[COURT OF APPEAL]

LAKER AIRWAYS LTD. v. DEPARTMENT OF TRADE

[1976 L. No. 883]

Aircraft - Civil aviation - Civil Aviation Authority - Licensing junctions - Duty to consider specified matters - Grant of licence - Subsequent change of policy - "Guidance" requiring Authority to revoke licence - Whether ultra vires - Civil Aviation Act 1971 (c. 75), ss. 3, 4 ¹

Crown - Prerogative - Statute, application to - Designation of airline under Bermuda Agreement 1946 - Power to withdraw designation - Whether restrained or fettered by statute - Civil Aviation Act 1971, ss. 3, 4

Estoppel - Conduct, by - Government department - Close working relationship with commercial airline - Representations of department - Quia timet action by airline to prevent threatened course of action by Secretary of State - Whether plea of estoppel available

The Civil Aviation Authority, established by the Civil Aviation Act 1971, was required by section 3 (1) to perform

1 Civil Aviation Act 1971, s. 3: "(1) It shall be the duty of the Authority to perform the functions conferred on it otherwise than by this section in the manner which it considers is best calculated - (a) to secure that British airlines provide air transport services which satisfy all substantial categories of public demand (so far as British airlines may reasonably be expected to provide such services) at the lowest charges consistent with a high standard of safety in operating the services and an economic return to efficient operators on the sums invested in providing the services and with securing the sound development of the civil air transport industry of the United Kingdom; (b) to secure that at least one major British airline which is not controlled by the British Airways Board has opportunities to participate in providing, on charter and other terms, the air transport services mentioned in the preceding paragraph; (c) subject to the preceding paragraphs, to encourage the civil air transport industry of the United Kingdom to increase the contribution which it makes towards a favourable balance of payments for the United Kingdom and towards the prosperity of the economy of the United Kingdom; and (d) subject to the preceding paragraphs, to further the reasonable interests of users of air transport services; ... (2) Subject to the following subsection, the Secretary of State may from time to time, after consultation with the Authority, give guidance to the Authority in writing with respect to the performance of the functions conferred on it otherwise than by this subsection; and it shall be the duty of the Authority to perform those functions in such a manner as it considers is in accordance with the guidance for the time being given to it in pursuance of this subsection. (3) No guidance shall be given to the Authority in pursuance of the preceding subsection unless a draft of the document containing it has been approved by a resolution of each House of Parliament."

S. 4: "(1) In time of war, whether actual or imminent, or of great national emergency, the Secretary of State may by order require that all or any property or rights of or under the control of the Authority shall be placed at the disposal of the Secretary of State; and while an order under this subsection is in force - (a) the Secretary of State may give to the Authority such directions as the Secretary of State thinks fit; and (b) in so far as any directions given in pursuance of

its functions in the manner best calculated to secure the general objectives set out in paragraphs (a) to (d), subject to any current "guidance" given by the Secretary of State after approval by each House of Parliament, as provided by section 3 (2) and (3). Objective (b) was "to secure that at least one major British airline not controlled by" the state-owned airways board "has opportunities to participate in providing ... air transport services. ..." Under section 4 the Secretary of State had wide powers to "give directions" to the Authority in the national interest in circumstances specified in the section; such directions were not subject to parliamentary approval and, where they conflicted with other requirements of the Act, those requirements were to be disregarded.

After the issue of the first policy guidance in the form of a Command Paper, the Authority considered an application by the plaintiffs, privately owned air service operators, for a licence to operate a cheap passenger service known as Skytrain between London (Stansted) and New York. After a full inquiry the Authority rejected objections and in October 1972 granted the plaintiffs a 10-year licence, to begin on January 1, 1973.

Before Skytrain could operate over United States territory a permit, signed by the President, had to be obtained from the United States Civil Aeronautics Board under the Bermuda Agreement 1946, a treaty between the governments of the United Kingdom and the United States of America. In February 1973 the British Ambassador formally notified the United States Secretary of State of the designation of the plaintiffs for operations on the specified route, requesting the utmost expedition of the processes associated with designation. Despite that note and further continuous pressure at all levels over many months the United States board did not until June 1974 forward its recommendation for the President's signature that the plaintiffs be given the necessary permit.

Meanwhile the plaintiffs, with the active help and encouragement of the executive, incurred capital expenditure in buying aircraft and preparing for Skytrain to start; and they were further encouraged when in February 1975 the Authority refused an application by the state-owned airways board to revoke their licence.

In July 1975 the Secretary of State under a new administration reversed the previous policy. He announced that

this subsection conflict with any requirements of this Act apart from this subsection those requirements shall be disregarded. ... (3) The Secretary of State may, after consultation with the Authority, give to the Authority directions to do a particular thing which it has power to do or refrain from doing a particular thing if the Secretary of State considers it appropriate to give such directions - (a) in the interests of national security; or (b) in connection with any matter appearing to the Secretary of State to affect the relations of the United Kingdom with a country or territory outside the United Kingdom; or (c) in order to discharge or facilitate the discharge of an obligation binding on the United Kingdom by virtue of its being a member of an international organisation or a party to an international agreement; or (d) in order to attain or facilitate the attainment of any other object the attainment of which is in the opinion of the Secretary of State appropriate in view of the fact that the United Kingdom is a member of an international organisation or a party to an international agreement; or (e) in order to enable the United Kingdom to become a member of an international organisation or a party to an international agreement; or (f) in order to prevent or deal with noise, vibration, pollution or other disturbance attributable to aircraft used for the purpose of civil aviation; and in so far as any directions given in pursuance of this subsection conflict with the requirements of any provision of this Act except subsections (1) and (2) of this section those requirements shall be disregarded."

future civil aviation policy should be not to license more than one United Kingdom airline on any given long-haul route and that the plaintiffs had been told that Skytrain could not be allowed to start. The change of policy was implemented in 1976 in a Command Paper on Future Civil Aviation Policy (Cmnd. 6400) which contained "guidance" to the Authority and received parliamentary approval under section 3 (2) and (3): paragraph 7 of the guidance² constituted in effect an instruction to the Authority to eliminate competition with the state-owned airline and to revoke the plaintiffs' licence, while a proviso in paragraph 8 (b) would allow the licensing of another British airline subject to the consent of the state-owned airline. The United States board thereupon withdrew the recommendation before the permit had been signed by the President.

The plaintiffs brought an action quia timet against the Department of Trade for declarations that paragraphs 7 and 8 of the guidance were ultra vires and that the department was not entitled to cancel the designation. The department, while denying that the guidance was ultra vires, claimed also that the Crown had the prerogative right or discretion to withdraw the designation under the treaty and that its exercise could not be questioned in legal proceedings.

Mocatta J. granted the plaintiffs the declarations asked for holding that the Act fettered the prerogative, and that in any event the plaintiffs were entitled to a declaration that the department was estopped by its previous conduct from withdrawing the designation after the plaintiffs, in reliance on their licence and that conduct, had incurred heavy expenditure.

On appeal by the department:-

Held, dismissing the appeal, (1) that although the Secretary of State was entitled to reverse the previous policy of encouraging some competition between state-owned and privately owned airlines and could have done so by legislation amending the Act of 1971, he had acted beyond his powers in formulating the new policy by the procedure of "guidance" under section 3 (2), albeit with parliamentary approval under section 3 (3) for any "guidance" under section 3 (2) should as a matter of construction be consistent with the general objectives laid down in section 3 (1) (a) to (d) and as paragraph 7 of the 1976 guidance and the proviso to paragraph 8 (b) were inconsistent with the statutory objectives the plaintiffs were entitled to a declaration to that effect.

Sed aliter if in any of the circumstances specified in section 4 the Secretary of State had given the Authority a "direction" which conflicted with any requirement of the Act (including those in section 3 (1)), for then by the terms of section 4 such requirement could be disregarded.

(2) (Per Roskill and Lawton L.JJ.) that, although the Crown's prerogative in relation to its treaty-making powers was not justiciable in the municipal courts at the suit of a subject unless the treaty had been made part of the municipal law, the Act of 1971 had entrusted to the Authority the function of granting licences to operate on international routes, and the Authority had performed that function by granting the plaintiffs a licence to operate between London and New York which would be rendered commercially valueless without the reciprocal rights attaching to designation under the treaty;

2 Future Civil Aviation Policy (1976) (Cmnd. 6400) paras. 7, 8: see post, pp. 670D - 671A.

and accordingly the Act by necessary implication fettered the use of the prerogative to cancel the designation of the plaintiffs under the treaty and achieve by that indirect method the result which could not be achieved by guidance held to be ultra vires.

Dicta in Attorney-General v. De Keyser's Royal Hotel Ltd. [1920] A.C. 508, H.L.(E.) considered.

Per Lord Denning M.R. As the exercise of the Crown's prerogative is discretionary, the courts are entitled to see that it is not exercised improperly or mistakenly; and it would be improper to cancel the designation by use of the prerogative power at a stage when all the necessary steps except the presidential signature had been completed in the United States; a fortiori it would be improper to use that method when the Act provided other means of stopping Skytrain (post, pp. 705F - G,706A-B, 706H - 707C).

But (3) that the plaintiffs as subjects threatened with material loss by reason of a change of government policy could not invoke the doctrine of estoppel against the Crown based on the department's previous conduct which (per Roskill L.J.) could hinder the constitutional result of a general election or (per Lawton L.J.) the formation of government policy.

Decision of Mocatta J. post, p. 649, affirmed.

The following cases are referred to in the judgments of the Court of Appeal:

Attorney-General v. De Keyser's Royal Hotel Ltd. [1920] A.C. 508, H.L.(E.).

Burmah Oil Co. Ltd. v. Lord Advocate [1965] A.C. 75; [1964] 2 W.L.R. 1231; [1964] 2 All E.R. 348, H.L.(Sc.).

Civilian War Claimants Association Ltd. v. The King [1932] A.C. 14, H.L.(E.).

Hoffmann-La Roche (F.) & Co. A.G. v. Secretary of State for Trade and Industry [1975] A.C. 295; [1973] 3 W.L.R. 805; [1973] 3 All E.R. 945, C.A.; [1975] A.C. 295; [1974] 3 W.L.R. 104; [1974] 2 All E.R. 1128, H.L.(E.)).

H.T.V. Ltd. v. Price Commission [1976] I.C.R. 170, Mocatta J. and C.A.

Liversidge v. Anderson [1942] A.C. 206; [1941] 3 All E.R. 338, H.L.(E.).

Maritime Electric Co. Ltd. v. General Dairies Ltd. [1937] A.C. 610; [1937] 1 All E.R. 748, P.C.

Nissan v. Attorney-General [1970] A.C. 179; [1969] 2 W.L.R. 926; [1969] 1 All E.R. 629, H.L.(E.).

Padfield v. Minister of Agriculture, Fisheries and Food [1968] A.C. 997; [1968] 2 W.L.R. 924; [1968] 1 All E.R. 694, C.A. and H.L.(E.).

Proclamations Case (1611) 12 Co.Rep. 74.

Reg. v. Liverpool Corporation, Ex parte Liverpool Taxi Fleet Operators' Association [1972] 2 Q.B. 299; [1972] 2 W.L.R. 1262; [1972] 2 All E.R. 589, C.A.

Robertson v. Minister of Pensions [1949] 1 K.B. 227; [1948] 2 All E.R. 767.

Rustomjee v. The Queen (1876) 2 Q.B.D. 69, C.A.

Secretary of State for Education and Science v. Tameside Metropolitan Borough Council [1976] 3 W.L.R. 641; [1976] 3 All E.R. 665, C.A. and H.L.(E.).

Ship Money Case, Rex v. Hampden (1637) 3 State Tr. 826.

Walker v. Baird [1892] A.C. 491, P.C.

The following additional cases were cited in argument in the Court of Appeal:

Blackburn v. Attorney-General [1971] 1 W.L.R. 1037; [1971] 2 All E.R. 1380, C.A.

Dowty Boulton Paul Ltd. v. Wolverhampton Corporation [1971] 1 W.L.R. 204; [1971] 2 All E.R. 277.

James (An Insolvent), In re (Attorney-General intervening) [1977] Ch. 41; [1977] 2 W.L.R. 1; [1977] 1 All E.R. 364, C.A.

Lever Finance Ltd. v. Westminster (City) London Borough Council [1971] 1 Q.B. 222; [1970] 3 W.L.R. 732; [1970] 3 All E.R. 496, C.A.

M. (An Infant), In re [1961] Ch. 328; [1961] 2 W.L.R. 350; [1961] 1 All E.R. 788, C.A.

North Western Gas Board v. Manchester Corporation [1964] 1 W.L.R. 64; [1963] 3 All E.R. 442, C.A.

Pan-American World Airways Inc. v. Department of Trade [1976] 1 Lloyd's Rep. 257, C.A.

Republic of Italy v. Hambros Bank Ltd. [1950] Ch. 314; [1950] 1 All E.R. 430.

The following cases are referred to in the judgment of Mocatta J.:

Attorney-General v. De Keyser's Royal Hotel Ltd. [1920] A.C. 508, H.L.(E.).

Attorney-General to the Prince of Wales v. Collom [1916] 2 K.B. 193.

Azoff-Don Commercial Bank, In re [1954] Ch. 315; [1954] 2 W.L.R. 654; [1954] 1 All E.R. 947.

Blackburn v. Attorney-General [1971] 1 W.L.R. 1037; [1971] 2 All E.R. 1380, C.A.

Burmah Oil Co. Ltd. v. Lord Advocate [1965] A.C. 75; [1964] 2 W.L.R. 1231; [1964] 2 All E.R. 348, H.L.(Sc.).

Case of Monopolies (1602) 11 Co.Rep. 84b.

Chandler v. Director of Public Prosecutions [1964] A.C. 763; [1962] 3 W.L.R. 694; [1962] 3 All E.R. 142; 46 Cr.App.R. 347, H.L.(E.).

Civilian War Claimants Association Ltd. v. The King [1932] A.C. 14, H.L.(E.).

Dowty Boulton Paul Ltd. v. Wolverhampton Corporation [1971] 1 W.L.R. 204; [1971] 2 All E.R. 277.

Dyson v. Attorney-General [1911] 1 K.B. 410, C.A.

Guaranty Trust Co. of New York v. Hannay & Co. [1915] 2 K.B. 536, C.A.

Ibeneweka v. Egbuna [1964] 1 W.L.R. 219, P.C.

Lever Finance Ltd. v. Westminster (City) London Borough Council [1971] 1 Q.B. 222; [1970] 3 W.L.R. 732; [1970] 3 All E.R. 496, C.A.

M (An Infant), In re [1961] Ch. 328; [1961] 2 W.L.R. 350; [1961] 1 All E.R. 788, C.A.

Maritime Electric Co. Ltd. v. General Dairies Ltd. [1937] A.C. 610; [1937] 1 All E.R. 748, P.C.

North Western Gas Board v. Manchester Corporation [1964] 1 W.L.R. 64; [1963] 3 All E.R. 442, C.A.

Pan-American World Airways Inc. v. Department of Trade [1976] 1 Lloyd's Rep. 257, C.A.

Rustomjee v. The Queen (1876) 2 Q.B.D. 69, C.A.

Southend-on-Sea Corporation v. Hodgson (Wickford) Ltd. [1962] 1 Q.B. 416; [1961] 2 W.L.R. 806; [1961] 2 All E.R. 46, D.C.

Walker v. Baird [1892] A.C. 491, P.C.

Wells v. Minister of Housing and Local Government [1967] 1 W.L.R. 1000; [1967] 2 All E.R. 1041, C.A.

The following additional cases were cited in argument before Mocatta J.:

China Navigation Co. Ltd. v. Attorney-General [1932] 2 K.B. 197, C.A.

Church of Scientology of California v. Johnson-Smith [1972] 1 Q.B. 522; [1971] 3 W.L.R. 434; [1972] 1 All E.R. 378.

Dillwyn v. Llewellyn (1862) 31 L.J.Ch. 658.

Grosvenor Hotel, London (No. 2), In re [1965] Ch. 1210; [1964] 3 W.L.R. 992, [1964] 3 All E.R. 354, C.A.

Hanratty v. Lord Butler of Saffron Walden (1971) 115 S.J. 386, C.A.

Howell v. Falmouth Boat Construction Co. Ltd. [1951] A.C. 837; [1951] 2 All E.R. 278, H.L.(E.).

McEldowney v. Forde [1971] A.C. 632; [1969] 3 W.L.R. 179; [1969] 2 All E.R. 1039, H.L.(N.I.).

Nissan v. Attorney-General [1970] A.C. 179; [1969] 2 W.L.R. 926; [1969] 1 All E.R. 629, H.L.(E.).

Plimmer v. Wellington Corporation (1884) 9 App.Cas. 699, P.C.

Republic of Italy v. Hambros Bank Ltd. [1950] Ch. 314; [1950] 1 All E.R. 430.

