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Table of Contents

  1. Acknowledgments
  2. Chapter one: Defining the constitution
  3. Chapter two: Parliamentary sovereignty
  4. Chapter three: The rule of law and the separation of powers
  5. Chapter four: The royal prerogative
  6. Chapter five: The House of Commons
  7. Chapter six: The House of Lords
  8. Chapter seven: The electoral system
  9. Chapter eight: Parliamentary privilege
  10. Chapter nine: Constitutional conventions
  11. Chapter ten: Local government
  12. Chapter eleven: Parliamentary sovereignty within the European Union
  13. Chapter twelve: The governance of Scotland and Wales
  14. Chapter thirteen: Substantive grounds of judicial review 1: illegality, irrationality and proportionality
    1. Congreve v Home Office [1976] QB 629; [1976] 1 All ER 697.
    2. R v Secretary of State for Foreign Affairs, ex parte World Development Movement Ltd [1995] 1 All ER 611
    3. Padfield and Others v Minister of Agriculture Fisheries and Food and Others [1968] 1 All ER 694
    4. H Lavender and Son Ltd v Minister of Housing and Local Government [1970] 3 All ER 871
    5. British Oxygen Co Ltd v Minister of Technology [1970] 3 All ER 165
    6. Ministry of Agriculture and Fisheries v Matthews [1949] 2 All ER 724
    7. Robertson v Minister of Pensions [1948] 2 All ER 767
    8. Lever (Finance) Ltd v Westminster Corporation [1970] 3 All ER 496
    9. Western Fish Products Ltd v Penwith District Council and another [1981] 2 All ER 204
    10. R v London Borough of Hillingdon, ex parte Royco Homes Ltd [1974] 2 All ER 643
    11. Brind and others v Secretary of State for the Home Department [1991] 1 All ER 720
    12. R v Ministry of Defence, ex parte Smith [1996] 1 All ER 256; [1996] QB 517
  15. Chapter fourteen: Procedural grounds of judicial review
  16. Chapter fifteen: Challenging governmental decisions: the process
  17. Chapter sixteen: Locus standi
  18. Chapter seventeen: Human rights I: Traditional perspectives
  19. Chapter eighteen: Human rights II: Emergent principles
  20. Chapter nineteen: Human rights III: New substantive grounds of review
  21. Chapter twenty: Human rights IV: The Human Rights Act 1998
  22. Chapter twenty-one: Human rights V: The impact of The Human Rights Act 1998
  23. Chapter twenty-two: Human rights VI: Governmental powers of arrest and detention
  24. Chapter twenty-three: Leaving the European Union

British Oxygen Co Ltd v Minister of Technology [1970] 3 All ER 165

LORD REID: My Lords, the appellants seek declarations that certain items of their industrial plant are eligible for grants under the Industrial Development Act 1966. Until that year taxpayers could claim investment allowances as of right. But that system was replaced by the provisions of the 1966 Act which empowered the Board of Trade, and now the Minister of Technology, to make grants if the conditions laid down in the Act apply.

The appellants produce in saleable form the atmospheric gases oxygen, nitrogen and argon and also other substances including hydrogen. The atmospheric gases are delivered to customers in liquid form at very low temperatures and under little more than atmospheric pressure. The hydrogen is delivered at ordinary temperature but under very high pressure. The plant with which this case is concerned is used to effect such delivery. It includes two types of tanker and two types of cylinder for containing gas under pressure.

The large tanker consists of a Foden four-wheeled tractor which supports the front end of a long tank of some 400,000 cubic feet capacity, the other end being attached to a double bogey. The smaller tanker consists of a tank about half that size mounted on an ordinary four-wheel lorry chassis. These transport the liquid gases in vacuum-insulated containers and have elaborate and expensive components; the tanks alone cost over 15,000 and 11,000 respectively. Outwardly they look much the same as tankers seen daily on the public roads transporting liquids such as petrol, oil or milk.

