LORD JUSTICE HICKINBOTTOM: Thank you very much. We'll 3 break now for the transcriber's break. 4 What do we have to go now in terms of your ground; 5 is it just 3 and 4. 6 MR KINGSTON: No, ground 2. 7 LORD JUSTICE HICKINBOTTOM: I am sorry, ground 2. 8 MR KINGSTON: I won't of course repeat what I have already 9 set out by way of the factual background, but ground 2 10 we need to engage, really, with some of the legal issues 11 and we'll do that. There will be another speaking note, 12 which I hope will enable us to go reasonably quickly, 13 depending on whether your Lordships want to go to the 14 law in any level of detail. I suspect you will already 15 have had that opportunity, and I shall simply highlight 16 paragraphs in the speaking note which will allow your 17 Lordships to see what we say is the correct position. 18 Then we have grounds -- well, 3 and 4, originally 4 19 and 5. 20 LORD JUSTICE HICKINBOTTOM: Yes, thank you very much. 21 Ten minutes. 22 (3.35 pm) 23 (A short break) 24 (3.50 pm) 25 LORD JUSTICE HICKINBOTTOM: I think in terms of progress, we 168 1 are just about in line with the timetable, I think. 2 MR KINGSTON: I rather hope so, my Lord. 3 LORD JUSTICE HICKINBOTTOM: No, I think we are and we have 4 kept up over the last couple of weeks. 5 What I suggest is that we start at 10 o'clock 6 tomorrow. I know it is only 15 minutes, but we have the 7 transcriber breaks and that may help a little bit, 8 unless it is impossibly inconvenient for anyone. 9 MR KINGSTON: Certainly not from our point of view. 10 LORD JUSTICE HICKINBOTTOM: We'll list it for 10. Thank you 11 very much. 12 MR KINGSTON: Thank you. 13 Submissions by MR KINGSTON 14 MR KINGSTON: Perhaps I could explain what it is that you 15 are receiving by way of a speaking note. 16 LORD JUSTICE HICKINBOTTOM: Are we supposed to have two? 17 MR KINGSTON: Yes, I had not thought originally that one 18 would be necessary related to materiality of the 19 guarantee, but in light of some further reflection 20 I have decided it is relevant, and I'll deal with it at, 21 I hope, a convenient point when working through the 22 legitimate expectation note. 23 LORD JUSTICE HICKINBOTTOM: Yes. 24 MR KINGSTON: So far as that is concerned, this is ground 2, 25 issues 4A to F, and our submissions are confined to 169 1 addressing the defendant's contention that the claimant 2 had no legitimate expectation that the absence of the 3 guarantee from HAL would not be used by him as 4 a material consideration in reaching his decision. 5 The submissions are made clearly against the 6 background of the matters that I have already set out at 7 some length this morning in addressing the process that 8 was adopted. 9 In support of the defendant's contention that the 10 claimant had no legitimate -- 11 LORD JUSTICE HICKINBOTTOM: I am sorry to break in so soon. 12 I was just wondering -- and this isn't to stop you 13 making all of these submissions in full -- if you 14 succeed on ground 1, you succeed on ground 1 and ground 15 2, as it were, becomes -- 16 MR KINGSTON: It does. 17 LORD JUSTICE HICKINBOTTOM: Possibly falls away altogether. 18 MR KINGSTON: Yes. 19 LORD JUSTICE HICKINBOTTOM: If you fail on ground 1, ground 20 2 may also in practice fail; is that -- there may be 21 something left in it. 22 MR KINGSTON: There will be. 23 LORD JUSTICE HICKINBOTTOM: Yes. 24 MR KINGSTON: If I may say with respect, there will be if we 25 fail on ground 1, depending to an extent on the reason 170 1 why. 2 LORD JUSTICE HICKINBOTTOM: Yes. 3 MR KINGSTON: But short of something fairly remarkable that 4 I haven't been able to think of in relation to ground 2, 5 it would survive. Albeit it may have to submit to some 6 modification. 7 LORD JUSTICE HICKINBOTTOM: Yes, that's fair enough, yes. 8 MR KINGSTON: So, my Lords, in support of the contention, 9 the defendant relies on a disagreement with our analysis 10 of the relevant law. 11 Secondly, there being no factual basis for the 12 legitimate expectation and, thirdly, that any 13 expectation was not legitimate because of Parliament's 14 role in the statutory process. 15 We take those in turn. 16 First of all, the law. The defendant's position is 17 that we are somewhat overreliant on early cases. But, 18 my Lords, in a system based on precedent, the importance 19 of previous cases depends on their relevance. The tier 20 of court in which they were decided and whether they 21 have been subsequently overruled or disapproved. Their 22 age, whether they are early or late, had no bearing on 23 the matter. 24 The court should note we submit that the defendant 25 does not submit, let alone particularise and 171 1 substantiate into the submission to the effect that any 2 of the cases we relied on were wrongly decided or have 3 been overruled or disapproved. 