Robertson v. Minister of Pensions [1949] 1 K.B. 227; [1948] 2 All E.R. 767.

Rodriguez v. R. J. Parker (Male) [1967] 1 Q.B. 116; [1966] 3 W.L.R. 546; [1966] 2 All E.R. 349.

Rother Valley Railway Co. Ltd. v. Ministry of Transport [1971] Ch. 515; [1970] 2 W.L.R. 1041; [1970] 1 All E.R. 1192; [1971] Ch. 515; [1970] 3 W.L.R. 909; [1970] 3 All E.R. 805, C.A.

ACTION

The plaintiffs, Laker Airways Ltd., a company registered in St. Helier, Jersey, Channel Islands, and incorporated under the laws of Jersey, by a writ issued on March 16, 1976, claimed declarations in a quia timet action against the defendants, the Department of Trade. By their amended and re-amended points of claim they sought declarations (1) that the guidance and directives given to the Civil Aviation Authority by the Secretary of State for Trade in the terms of or pursuant to the White Paper, Future Civil Aviation Policy (1976) (Cmnd. 6400) were outside the powers granted to the Secretary of State and were also contrary to the provisions of section 3 (1) of the Civil Aviation Act 1971; (2) that a licence No. A. 14011 granted to the plaintiffs by the Authority in respect of the air service commonly known as Skytrain to commence on January 1, 1973, and expire on December 31, 1982, was valid and not revoked and remained in full force and effect; and (3) that by reason of the terms of the Civil Aviation Act 1971 the department were not entitled to withdraw or amend the designation of the plaintiffs for operations on United Kingdom Route 2 of the Annex to the Agreement relative to air services between the United Kingdom and the United States of America signed at Bermuda on February 11, 1946, as amended by the exchange of Notes of May 27, 1966, the designation having been made by note dated February 26, 1973, on behalf of the department and that any such withdrawal or amendment would be contrary to natural justice; and/or that the department had waived their right and power to make

and were estopped from making such withdrawal until December 31, 1982, or until the lawful termination of the licence; and/or that it would be inequitable for the department to make such withdrawal before such date or the happening of those events.

By their amended points of defence the department claimed, inter alia, that the note dated February 26, 1973, designating the plaintiffs as air carriers on the specified route, was an exercise by the Crown of its prerogative powers and that the plaintiffs were not thereby entitled to operate any air service between Stansted (in the United Kingdom) and New York. They admitted that on February 10, 1976, the Secretary of State had in conversation with the chairman and managing director of the plaintiff company, Mr. Frederick Laker, informed him that though withdrawal of the Skytrain licence was a matter for the Authority, he was going to withdraw the designation. They claimed further that the guidance contained in the White Paper (Cmnd. 6400), having in accordance with section 3 (3) of the Act of 1971 been approved by resolution of the House of Commons on February 26, 1976, and of the House of Lords on March 15, 1976, had been sent to the Authority on March 17, 1976; that the guidance did not give directions to the Authority; but that the department had lawfully given the guidance in accordance with section 3 of the Act and that pursuant to subsection (2) thereof it was the duty of the Authority to perform its functions in such a manner as it considered to be in accordance with the guidance. The department denied that they had purported to prevent the Authority from exercising its duties in accordance with the Act as alleged or at all. They admitted that they intended to withdraw the plaintiffs' designation and had decided to do so as a matter of discretion vested in them. They claimed that the designation of the plaintiffs would be withdrawn in the exercise by the Crown of its prerogative in relation to a treaty (the Bermuda Agreement) made between the governments of the United Kingdom and the United States of America and as a matter of executive discretion and that the intended withdrawal was not a matter which the plaintiffs were entitled to challenge in legal proceedings. They also denied that the exercise of the prerogative or the discretion could be waived or fettered. They conceded that the plaintiffs' licence was valid and had not been revoked and that for the time being it remained in full force and effect; but on the grounds set out they denied that the plaintiffs were entitled to the relief claimed or any part thereof.

Andrew Bateson Q.C. and Peter Bowsher for the plaintiffs.

Michael Eastham Q.C., Harry Woolf and D. Armstrong Evans for the defendants.

July 30.MOCATTA J. read the following judgment.

Introduction

This is a case of considerable constitutional importance. It raises a number of difficult questions of law and is of the greatest interest both in its legal and non-legal aspects.

Laker Airways Ltd. is a British corporation registered in Jersey, Channel Islands. It is a wholly owned subsidiary of Laker Airways (International) Ltd. ("Laker International") which is also a United Kingdom corporation. 90 per cent. of Laker International's issued and outstanding stock is owned by Mr. F. M. Laker, the founder of the Laker companies, who serves as chairman and managing director of both Laker International and Laker Airways Ltd., the plaintiff company. The other 10 per cent. of the stock is owned by Mrs. Laker.

Laker International has a number of other subsidiaries than the plaintiffs that are either wholly or partly owned by it. These include Laker Airways (Services) Ltd., a company which undertakes aircraft maintenance at Gatwick airport, which is the home of the Laker companies, and offers consultative services on a world-wide basis; another subsidiary provides passenger, baggage and aircraft handling both for the Laker companies and other airlines; other subsidiaries include several travel agencies that are leaders in the promotion of package holiday inclusive tours and the operation of advanced booking charters. Laker International also owns a one-third interest in International Caribbean Airways, the flag carrier of Barbados, which provides a scheduled service between Barbados, Luxembourg and London. In 1969 the plaintiffs were issued a permit for charter air transportation by the United States Civil Aeronautics Board.

As regards Mr. Laker himself, his experience in aviation goes back very many years. It is unnecessary to speak of years earlier than 1958 when Mr. Laker's companies became part of Airwork Ltd., which subsequently merged with another company to form Air Holdings Ltd., which in turn created the well-known British United Airways. Mr. Laker became the first managing director of British United Airways, the largest independent British airline at the time, which operated extensive charter and scheduled services throughout the world. The most remarkable achievement perhaps of British United Airways during the period when Mr. Laker was its managing director was the successful running of a scheduled service to and from South America in place of that unsuccessfully run for a number of years by British South American Airways, a state-owned enterprise. Mr. Laker resigned as managing director of British United Airways in 1965 and in 1966 formed the Laker companies which I have already mentioned.

This action is concerned with a project of the plaintiffs, no doubt emanating from the fertile brain of Mr. Laker, called Skytrain. The essence of this project is that a service should be run from Stansted Airport in the United Kingdom to New York, differing in kind from all present scheduled services across the Atlantic, and appealing by reason of its cheapness to a potentially large body of would-be travellers on both sides of the Atlantic who without it would be unable to afford the two-way flight across the ocean.

When originally licensed by the Civil Aviation Authority for 10 years from January 1, 1973, the Skytrain project had an immense attraction by reason of the cheapness of its fares. The winter fare for the crossing of the Atlantic was for an adult as low as £32.50 and the summer fare £37.50; fares for children under 12 were in winter £27.50 and in summer £32.50, whilst infants under two years of age were carried at 10 per cent. of the applicable adult fare.

Apart from the cheapness of the proposed fares, which on February 5, 1975, were increased for an adult with the approval of Civil Aviation Authority to £59 one way, there were a large number of differences between the proposed Skytrain service and the various international scheduled services across the Atlantic. Thus the Skytrain service had by its very nature a number of inherent drawbacks for what one might describe as the average present-day passenger crossing the Atlantic by scheduled services. First of all it would be impossible to make any reservations for a Skytrain flight, of which 11 were sanctioned by the Civil Aviation Authority in any one direction across the Atlantic in any one week during the period May 1 and September 30, whilst during the remainder of the year not more than one journey in any one direction might be made on any one day. Only Boeing 707s and D.C.10s, the latter with a capacity of not more than 345 seats, were licensed to be used on the service, whilst during the winter months not more than 189 passengers might be carried on any one journey. This number could be carried by a Boeing 707.

Other distinctions to the detriment of Skytrain and imposed for the protection of existing scheduled services were that it would be impossible to make a reservation in advance. the airport ticket desk only opening six hours before the programmed departure of an aircraft. No seats could be guaranteed. A would-be passenger by Skytrain would have the possibility of a six-hour wait plus the necessary check-in time before being able to board his aircraft assured of a seat. Tickets would only be sold to passengers on a first come first served basis. If a passenger required food, drinks, music or films he would have to pay extra. The free baggage allowance was only 15 pounds and the maximum permitted on payment of an extra charge was 33 pounds per person. Cash only was to be accepted in payment of fares. Owing to the fact that regular international scheduled services do not fly to or from Stansted, the use of that airport as a terminus for flights eastward across the Atlantic would be very unattractive to passengers wishing to travel still further by air once they had landed in the United Kingdom. Furthermore, the use of that airport in order to board an aircraft travelling westward would be unattractive to a would-be passenger arriving in the United Kingdom by air from the Continent or elsewhere overseas and desiring to fly on to the United States.

These various distinctions between the proposed Skytrain project and what most people know will be provided for them if they can afford to pay even economy fares on scheduled flights, let alone first class fares, would apply, though to a less marked degree, in comparison with the facilities obtained by a passenger able to purchase return only cheap fares; for example, what are sometimes known as Early Bird tickets, excursion fares, etc. Such fares have to be paid a considerable time in advance, but, if paid and if the passenger can remain overseas for the minimum period and not in excess of the maximum period, afford definite advantages over Skytrain, since such passengers can enjoy firm seat reservations in advance of travel through extensive sales office networks, seasonally lower fares, child reductions, choice of airlines, airports and flights, larger baggage allowance, transit links and confirmed connections, inclusive in-flight services, short checking-in time and credit payment of fares. It will be obvious that the absence of many of the facilities associated both with scheduled

flights and return only cheaper fares render possible the greatly reduced fares which the plaintiffs propose to charge, and which they were licensed to charge, for Skytrain services. One obvious saving in this respect would be the absence of the need for the plaintiffs to pay any commission to travel agents. Similarly the absence of free in-flight services such as food, would clearly result in a considerable saving. The charges made on chartered planes for return flights across the Atlantic, which I was told at the date of trial amounted to £150 with a minimum stay of 14 days on the other side of the Atlantic and travel in blocks of 40 persons, should be compared with the proposed charge for Skytrain, approved by the Civil Aviation Authority and operative down to the end of 1976, of £118 for an adult for a return flight, without any restriction as to any length of stay on the other side of the Atlantic and any compulsion to travel as part of any group of persons.

Much of the very interesting material put before the court at the trial, which took place on the basis of affidavit evidence, was concerned with the fascinating debate whether Skytrain could be made a commercial success and, if it could, whether by so doing it would make substantial inroads into the takings of scheduled airlines and chartered services. Mr. Laker in many interesting and long memoranda argued that the impact of Skytrain would be minimal upon scheduled services and chartered services. Skytrain would, he contended, appeal to a new class of would-be air passengers on both sides of the Atlantic who could not afford the substantially higher fares required for travel by charter flight and the very substantially greater fares which such passengers would have to pay if they travelled by any scheduled service.

The nature of the action and relevant statutory and treaty provisions

The points of claim sought declaratory relief under three headings. The first declaration sought reads as follows:

"A declaration that the guidance and directives given to the Civil Aviation Authority by the Secretary of State for Trade in the terms of or pursuant to the White Paper, Future Civil Aviation Policy (1976) (Cmnd. 6400) are ultra vires the powers granted to the Secretary of State for Trade and further are contrary to the provisions of section 3 (1) of the Civil Aviation Act 1971."

I need not say much about the second declaration sought which was to the effect that the licence granted to the plaintiffs by the Civil Aviation Authority in respect of the Skytrain service beginning on January 1, 1973, and expiring on December 31, 1982, was valid and remained in full force and effect. It was accepted on behalf of the defendants that this was the case. Accordingly no declaration from the court is necessary on this topic.

The third declaration, which was twice amended, reads in its re-amended form as follows:

"A declaration that by reason of the terms of the Civil Aviation Act 1971 the defendants are not entitled to withdraw or amend the designation of the plaintiffs for operation on United Kingdom Route 2 of the annex to the agreement relative to air services between the

United Kingdom and the United States of America signed at Bermuda on February 11, 1946, as amended by the exchange of notes of May 27, 1966, the said designation having been made by note dated February 26, 1973, on behalf of the defendants and that any such withdrawal or amendment would be contrary to natural justice; and/or that the defendants have waived their right and power to make and are estopped from making such withdrawal until December 31, 1982, or until the lawful termination of the said licence; and/or that it would be inequitable for the defendants to make such withdrawal before the said date on the happening of the said events."

The last few lines of the proposed declaration beginning with the words "and/or that the defendants have waived their right ..." were added by the initial amendment to the points of claim and matched the inclusion at the end of the original pleadings of new paragraphs 10 and 11. The latter is a particularly long paragraph, containing no fewer than nine lettered sub-paragraphs raising facts on which the plaintiffs sought to base their claims of waiver and estoppel. The words "by reason of the terms of the Civil Aviation Act 1971 the defendants are not entitled to" after the first three words of the declaration sought were added by another amendment and reflected an interesting argument advanced by Mr. Bateson on behalf of the plaintiffs that the Civil Aviation Act 1971 had fettered by implication the ambit of the Royal prerogative in the relevant field.

The three major issues or questions of law arising are:- (i) whether the guidance set out in what I will for short call the White Paper was in any material respect ultra vires; (ii) whether the Royal prerogative has in any material respect been fettered by the Civil Aviation Act 1971 and the grant of a licence to the plaintiffs thereunder by the Civil Aviation Authority, so as to disentitle the Crown from cancelling the designation of the plaintiffs under the Bermuda Agreement; and (iii) whether by reason of waiver, estoppel or pursuant to the requirements of natural justice the Crown is, in the circumstances which I shall narrate, disentitled to cancel such designation.

Such cancellation was for convenience referred to in argument by the ugly but useful word "dedesignation" and the comparable verb "to dedesignate."

By the points of defence the defendants denied that the plaintiffs were entitled to either of the declarations sought. The initial designation of the plaintiffs was an exercise by the Crown of its prerogative powers and the plaintiffs were not thereby entitled to operate any air service between Stansted and New York. It was admitted that on February 10, 1976, Mr. Peter Shore, the then Secretary of State for the Department of Trade, informed Mr. Laker at a conversation with him that he (the Secretary of State) was going to withdraw the designation notwithstanding that the withdrawal of the Skytrain's licence was the business of the Civil Aviation Authority. It was denied that the White Paper, which had been approved by resolution of both Houses of Parliament and had been sent to the Civil Aviation Authority under cover of a letter dated March 17, 1976, gave directions to the authority or was ultra vires. It was denied that by reason of any of the matters set forth in paragraph 11 of the amended

points of claim the defendants made any representations to the plaintiffs. Finally it was alleged that the intended dedesignation of the plaintiffs would take place by virtue of the exercise by the Crown of its prerogative in relation to a treaty, namely the Bermuda Agreement, and as a matter of executive discretion, and was not something which was justiciable in the courts. It was further denied that the exercise of the prerogative or of the said discretion could be waived or fettered as alleged or at all.

In order that these various issues and allegations can be understood, it is clearly necessary to make fairly substantial references both to the Bermuda Agreement and to the Civil Aviation Act 1971.

The Bermuda Agreement 1946 between the government of the United Kingdom and the government of the United States of America was made pursuant to the Convention on International Civil Aviation signed at Chicago on December 7, 1944. Article 1 of that convention provided that the contracting states recognised that every state had complete and exclusive sovereignty over the air space above its territory. Article 6 provides:

"No scheduled international air service may be operated over or into the territory of a contracting state, except with the special permission or other authorisation of that state, and in accordance with the terms of such permission or authorisation."

A large number of bilateral agreements comparable to the Bermuda Agreement have been made by this and other contracting states.

It would burden this judgment too much to set out verbatim all the provisions, that might be relevant to the competing arguments in this case, contained in the Bermuda Agreement itself, appendix 1 and the annex. For present purposes it is sufficient to cite the following.

Article 1 of appendix 1 (there is no appendix 2) provided that each contracting party granted to the other contracting party rights to the extent described in the annex for the purpose of the establishment of air services described therein or as amended in accordance with section IV of the annex, referred to as "the agreed services."

Article 2 (1) provides:

"The agreed services may be inaugurated immediately or at a later date at the option of the contracting party to whom the rights are granted, but not before (a) the contracting party to whom the rights have been granted has designated an air carrier or carriers for the specified route or routes, and (b) the contracting party granting the rights has given the appropriate operating permission to the air carrier or carriers concerned (which, subject to the provisions of paragraph 2 of this article and of article 6, it shall do without undue delay."

Article 2 (2) provides:

"The designated air carrier or carriers may be required to satisfy the aeronautical authorities of the contracting party granting the rights that it or they is or are qualified to fulfil the conditions prescribed by or under the laws and regulations normally applied by those authorities to the operations of commercial air carriers."