The first type of cylinder is used for delivery of hydrogen at very high pressure. Batteries of nine cylinders with various controls are mounted on trailers. The cylinders can readily be detached and they could be used separately. But in practice they never are used separately and they are only detached from the trailers very seldom for maintenance and inspection. When hydrogen is delivered to customers in these cylinders sometimes it is at once transferred to the customers' storage plant but sometimes the trailer is left with the customer for a time and he draws hydrogen from the cylinders as he needs it. The appellants use very large numbers of the second type of cylinder each of which is a separate unit. It is delivered full of oxygen or some other gas. The customer uses the contents as required and the cylinder is then collected by the appellants and refilled. It is really a type of returnable container.

I must now set out the relevant parts of the 1966 Act:

1. (1) Subject to the provisions of this section, the Board of Trade (hereafter in this Act referred to as 'the Board') may make to any person carrying on a business in Great Britain a grant towards approved capital expenditure incurred by that person in providing new machinery or plant for use in Great Britain-(a) for carrying on a qualifying industrial process in the course of that business;

(2) For the purposes of this section a qualifying industrial process is a process for or incidental to any of the following purposes, that is to say-(a) the making of any article.

....The single gas cylinders raise different and more far-reaching issues. They cost about 20 each and in the three years after the 1966 Act came into force the appellants purchased a very large number of them at a cost of over 4,000,000. The appellants complain that the Minister has made a rule not to pay grant on any item of plant costing less than 25, at least unless it is used in conjunction with other items. So it is necessary to consider what is the duty of the Minister in administering the Act and what rights, if any, the Act confers on those eligible for grants.

Section 1 of the Act provides that the Board of Trade 'may' make grants. It was not argued that 'may' in this context means 'shall', and it seems to me clear that the Board were intended to have a discretion. But how were the Board intended to operate that discretion? Does the Act read as a whole indicate any policy which the Board is to follow or even given any guidance to the Board? If it does then the Board must exercise its discretion in accordance with such policy or guidance (Padfield v Minister of Agriculture, Fisheries and Food). One generally expects to find that Parliament has given some indication how public money is to be distributed. In this Act Parliament has clearly laid down the conditions for eligibility for grants and it has clearly given to the Board a discretion so that the Board is not bound to pay to every person who is eligible to receive a grant. But I can find nothing to guide the Board as to the circumstances in which they should pay or the circumstances in which they should not pay grants to such persons.

The relevant part of the long title is 'An Act to provide for the making of grants out of moneys provided by Parliament towards expenditure on the provision of new business assets'. There is no guidance there. Then s 1(6) deals with eligibility and provides that the amount of any grant shall be 20 per cent of the expenditure in respect of which it is made. Sections 2 to 6 deal with special cases. Section 7 is a general power to vary the rate of grant by order. None of these throws any light on this matter, nor does s 8 which deals with conditions to be imposed in making grants. Section 11 and 12 are perhaps more relevant. Section 11 provides for the appointment of committees to advise the Board on the administration of the Act and it could be taken as an indication that otherwise the Board's discretion is unlimited. Section 12 provides for an annual report to Parliament so that Parliament can ex post facto consider the way in which this discretion has been exercised. Section 13 is a definition section. 'Approved capital expenditure' is to mean 'expenditure appearing to the Board to be of a capital nature and approved by them for the purposes of the grant'. This again gives no guidance as to reasons for which approval can be given or withheld.

I cannot find that these provisions give any right to any person to get a grant. It was argued that the object of the Act is to promote the modernisation of machinery and plant and that the Board were bound to pay grants to all who are eligible unless in their view particular eligible expenditure would not promote that object. That might be good advice for an advisory committee to give but I find nothing in the Act to require the Board to act in that way. If the Minister who now administers the Act, acting on behalf of the government, should decide not to give grants in respect of certain kinds of expenditure, I can find nothing to prevent him. There are two general grounds on which the exercise of an unqualified discretion can be attacked. It must not be exercised in bad faith, and it must not be so unreasonably exercised as to show that there cannot have been any real or genuine exercise of the discretion. But apart from that if the Minister thinks that policy or good administration requires the operation of some limiting rule, I find nothing to stop him.