4 The defendant states that the claimed legitimate 5 expectation is substantive in nature with no explanation 6 proffered for disagreeing with the claimant's 7 explanation as to why it should not be regarded as 8 substantive. We set that out at paragraph 60 of our 9 skeleton. 10 Neither is there any acknowledgement that the line 11 between the two types of expectation is often illusory, 12 difficult to define, despite this being a point cited by 13 the defendant. That is the Bhatt Murphy case, a point 14 made at paragraph 27. Perhaps I could also add there 15 and your Lordships don't need to turn it up, look in due 16 course, but Coughlan makes the same point. That's 17 authorities bundle 8 at tab 177 at paragraph 59. 18 Finally, there is no suggestion by the defendant 19 that the relevant test for establishing the legitimate 20 expectation is different as between the procedural and 21 the substantive expectation and all the tests to be 22 deciding whether the expectation should be upheld. It 23 is different whether the expectation is procedural or 24 substantive. 25 In short, and thus far, we submit, the defendant 172 1 fails to identify what the distinction and the debate 2 around it, substantive or procedural, goes to in these 3 proceedings. 4 As we have explained in our skeleton, the claimant's 5 expectation was not substantive in nature. That is, 6 that the defendant would select the claimant's scheme. 7 Its expectation was procedural, namely that the 8 defendant would follow a selection process in which the 9 lack of an up-front guarantee by HAL would be 10 disregarded judging the merits of two competing schemes. 11 The defendant submits -- 12 MR JUSTICE HOLGATE: That is substantive in a sense. I mean 13 if that is capable otherwise of being a material 14 consideration, the effect of your argument is it is 15 something which should not be taken into account, as 16 opposed to, for example, procedural legitimate 17 expectation which results in, for example, being a right 18 to being consulted. 19 MR KINGSTON: That is a relevant distinction but one of the 20 reasons I have drawn attention to Coughlan and 21 paragraph 59 is there some discussion around the cases 22 of those who thought -- some convicted people, who 23 thought they had got some sort of promise that they 24 wouldn't be committed to the Crown Court for sentence 25 with a prospect of a more condign sentence being 173 1 imposed, as to whether that was substantive or 2 procedural. The court essentially is saying, if I can 3 paraphrase somewhat crudely, actually it doesn't really 4 matter. The question is, was there a legitimate 5 expectation and was that expectation inappropriately 6 disappointed? 7 So, my Lord, to be frank, I am comfortable either 8 way. But we explained why we thought it was procedural, 9 that is that the Secretary of State had set up the 10 process which I took your Lordships through this 11 morning, a process which was designed, we said, to 12 produce a fair outcome on the evidence and throughout 13 that process ignored a consideration until very late 14 when, on our submission, he changed the rules and said, 15 actually I'm going to treat this now as a material and, 16 we would say, highly material consideration. 17 The defendant submits that a substantive legitimate 18 expectation requires a clear unambiguous and unqualified 19 representation, relies on Bhatt Murphy and Bancoult in 20 support. That is essentially a reliance in what is 21 called in lots of the cases the MFK formulation. 22 Although it is right, and we accept that Bancoult uses 23 that terminology, you should note there that 24 Lord Hoffmann specifically said he was not embarking on 25 a re-examination of the jurisprudence and importantly, 174 1 neither Bancoult and Bhatt Murphy use the formulation in 2 the context of considering specifically whether such an 3 expectation can arise as a result of conduct practice or 4 simple acquiescence. 5 In fact, we say, my Lords, it is clear from 6 Bhatt Murphy that so far as there is being any 7 requirement for express words to be spoken or written 8 conduct can be sufficient. I give you some references 9 here. Paragraph 33. It is reference to Coughlan, the 10 endorsement of the formulation, a lawful promise or 11 practice and also paragraphs 40, 42 and 43 where there 12 is an acceptance that a substantive legitimate 13 expectation can arise as a result of a promise or 14 practice. You should note further the endorsement of 15 Preston, which was yet another revenue case, with its 16 reference to conduct. Likewise paragraph 49, the 17 reference to the impact of the authority's past conduct 18 of potentially affected person must again be pressing 19 and focused." 