By article 6 of the Bermuda Agreement it was provided that each party reserved the right to withhold or revoke the exercise of the right specified in the annex to the agreement by a carrier designated by the other party, in the event that it was not satisfied that substantial ownership and effective control of such carrier were vested in nationals of either contracting party, or in the case of failure by the carrier to comply with the laws and regulations referred to in article 5. That article stated that the laws and regulations of a contracting party relating to entry into or departure from its territory of aircraft engaged in international air navigation while within its territory should apply to aircraft of the designated air carrier or carriers of the other contracting party. Article 12, the definition article, provides that the term "designated air carriers" should mean the air transport enterprises which aeronautical authorities of one of the contracting parties had notified in writing to the similar authorities of the other contracting party, as the air carriers designated by it in accordance with article 2 for the route specified in such notification.

Article 13 became of some importance during the course of the hearing. It provides as follows:

"Either contracting party may at any time request consultation with the other with a view to initiating any amendments of this agreement or its annex which may be desirable in the light of experience. Pending the outcome of such consultation, it should be open to either party at any time to give notice to the other of its desire to terminate this agreement. Such notice shall be simultaneously communicated to the Provisional International Civil Aviation Organisation or its successor." - I was informed that this organisation is no longer provisional and has its domicile in Montreal. - "If such notice is given, this agreement shall terminate 12 calendar months after the date of receipt of the notice by the other contracting party, unless the notice to terminate is withdrawn by agreement before the expiry of this period. In the absence of acknowledgement of receipt by the other contracting party notice shall be deemed to have been received 14 days after the receipt of the notice by the Provisional International Civil Aviation Organisation or its successor."

This article became relevant since on June 28, 1976, when the hearing was resumed after an adjournment on May 28, the second day of the original trial, rendered necessary by the then substantial amendments to the points of claim to support the relief sought in the third declaration based on waiver and estoppel, Mr. Eastham, who appeared for the defendants, drew the attention of the court to a press notice dated June 23, 1976. This document reported an announcement by the Secretary of State for Trade in a written answer in the House of Commons to the effect that the Bermuda Agreement, which was the first major air services agreement negotiated after the end of the war, had become out of date in a number of respects and it was considered by the government that for some time past the benefits conferred by the agreement on the United States were greatly in excess of those gained by the United Kingdom. The government therefore believed the time had come to renegotiate the Bermuda Agreement as a whole. Accordingly they had requested the United States

government for consultations for a renegotiation and, pending the outcome of these consultations, the United Kingdom government had served notice of termination of the existing agreement, such notices to run for 12 months from June 22, 1976.

Mr. Eastham did not suggest that this notice altered any arguments raised by the pleadings in the action and I accordingly considered the issues raised without treating the problem as materially affected by the notice. One may hazard a guess that with the attention of the administration in the United States from the President downwards being concentrated at this time to a considerable extent upon the forthcoming Presidential election, the delays subsequent to an election, in the event of a new President being elected, provided for by the constitution of the United States, involving the new President not assuming office until some date in January 1977, and the consequential delays before such a new incumbent to the office. if there be one, settling down with his new cabinet and considering with the appropriate permanent officials the request for revision of the Bermuda Agreement by the United Kingdom government, make it exceedingly unlikely that the present Bermuda Agreement will be substituted by a new agreement by June 21, 1977. It would seem to me at any rate much more likely that the present agreement will be continued for some subsequent period in order to give the two governments time within which to arrive at a consensus upon the terms of a new agreement. Furthermore. it by no means follows that even if and when such consensus is reached there would be anything in the new agreement inconsistent with the continuation of the designation of the plaintiffs, or the equivalent of the present designation of the plaintiffs, by the United Kingdom government as an air carrier designated by it in accordance with the new agreement.

Turning to the annex, Part II of this in sub-paragraph (a) provided that the rates to be charged by the air carriers of either contracting party between points in the territories of the United States and United Kingdom should be subject to the approval of the contracting parties within their respective constitutional powers and obligations. In the event of disagreement the matter in dispute was to be handled as provided in the fairly long and complicated provisions contained in sub-paragraphs (b) to (j) of the remainder of Part II of the annex. Part III of the annex under the heading "(a) Routes to be served by the air carriers of the United Kingdom" provided for, inter alia, a route from London to New York. There were further routes set out from London or Prestwick via various intermediate points to New York and other cities in the United States and also from Bermuda and various British overseas territories (now independent with the exception of Hong Kong) to various other cities in the United States, including for example, Miami and San Francisco. Under the heading "(b) Routes to be served by the air carriers of the United States "there appear a great number of routes from many United States cities to London, Prestwick and other places, which it is not now necessary to name, notwithstanding the great interest of some of these routes, particularly the places featuring under the headings "Intermediate Points" and "Points beyond the United Kingdom."

I now pass to the relevant provisions of the Civil Aviation Act 1971. Section 1 set up the Civil Aviation Authority, which was to be a body

corporate. It was to consist of not less than six and not more than 12 persons appointed by the Secretary of State and the section declared that the Authority was not to be regarded as a servant or agent of the Crown or as enjoying any status privilege or immunity of the Crown.

Section 2 states the functions of the Authority which, so far as relevant, were (a) the functions conferred upon it by the following provisions of Part I of the Act of 1971 and (b) the functions conferred upon it by or under Part II of the Act with respect to the licensing of air transport, the licensing of the provision of accommodation in aircraft, the provision of air navigation services, the operation of aerodromes and the provision of assistance and information. The licensing functions of the Authority had previously been carried out by the Air Transport Licensing Board which had in this respect somewhat the same powers as the Civil Aviation Authority. The Act of 1971 repealed most of the provisions of the Civil Aviation (Licensing) Act 1960. Section 3 bearing the marginal note "General objectives, and guidance by the Secretary of State" provides:

"(1) It shall be the duty of the Authority to perform the functions conferred on it otherwise than by this section in the manner which it considers is best calculated - (a) to secure that British airlines provide air transport services which satisfy all substantial categories of public demand (so far as British airlines may reasonably be expected to provide such services) at the lowest charges consistent with a high standard of safety in operating the services and an economic return to efficient operators on the sums invested in providing the services and with securing the sound development of the civil air transport industry of the United Kingdom; (b) to secure that at least one major British airline which is not controlled by the British Airways Board has opportunities to participate in providing, on charter and other terms, the air transport services mentioned in the preceding paragraph; (c) subject to the preceding paragraphs, to encourage the civil air transport industry of the United Kingdom to increase the contribution which it makes towards a favourable balance of payments for the United Kingdom and towards the prosperity of the economy of the United Kingdom; and (d) subject to the preceding paragraphs, to further the reasonable interests of users of air transport services; ..."

"(2) Subject to the following subsection, the Secretary of State may from time to time, after consultation with the Authority, give guidance to the Authority in writing with respect to the performance of the functions conferred on it otherwise than by this subsection; and it shall be the duty of the Authority to perform those functions in such a manner as it considers is in accordance with the guidance for the time being given to it ..."

"(3) No guidance shall be given to the Authority in pursuance of the preceding subsection unless a draft of the document containing it has been approved by a resolution of each House of Parliament."

What I have previously described, as a matter of convenience, as the White Paper was issued pursuant to subsections (2) and (3) of section 3 of the Civil Aviation Act 1971.

Section 4 contains provisions of very considerable importance in relation to the arguments advanced before me. Subsection (1) deals with the powers of the Secretary of State in time of war or a great national emergency, when he may give to the Authority such directions as he thinks fit, and in so far as any such directions should conflict with any requirements of the Act of 1971, apart from subsection (1), those requirements were to be disregarded. Subsection (3), so far as relevant to the present case, provides as follows:

"The Secretary of State may, after consultation with the Authority, give to the Authority directions to do a particular thing which it has power to do or refrain from doing a particular thing if the Secretary of State considers it appropriate to give such directions - (a) in the interests of national security; or" - and this is of the greatest importance - "(b) in connection with any matter appearing to the Secretary of State to affect the relations of the United Kingdom with a country or territory outside the United Kingdom; ..."

I need not read the rest of subsection (3), though subparagraphs (c), (d) and (e) each have regard to the position of the United Kingdom in relation to international organisations or international agreements.

Section 21, the first section in Part II of the Act of 1971 with the heading "Regulation of Civil Aviation," provides by subsection (2) that no aircraft shall be used for the carriage for reward of passengers unless the operator of the aircraft holds a licence granted to him by the Civil Aviation Authority authorising him to operate aircraft on such flights as the flight in question. This prohibition by subsection (2) applies to any flight in any part of the world by an aircraft registered in the United Kingdom and to any flight beginning or ending in the United Kingdom by an aircraft registered in the relevant overseas territory.

Section 22 contains provisions in relation to the grant and refusal of air transport licences. An application for such a licence has to be made in writing to the Authority containing such particulars as the Authority may specify in a published notice, and the Authority has power under the section to grant a licence with such modifications as it thinks fit or to refuse to grant a licence. Furthermore, a licence granted may contain such terms as the Authority thinks fit and may include terms as to the charges which are to be made. By section 23 it is provided that an application for the revocation or suspension or variation of an air transport licence may be made to the Civil Aviation Authority at any time by a person "of a prescribed description." The latter category is defined in regulation 14 (1) of the Civil Aviation Authority Regulations 1972, setting out the persons who have a right to be heard before any decision to grant, refuse to grant, revoke, suspend or vary an air transport licence is made. The persons in question include the applicant, the holder of any air transport licence and various other persons whom it is unnecessary for me to specify. The same regulation, which is of considerable length, deals with the manner in which hearings shall be conducted by the Authority, including a provision that every hearing shall be held in public unless the Authority shall otherwise decide in relation to the whole or any part of a particular case.

Regulation 16 provides for appeals to the Secretary of State against decisions of the Authority with respect to an air transport licence.

Finally, section 24 contains various supplementary provisions. I need only refer to subsection (3), which provides that where the Authority decides to grant, refuse to grant, vary or revoke a licence it shall be its duty to furnish a statement of its reasons for its decision to the applicant for a licence and to any other person who, in accordance with the Regulations, has entered an objection in the case or requested such a statement. In the papers exhibited to the affidavits before me are two closely reasoned and impressive statements by the Authority giving the reasons for its decisions, to which I will make later reference.

It is interesting to note that Part III of the Civil Aviation Act 1971 deals with the setting up of the British Airways Board and its powers, including the control of the activities of the now defunct two separate corporations, namely British Overseas Airways Corporation and British European Airways Corporation, which have now, pursuant to the Air Corporations (Dissolution) Order 1973, ceased to exist and have been replaced by the new British Airways. Section 40 of the Act of 1971 gives the Secretary of State considerable powers to give directions to the British Airways Board in relation to any matter appearing to the Secretary of State to affect the national interest, and section 58 provides that it shall be the duty of the board to comply with any directions given to it by the Secretary of State in pursuance of Part III of the Act of 1971.

Narrative

Before referring to the relevant part of the White Paper, it will be convenient to state in narrative form the major events and facts, none of which are in dispute, leading up to the issue of the White Paper and the subsequent issue of the writ in this action. I have already referred briefly to some of the events which I shall mention in the narrative. I shall then, after having referred to the relevant passages in the White Paper, be in a position to deal with the arguments in relation to each of the three major issues arising in this litigation and give my decisions upon them.

On June 15, 1971, the plaintiffs filed an application for the grant of a class "A" air service licence under the then operative Civil Aviation (Licensing) Act 1960, which was dealt with by the Air Transport Licensing Board. The proposal then was for a non-reservation service between Gatwick airport and Kennedy airport, New York, on a daily frequency service from May 1 to September 30 each year and for four flights a week from October 1 to April 30 in each year. The proposed tariff was then £37.50 for the summer flights and £32.50 for winter flights. Objections were submitted by the previous manifestation of what is now called British Caledonian Airways. The application was heard before the Air Transport Licensing Board on October 19, 20 and 21, 1971, and on November 19 the licensing board refused the application and gave their reasons in a lengthy report. The plaintiffs appealed from this decision to Sir Dennis Proctor, who had been appointed as a commissioner, pursuant to the then current regulations, to hear the appeal. The commissioner conducted a public hearing on February 9, 1972, and made his report, dated February 1972, recommending that the appeal be allowed.

Before the date of Sir Dennis Proctor's report and recommendation to the Secretary of State, the plaintiffs had ordered two D.C.10 aircraft. These are wide bodied aircraft, somewhat similar to what are called Jumbos when manufactured by Boeings, which Mr. Laker considered more suited to his Skytrain project than either Boeing Jumbos or Lockheed Tristars. In one of the documents in the case he expressed the view that the D.C.10 aircraft was almost hand made to suit the requirements of Skytrain. The two D.C.10s were ordered on January 30, 1972, and on February 9 the plaintiffs applied to the tariff division of the Department of Trade and Industry for a direction for the duty free import of two D.C.10 type aircraft due for delivery in September and October, 1972. The application was made on the appropriate printed form of the department and was enclosed in a letter, the second paragraph of which is of some materiality in relation to the state of knowledge of the department in relation to the plaintiffs' plans. That paragraph reads:

"These aircraft are required to maintain our existing overseas schedule operations for International Caribbean Airways and to compete favourably with our competitors on the North Atlantic and throughout Europe. In the longer term they will replace our existing Boeing 707s, which require extensive major repairs and costly modification. The terms of sale to Laker Airways are financially most favourable with a guaranteed delivery of September and October of 1972."

The reference to the terms of sale being financially most favourable arises from the fact that the aircraft in question were originally intended for Japan Airlines and the purchase was financed by a Japanese concern called Mitsui. However, consequent upon the intervention in the Japanese market of the Lockheed Corporation, who, under circumstances that have received considerable publicity, were pushing their Tristar broad bodied aircraft, Japan Airlines no longer required the two D.C.10s. In consequence the plaintiffs were able to acquire these on unusually favourable terms; as I understand it, they were, when delivered, under mortgage to Mitsui, the original purchasers. The application form stated that the value in sterling of each complete aircraft was nearly £7,750,000, whilst spares not embodied in each aircraft at the time of importation were of a value not far short of £3,000,000.

On March 30, 1972, the then Secretary of State in a letter addressed to the Secretary of the Air Transport Licensing Board, with copies to the plaintiffs amongst others, gave his reasons for not acting upon the recommendation made to him by Sir Dennis Proctor and deciding that the plaintiffs' appeal against the refusal of the Air Transport Licensing Board to grant them the licence sought should be dismissed. However, the reasons for this decision of the Secretary of State contained in the letter are very interesting. The Secretary of State thought that the proposal by the plaintiffs in relation to Skytrain raised a number of issues requiring consideration within the broader context of aviation policy and that it would be inappropriate, only a short time before the Civil Aviation Authority assumed its main responsibilities, to anticipate any such consideration. The letter then sets out three matters amongst the issues which the Secretary of State had in mind. Reliance was placed in argument on the width

of these issues as demonstrating the very wide ambit of the matters falling to be taken into account by the authority when considering an application for a licence to fly a passenger service on a long-haul route from the United Kingdom. I accordingly quote the three issues which, amongst others, the Secretary of State had in mind when refusing to allow the appeal of the plaintiffs and leaving the matter to be raised before the shortly to be set up new Civil Aviation Authority. Those three issues are as follows:

"(a) The United Kingdom is actively pursuing with other countries concerned the possibility of introducing, if possible this year, a new advance booking charter facility which would prima facie provide an alternative basis for the provision of cheap travel. (b) The introduction of a service on the lines proposed by the appellant must be considered against the background of the inherent probability that it will become generalised to other carriers and other routes. The implications of this both for the economics of the proposed service and for other kinds of service, both scheduled and charter, as well as for the structure of international air fares must be taken into account, particularly in the light of actual experience of the working of the new advance charter facility. (c) In paragraph 13 of his guidance to the Civil Aviation Authority he has recognised that the entry of additional airlines into particular types of operation may sometimes need to be carefully controlled to avoid undue fragmentation of effort."

As I understand it the "new advance ... charter facility" mentioned refers to the possibility of chartering planes to carry passengers on a long-haul flight such as one to America, provided that places on the aircraft in question are booked and paid for sufficiently far in advance. According to the explanations given by counsel, this facility has been adopted in this country in substitution for the previous facility whereby the rather high fares approved by International Air Transport Association for ordinary scheduled air services could be avoided by a plane being chartered by a particular group of persons connected together in some manner, such as belonging to a particular club or engaging jointly in a particular activity. This so-called "affinity" facility apparently still obtains in the United States, though plainly it lends itself to much manipulation.