It was argued on the authority of R v Port of London Authority, ex parte Kynoch Ltd that the Minister is not entitled to make a rule for himself how he will in future exercise his discretion. In that case Kynoch owned land adjoining the Thames and wished to construct a deep-water wharf. For this they had to get the permission of the authority. Permission was refused on the ground that Parliament had charged the authority with the duty of providing such facilities. It appeared that before reaching their decision the authority had fully considered the case on its merits and in relation to the public interest. So their decision was upheld. Bankes LJ said ([1919] 1 KB at 184):

"There are on the one hand cases where a tribunal in the honest exercise of its discretion has adopted a policy, and, without refusing to hear an applicant, intimates to him what its policy is, and that after hearing him it will in accordance with its policy decide against him, unless there is something exceptional in his case. I think counsel for the applicants would admit that, if the policy has been adopted for reasons which the tribunal may legitimately entertain, no objection could be taken to such a course. On the other hand there are cases where a tribunal has passed a rule or come to a determination, not to hear any application of a particular character by whomsoever made. There is a wide distinction to be drawn between these two classes".

I see nothing wrong with that. But the circumstances in which discretions are exercised vary enormously and that passage cannot be applied literally in every case. The general rule is that anyone who has to exercise a statutory discretion must not 'shut [his] ears to the application' (to quote from Bankes LJ ([1919] 1 KB at 183)). I do not think that there is any great difference between a policy and a rule. There may be cases where an officer or authority ought to listen to a substantial argument reasonably presented urging a change of policy. What the authority must not do is to refuse to listen at all. But a Ministry or large authority may have had to deal already with a multitude of similar applications and then they will almost certainly have evolved a policy so precise that it could well be called a rule. There can be no objection to that provided the authority is always willing to listen to anyone with something new to say - of course I do not mean to say that there need be an oral hearing. In the present case the Minister's officers have carefully considered all that the appellants have had to say and I have no doubt that they will continue to do so....

VISCOUNT DILHORNE:....The appellants also contended that the Board was not entitled to make it a rule not to make a grant in respect of an item costing less than 25. They found support for this contention in a passage in the judgment of Banks LJ in R v Port of London Authority where he said ([1919] 1 KB 176 at 184).....[reproduced above]...

Banks LJ clearly meant that in the latter case there is a refusal to exercise the discretion entrusted to the authority or tribunal but the distinction between a policy decision and a rule may not be easy to draw. In this case it was not challenged that it was within the power of the Board to adopt a policy not to make a grant in respect of such an item. That policy might equally well be described as a rule. It was both reasonable and right that the Board should make known to those interested the policy that it was going to follow. By doing so fruitless applications involving expense and expenditure of time might be avoided. The Board says that it has not refused to consider any application. It considered the appellants'. In these circumstances it is not necessary to decide in this case whether, if it had refused to consider an application on the ground that it related to an item costing less than 25, it would have acted wrongly.

I must confess that I feel some doubt whether the words used by Bankes LJ in the passage cited above are really applicable to a case of this kind. It seems somewhat pointless and a waste of time that the Board should have to consider applications which are bound as a result of its policy decision to fail. Representations could of course be made that the policy should be changed.

I cannot see any ground on which it could be said that it was ultra vires of the Board to decide not to make grants on items costing less than 25 nor on which it could be said to be ultra vires to decide not to make a grant in respect of plant used for a dual purpose, one of which qualifies, if in its opinion the main purpose of the plant was for making delivery to customers. The Act gives no guidance to the Board nor to the Minister as to the policy to be pursued in deciding whether or not to make a grant. It is left to the Board to decide how to exercise the power given to it. No doubt that exercise will be in accordance with the policy of the government of the day. An annual report has to be made to Parliament (s 12) and that will no doubt reveal the manner in which the power has been used.

In my opinion this appeal should be dismissed.