20 In Unilever, noting that that was a case which was 21 treated as being of substantive legitimate expectation, 22 Lord Justice Simon Brown, expressly disapproved the 23 notion that every case required an unambiguous and 24 unqualified representation as its starting point. 25 In Coughlan it was said abuse of power may take many 175 1 forms, and another form of it is reneging without 2 adequate justification by an another otherwise lawful 3 decision on a lawful promise or practice adopted towards 4 a limited number of individuals. 5 That's perhaps a convenient point to interpolate 6 with the additional note which I have provided in 7 relation to the materiality of the guarantee. This 8 arises because -- 9 MR JUSTICE MARCUS SMITH: I don't think I have the second 10 paper. 11 LORD JUSTICE HICKINBOTTOM: I am sorry. 12 MR JUSTICE MARCUS SMITH: I fear I only have one speaking 13 note and not two. 14 MR KINGSTON: I am sorry. 15 MR JUSTICE MARCUS SMITH: I am sure it is my loss. 16 (Handed). 17 This arises because at a number of different points 18 in the submissions the defendant makes the point that, 19 and if you look at paragraph 1.1, paragraph 29 of its 20 detailed grounds of defence, this was a matter, that is 21 the question of the guarantee whether HAL would provide 22 it, that was plainly capable of being a material 23 consideration in relation to the designation of the NPS. 24 It was related to the deliverability of the ENR. 25 At paragraph 33 of the skeleton argument the 176 1 defendant argues it was plainly capable of being 2 a relevant consideration in relation to the designation 3 of the NPS as it was relevant to deliverability of the 4 ENR scheme. 5 Paragraph 86 of the skeleton, the defendant submits 6 it would have been entirely legitimate for the defendant 7 to consider all aspects relating to the potential 8 delivery of the shortlisted schemes including the 9 claimant's ENR scheme would need to be delivered by 10 a third party. 11 Finally, at paragraph 87 of its skeleton, the 12 defendant says the matter of HAL's guarantee was 13 a potentially relevant consideration. 14 What is striking about each of these references is 15 that the defendant assiduously avoids stating that the 16 question of the guarantee was a matter that the 17 defendant was legally obliged to have regard to in 18 making his preference decision. In other words, the 19 defendant does not state that HAL's support or lack of 20 support for the ENR was as a matter of law a material 21 consideration to which he was obliged to have regard. 22 Instead it is variously described as something that was 23 plainly capable of being a material consideration 24 potentially relevant, something he could entirely 25 legitimately consider. 177 1 There is a reason why the defendant draws that 2 distinction, that is the distinction between a matter 3 that is capable of being material and a matter that the 4 law dictates is irreducibly a material consideration, 5 the reason is that the defendant had the option of using 6 or not HAL's position on the ENR as a selection 7 criteria. 8 As the defendant states, the lack of a guarantee had 9 the potential to impact on the deliverability of the 10 ENR, or at least impact on the timeline for its 11 delivery, and was therefore relevant to the matter under 12 consideration. 13 However, using it as a selection criteria risks 14 giving HAL an unfair advantage in the process of scheme 15 selection. The defendant had to choose whether or not 16 he was going to use it as a selection criteria, having 17 regard to these competing considerations. 18 My Lords, the law has long recognised that in any 19 decision-making process there will be some matters to 20 which the decision-maker must, as a matter of law, have 21 regard and others which are capable of being material, 22 whether they are ultimately treated as such is a matter 23 for the decision-maker. That is subject only to review 24 on the Wednesbury grounds. 25 Citing Lord Justice Simon Brown in Fewings De Smith 178 1 summarises the position as follows: 2 "When exercising a statutory power a decision-maker 3 may take into account a range of lawful considerations. 4 Some of these are specified in the statute as matters to 5 which regard may be had. Others are specified as 6 matters to which regard may not be had. There are other 7 considerations which are not specified but which the 8 decision-maker may or may not lawfully take into 9 account." 10 I have noted where that is taken from and your 11 Lordships should also see in the authorities bundle at 12 tab 124, volume 5, Hurst. 