The defendants were reluctant to grant duty relief on the two D.C.10s without being satisfied that the Lockheed Tristar fitted with British made Rolls Royce RB211 engines had not been considered suitable. In his reply, Mr. Laker explained that whilst his company was doing everything possible to maintain the Union Jack at a high level and would gladly buy any suitable British manufactured aircraft were one available, none was available nor was the Lockheed Tristar. In addition Mr. Laker did not think the Tristar suitable for the North Atlantic service and would not be able to finance the purchase of such aircraft. As regards the two D.C.10s he had, for reasons I have briefly outlined, been able to obtain these at a very favourable price; the purchase price was a 1971 delivery price and the plaintiffs had secured that the purchase of the aircraft was financed remarkably cheaply as to 95 per cent. of their value, plus 100 per cent. of the

value of the requisite spare parts and ground equipment. Furthermore, Mr. Laker in his letter confirmed that the Bank of England had given their unreserved approval to the transaction. In consequence of this correspondence, on July 13 the department gave the appropriate direction for the import of the two aircraft free of all import duty.

On August 1, 2 and 4, 1972, there was a public hearing before the Civil Aviation Authority on the plaintiffs' application for a licence for Skytrain. British Caledonian Airways and British Overseas Airways Corporation objected to the application. The Authority granted the application for 10 years as requested, but the grant was subject to two modifications, namely, that the route should be Stansted-New York and not Gatwick-New York and that the service should be limited to a daily capacity equivalent to that of a Boeing 707 during the period October 1 to March 31 each year. No doubt the latter qualification was imposed in order to act as a safeguard against any loss of custom which British Airways or British Caledonian Airways might suffer during the somewhat meagre demand for places on normal scheduled services across the Atlantic during the winter months. I have already stated the difference in capacity between a Boeing 707 and a D.C.10 aircraft.

The reasons for the decision were set out at some length in the report dated September 26, 1972. The Civil Aviation Authority accepted the applicants' contention that there was a substantial demand for cheap, "no frills," short notice mass travel which was not at that time otherwise adequately catered for. The enterprise of the plaintiffs - an element associated with Mr. Laker, who may perhaps not inaccurately be described as a modern counterpart of the merchant adventurers who brought so much greatness to this country in past centuries - in seeking to meet this demand was welcomed and the authority viewed with favour the innovation involved in the application. The problem which bothered the Authority, which is fully understandable, is the extent to which the traffic attracted to the Skytrain service would be new traffic and would not be traffic drawn away from B.O.A.C. scheduled flights. The operation of the service from Stansted instead of from Gatwick was imposed in order to protect in particular British Caledonian Airways. The limitation on the number of passengers who might be carried during the winter months was imposed with similar objects. The Authority believed that with these modifications the licence for Skytrain could be granted without risk of any serious effects on existing scheduled operators, and that the opportunities for British Caledonian Airways, then seeking to develop their North Atlantic services, would not be appreciably diminished. The Authority further believed that the service could properly be designated under the bilateral Air Services Agreement entered into at Bermuda. The Authority also dealt with the problem that if Skytrain were to be operated, the consequence would be a generalised intensification of competition by the initiation of comparable services and a general fare cutting war. The Authority did not consider this likely to occur, but pointed out that if it were to occur, it had full powers enabling it to control the situation. The licence was dated October 18, 1972, and was to come into effect on January 1, 1973, and expire on December 31, 1982. Shortly thereafter, on October 6, 1972, the plaintiffs entered into the purchase contract for the two D.C.10 aircraft

and on October 17 notice of appeal given by British Caledonian Airways against the grant of the licence to the plaintiffs by the Authority was received. The first D.C.10 was delivered on November 12 and the second on November 22. On December 22 the appeal by British Caledonian Airways was dismissed.

Consequent upon this, a note dated February 28, 1973, was sent by the British Ambassador in Washington to the United States Secretary of State designating the plaintiffs pursuant to the Bermuda Agreement. It is relevant to read two paragraphs of this formal designation. They are as follows:

"Her Britannic Majesty's Ambassador hereby designates Laker Airways Ltd. for operations on United Kingdom Route 2 of the annex to the agreement relating to air services between the United Kingdom and the United States of America signed at Bermuda on February 11, 1946, as amended by the exchange of notes of May 27, 1966. The purpose of the designation is to enable Laker Airways Ltd. to operate air services between London (Stansted) and New York and vice versa as discussed at the consultation held between delegations representing the United Kingdom and the United States of America on January 30 and 31, 1973.

"Her Britannic Majesty's Ambassador has the honour to request that processes associated with this designation be expedited to the maximum degree possible."

It is perhaps of some significance that this formal notice from the British Ambassador in Washington indicates that the United Kingdom government delegation had sponsored Skytrain at consultations between it and the United States delegation on January 30 and 31, 1973. What is more important is that despite the request contained in the last paragraph of the communication, the various United States' authorities dragged their feet in relation to the part they had to play under the Bermuda Agreement in relation to the designation of the plaintiffs by the United Kingdom government to such an extent that despite any protest on behalf of the United Kingdom government (and there were many), the recommendation of the United States Civil Aeronautics Board was not sent to the White House for the approval of the President until June 1974. Had the Americans not moved so slowly, it is likely that Skytrain would have been operating before the end of 1973 and would also probably be operating down to this day. At any rate some of the unresolved problems as to the popularity of Skytrain and the effect of such popularity, if it materialised, upon other scheduled trans-Atlantic services would have become apparent. There would no longer be any need for anxious prophecy as to the effect of the operation of Skytrain across the Atlantic.

There followed a number of detailed and somewhat astringent notes or messages between the British Ambassador in Washington and the United States Secretary of State regarding the British designation of Laker Airways under the Bermuda Agreement. One of these dated March 21, 1973, after answering various queries raised by the Secretary of State, drew attention to the fact that 15 weeks had elapsed since the British Ambassador gave notice on December 4, 1972, to the Secretary of State of the intention of

the British government to designate Laker Airways. The ambassador trusted that the matter would be handled with expedition. He added that the British government's view was that any undue delay in the issue of the operating permission would be a denial of the rights provided for the airline designated by the United Kingdom under the agreement.

There are, in 1973, numerous examples of further chasers, aidesmémoire, notes and other communications between the British Ambassador in Washington and the State Department on the question of the designation of Laker Airways. There was one on April 14, another on June 8, another on July 20, a further one on August 7, and a fairly lengthy aide-mémoire of September 4 recapitulating in chronological order the various formal representations that had previously been made. One of these, namely that of July 20, complained of "continued procrastination by the United States Civil Aeronautics Board," whilst the note of August 7, 1973, stressed the United Kingdom's view that the level of fares on the Laker Airways service should be considered separately from the granting of operating conditions following designation. At that date the aide-mémoire notes that, notwithstanding these numerous representations, the board proceedings preliminary to the issue to Laker Airways of the appropriate operating permit were only then about to commence.

Two further events should be noted as having occurred during 1973. On September 18 the plaintiffs applied for duty relief on the third D.C.10: this was originally refused on February 11, 1974, but was ultimately granted after the general election of February 14, 1974, on April 9, 1974. That grant of duty relief was made subject to various conditions. One of these conditions was that the aircraft in question should be used during the first three years, commencing in June 1974, for at least half of its revenue earning mileage on non-stop flights exceeding 2,500 nautical miles and on flights incorporating a non-stop leg from the Azores to Barbados and vice versa and that, if in any three years the conditions thus laid down were not complied with, the direction would cease to have effect and duty would become payable. The order for the third D.C.10 was placed on October 1, 1973, and the purchase contract for it signed on January 25, 1974. It was delivered on May 25, 1974.

Before leaving this matter of the purchase of the third D.C.10 and the initial refusal but subsequent grant by the Department of Trade and Industry of relief from import duty on the aircraft, it is of considerable importance in relation to the estoppel aspects of the third declaration claimed to note that, when the plaintiffs wrote to Mr. Forward of the defendants' department on September 18, 1973, applying for duty relief, Mr. Laker urged in support of his application, as the most important development of all, that

"the final hearing before the Civil Aeronautics Board for the grant of a licence for our unique Skytrain walk-on, walk-off service is due to be heard on December 4 this year, and we now have a real chance of being able to operate on or about April 1, 1974."

When, some five months later, the plaintiffs received the initial refusal of their application in a letter from Mr. Forward dated February 11, 1974, the defendants wrote to the then Minister for Aerospace and Shipping,

Department of Trade and Industry, drawing his attention to the fact that Mr. Laker had not only via the plaintiff company made application for duty relief as long ago as September 18, 1973, but that Mr. Laker had himself been in constant touch with Mr. Forward. The letter explained, what I have briefly mentioned earlier in this judgment, that all three D.C.10s had been purchased on particularly favourable terms.

It is not altogether clear, from the documents exhibited to the various affidavits, when the appropriate inquiry began in America as to whether an operating permit for the plaintiffs in relation to Skytrain should be granted. The chief of the Bureau of Administrative Law Judges assigned Administrative Law Judge Greeg M. Murphy to conduct the inquiry. From the plaintiffs' letter of September 18, 1973, to Mr. Forward of the defendants, from which I have already quoted, it appears that the last hearing took place on or about December 4, 1973. However that may be, the judge's decision was made public on March 13, 1974, and recommended the grant of an operating permit to the plaintiffs in respect of Skytrain subject to various conditions. The full report and recommendations, together with a draft order requiring the approval of the President, including the terms of the permit proposed, are exhibited to an affidavit of Mr. Laker.

This does not, however, seem to have been the end of the preliminary inquiries, since in a letter written by Mr. Laker to the Rt. Hon. Peter Shore, the new Secretary of State for Trade, dated April 22, 1974, Mr. Laker mentioned that the final public hearing in relation to Skytrain was held in Washington on April 17 when the British Embassy supported the plaintiffs by having the Civil Air Attache in attendance for the whole hearing. Nevertheless, Mr. Laker in his letter, despite the support by Judge Murphy and the State Department, indicated that there remained opposition from Pan American, Trans World Airlines and the American non-scheduled carriers other than Capital, and he was in consequence afraid that the Civil Aeronautics Board, for political reasons, would probably try to delay Skytrain as long as possible.

Mr. Laker referred to the interview he had had with the Secretary of State, and in his letter emphasised what he thought would be the advantages to this country in terms of the earning of foreign currency, amongst other things, if Skytrain were to start at an early date. The purpose of his interview and of the letter was, as appears from its last paragraph, to request that the Secretary of State, the Civil Aviation Authority and the British Embassy in Washington should be instructed to do all they could to ensure that the appropriate licence on the American side for Skytrain should be granted in time for the service to operate during the summer of 1974. Various other letters were written by Mr. Laker to the Secretary of State and on July 24, 1974, the latter answered by saying that the United States deputy assistant secretary to the State Department responsible for civil aviation matters had been in London on July 15 and had been left in no doubt by Mr. Clinton Davis, a junior minister in the department, that the United Kingdom Government believed that the United States authorities

"had signally failed to uphold their obligation to deal with your application for a foreign air carrier permit without undue delay. He

acknowledged that we had raised this matter both formally and informally on a number of occasions and promised that he would do his utmost to ensure an early decision."

There were further letters from Mr. Laker to the defendants and on September 11, 1974, Mr. Clinton Davis wrote to Mr. Laker:

"On Skytrain, I understand you have been keeping in close touch with officials here, and will therefore know that both formal and informal representations were recently made to the United States authorities on this matter. These should have left them in no doubt that we expect full compliance with the terms of the U.K./U.S. Air Services Agreement, as regards the designation of Skytrain."

On October 4, 1974, the Secretary of State wrote to Mr. Laker a letter in which he stated:

"We have continued to take the opportunity whenever possible of reminding the United States government of the strong representations we have made about your permit. Our embassy in Washington did so again only yesterday. We are continuing to press the United States government for an early and favourable decision."

However, the letter ended by stating that it was impossible to forecast at that time how soon the plaintiffs would be able to start operations after the grant of a permit.

An important development occurred on December 3, 1974, when the plaintiffs received a formal letter from the defendants stating that the Secretary of State had instructed his officials to carry out in consultation with the Civil Aviation Authority a review, with terms of reference covering consideration of what changes might be desirable in United Kingdom civil aviation policy as embodied in the extant guidance, approved by Parliament in March, 1972, in the light of the then economic and financial position. The letter stated that the review was expected to concentrate on those paragraphs of the guidance dealing with air transport licensing and pricing. It was stated that the review was expected to be completed in the spring of 1975, when it would be for ministers to decide what changes, if any, in the present guidance should be proposed in Parliament. Accordingly the plaintiffs, together with other addressees of this letter, were invited to submit in writing any views they might have on the issues outlined in the letter and any related matters relevant to the scope of the review by not later than January 17, 1975. The plaintiffs sent in a very lengthy memorandum in response to this inquiry. This, however, did not deal with Skytrain which, apparently, it was not intended that the recipients of the letter should cover in their response to the request contained in it.

On December 4, 1974, the plaintiffs applied to the Civil Aviation Authority for a revision of the tariff under which Skytrain would operate. On the same day British Airways applied to the authority to revoke the Skytrain licence, and Dan Air also applied for the licence to be suspended. The formal application by the British Airways Board for the revocation of the plaintiffs' licence on the appropriate form addressed to the Authority was dated December 23, 1974.

The Authority held a public hearing on January 21 and 22, 1975, in relation to the application made by Dan Air and the British Airways Board and of the application made by the plaintiffs for the Skytrain tariff to be varied upwards.

The report of the Authority dated February 5, 1975, contained the Authority's rejection of the applications made by the British Airways Board and Dan Air and the approval of the plaintiffs' application to increase the Skytrain fare to £59 or $135 for a one way crossing of the Atlantic. It would lengthen this judgment unbearably to cite at all extensively from this report. It can, however, be said that it is a very closely reasoned document and takes into account the effects of the economic depression on air travel across the Atlantic and the possibilities of improved public demand for seats on such flights. It also mentioned the successful establishment of advance booking charters, which originated on April 1, 1973, and took the place in this country of the previous affinity charter flights, under which it was necessary to belong to a group or a club in order to be able to obtain the benefit of the greatly reduced fares charged to passengers by charter flights, in comparison with fares payable under the International Air Transport Association tariffs on ordinary scheduled flights. The report mentioned that if the Skytrain services were not inaugurated by the summer of 1975 it might be the case that, on the least favourable assumption, the three D.C.10 aircraft purchased by the plaintiffs would have to be returned to Mitsui with a consequential net loss to the plaintiffs of between £6,000,000 and £7,000,000. This sum of money had already been spent. The report stated that it would be wrong to render nugatory the plaintiffs' expenditure of up to £7,000,000 by going back on the decisions previously reached by the Authority and upheld by the Secretary of State in December 1972 and his designation of the plaintiffs as a scheduled carrier on February 28, 1973, without the most compelling reasons.

The Civil Aviation Authority considered that there was a segment of public demand both in the United States and in the United Kingdom which would not be satisfied if Skytrain services were not introduced, though the demand was anticipated to be greater in the United States than in the United Kingdom. For the various reasons set out, the conclusion was reached that it would be wrong to revoke the Skytrain licence. The Authority did, however, express the view, though this in no way restricted the use by the plaintiffs of the licence if the American side of the matter had been put in order, that the Skytrain experiment, which had been so regrettably delayed by what the Authority described as the "unconscionable procrastination" of the United States authorities, might more wisely be launched in propitious circumstances and accordingly should not be inaugurated until the market had resumed a healthy rate of growth. The time factor involved was thought by the Authority to be 12 months or perhaps even longer. The Authority considered the possibility of varying the Skytrain licence by specifying a date before which the service should not start, but rejected this idea since it was unrealistic to try to forecast the particular date by which the market would have recovered sufficiently.

There were no appeals from these decisions. On March 21, 1975, the Secretary of State in answer to a Parliamentary question said that it was his intention that Sky-train should be part of the policy review, contrary to

what had been previously understood as already indicated. As a result of being informed of this by the defendants, the plaintiffs submitted a very long supplementary submission to the defendants with particular regard to Skytrain.

The upshot of the review was announced in a statement to the House of Commons made by the Secretary of State on July 29, 1975. The Secretary of State referred to the setback that the airline industry world wide had suffered from the oil crisis and the country's economic recession. Traffic carried by United Kingdom airlines had fallen by about 10 per cent. in 1974 and British Caledonian Airways had been obliged to withdraw its scheduled services from the North Atlantic. The Secretary of State stated that he had reached a decision that in future it should be our general policy not to permit competition between United Kingdom airlines on long-haul scheduled services and therefore not to license more than one United Kingdom airline on any given long-haul route. The Secretary of State slated that he wished British Caledonian to continue, though not in direct competition with British Airways on the same route, and that, accordingly, he had decided that British Caledonian should have a sphere of influence for its long-haul scheduled activities based on its West African and South American services. He envisaged a limited exchange of routes with British Airways which would consolidate the two airlines' respective spheres of interest with benefit to both.