13 If the claimant is correct, and this is picking up 14 my Lord's point a moment ago, if the claimant is correct 15 on ground 1 then the guarantee was something to which 16 regard may not be had because it would breach EU law and 17 that would render the consideration of the issue under 18 ground 2 as unnecessary. With that important 19 consideration then in mind, we consider the issue on the 20 basis that ground 1 is not made out. 21 In the present case the defendant was not mandated 22 by law to take the matter of the guarantee into account 23 when making his preference decision. But because it was 24 a matter that was relevant to the decision he had to 25 make it was capable of being a material consideration. 179 1 This is the reason why of course we don't submit that 2 the guarantee was an immaterial consideration in the 3 sense that it was not capable of being a material 4 consideration. Had the matter of the guarantee been 5 wholly irrelevant to the decision under the 6 consideration, the claimant would have brought 7 a judicial review claim against the defendant that he 8 had had regard to an immaterial consideration. But that 9 is not its case. Its case is that the defendant had 10 regard to the guarantee in breach of the claimant's 11 legitimate expectation that this would not feature as 12 a selection criteria. 13 In this regard the court will note the doctrine of 14 legitimate expectation provides a conceptually different 15 basis for challenging the lawfulness of executive action 16 from challenges that are based on a complaint that the 17 decision-maker has had regard to an immaterial 18 consideration. 19 The claimant who complains about a breach of 20 legitimate expectation is not complaining that the 21 decision-maker had regard to a matter that was not 22 capable in law of being a material consideration, his 23 complaint is that the decision-maker had regard to 24 potentially material consideration having led the 25 claimant to reasonably and legitimately expect that the 180 1 consideration would not feature in the defendant's 2 decision-making processes. 3 We draw attention then to paragraph 69 of Coughlan: 4 "Reneging without adequate justification by an 5 otherwise lawful decision on a lawful practice adopted 6 towards a limited number of individuals." 7 In other words, the existence and indeed the breach 8 of a legitimate expectation does not render 9 a consideration that's capable in law of being material, 10 immaterial. Materiality as a matter of law of the 11 consideration under question remains unchanged 12 throughout because its relevance to the matters under 13 consideration does not go away. Legitimate expectation 14 affects the question of whether at the point of which 15 the decision is taken the decision-maker can lawfully 16 have regard to it. 17 Then, my Lord, that's, as it were, the interpolation 18 at paragraph 2.6 of our speaking note. 19 LORD JUSTICE HICKINBOTTOM: There are a number or points 20 that arise out of that I think. One is, isn't it, that 21 I think your submission is that the guarantee, you can 22 call it for shorthand, was a consideration which may or 23 may not have been material -- 24 MR KINGSTON: It was a consideration -- 25 LORD JUSTICE HICKINBOTTOM: -- at the time of the NPS. 181 1 MR KINGSTON: It was a consideration which throughout the 2 process was capable of being material but from a very 3 early stage, including the Airports Commission process, 4 the defendant was clearly taking a considered view that 5 he would not hand what my learned friend Mr O'Donoghue, 6 would describe at one stage as the "veto" effectively to 7 HAL to rule out competitors at Heathrow. I drew your 8 Lordship's attention, to the rather stark way in which 9 we see that operating as a criteria was that the 10 defendant not saying to the Airports Commission, "Just 11 a moment you can't go around introducing your own 12 schemes at Heathrow unless Heathrow themselves have said 13 they are willing to implement the scheme, because their 14 willingness to implement is important from my point of 15 view." 16 As I pointed out this morning, the Airports 17 Commission eventually said, "No, we don't think our own 18 scheme at Heathrow is a runner but not for any reason 19 related to Heathrow's willingness to implement it." 20 So yes, it was capable -- from a very early stage 21 the defendant was making it clear and his review of the 22 sift criteria and then the appraisal process, no 23 indication at all that the Airports Commission was going 24 wrong or some criteria had been missed. 25 Likewise in the review process, July 2015 182 1 to December 2015 when the defendant is being told in 2 meetings, and I took you through them this morning, he 3 has been told in meetings, "Look, we do not want to be 4 discriminated against because we don't own Heathrow. 