In relation to Skytrain, he stated that he had carefully considered the plaintiffs' proposals, but was satisfied that if they were allowed to go ahead in the conditions likely to prevail in the North Atlantic market for a considerable time to come, it would divert traffic away from the existing services and in particular damage British Airways. He had accordingly told the plaintiffs that in such circumstances the Skytrain service could not be allowed to start. He ended his statement by saying that the policy changes he had outlined would need to be incorporated in a new guidance for the Civil Aviation Authority for which he would be seeking parliamentary approval in due course. He was also considering whether an amendment to the Civil Aviation Act 1971 would be required. In answer to supplementary questions, the Secretary of State said that it should not be assumed that he and his supporters did not have the same feelings for the enterprise of Mr. Laker and the plaintiffs as did the Opposition. Nevertheless, so far ahead as the Secretary of State could see, he did not see how Laker Airways could be permitted to proceed with Skytrain without damaging others and still bring benefit to the nation as a whole.

In a subsequent debate in the House of Commons on July 31, Mr. Clinton Davis stated that he could not see that the introduction of Skytrain could be justified for a considerable period of time. On the other hand, he did not approve of the way in which the United States had held up or failed to comply with their obligations under the Bermuda Agreement in respect of Skytrain. Mr. Clinton Davis stated that the United Kingdom government would be informing the United States authorities that certainly for the time being they were not withdrawing the plaintiffs' Skytrain designation under the Bermuda Treaty as a scheduled service carrier and that they would continue to remind the United States authorities of their views upon that matter. Mr. Davis concluded by stating of Mr. Laker that he was a

man of considerable enthusiasm and zeal "whom all of us greatly admire," that there was no doubt that he was an impressive person in every respect, though that did not mean that the government must necessarily accept the conclusions of the arguments that he adduced so purposefully.

During August 1975 the Civil Aeronautics Board withdrew the papers which had been lodged in the White House for the purpose of obtaining the President's approval to the permit which it had been recommended should be granted to the plaintiffs, because of the Secretary of State's statement in the House of Commons and well in advance of the promised White Paper embodying the new guidance.

The White Paper, headed Future Civil Aviation Policy (Cmnd. 6400), was presented by the Secretary of State to Parliament in February 1976. The new guidance contained in it was approved by the House of Commons on February 26, 1976, and by the House of Lords on March 15. On the other hand, in the House of Lords a motion was passed by 83 to 68 calling upon the government to withdraw the instruction to the Civil Aviation Authority to revoke the Laker Airways Skytrain licence. On March 16 the plaintiffs' solicitors wrote to the Secretary of State informing him that they had advised the plaintiffs that the guidance and directives contained therein were ultra vires and were directly contrary to the provisions of section 3 (1) of the Civil Aviation Act 1971, and invited the Secretary of State to withdraw them. On the same date the writ in this action was issued. On March 19 the defendants answered the plaintiffs' solicitors to the effect that the Secretary of State was advised that the new guidance was intra vires and that a letter giving the new guidance had been sent to the Civil Aviation Authority and that there could be no question of its withdrawal.

I am afraid that this narrative section has unavoidably been of a considerable length, but it does state the background against which most of the legal arguments relative to the three main issues can be considered.

The ultra vires issue

The White Paper was in two parts. Part I headed "Future civil aviation policy" consisted of 28 paragraphs spreading over a little more than seven pages. Part II is headed "The guidance."

Part I sets out in more detail the arguments presented to the House of Commons by the Secretary of State in his statement on July 29, 1975. It stressed the need to tailor capacity to the reduced demand for air passages across the Atlantic in order to avoid heavy losses and waste of resources. Accordingly it had been decided that it would not be possible, even to the United States, to permit of the use or licensing of a second British airline, since this could only be achieved at the expense of British Airways. There would he a division between British Airways and British Caledonian Airways of zones, so that the latter would be maintained as a "second centre of air line expertise in the United Kingdom," but the two airlines would not compete with each other on the same routes. In paragraph 13 an exception to this principle was laid down in relation to Concorde services by British Airways on routes to New York, Washington, Melbourne and Tokyo. In paragraph 14 the Secretary of State dealt with Skytrain and stated that in current and foreseeable economic conditions the damage that

Skytrain would do to British Airways would be unacceptable and could jeopardise the arrangements made with the approval of both the United Kingdom and the United States governments to rationalise capacity on routes between the two countries. It was not proved before me whether in fact any agreed rationing of capacity had or had not been introduced by the airlines concerned.

The White Paper expressed the view that as an estimate British Airways would incur losses of about £6,000,000 a year if the plaintiffs' Skytrain and one corresponding United States service were to be operated.

Paragraph 15 stated that the Secretary of State had accordingly decided that the plaintiffs' designation as a scheduled air service operator under the Bermuda Agreement should be cancelled. The paragraph continued, "The Sky-train licence will be dealt with in accordance with paragraph 7 of the new policy guidance." In a later paragraph the Secretary of State stated that he had decided that it was not necessary to seek to amend the Civil Aviation Act 1971 and that he considered that the new guidance would, if approved, remain substantially unchanged for a considerable period of years.

For present purposes the vital paragraphs in Part II of the White Paper are paragraphs 7 and 8. It is necessary to set out paragraph 7 in full. It reads as follows:

"In the case of long-haul scheduled services (i.e. services between the United Kingdom and points outside the areas to which paragraph 9 applies) the Authority should not, except as provided for in paragraph 8, license more than one British airline to serve the same route. British Caledonian Airways should be the preferred airline for routes between the United Kingdom and its sphere of interest as defined in Annex A to this guidance, whilst British Airways should be the preferred airline for all other long-haul routes. It is the intention that, even in the case of long-haul routes not already being operated by the preferred airline, the Authority should only in quite exceptional circumstances grant to another airline, against the objection of the preferred airline, a licence to provide a long-haul scheduled service. Accordingly, the Authority should so license an airline other than the preferred airline only if it is satisfied that a substantial demand exists, that the service could be operated profitably, that the preferred airline would not itself be likely to mount an adequate service on the route concerned within a reasonable period, and that granting the licence would not conflict with the provision in paragraph 5 above concerning the maintenance and development of a viable network of scheduled services. The Authority should review existing licences and exemptions in the light of this paragraph and take appropriate action."

Paragraph 8 begins, "Nothing in paragraph 7 should, however, prevent the licensing of: ..." Then follows sub-paragraph (a) dealing with Concorde aircraft on long-haul routes. This is followed by the two following sub-paragraphs:

"(b) British Caledonian Airways or another British airline to provide a scheduled service within British Airways' sphere of interest as defined by paragraph 7, provided British Airways has given its consent;

or (c) British Airways or another British airline to provide a scheduled service within British Caledonian Airways' sphere of interest as defined by paragraph 7, provided British Caledonian Airways has given its consent."

Although the construction of the provisions in paragraph 8 (b) and (c) cannot be affected by what was stated in the House of Commons, it is nevertheless of some interest to note that in the debate on the White Paper in answer to a specific question by a member, Mr. Clinton Davis said that it was not intended that paragraph 8 should be interpreted as implying that British Airways and British Caledonian Airways should not unreasonably withhold their consent.

Mr. Eastham repeated the Secretary of State's intention, expressed in paragraph 15 of Part I of the White Paper, to dedesignate the plaintiffs under the Bermuda Agreement, but said that this was being held up pending the decision of the court in this action. The second sentence of the same paragraph 15 indicates pretty clearly that the Civil Aviation Authority will be expected to revoke the Skytrain licence.

The subject matter of the dispute between the plaintiffs and the defendants is so interesting on its facts that one has had to curb one's natural curiosity and avoid oneself reading, and prevent the reading during the hearing by counsel, of a mass of literature exhibited to affidavits filed by Mr. Laker and, for the defendants, by Mr. Kemmis. The large majority of this literature was exhibited by Mr. Laker, but some of this was filed to counter points made by Mr. Kemmis. For present purposes it is quite unnecessary to consider the rival arguments on the financial viability of Skytrain at any time between 1972 and today, or its effect on the balance of payments, or the extent to which it would meet an unsatisfied public demand on both sides of the Atlantic, or would draw away custom from British Airways or other operators of scheduled trans-Atlantic air services. It is clear enough from what I have narrated that there are arguments both ways on all these points, which cannot be resolved with certainty without either the gift of prophecy or putting the matter to the test by allowing Skytrain to operate, and can only be resolved in so far as the judgment of a court or tribunal can be said to be capable of determining what will happen in the future (a task, for example, laid upon the shoulders of members of the Restrictive Practices Court) after a long and careful hearing, which it is not the function of this court to perform in order to decide the issues in this action.

A further introductory point which should be made is that if on the true construction of section 3 (2) of the Act of 1971 and the new guidance the latter goes beyond what the former permits, the guidance will pro tanto be ultra vires, notwithstanding the approval of both Houses of Parliament. The contrary was not suggested by Mr. Eastham. The statute cannot be amended save by statute.

No authority was cited to me as to the meaning of "guidance" relevant to the use of that word in the context of section 3 (2), but I accept Mr. Bateson's argument that it cannot in that context, although it might perhaps in some other context, involve a mandatory direction, in this case as to

how the Civil Aviation Authority are to perform their statutory duties under section 3 (1) (a) to (d). I think the three issues mentioned in the letter (already quoted) from the department to the Air Transport Licensing Board dated March 30, 1972, which the Secretary of State thought the newly created Civil Aviation Authority should consider, furnish a good example of guidance. Similarly, if the Secretary of State thought that agreements between national airlines on limiting capacity so as to tailor it more closely to anticipated public demand for seats should be taken into consideration by the Authority, it would clearly be appropriate for him in his guidance to draw the attention of the Authority to the importance of the subject and to the desirability of giving it proper weight before reaching decisions on licensing.

I am, however, unable to accept that the Secretary of State can, by anything in his guidance, deprive the Authority of deciding, for example whether, without any Skytrain service of some kind, British airlines provide air transport services which satisfy all substantial categories of public demand, etc., as is stated in section 3 (1) (a) to be their duty. One of the major arguments that has been debated, originally before the Air Transport Licensing Board and, on appeal, before Sir Dennis Proctor and subsequently twice before the Authority, is that there is a large untapped public demand by persons of modest means on both sides of the Atlantic for the cheap step-on step-off kind of service proposed by the plaintiffs in their Skytrain project which is not met, and cannot be met, by reason of the fares charged both by the present scheduled services under the International Air Transport Association tariffs and by the various varieties of charter or advance booking flights now available. It is for the Authority to consider the pros and cons of this argument, as well, of course, as the financial viability of Skytrain if permitted, and not for the Secretary of State, without the benefit of hearing expert evidence given in public and tested by crosse-examination, to pre-empt their decision by his so-called guidance. He may, of course, by his appellate jurisdiction be able to reverse the decision of the Authority on points like the two mentioned, but this would be a different matter altogether and I doubt if any Secretary of State would consider it a proper exercise of his appellate functions (I would not) to reverse the decision of the Authority on the basis of a previously adopted attitude, regardless of the potency and persuasiveness of the report of the Authority.

I am of opinion that this line of reasoning as to the permitted ambit of the guidance that may be given is greatly strengthened by the provisions of section 4 of the Civil Aviation Act 1971 as to when the Secretary of State may give directions to the Authority. He may not only do this in time of war, whether actual or imminent, or of great national emergency, but in a considerable number of other circumstances set out in section 4 (3). The contrast between the use of the words "guidance" in section 3 (2) and "directions" in section 4 is most marked: the two concepts clearly differ widely. (See, also, the directions given the Authority under Annex B of the guidance in relation to air navigation services pursuant to section 28.) Further, it is noticeable that the six categories set out in the lettered paragraphs of subsection (3), whilst falling into what may broadly be described as three main groups, namely, national security, nuisance and

various aspects of international relations, do not mention the questions of demand and supply, economic viability and the effect on other national or foreign airlines which are in issue here.

In my view, therefore, the Secretary of State has not the power to lay down, as is done in paragraph 7, that the Authority should not license more than one British airline to serve the same route. This is plainly in my judgment a direction which drastically alters the duty conferred upon the Authority by section 3 (1). The fact that this direction may be departed from if British Airways or British Caledonian Airways give their consent certainly does not, in my view, remove the vice of the direction. If anything, it aggravates it. To say to the Authority that they must not even consider granting a licence on a route already being served by scheduled services of either of the named airlines without the latter's consent is to impose a fetter, apparently intended to be absolute, upon the performance by the Authority of their statutory duty. Even if, as I am inclined to think, the consent of the relevant named airline could not be unreasonably withheld, I think this conditional ban upon the exercise by the Authority of their statutory duty goes beyond the ambit of the word "guidance" in the context of the scheme of this Act and in particular of section 3 (1).

Mr. Eastham attempted to counter these considerations, or some of them, by arguing that the words "compete" and "competition" do not appear in section 3 (1) (b) and that the provisions of that paragraph are met by allocating different spheres of interests in the world between British Airways and British Caledonian Airways. The last-mentioned concern would thus be given the opportunity to participate in the air transport services mentioned in section 3 (1) (a). But this would not in my view be the case, for example, if British Caledonian Airways wanted to run a Skytrain service from Stansted to New York and the Authority was satisfied that without it British airlines did not satisfy all substantial categories of public demand - and that such a service would satisfy such demand, or part of it, and that the other provisions of paragraph (a) could be met.

For these reasons paragraphs 7 and 8 of the guidance in the White Paper were ultra vires and the plaintiffs are entitled to a declaration to this effect. This will be more limited than requested in the points of claim, but will give the plaintiffs the substance of what they seek under this issue. At one stage it was being suggested by the defendants that if I were to reach the conclusions I have, they desired the court to declare the whole of the guidance ultra vires. I would have been most reluctant to have done this without having heard any argument on the remainder of the guidance and I am glad the defendants changed their minds on this point.

Was there a fetter on the Royal Prerogative?

I now come to a more difficult and perhaps more generally important matter, namely, the second issue, which is whether in view of the terms of the Civil Aviation Act 1971, the licence granted under it for Skytrain, the later refusal by the Authority to revoke that licence, the lack of any appeal, and the provisions of the Bermuda Agreement, the prerogative right of treaty-making was fettered so as to deprive the Crown of the right

to dedesignate the plaintiffs or, more accurately, to withdraw the designation of the plaintiffs contained in the note from the British Ambassador in Washington to the United States Secretary of State dated February 28, 1973. In paragraph 15 of Part I of the White Paper the Secretary of State expressed his intention to dedesignate the plaintiffs and, as I have said, Mr. Eastham repeated this during the hearing before me.

This question of the entitlement to dedesignate claimed by the defendants to exist in the Crown by virtue of the prerogative, in the contention of the plaintiffs, should be decided against the defendants and, on the basis that the plaintiffs were correct on this, they would be entitled to succeed on their third declaration without requiring any assistance from their alternative argument based on estoppel.

Whilst it was admitted for the defendants that the prerogative could by implication be fettered by a statute covering the same ground - see Attorney-General v. De Keyser's Royal Hotel Ltd. [1920] A.C. 508; In re Azoff-Don Commercial Bank [1954] Ch. 315; In re M. (An Infant) [1961] Ch. 328 - and that acts done by the Crown purportedly under the prerogative may be held by the courts to be ultra vires - see the Case of Monopolies (1602) 11 Co.Rep. 84b and Professor S. A. de Smith's Constitutional and Administrative Law, 2nd ed. (1973), p. 124 - it was submitted that there was no such fetter here:

"A treaty is not a source of legal rights directly enforceable against the Crown in United Kingdom courts, even though it may be intended to benefit particular individuals (for example, where the Crown receives money from a foreign government by way of compensation for injuries done to them)."

I have taken this quotation from Professor de Smith, op. cit., at p. 132, where it is supported by Rustomjee v. The Queen (1876) 2 Q.B.D. 69 and Civilian War Claimants Association Ltd. v. The King [1932] A.C. 14. In the same textbook the more guarded statement is made, at p. 136, that "A cause of action against the Crown can never (or hardly ever) be founded on a valid act of state (for example, the conclusion of a treaty)." As to this, apart from the cautionary "or hardly ever," it must be remembered that in order to succeed on a declaration the plaintiff does not have to establish a cause of action: this was clearly laid down in the famous case of Dyson v. Attorney-General [1911] 1 K.B. 410, where, as Zamir points out in The Declaratory Judgment, 1st ed. (1962), p. 13, the plaintiff "had no cause of action in the conventional sense"; see also Guaranty Trust Co. of New York v. Hannay & Co. [1915] 2 K.B. 536, per Pickford L.J., at pp. 558 and 561, and per Bankes L.J., at p. 572, and Ibeneweka v. Egbuna [1964] 1 W.L.R. 219, 224, 225.