5 We're reliant on somebody else." And he's being assured 6 that that is not a matter which they need be concerned 7 about. 8 We get to the review process itself and the review 9 process doesn't say: we found a yawning gap in the 10 Airports Commission process. They have not considered 11 whether in relation to one of the shortlisted schemes 12 Heathrow Airport is willing to implement it. From the 13 Secretary of State's point of view that is a material 14 consideration. 15 That of course would have overturned all the 16 Secretary of State's participation in the Airports 17 Commission process, his review of their work as it was 18 ongoing and overturned everything that happened between 19 July and December, instead of which he continued to roll 20 out the view, including March 2016, deliverability is 21 not something we have any issue with, right through 22 until August. 23 Potentially material in the process, but ruled out 24 at a very early stage and continued to be ruled out 25 consistently over a four year period by a Secretary of 183 1 State who clearly, and for reasons it seems to us 2 perfectly obvious, was not prepared to say, "I am going 3 to allow this process of the selection of where new 4 capacity should be" to be ruled effectively by the 5 willingness of one of the participants to implement 6 somebody else's scheme." 7 MR JUSTICE HOLGATE: You use the word "willingness" which is 8 a word also used in the speaking note this morning. 9 What does "bear willingness or otherwise" have to do 10 with the intrinsic merits of either the two schemes 11 before the Secretary of State? 12 MR KINGSTON: The intrinsic merits none. 13 MR JUSTICE HOLGATE: Exactly. 14 MR KINGSTON: My Lords, it is not, if I may say so -- my 15 position, the Secretary of State's position throughout 16 the process was entirely logical and entirely 17 appropriate. He set up an evidence based process. It 18 was his view that the results should emerge from the 19 evidence. Ms Low's second witness statement asserts 20 positively that he continued to adhere to that process. 21 See paragraph 100. And that the evidence should drive 22 the result, not that any guarantee or any willingness on 23 the part of one of the participants to implement any of 24 the other schemes should be a legitimate consideration, 25 a material consideration in the process. 184 1 So, my Lords, our position is entirely at one with 2 what we say the Secretary of State and, indeed, all of 3 his actions were indicating throughout the period until 4 the 17 August 2016. 5 MR JUSTICE HOLGATE: Quite apart from that, the materiality 6 of the guarantee point may depend on how it was being 7 used in the decision-making process and it is in that 8 context we may need to look at the second witness of 9 Ms Low. 10 MR KINGSTON: Yes, I agree. 11 MR JUSTICE HOLGATE: Would that be a convenient moment? 12 MR KINGSTON: Yes, if your Lordship would like to do that. 13 MR JUSTICE HOLGATE: It is not so much the witness 14 statement -- I believe somewhere this was dealt with in 15 the January PTR -- there was a document disclosed upon 16 which the relevant text is based. 17 MR KINGSTON: The 5 September 2018 note, my Lord? 18 MR JUSTICE HOLGATE: I think that's it, yes. It is around 19 paragraph 130. 20 MR KINGSTON: Yes, page 353. That's volume 4, tab 2, 21 page 353. This is a continuation of a process that 22 Ms Low started earlier on of explaining the position 23 with regard to what was material or not. But the 2018 24 meeting which, as you know, our view is that this 25 effectively confirms the submission we have made. 185 1 LORD JUSTICE HICKINBOTTOM: Just to put this in context, by 2 this time the Commission had reported. 3 MR KINGSTON: Yes, they had. 4 LORD JUSTICE HICKINBOTTOM: And the Commission had 5 determined on the basis of everything, including 6 deliverability in a broad sense, they weren't focused on 7 guarantee because that wasn't in anybody's mind I don't 8 think at that time. 9 MR KINGSTON: No. 10 LORD JUSTICE HICKINBOTTOM: That northwest runway is the 11 best alternative of the three. That's the factual 12 background for this. So we are now at the stage when 13 the Secretary of State is effectively considering the 14 Commission's view and the Commission's evidence. 15 MR KINGSTON: Could I just clarify with my Lord, at which 16 stage? If we are looking at September 2018 we are 17 looking at a stage when the proceedings have been 18 started, so paragraph 130 is related to the 19 5 September 2018 meeting the defendant had with his 20 lawyers in which -- 21 MR JUSTICE HOLGATE: The purpose of the meeting is to obtain 22 instructions from the defendant as the basis upon which 23 he took his decision to designate. 