Whilst it is commonplace law that a treaty, unless given effect to by Act of Parliament, forms no part of the law of England - for the most recent affirmation of this, see Pan-American World Airways Inc. v. Department of Trade [1976] 1 Lloyd's Rep. 257, a decision of the Court of Appeal - it is equally clear that, at any rate in peacetime, a treaty cannot sanction an invasion by officers of the Crown of the rights of private citizens

whenever it is necessary in order to compel obedience to the provisions of a treaty: see Walker v. Baird [1892] A.C. 491. Mr. Eastham was constrained to admit, as he was bound to do as a result of Attorney-General v. De Keyser's Royal Hotel Ltd. [1920] A.C. 508 and Burmah Oil Co. Ltd. v. Lord Advocate [1965] A.C. 75, that if the exercise of the prerogative interfered with any vested property right of a subject, the latter was entitled to compensation. None was claimed in this action, which was brought quiâ timet on account of a statement in the White Paper by the Secretary of State of his intention. But Mr. Eastham did not shrink from saying that if and when the prerogative power had been exercised by dedesignation, the plaintiffs would have no remedy; they would have to suffer as best they might a piece of bad luck. I do not have to determine this point, but at first sight it seems capricious in the extreme to draw the suggested distinction between interference with any vested property right and interference with the right to earn one's living by the use of exceedingly expensive chattels, bought for a purpose which was lawful by the law of England at the time of purchase, and will remain lawful unless and until the Civil Aviation Authority licence is revoked.

Apart from the cases I have already mentioned dealing with the exercise of the prerogative in relation to treaty-making powers, Mr. Eastham drew my attention to Blackburn v. Attorney-General [1971] 1 W.L.R. 1037. In that case in the Court of Appeal Lord Denning M.R. cited, at p. 1039, this statement by Lord Coleridge C.J. in Rustomjee v. The Queen (1876) 2 Q.B.D. 69, 74:

"She" - that is the Queen - "acted throughout the making of the treaty and in relation to each and every of its stipulations in her sovereign character, and by her own inherent authority; and, as in making the treaty, so in performing the treaty, she is beyond the control of municipal law, and her acts are not to be examined in her own courts."

There has been no questioning in the arguments on behalf of the plaintiffs in this case as to the treaty-making power of the Crown, nor any suggestion that there has been imposed upon the prerogative any fetter upon the exercise by the Crown pursuant to that right, of its power to terminate the Bermuda Agreement in accordance with its terms by the giving, as has been done, of 12 months' notice. What is in issue here, however, is the applicability in the somewhat unusual circumstances of the Bermuda Agreement, with its provisions for the designation of airlines by the contracting parties and the later provisions and scheme of the Civil Aviation Act 1971, of the principle laid down in that part of the above quotation dealing with the performance of a treaty to the very limited question arising here of the suggested power within the prerogative to dedesignate.

In the course of his argument Mr. Eastham, in order to save me unnecessary note taking, put in a Note on Designation. In paragraphs 9 and 10 of that document the conclusion is reached that,

"whichever way one looks at it, designation is simply a process of communication between states as part of the machinery established by

them to regulate internationally the provision of air services pursuant to the Chicago Convention."

What we are considering therefore is "simply a process of communication."

This is fairly substantially removed from the treaty-making power of the prerogative or from an attempt to make the Crown liable as agent or trustee for a citizen in respect of money paid under a treaty. Moreover, it seems to me that the case of the Crown is put unrealistically, in relation to dedesignation, when it was claimed by Mr. Eastham that the Crown has the right to dedesignate at any time. If, for example, the time sought for the exercise of that right was after the designated British airline had received a licence from the Civil Aviation Authority to fly Skytrain, or for that matter any other service to the United States, and the Civil Aeronautics Board of the United States had granted that British airline an operating licence to fly into and from the United States, it is difficult to see how the right of dedesignation would have any effect. It would have none in English municipal law as long as the Civil Aviation Authority licence remained in force: see the reasoning in Pan-American World Airways Inc. v. Department of Trade [1976] 1 Lloyd's Rep. 257. There is no evidence before me that the United States law is any different in relation to the supposed Civil Aeronautics Board licence. Admittedly, this consideration would be but poor comfort to the plaintiffs here if it stood alone, since no board licence has yet been issued and the papers have been withdrawn from the White House, possibly with some relief, consequent upon the changed policy of the British government. The example does, however, cause one to have doubts as to the validity of the width of the powers claimed on behalf of the Crown in relation to dedesignation. It seems bizarre to suggest that the Crown should have a prerogatory power to do something nugatory.

It was strongly argued for the Crown that no fetter had been imposed by the scheme and provisions of the Civil Aviation Act 1971 upon the Crown's prerogative right, pursuant to its undoubted treaty-making powers, to dedesignate. There was no term in any section of the Act of 1971 expressly limiting the prerogative or conferring powers of designation upon the Civil Aviation Authority. The Crown did not accept that its proposed dedesignation in this case or its alleged power at any time to dedesignate was based only upon consideration of municipal matters as Mr. Bateson had argued. The Secretary of State had to consider various foreign policy issues, their interaction with domestic issues and the effect on the balance of payments if the Skytrain service were allowed to operate. The plaintiffs could not complain if, as a matter of agreement between governments, there had been a mutual restriction of passenger carrying capacity for trans-Atlantic scheduled services. Nor could the Civil Aviation Authority reach or negotiate any agreement upon such matters. I was referred in support of the foreign policy aspects of dedesignation and therefore its characteristic as an exercise of the prerogative to section 4 (3) (b) of the Act of 1971 - already mentioned earlier in this judgment on the ultra vires issue - and section 34 (1) (a) and (d).

For the plaintiffs it is argued that the Bermuda Agreement was silent upon dedesignation and that accordingly there was no power to revoke a

designation. I find this argument quite unconvincing notwithstanding the fact that, as appears from Bin Cheng, The Law of International Air Transport (1962), some bilateral agreements entered into pursuant to the Chicago Convention expressly confer the right to revoke. It is unnecessary to detail the grounds for rejecting this argument; one very obvious one would arise under a bilateral agreement unlike the present one between the United States and the United Kingdom, which limited each contracting party to the designation of one airline only. I was told there are many such agreements. If such airline went out of business or was denied a licence by its own national authorities because of lack of proper maintenance and consequential lack of airworthy planes, it would be absurd to suppose that the contracting party would be debarred from designating that airline and designating another in its stead.

Much more powerful arguments were, however, available to and deployed on behalf of the plaintiffs. In the first place the arguments about foreign policy and international agreements were, in my judgment, quite incompatible with the detailed provisions of section 4 (3) (b) to (e) of the Act of 1971, which empower the Secretary of State to give directions to the Civil Aviation Authority on such matters in relation to the powers of the authority, inter alia, to give, refuse or revoke a licence. Without a licence here a designated airline could not lawfully operate. The use of the prerogative to designate, whilst leaving the United Kingdom licence extant, would, therefore, be quite unnecessary. Section 34 of the Act of 1971 clearly affords no independent support to the Crown's argument: it is merely, in subsection (1) (d), placing a duty on the Authority to provide the Secretary of State with information which may be relevant to his powers under section 4 (3) (b) to (e). There can be no objection to the Authority considering the relevance of capacity of limitation agreements between British and American airlines. Section 3 (1) (c) of the Act of 1971 states that in discharging its duties in relation to paragraphs (a) and (b) of that subsection, which appear to be of paramount importance by reason of the absence from each of the immediately introductory words in paragraphs (c) and (d), namely, "subject to the preceding paragraphs," the Authority shall have regard to increasing the contribution made by the United Kingdom civil air transport industry towards the favourable balance of payments, a matter upon which the Secretary of State placed reliance, in the negative or opposite sense, in arriving at his change of policy.

The Act of 1971 set up a new body to deal with the licensing of civil aviation. Under the earlier Act of 1949 and the amending Civil Aviation (Licensing) Act 1960 (the vast bulk of the latter of which was repealed by the Act of 1971), the Air Transport Licensing Board was set up by Regulations of the same year, amended in 1966. The matters to be considered by the board were contained in section 2 (2) and, although covering to some extent the same ground as the duties conferred on the Civil Aviation Authority by section 3 (1) of the Act of 1971, were not so extensive or so emphatically expressed. In particular, there was nothing comparable to section 3 (1) (b) of the Act of 1971, whilst as regards the foreign affairs aspect, the only provision was that contained in section 2 (3) to the effect that

"if in the case of any application for an air service licence the Minister so directs in writing on the ground that any air transport service proposed in the application would in his opinion involve the negotiation with the government of some other country or territory of rights which it would be expedient for the time being to seek, the board shall forth-with refuse that application so far as it relates to that service."

It seems reasonably clear that it was the intention of Parliament that the Authority should have a somewhat higher status than its predecessor with somewhat larger powers, and it was thought right in section 4 to confer expressly upon the Secretary of State powers of direction in time of war. I think it not unjustified to draw some inference at any rate to the effect that the Authority was intended to be more independent (despite the right of appeal to the Secretary of State in both cases) and that the detailed powers of direction, contained in section 4, were or may have been thought necessary to preserve some prerogative rights that might otherwise have been considered to be in jeopardy.

However that may be, it would seem a singularly fruitless, uneconomic and time-consuming procedure to allow fairly elaborate public hearings to take place with legal representation and subsequent comparable hearings consequent upon attempts to revoke licences previously given, if a designation made subsequently to the granting of an appropriate long-haul licence were to be terminable by the exercise of the prerogative, notwithstanding that the licence was still extant and the powers expressly granted to the Crown under section 4 (3) had not been used. Why should they have been expressly provided for if very much the same field could be covered by the exercise of the prerogative? In relation to this question, see what was said by Lord Dunedin in Attorney-General v. De Keyser's Royal Hotel Ltd. [1920] A.C. 508, 528, by Lord Atkinson, at p. 539, by Lord Moulton, at p. 555, by Lord Sumner, at p. 561, and by Lord Parmoor, at pp. 575-576.

Although this issue is not free from difficulty, I have reached the conclusion that the machinery for licensing air services from the United Kingdom to a foreign country by the Civil Aviation Authority under the provisions of the Civil Aviation Act 1971 did fetter or restrict the prerogative in relation to what may be described as a very minor aspect of the treaty-making power and that the plaintiffs are entitled to a declaration that the defendants are not entitled to withdraw the designation of the plaintiffs under the Bermuda Agreement until the termination of that agreement on December 31, 1982, or until the revocation of the licence granted by the Authority to the plaintiffs for Skytrain, whichever is earlier. It is quite unnecessary for me, on the facts of this case, to express any view on the duty, if any, to make an initial designation, and whether the holder of a licence from the Authority to fly a service to a foreign country, with which the United Kingdom has a bilateral agreement entered into pursuant to the Chicago Convention, could obtain a declaration from the court that Her Majesty's Government should designate such a licensee.

Nothing that I have said in dealing with this issue has been intended to throw any doubt upon the principle that, whilst the courts are empowered to determine the existence, scope and form of a prerogative power, that

power is absolute, in the sense that the courts have disclaimed jurisdiction to review the propriety or adequacy of the grounds on which it has been exercised: see, for example, Chandler v. Director of Public Prosecutions [1964] A.C. 763 and de Smith, Constitutional and Administrative Law,2nd ed. (1973), pp. 116-117.

The estoppel issue

In view of the decision I have reached on the issue as to the prerogative, it is strictly speaking unnecessary for me to deal with the estoppel issue on which, if the plaintiffs are successful, they would, subject to anything that counsel may have to say to the contrary, be entitled to a similar declaration to that which I have already decided they are entitled under the second issue. However, I may be wrong in my reasoning on the second issue, the estoppel issue was fully argued and I think it right to express my views on it, all the more so as the necessary amendments to the points of claim were in fact put forward as a result of suggestions made by me on the first day of the trial and the morning of the second day. It seemed to me then that in view of what I was being told about the financial obligations assumed by the plaintiffs, not only at the outset in relation to the purchase of the two initial D.C.10s, but also in relation to the purchase of the third D.C.10, and very considerable expenditure thereafter in making preparation at Stansted for issuing tickets by special machines and so on in relation to would-be Skytrain passengers; and further, in view of the somewhat expanding application of one or other of the aspects of the doctrine of estoppel which has taken place in the courts since the war, it would be most unwise in a case of this importance for the issue not to be raised on the pleadings and be available to be argued in a higher court, if that should turn out to be necessary.

The first point requiring consideration is whether estoppel, in all its aspects being essentially a shield and not a sword, can be availed of by the plaintiffs in this action even though they may be able to substantiate the other necessary ingredients of the doctrine.

In my judgment, in the peculiar circumstances of this case, the plaintiffs can rely on the doctrine of estoppel, although at first glance it might seem as if they were seeking to use the doctrine as a sword and not a shield. I say this because in the first place this is a quiâ timet action, in that at the moment the plaintiffs are in possession of their licence from the Civil Aviation Authority and the defendants are holding up revocation of the designation pending the decision of the court, though they have left no doubt whatever about their intention under both heads. Secondly, as I have indicated earlier in this judgment by reference to Dyson v. Attorney-General [1911] 1 K.B. 410, Guaranty Trust Co. of New York v. Hannay & Co. [1915] 2 K.B. 536 and Zamir, The Declaratory Judgment the plaintiffs in seeking declarations against the defendants are not seeking to enforce a cause of action. They are in effect seeking to erect estoppel as a shield against a threatened course of action by the defendants damaging to that intended to be taken by the plaintiffs. Their position is wholly different from that of a plaintiff seeking to enforce by way of debt, damages, injunction or specific performance a recognised cause of action.

The next question for consideration is the extent to which the defence of estoppel is available against the Crown. It used to be thought that estoppel did not bind the Crown, but it would seem that this idea is ill-founded: see Halsbury's Laws of England, 4th ed., vol. 8 (1974), para. 960, footnote 1. In Attorney-General to the Prince of Wales v. Collom [1916] 2 K.B. 193, Atkin J. said, at p. 204:

"A further point was raised that no estoppel binds the Crown and that this equity is based upon estoppel. There is authority for the general proposition so far as estoppel by deed is concerned. I know of no authority for the proposition as applied to estoppel in pais. But I think that it is established that equitable defences such as I consider this to be are available against the Crown: see Attorney-General for Trinidad and Tobago v. Bourne [1895] A.C. 83; and this very principle as laid down in Ramsden v. Dyson (1866) L.R. 1 H.L. 129 was applied against a claim of the Crown in a decision of the Judicial Committee in Plimmer v. Wellington Corporation (1884) 9 App.Cas. 699."

Mr. Eastham did not deny that estoppel could in suitable circumstances be raised against the Crown, but he submitted that there were a number of authorities laying down the proposition that an equitable estoppel would not lie against a local authority to prevent such a body from carrying out its statutory duties, despite representations that it may have made to the defendant upon which the defendant had acted to his detriment, since such representations related to an exercise of the local authority's power contrary to what was laid down by statute. If this applies in the case of a local authority, Mr. Eastham submitted that it must apply in relation to the exercise by the Crown of the prerogative of treaty making or taking action pursuant to a treaty entered into by the Crown. Perhaps the most striking authority to support his proposition in relation to local or statutory authorities is the decision in Maritime Electric Co. Ltd. v. General Dairies Ltd. [1937] A.C. 610, where the refusal to apply the doctrine of estoppel worked grave injustice. Perhaps the most recent example of the refusal by the courts to apply the doctrine, when its application would run contrary to the statutory powers of a local authority, is to be found in Southend-on-Sea Corporation v. Hodgson (Wickford) Ltd. [1962] 1 Q.B. 416.

However, there seems to have been some development in this branch of the law since that decision. Thus in Lever Finance Ltd. v. Westminster (City) London Borough Council [1971] 1 Q.B. 222, Lord Denning M.R. said in relation to the last cited case, at p. 230:

"those statements must now be taken with considerable reserve. There are many matters which public authorities can now delegate to their officers. If an officer, acting within the scope of his ostensible authority, makes a representation on which another acts, then a public authority may be bound by it, just as much as a private concern would be."

See also per Sachs L.J. at pp. 232-233 on the need to hold a careful balance between two potentially conflicting principles. Sellers L.J. in North

Western Gas Board v. Manchester Corporation [1964] 1 W.L.R. 64, 74 found no difficulty in holding that Manchester Corporation was estopped from saying that the nature of the payment that they had received over a number of years from the Gas Board was not that of a rate levied on the board when they were carrying out the statutory duty imposed on them by Schedule 4 to the Rating and Valuation (Miscellaneous Provisions) Act 1955. This approach would have been a simple way out of the dilemma in Maritime Electric Co. Ltd. v. General Dairies Ltd. [1937] A.C. 610. Lord Denning carried the matter further in Wells v. Minister of Housing and Local Government [1967] 1 W.L.R. 1000, 1007 where he said that he knew that a public authority could not be estopped from doing its public duty, but he did think that it could be estopped from relying on technicalities and on this reasoning he held against the Minister in that case. Perhaps the most recent case in this field is Dowty Boulton Paul Ltd. v. Wolverhampton Corporation [1971] 1 W.L.R. 204, in which Pennycuick V.-C. decided that where a public authority by valid exercise of a statutory power had created a right extending over a term of years, the existence of that right pro tanto excluded the exercise of other statutory powers in respect of the same subject matter and that such exercise was not invalid as a fetter upon the future exercise of powers.