24 MR KINGSTON: Yes. 25 MR JUSTICE HOLGATE: So if one reads through that text, it 186 1 starts off by saying that decision was based on the 2 recommendations of the AC and the question that was 3 uppermost in the mind of the decision-maker was: has 4 anything changed since the report was issued to cause me 5 not to take the same approach as the Airports 6 Commission? That is what this text says. And it is in 7 that context that the issue of the guarantee is raised. 8 The second paragraph says: 9 "The issue about a guarantee was: is there something 10 that requires us to move away from the AC points on 11 safety and novelty of the HHL scheme? A big fact in 12 preventing me moving away from the AC view was that even 13 if the AC had got it wrong there was no guarantee that 14 it would be built." 15 The simple question of law is: why is the guarantee 16 relevant to prevent a decision-maker from moving away 17 from the AC's view, for example, in your client's 18 favour? It is difficult to see what the relevance of 19 the guarantee is in the sense of preventing a different 20 view from being taken. 21 MR KINGSTON: My Lords -- 22 MR JUSTICE HOLGATE: This I thought was the point being 23 raised by you at the PTR. 24 MR KINGSTON: It was and still is and you have -- 25 MR JUSTICE HOLGATE: It was a point which also you raised at 187 1 that stage, perhaps more particularly, in the context of 2 discretion. 3 MR KINGSTON: Yes. But our position remains the same. 4 We -- 5 MR JUSTICE HOLGATE: There is a logic question which we are 6 asking. 7 MR KINGSTON: We don't have the answer to the logic question 8 because the illogicality of the position taken is an 9 illogicality which arises from both the way the 10 questions were put to the Secretary of State by his team 11 in the course of this meeting and his answers. 12 My Lords, for reasons which we set out in our skeleton 13 argument we do not understand how the questions connect 14 up or the logic of the process that was being gone 15 through, and the meeting note doesn't help. What the 16 meeting note does do, and this was a point we made at 17 the PTR, was to indicate the biggest issue element, that 18 this was a big issue for the Secretary of State. 19 MR JUSTICE HOLGATE: For not moving away from the 20 Commission's conclusion. 21 MR KINGSTON: But, my Lords, that is a little difficult to 22 understand, how it could be an issue for not moving away 23 from the Commission's conclusions. 24 MR JUSTICE HOLGATE: Yes. 25 MR KINGSTON: My Lord's point is in that respect, we agree. 188 1 We do not understand how it could be used in that way. 2 If the Commission's reasons were good reasons and the 3 Secretary of State was relying on them, although I am 4 bound to say in relation to safety and novelty the 5 Commission had no concerns in regard to safety and with 6 regard to novelty -- no concerns that led to any 7 distinction between the schemes. 8 MR JUSTICE HOLGATE: That is a different point. 9 MR KINGSTON: But the second paragraph quoted under 10 paragraph 130: 11 "A big factor in preventing me moving away ..." 12 The first sentence: 13 "The issue about a guarantee was: is there something 14 that requires us to move away from the AC points on 15 safety and novelty (of the HHL scheme)." 16 On safety and novelty, in relation to safety, the 17 AC -- and it is a different point, I will come to it in 18 grounds 4 and 5, but on safety the Airports Commission 19 drew no distinction between the schemes and they had no 20 basis for doing so. On novelty, so far as novelty feeds 21 into deliverability and it is being said that the 22 guarantee, the issue of the guarantee or not relates to 23 deliverability, on novelty it is quite clear, as long as 24 you don't stop reading the Airports Commission's report 25 at paragraph 11.42 and read to the conclusions at 11.51 189 1 to 11.53, it is quite clear that the Airports Commission 2 factored in the novelty element and reached the 3 conclusion that there was no distinction to be drawn 4 between these schemes in terms of their ability to 5 deliver against the objective, the objective being to 6 provide the new runway capacity by 2030, something which 7 is recited at paragraph 11.51 of the Airports 8 Commission's conclusion. 9 The premise on which the question was being put was 10 false in any event, but then the response in the second 11 sentence, "a big factor in preventing me moving away was 12 that even if the AC had got it wrong there was no 13 guarantee it would be built", we don't understand how 14 that connects with a logical process of making 15 a decision which is said to be evidence based and 16 prompted therefore by what does the evidence show? If 17 there was no guarantee in place and if the Secretary of 18 State was accepting the Airports Commissions' 19 conclusions in any event, what had the guarantee got to 20 do with it? But there is no doubt that he took it into 21 account, both in this, if I may say so, self-serving 22 note with his team, after proceedings had been started 23 and he was aware of our complaint, but also in earlier 24 parts of the process. 