I think I have sufficiently referred to the various authorities on this topic in relation to powers of local authorities. They do not appear to present a particularly formidable obstacle to the plaintiff's reliance on the doctrine of equitable estoppel. However, Mr. Bateson has submitted that the true view was that these authorities had no direct relevance to the present case. What was being sought was to stop the Crown from exercising its alleged right to dedesignate. This was not denying the Crown the obligation to discharge certain duties under a statute. I think this distinction made by Mr. Bateson is valid.

The next point was whether any representation was made on behalf of the Crown to the plaintiffs with the intention of affecting the legal position obtaining between the person making the representation and the person to whom it was made. Mr. Bateson accepted Mr. Eastham's criticism of the width of the relief sought in the third declaration based upon estoppel, namely, that the defendants were estopped from withdrawing the designation under the Bermuda Agreement until December 31, 1982. What he submitted was that the Crown was estopped from dedesignating the plaintiffs until either the termination of the Bermuda Agreement or the lawful termination of the licence held by the plaintiffs from the Civil Aviation Authority, whichever was the earlier. The new paragraph introduced by way of amendment to the points of claim sets out under headings (b) to (g) representations made by the defendants in relation to the matter of designation under the Bermuda Agreement.

The first of these was that on or about July 13, 1972, the defendants granted the plaintiffs duty relief on the purchase of the first two D.C.10 aircraft. It does not appear to have been made clear in the correspondence relating to this, which I have recited in the course of the narrative portion of this judgment, that the plaintiffs were purchasing these aircraft for the purposes of Skytrain. The same cannot be said in relation to the grant

on about April 9, 1974, of duty relief to the plaintiffs in relation to the purchase of the third D.C.10 aircraft, as has appeared in my narrative.

The plaintiffs then pleaded that a very large number of representations were made on behalf of the Crown to the United States government in an endeavour to persuade that government to accept the designation and to grant the plaintiffs the necessary operating permit in the United States. The defendants kept the plaintiffs very closely informed about the many representations made via the British Embassy in Washington, a considerable number of which I referred to. By notifying the plaintiffs of these communications and assuring the plaintiffs by other correspondence, the defendants, it was pleaded, assured the plaintiffs that appropriate representations were being made in the United States. Even after the Secretary of State's announcement in the House of Commons on July 29, 1975, of his change in policy, the Under Secretary of State for Trade (Mr. Clinton Davis) stated in the House of Commons that for the time being the defendants were not withdrawing the Skytrain designation and would continue to remind the United States authorities of the views of the British Government on the matter.

Mr. Eastham accepted that quite apart from the purchase of the third D.C.10 aircraft, the plaintiffs incurred substantial expenses far in excess of anything which could be regarded as falling within the principle of de minimis, thus relieving the plaintiffs from proving such expenditure, which I was told might well have approached £100,000, in relation to the necessary preparations for the service, e.g., at Stansted. I take the view that the matters relied upon by the plaintiffs, which I have mentioned, other than the application for relief from duty on the purchase of the first two D.C.10 aircraft, would be taken by any reasonable person in the position of the plaintiffs and of Mr. Laker and his staff on behalf of the plaintiffs as amounting to representations that the defendants would not take any steps to withdraw the designation of the plaintiffs under the Bermuda Agreement whilst that agreement was in force, provided that the licence granted to Laker Airways by the Civil Aviation Authority was itself in force. I do not think it matters any more than it does in the local authority cases, whether there was a binding contractual relationship between the plaintiffs and the defendants or a business relationship between the two prior to what the plaintiffs rely upon as the representations made to them or at all. There was a very close working relationship between the two of the greatest importance.

For these reasons I think that the plaintiffs are also entitled to succeed upon the issue of estoppel, which would have afforded them another ground for a declaration to the same effect as that to which they are, in my judgment, entitled under the previous issue.

Conclusion

For the above reasons the plaintiffs are entitled to succeed on each of the three main issues which were debated before me. In truth, in my judgment, the Secretary of State, having made up his mind almost exactly a year ago to make a change in civil air transport policy, set about giving it effect in the wrong way. Plainly from what he said in the House of

Commons he had it in mind in July 1975 that it might be necessary for him to have statutory authority for the change in policy proposed. He seems, however, ultimately to have been advised that this was not necessary, contrary to the opinion which I have formed for the reasons given. It would have been relatively simple for the British Airways Board, at the instance of the Secretary of State, to have sought once more before the authority to have secured the revocation of the Skytrain licence on the grounds that the deep depression prevailing on both sides of the Atlantic had altered the position still further adversely to Skytrain. Further the Authority had power of its own motion under section 23 (2) of the Civil Aviation Act 1971 at any time to revoke, suspend or vary a licence if the Authority considered it appropriate to do so, whether or not an application in relation to such revocation had been made pursuant to section 23 (1). No such revocation or suspension was made. Further, despite the strong arguments based on the foreign policy and international relations aspect of the subject urged by Mr. Eastham, no step was taken by the Secretary of State under section 4 (3) of the Act of 1971, no doubt because in fact those provisions were inapplicable to the Secretary of State's decision or the reasoning upon which it was based.

It may be that the decisions I have reached, if not reversed on appeal, may result in something of a Pyrrhic victory for the plaintiffs, in that the defendants may be able to persuade the government to introduce the necessary amending legislation or may seek in various ways to secure that the Authority revoke the outstanding licence granted by them to the plaintiffs. It is not for me to speculate on these matters, but one cannot help noticing that it is now just over a year since the Secretary of State made his statement to the House of Commons, and, as one has learnt as an ordinary reader of daily newspapers, the economic position at any rate in the United States has greatly changed for the better in the course of that year. Moreover, there has been a change in the person holding, the office of Secretary of State for the Department of Trade. It is not beyond the bounds of possibility that the successor to Mr. Shore may in present circumstances take a different view of the prospects of Skytrain from that taken over a year ago by his predecessor. However, this is not a matter that concerns me.

I will now hear any submissions that counsel may wish to make as to the precise form of the two declarations which should be granted to the plaintiffs.

Declarations (1) that paragraphs 7 and 8 of the guidance given to the Civil Aviation Authority by the Secretary of Stale for Trade in the terms of or pursuant to the White Paper Future Civil Aviation Policy (1976) (Cmnd. 6400) were outside the powers granted to the Secretary of State for Trade; and (2) that by reason of the terms of the Civil Aviation Act 1971 the department were not entitled until December 31, 1982, or until the termination of the Bermuda Agreement or the lawful termination of the licence, whichever should be the earliest, to withdraw the designation of the plaintiffs for operations on United Kingdom Route 2 of the annex to the agreement relative to air services between the United Kingdom and the United States of America signed

at Bermuda on February 11, 1946, as amended by the exchange of notes of May 27, 1966, the designation having been made by note dated February 26, 1973, on behalf of the department, and that the department were estopped from making such withdrawal for the period stated.

Solicitors: Roney, Vincent & Co.; Treasury Solicitor.

[Reported by A. G. B. HELM, ESQ., Barrister-at-Law]

The department appealed on the grounds that (A) the judge erred in law in concluding that the Secretary of State for Trade did not have the power to give to the Civil Aviation Authority guidance in the terms of paragraphs 7 and 8 of the guidance contained in the White Paper and that in giving such guidance was acting ultra vires, in that (i) the judge was wrong in holding that the Secretary of State had no power to give guidance to the Authority to the effect that it should not license more than one British airline to serve the same route; (ii) the terms of paragraphs 7 and 8 amounted to guidance within the meaning of section 3 (2) of the Act of 1971 and not to a direction, within the meaning of section 4 of the Act; that contrary to the judge's conclusion, section 3 (2) of the Act of 1971 enabled the Secretary of State to give guidance to the Authority which affected the manner in which it performed the functions referred to in section 3 (1) of the Act; that the Authority was expressly required by section 3 (2) to perform those functions in such a manner as it considered to be in accordance with the guidance: that a distinction between a guidance within the meaning of section 3 (2) and a direction within the meaning of section 4 of the Act of 1971 was that a direction might require the requirements of the Act of 1971 to be disregarded if in conflict with the direction, whereas a guidance could not and accordingly should not, in the absence of express and unambiguous language, be construed as purporting so to require; (iii) the terms of paragraphs 7 and 8, or the parts thereof dealing with the review of existing licences, were not to be construed as purporting to preclude the Authority from performing the functions imposed on it by the Act of 1971; (iv) further and in the alternative, on the true interpretation of section 3 (2) of the Act, the Authority was under a duty only to give such effect to the terms of paragraphs 7 and 8 as was consistent with the performance of the functions imposed on it by section 3 (1); (B) that the judge erred in law in concluding that the provisions of the Act of 1971 fettered or restricted the exercise by the Crown of its prerogative or other powers in relation to its conduct of foreign affairs and the withdrawal of a designation under a treaty with another country, namely, the Bermuda Agreement relating to air services between the United Kingdom and the United States of America; (C) that he erred in law in concluding that the court was entitled to grant a declaration the effect of which was

to restrict the ability of the Crown to exercise its rights and powers in relation to foreign affairs and under the Bermuda Agreement; (D) that he erred in law in failing to hold that an act or proposed act by the Crown in relation to the conduct of foreign affairs with another sovereign state and in the performance of or under the Bermuda Agreement was not justiciable in the municipal courts of the United Kingdom; (E) that he erred in law in seeking to evaluate the importance of different aspects of the prerogative of the Crown in relation to the conduct of foreign affairs; (F) that he was wrong to conclude that the Crown could be and was estopped by the matters relied on by the plaintiffs or at all from exercising its rights and powers. Further, there was no evidence that (a) the Crown had made any representation or promise or given any assurance to the plaintiffs that the designation of the plaintiffs would not be withdrawn during the period reffer to in the second declaration granted by the judge or at all; (b) the Crown had ever intended or was understood by the plaintiffs to have intended to affect its rights and powers to withdraw the designation; (c) such a representation, promise, or assurance had induced the plaintiffs to act to their detriment.

By a respondents' notice the plaintiffs gave notice that they intended on the hearing of the appeal to contend (1) that the judgment be varied so as to delete from the second declaration referred to in the department's notice of appeal the words "or until the termination of the Bermuda Agreement"; and (2) that so much of the judgment as ordered that the department should pay the plaintiffs 75 per cent. of their costs to be taxed should be varied and that judgment should be entered for the plaintiffs ordering that the department should pay the plaintiffs the whole of their costs of the action (save for any special order made on amendment of the pleadings) to be taxed; and (3) for an order that the costs of the department's appeal and the respondents' notice be paid to the plaintiffs by the department. The grounds of the cross-notice were that: (1) it was inconsistent with the reasons expressed in the judge's judgment to declare that the department were entitled to withdraw the designation of the plaintiffs on the happening of any event other than the termination of the plaintiffs' licence by lapse of time or other lawful means; (2) the judge misdirected himself that the Bermuda Agreement would expire on December 31, 1982; (3) the judge, having found in the plaintiffs' favour on all points argued at the trial, ought not to have deprived them of a part of their costs; (4) the judge misdirected himself that because the relief granted to the plaintiffs arose in part from a late amendment of the points of claim they ought to be deprived of a portion of their costs over and above the usual order as to costs made on granting leave to amend.

Notice was also given that the plaintiffs would contend that the balance of the judgment should be affirmed on other grounds, inter alia: (a) that the judge ought to have accepted the plaintiffs' submission that there was no power in the department to revoke a designation because the Bermuda Agreement contained no express power to revoke a designation and there were no grounds for implying such a power; and (b) that the judge ought to have accepted the plaintiffs' submission that the

estoppel relied on by them was raised and properly raised by them as a shield against the claim to prerogative power made by the department in their defence.

By a further notice dated November 12, 1976, the department sought leave to rely on the following additional grounds. In relation to ground (A) set out in the principal notice of appeal, the department would contend that in the further alternative (a) on the true construction of section 3 of the Act of 1971, in the event of any apparent conflict between guidance for the time being given to the Authority under section 3 (2) and the statutory objectives set out in section 3 (1) (a) to (d) or any of them, the guidance prevailed and it was the duty of the Authority to perform its functions in such manner as it considered was in accordance with such guidance for the time being given to it, notwithstanding that by so doing it might thereby be unable to perform any function conferred on it otherwise than by section 3 in the manner which it considered was best calculated to achieve some or all of the objectives set out in section 3 (1); and that the appellant department would rely for that construction on the following matters: (i) section 3 (1) applied to the manner of performance of functions conferred on the Civil Aviation Authority otherwise than by section 3; (ii) section 3 (2) applied to the manner of performance of functions conferred on the Authority otherwise than by subsection (2) of section 3; (iii) having regard to the definition of "functions" contained in section 64 of the Act, both the duty imposed by section 3 (1) and that imposed by section 3 (2) were functions of the Authority; (iv) the duty imposed on the Authority by section 3 (2), being a function conferred by section 3, was not a function to which section 3 (1) applied; or (b) on the true construction of section 3, having regard to the matters aforesaid, it was the duty of the Authority to perform its functions in the manner which it considered was best calculated to achieve the statutory objectives set out in section 3 (1) but so to do in the manner which it considered was in accordance with any guidance for the time being given to it in pursuance of section 3 (2); and accordingly any guidance so given fell to be construed by the Authority in such manner as enabled the Authority to perform its functions in the manner so described.

Samuel Silkin Q.C., A.-G., Michael Eastham Q.C., Harry Woolf and D. Armstrong Evans for the department. The department challenges all Mocatta J.'s conclusions, namely, (1) that the statutory guidance in Future Civil Aviation Policy (Cmnd. 6400) of 1976 was ultra vires; (2) that by reason of the provisions of the Civil Aviation Act 1971 the Crown has no power to withdraw the designation of Lakers under the Bermuda Agreement of 1946 - the prerogative issue; and (3) that the Crown is estopped by certain alleged representations from withdrawing that designation so long as the Bermuda Agreement remains in force - the estoppel issue. The department wishes to be clear about its powers and duties under the Act of 1971 and also by virtue of the prerogative, both in the domestic and the international sphere. The present case involves one of many bilateral agreements, the Bermuda Agreement between the governments of the United Kingdom and the United States of America signed in 1946, which the United Kingdom

now considers to be out of date and which it has given notice to terminate. What is here in issue is the boundary between municipal law and the prerogative. The Act fits into a pattern of domestic rights and international flying rights, and in setting up the Civil Aviation Authority it conferred general powers and functions on the Authority and gave direct responsibility to the Secretary of State: see Halsbury's Laws of England, 4th ed., vol. 2 (1973), para. 829, p. 410 and para. 847, pp. 418-419.

Section 3, with which the court is mainly concerned, is difficult to construe. Subsection (1) deals in four paragraphs (a) to (d) with the general objectives, the "criteria" for the Authority in relation to the narrower economic aspects of policy. Subsection (2) enables the Secretary of State to give "guidance" to the Authority; and subsection (3) requires that before the guidance is given it shall be approved by affirmative resolution of both Houses of Parliament. The judge has held that the Secretary of State cannot give guidance which conflicts with the criteria in subsection (1), which the Authority has to observe, and that if the guidance does so conflict it is ultra vires. The department challenges that limited view of guidance. It must have been intended that government policy could be operated through the guidance procedure; that would necessarily involve, inter alia, matters of international policy and the exercise of the prerogative which would take precedence over the criteria imposed on the Authority in relation to domestic matters and might well conflict with one or more of the criteria which the Authority would otherwise apply: see also section 24 which is also concerned with guidance and general government policy.