25 LORD JUSTICE HICKINBOTTOM: If that is right, that's 190 1 a fairly simple public law error. 2 MR KINGSTON: Yes, it is and a striking one, if I may say 3 so. But it arises in the striking form that it does 4 because the 5 September meeting -- as I've said, after 5 proceedings had started the Secretary of State and his 6 team know what the claimant is saying and I really don't 7 mean this in any pejorative way but he is asked a series 8 of questions in a more or less leading form to invite 9 him to agree with some propositions, and your Lordship 10 should look at the whole note, to invite him to agree 11 with some propositions that will provide him with some 12 sort of rationale as to why out of the blue on 13 17 August 2016 he said, "What about a guarantee?" 14 My Lords, I have no answer for the logic of the 15 process. Indeed, I rely on its illogicality for the 16 reasons which we have indicated. 17 LORD JUSTICE HICKINBOTTOM: Yes, thank you. 18 MR KINGSTON: But it is right, and 19 my Lord Mr Justice Holgate has referred to Ms Low's 20 second witness statement, there are a number of points 21 at which it seems quite clear that the defendant was 22 treating the guarantee or the absence of guarantee as 23 material, notwithstanding the fact that throughout the 24 process, for something in the order of four years, he 25 was declaiming any intention to do so. 191 1 LORD JUSTICE HICKINBOTTOM: That is the foundation of your 2 legitimate expectation argument. 3 MR KINGSTON: Absolutely, yes. 4 LORD JUSTICE HICKINBOTTOM: Yes, thank you. 5 MR KINGSTON: Unless there is anything else from Ms Low's 6 witness statement, I put that to one side for the moment 7 at least. 8 LORD JUSTICE HICKINBOTTOM: I see that it is 4.30. How long 9 do -- you have a few -- 10 MR KINGSTON: A little longer I am afraid. 11 LORD JUSTICE HICKINBOTTOM: So is now a convenient time? 12 MR KINGSTON: Perfectly convenient, yes, my Lords. 13 MR JUSTICE HOLGATE: Can I raise one question for Mr Palmer, 14 please, arising from the submissions we had from the 15 Speaker this morning. 16 A key issue on the application of Article IX 17 ultimately, as I understood it, is the fact that the 18 Secretary of State is disputing the meaning of what was 19 said in Parliament and therefore this becomes a question 20 of inference and that's impermissible on a true 21 understanding of the case law. I think we need to be 22 clear as to where issue is taken by the Secretary of 23 State as to what on one view would appear to be very 24 clear statements made in Parliament not just about the 25 fact that matters are taken into account but the degree 192 1 of importance they had. It is not really open on one 2 view to much interpretation. 3 We have gone back to the submissions made on 4 25 January 2019, which I think are in volume 13, to see 5 what issue Ms Hannett had in mind the Secretary of State 6 was raising. I am not looking for an answer at this 7 stage but just so we can be assisted on this, if we need 8 to decide Article IX issues, to see what sort of point 9 was being raised on behalf of the Secretary of State. 10 It may be this is not the right document to look at, 11 but at that stage it was being said that the claimant 12 seeks to draw from the statements made in Parliament an 13 inference that the reasons given in the ANPS were bogus. 14 Is that it? 15 MR PALMER: My Lord, it is more than that. 16 MR JUSTICE HOLGATE: Yes, I think in due course we need to 17 know what it is because insofar as they don't rely on 18 those points, it may be that the issue that was raised 19 this morning by Ms Hannett doesn't arise. 20 MR PALMER: I am still unclear. I am waiting to hear the 21 rest of the claimant's submissions. 22 MR JUSTICE HOLGATE: If, for example, they simply wished to 23 say at the end of the day: we rely upon these statements 24 (a) because they showed this factor was taken into 25 account and (b) because the person concerned said this 193 1 was a prime consideration, I am not sure I see what the 2 interpretational problem is. 3 MR PALMER: It is the background against which those 4 statements are made, the contextualisation of those in. 5 MR JUSTICE HOLGATE: Additional points which are being made 6 by the claimant. 7 MR PALMER: I can deal with this tomorrow, but the essential 8 point is that those comments are made within a context, 9 the starting of their point being the acceptance of the 10 Airports Commission's recommendation. Then the question 11 is: is there a good planning reason to move away from 12 that? And then on top of that there is the point of the 13 guarantee. I can develop all that. 14 We simply do not accept -- I do not accept on behalf 15 of the defendant, on behalf of the Secretary of State 16 that it is right literally to refer to the guarantee as 17 "the biggest reason", even though that, as a matter of 18 record, is what was said at that time in that context on 19 an ex tempore basis in the course of debate. 20 MR JUSTICE HOLGATE: It is a difference between taking the 21 words apparently at face value as opposed to the 22 inferences which -- 23 MR PALMER: Not the inferences. It is the point -- 24 MR JUSTICE HOLGATE: I see, the understanding. 25 MR PALMER: There is a formal statement of the government's 194 1 position, the Secretary of State's position published in 2 draft form, consulted upon, approved. That represents 3 the reasons. 4 MR JUSTICE HOLGATE: That is a different. 5 MR PALMER: So to call something else which does not appear 6 as the biggest reason we say is simply wrong. To 7 understand those comments you have to look at them in 8 context: what might be going through the Secretary of 9 State's mind at that time in the course of an ex tempore 10 debate and that is where you get into the Article IX 11 territory as soon as you step into that. 12 MR JUSTICE HOLGATE: Thank you. 13 LORD JUSTICE HICKINBOTTOM: In terms of timetable, 14 Mr Kingston, I think, according to the timetable that 15 has been set, you have another hour tomorrow. 16 MR KINGSTON: Yes. I have grounds 4 and 5 to do and that 17 I will complete. 18 LORD JUSTICE HICKINBOTTOM: Endeavour to do. 19 MR KINGSTON: Subject to any questions your Lordships might 20 have. I will have another short speaking note on 21 grounds 4 and 5 and as long as I promise not to go too 22 quickly, as I gather I might have done this morning, for 23 which I apologise, I should complete that, I hope, with 24 the rest of the illegitimate expectation. 25 LORD JUSTICE HICKINBOTTOM: In about an hour. 195 1 MR KINGSTON: In about an hour. It might be slightly over 2 but hopefully not. 3 MR PALMER: My Lord, can I indicate a concern that I do have 4 which is that at the pre-trial review, as I recall, it 5 was indicated that skeleton arguments were to be 6 produced with a tight page limit of 30 pages and that on 7 the day additional speaking notes, acting as substitutes 8 would not be permitted. I haven't objected to what has 9 been said, but what has been delivered so far is about 10 100 pages of skeleton argument which has been read at 11 pace without looking at the vast majority of cases but 12 the underlying documents. 13 That gives me rather more to do in three quarters of 14 a day than I had previously anticipated I would have to 15 do. There is some flexibility in the timetable if 16 my Lords permit it. I think the current timetable 17 finishes at Friday lunchtime. So could I just flag at 18 this stage that I will do my best tomorrow. 19 MR JUSTICE HOLGATE: I was wondering whether you might 20 benefit from seeing any further speaking note. 21 MR PALMER: That would be of enormous assistance. 22 LORD JUSTICE HICKINBOTTOM: Just to remind you of the 23 timetable. The timetable is due to finish at 3 o'clock 24 on Friday. So when you say there is some flexibility -- 25 MR PALMER: There is an extra hour and a half. 196 1 LORD JUSTICE HICKINBOTTOM: -- there is not a huge amount. 2 But I understand the point that you have made. It is 3 only as a result of having speaking notes and the 4 transcript that we have managed to go at the pace that 5 we have. But there is an enormous amount of -- 6 MR PALMER: My understanding had been that they had been 7 used mainly to assist with bundle references and so 8 forth, rather than to provide alternative skeleton 9 arguments. That is my concern. 10 LORD JUSTICE HICKINBOTTOM: Anyway, we understand the need 11 for you to have a proper opportunity to respond to all 12 of this. 13 MR PALMER: I am grateful. 14 LORD JUSTICE HICKINBOTTOM: We'll start at 10 o'clock 15 tomorrow and see how we get on tomorrow but you should 16 all being well start at about 11 o'clock tomorrow. 17 Good, thank you very much. 18 (4.40 pm) 19 (the court adjourned until the following day at 10.00 am) 20 21 22 23 24 25 197 1 INDEX 2 Submissions by MS HANNETT ............................1 3 Submission by MR KINGSTON ...........................47 4 Submissions by MR O'DONOGHUE .......................105 5 Submissions by MR KINGSTON .........................169 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 198