If the judge's view of the limitations put on "guidance" under section 3 (2) is correct, the Secretary of State still has the prerogative power. "Designation," which is in question here, cannot by itself accomplish anything by virtue of municipal law; it is simply a step towards accomplishing something in the international sphere; and the act of designation, as also the act of withdrawal of designation, is not justiciable in the municipal courts because it is an exercise of the prerogative in relation to a treaty. A prerogative right is a power in the Crown undiminished by statute, and the phrase is used to cover those powers of the Crown which are not open to review by our courts. Parliament has recognised the prerogative in sections 24 and 34 of the Act of 1971. The judge's conclusion was that the machinery for licensing air services from the United Kingdom to a foreign country, operated by the Authority under the Act of 1971, fettered the prerogative to the extent that the Secretary of State was not entitled to withdraw the designation of Lakers while it had a valid licence granted by the Authority. That is a far-reaching decision, for the general rule is that if the prerogative is to be fettered by statute, the statute must make that quite clear. There is nothing in the Act of 1971 which expressly or by necessary implication curtails or fetters the prerogative power of the Secretary of State or limits his freedom of action under the Bermuda Treaty or in negotiation with other states. Although Parliament can fetter the powers of the Crown in international matters, as it has done by the European Communities Act 1972, there must be clear language imposing such a fetter: see per Lord Denning M.R. in Pan-American World Airways

Inc. v. Department of Trade [1976] 1 Lloyd's Rep. 257, 260, that there is no limit on the terms or conditions which the Secretary of State may impose when granting operating permits under the Air Navigation Order 1974 made under the Civil Aviation Act 1949 to give effect to the Chicago Convention. Though designation may be purely a matter of communication, it is effected under a treaty which has not been made part of municipal law and therefore it is not to be scrutinised in our courts: see Rustomjee v. The Queen (1876) 2 Q.B.D. 69, 73-74. Lakers' claim in these proceedings is that when they obtained a licence from the Authority they also gained a right to be designated under the Bermuda Agreement: They are claiming what Rustomjee claimed, and their claim must fail as his did. [Reference was made to Civilian War Claimants Association Ltd. v. The King [1932] A.C. 14; Vaisey J. in Republic of Italy v. Hambros Bank Ltd. [1950] Ch. 314, 329; and S. A. de Smith, Constitutional and Administrative Law, 2nd ed. (1973), pp. 124, 131.] The courts have taken a narrow view on how the prerogative can be fettered by statute: see per Lord Sumner in Attorney-General v. De Keyser's Royal Hotel Ltd. [1920] A.C. 508, 561, where the statute dealt directly with the "subject matter." The subject cannot claim rights under a treaty; and if Lakers' claim is based on the grant of a licence by the Authority, the Act of 1971 does not touch on the second essential requirement for flying between Stansted and New York, namely, the permit from the United States by virtue of being designated under the Bermuda Agreement. Lakers' right to fly to New York depends on getting the United States permit under the treaty; and until they have that, their right is inchoate. Nor can anything be found in the Act which says that once Lakers were designated the designation could not be withdrawn. On the need for an express or clearly implied ouster or restriction of the prerogative, see per Lord Evershed M.R. in In re M. (An Infant) [1961] Ch. 328, 338. If designation and the processes leading up to it are no more than administrative matters of municipal significance which follow on the grant of a licence by the Authority, and the Act of 1971 somehow embraces designation under the Bermuda Agreement and the Chicago Convention, it would follow that the Authority could deal with the broad economic and political factors involved in international negotiations. That cannot be right. Designation is essential to the working of a licence, and the Secretary of State can withdraw the designation independently of the licence granted by the Authority. The Act of 1971 by itself is not sufficient to deal with questions arising under the treaty. Both municipal control and control through designation are necessary before a carrier can fly from Stansted to New York.

On the issue of estoppel, which the judge himself raised and which was brought in by amendment, Lakers cannot succeed. There is no authority to support the submission that the Crown can be estopped in relation to its treaty-making power. A government cannot be estopped from changing its policy. None of the cases cited by the judge supports his conclusion that so long as Lakers had a licence, the Crown could not cancel the designation. When the judge said that the law on estoppel had developed recently he referred to cases concerning local authorities (Lever Finance Ltd. v. Westminster (City) London Borough; Council [1971] 1 Q.B. 222, 232-233;

North Western Gas Board v. Manchester Corporation [1964] 1 W.L.R. 64, 75; and Dowty Boulton Paul Ltd. v. Wolverhampton Corporation [1971] 1 W.L.R. 204); but they do not touch the situation here where the Secretary of State is empowered under a treaty to negotiate on behalf of the Crown with another country in changing economic situations producing, for example, an excess of air transport capacity. It is inconceivable that the Secretary of State should be obliged, because of some extension of the doctrine of estoppel, to say: "I must ignore international factors because I have encouraged Lakers to believe that having got their licence the designation would not be withdrawn." It would be equally absurd if the government, in order to negotiate on behalf of the British air industry generally, had first to cause Lakers' licence to be cancelled. Estoppel cannot run against the Crown when exercising the prerogative in relation to international agreements and treaties. A person who is a stranger to the treaty cannot claim a right enforceable in the Queen's Bench Divisional Court. The court will not exercise its discretion to grant a declaration on the basis of estoppel, the effect of which would be that the private right of a particular individual would in practice estop the greater public interest in, for example, negotiating a new agreement with the United States. The power of designation and also of cancellation of a designation are matters in the control of the Crown exercising its prerogative, and international considerations must take precedence over domestic and municipal matters.

On the question whether the Secretary of State had power to give the Authority guidance in the terms of paragraphs 7 and 8 of the Command Paper and whether in giving such guidance he was acting ultra vires because paragraph 7 told the Authority not to license more than one British airline to serve the same route and paragraph 8 made the grant of a licence subject to the consent of British Airways or British Caledonian Airways, section 3 is difficult to construe, and additional grounds of appeal (see ante, p. 686A-F) are relied on to assist in its construction. Section 3 (1) deals with the manner of performance of the Authority's functions conferred on it "otherwise than" by section 3; section 3 (2) applies to the manner of performance of functions conferred on the Authority "otherwise than by" subsection (2); having regard to the definition of functions in section 64 of the Act (as including powers and duties), both the duty imposed by section 3 (1) and that imposed by section 3 (2) are functions of the Authority; the duty imposed on the Authority by section 3 (2), being a function conferred by section 3, is not a function to which section 3 (1) applies. On the true construction of section 3 it is the duty of the Authority to perform its functions in the manner best calculated to achieve the statutory objectives set out in section 3 (1) but where there is any apparent conflict between "guidance" for the time being given to the Authority under section 3 (2) and the statutory objectives in section 3 (1), the guidance prevails and the Authority must perform its functions in such manner as it considers to be in accordance with the current guidance. It is not the function of the Authority to perform general licensing functions in the manner set out in the criteria in subsection (1).

A hypothetical example is to be found in the 1976 guidance in Cmnd. 6400 which refers specifically to Concorde. In the negotiations about Skytrain

the United Kingdom government has also to negotiate on Concorde, the subject of an agreement with the French government on joint expenditure. If there has to be a choice at government level on whether to push Skytrain or Concorde, the United Kingdom could not be fettered by the Authority's act in granting Skytrain a licence. And if the decision was to encourage Concorde and not Skytrain the guidance will require the Authority to license Concorde in a manner which will almost certainly conflict with one or more of the criteria in section 3 (1). Though the powers of the Secretary of State may be fettered to the extent that the Act has transferred air transport matters to the Authority, it must be within his powers to give guidance bona fide in relation to international air transport which will override the criteria. The White Paper of 1976 resulted from a situation in which the forecast of demand for air services had been shown to be too optimistic and the change from the previous competitive policy was properly done by guidance under section 3 (2). The government of the day is entitled, with the approval of Parliament, to give guidance which will ensure that the right choice is made in relation to world demand and international agreements and which will last for a period of years. Why should a new Act have to be passed when guidance under section 3 (2) is quite sufficient to reverse previous policy in changing economic conditions? Under section 3 (1) the Authority's duty is to perform its functions in the manner best calculated to achieve the general objectives there set out; but if there is a conflict with guidance given under subsection (2) the guidance has priority and the Authority must follow the guidance, giving it the most benevolent possible construction. Section 24 (2) enables the Authority to ask for additional or alternative guidance, and under section 3 (2) the Secretary of State is required to consult the Authority before he gives the guidance, so that provides ample opportunity to avoid conflict. The plaintiffs' main attack is founded on paragraph (b) of section 3 (1) and its conflict with the policy guidance in paragraph 7 of the Command Paper. But it is not correct that, by reason of paragraph (b) of section 3 (1), the Authority would not be performing its functions properly unless it ensured that on each long-haul route there should be a general opportunity for competition between independent British airlines and British Airways in a diminishing market. The White Paper of 1972 (Cmnd. 4899) makes clear that the then Secretary of State wished to avoid the danger of open-door competition and recognised the effect of bilateral agreements over international routes. Neither the White Paper of 1972 nor that of 1976 treats paragraph (b) of section 3 (1) out of its context.

The scheme of the Act of 1971 gives the Secretary of State two methods of control. Under section 3 (2) he can bring the Authority's acts into accord with overall policy by guidance which is intended to have a long-term effect and is subject to approval by Parliament: see per Lord Denning M.R. in F. Hoffmann-La Roche & Co. A.G. v. Secretary of State for Trade and Industry [1975] A.C. 295, 321, on the importance of an order which has been approved by both Houses of Parliament. Under section 4 the Secretary of State can give a direction in time of war or emergency or in the circumstances set out in the section and such a direction takes effect at once. Such a direction can also

override all other provisions of the Act, and could certainly conflict with particular decisions of the Authority. Moreover, it is not subject to Parliamentary control. The powers given by section 4 are so wide that Parliament cannot have intended them to be used whenever the government of the day has decided on a change of policy. The procedure of reversing policy by guidance approved by Parliament is preferable to a directive by the executive under section 4 which is outside parliamentary control. The 1976 guidance cannot be regarded as conflicting with the criteria as a whole and paragraphs 7 and 8 are not ultra vires.

It would have been possible to make clear in the Act of 1971 that in so far as the Crown had exercised its power to designate a carrier under the international treaty it should not be able to cancel that designation unless the Authority had first revoked the licence it had granted, or to have given the unelected Authority a greater degree of independence than its predecessors, but the Act has not done that. Yet the judge has construed it as though Parliament had perpetrated a combination of errors which prevent the Crown from exercising its power to withdraw a designation when the whole international trade situation has changed, and has also so circumscribed the Secretary of State's power in municipal law that in the end power over policy would be vested in the Authority and the power of the executive cut down in an area where it previously exercised power. The Secretary of State considered that the guidance of 1976 was in accord with what his predecessor had done by means of guidance and that it was not ultra vires.

Andrew Bateson Q.C. and Peter Bowsher for Lakers. The 1972 guidance (Cmnd. 4899) was a true guidance under section 3 (2) which told the Authority the factors likely to be important to the Crown. Paragraph 7 of the 1976 Guidance (Cmnd. 6400) is an instruction to the Authority not to perform its functions but to revoke without a hearing the licence granted to Lakers. Paragraph 8 makes the consent of British Airways a condition precedent to the grant or revocation of existing licences by the Authority in the exercise of licensing powers conferred by an Act of Parliament. Both those paragraphs are ultra vires. What the Secretary of State has done in the White Paper of 1976 is to adjudicate on Skytrain, a matter which the Act vests in the Authority alone; it makes revocation of Lakers' licence automatic if the designation is revoked. The facts are relevant and important. The Act requires the Authority to adjudicate in quasi-judicial proceedings in relation to a licence, and that is how the Authority has acted. The Act did not give that right to the Secretary of State using the procedure of guidance: that is another reason why the guidance is ultra vires.

If a licence is granted it is to be presumed that a designation will follow, and after another inquiry at the other end under the Bermuda Agreement the licensee will get the permit if he complies with the operational requirements of the country of destination. That is how the system has worked, save in the case of Skytrain.

What has to be fitted into the overall picture is a right to revoke a designation, which in 99 cases out of 100 is of no value to the Crown. Mocatta J. held that there was an implied right to revoke a designation,

but only after the municipal licence had been revoked, and that that was not an exercise of the prerogative at all.

On the facts and the documentary evidence the decision to kill Skytrain for the foreseeable future was not taken at a high international policy level and had nothing to do with foreign policy; nor was it made in circumstances of national emergency or war. It was made for the kind of reason which the Act places solely in the jurisdiction of the Authority and with which it has to deal day by day. From March 1974 Skytrain could have started as soon as the President of the United States had signed the permit; but after the Secretary of State made his statement to Parliament in July 1975 the licence was withdrawn from the President's office.

Of course a government is entitled to reverse its policy, but it should do so lawfully. The government could have passed a new Act or adopted some other procedure to stop Skytrain; but it has not done so; and at the moment Skytrain has a valid licence from the Authority to fly between this country and New York; all that is required is the President's signature at the United States end. The evidence shows that there was no international bar to starting Skytrain. But the guidance is an internal domestic decision to create a monopoly for the state airline. That has nothing to do with treaties or the prerogative. Designation is not an exercise of the prerogative. It is merely a letter of notification that a licence has been granted by the Authority. It is a process of communication.

On the ultra vires issue, the purpose of the Act of 1971 was to secure that British airlines provided services which satisfied the criteria in sub-section 3 (1) (a) to (d). The purpose of the 1976 guidance and in particular paragraph 7 was to create a state monopoly by securing that British Airways alone should service New York even though it does not satisfy public demand and does not assist the balance of payments. The guidance in paragraph 8 (b) and (c) deprives the Authority of any jurisdiction for the foreseeable future to determine whether any other airline shall operate a service to New York, or, alternatively, makes the exercise of that power subject to the consent of British Airways or British Caledonian Airways. The guidance is, and is intended to be, an order, a direction to the Authority to revoke Lakers' licence without a hearing and without any prospect of its restoration. Guidance means assistance to another to help him to come to a decision, leaving the ultimate decision to the person so assisted. A direction deprives the recipient of power to make a decision. He has to do what he is told.

The words in section 3 (1) and (2) which are the subject of the additional grounds of appeal are difficult to interpret; but it is suggested that section 3 (1) should be read "It shall be the duty of the Authority to perform the functions of granting or revoking a licence in the manner it considers best calculated to achieve the objectives in paragraphs (a) to (d)," because the functions it performs "otherwise than by this section" are those in sections 22 and 23 concerned with the grant or revocation of a licence. Subsection (2) of section 3 places an express duty on the Authority to perform the functions conferred by the subsection in accordance with the guidance. The words "otherwise than by

this subsection" do not give the Crown power to give directions which have to be obeyed. The fact that the Authority has some discretion as to the way it carries out the guidance means that guidance is not the same as a direction under section 4. The suggestion that guidance takes precedence over the Act or at least over the criteria in paragraphs (a) to (d) of section 3 (1) cannot be supported, for if "guidance" means assistance to the Authority in coming to a decision based on the criteria, it cannot have the effect of a direction. A Command Paper, albeit affirmatively approved by Parliament, cannot prevail over the provisions of an Act of Parliament; and from the constitutional point of view that ground of appeal should fail for it could lead to government by directive.

[LORD DENNING M.R. We have already had directives from the Common Market.]

They should not be extended into domestic law. This case is concerned with the right to fly on international routes. Parliament has laid down the procedure by which the Authority gives a right in this country to British aviation companies to fly; the Crown then tells the United States authorities so that they can put their procedure in motion to give a corresponding right at that end. Parliament did not intend that where the right to fly has been conferred by the Authority after full inquiry under the provisions of a United Kingdom Act that right can be taken away by telling the United States authorities that a particular airline which still holds a valid licence is no longer designated. It is conceded that if a treaty gives an express right to designate, its extent, scope and form would not be justiciable by our courts. But that is not the position here; and since the Act of 1971 gives control over licensing to the Authority, the designation of a carrier with a licence is a pure postbag formality. In that way the Act does fetter the prerogative on the question of designation. On the authorities cited on fettering the prerogative by statute, the Act of 1971 gives power to the Crown by section 4 and guidance from the Crown by section 3 (2). Apart from those provisions, the powers are all conferred on the Authority. If the Crown were free to disregard the conditions which the Authority has to observe and could revoke a designation at will it would render the Act nugatory. It does not matter whether one says that where there is a valid licence there is an implied term that designation will not be cancelled, as the judge said, or whether it is called a fetter on the prerogative power. Either will have the result that the Act which confers functions on the Authority and requires its procedures to be fulfilled does not allow the Crown to prevent Lakers from flying, for any reason, once the licence has been granted. A treaty cannot be used to invade or abridge the rights of a citizen: see Walker v. Baird [1892] A.C. 491, 495, 496. Lakers have a right to fly by reason of their licence granted under municipal law; they may need to complete the licence in the United States; but it cannot be said that the licence gives them no rights at all. It may be that their rights were inchoate; but they were rights, and there is no doubt that it is intended to invade them by revocation and then by withdrawal of the municipal licence.

There is no express requirement in the Bermuda Agreement for the Crown to revoke a designation; therefore any right to revoke a designation

must, as Mocatta J. said, be implied. Designation is a step taken subsequent to and consequent on a full investigation by the Authority and the grant of a licence. Revocation of a designation must also be subsequent to and consequent on revocation of a licence after full investigation by the Authority or after a direction by the Secretary of State under section 4, or by lapse of time. Alternatively, revocation of designation cannot be exercised in such a way as to defeat the statutory powers of the Authority under the Act of 1971 or render them nugatory. Parliament having provided for the Secretary of State to revoke a licence under section 4, he cannot nullify Laker's licence by revocation for reasons other than those in section 4. Any right to revoke must be fettered by the rights given to Lakers by the Act of 1971 to have an adjudication before the Authority. If the right to designate or revoke is a prerogative act its exercise is curtailed by the grant of a licence to a British citizen and cannot be invoked under a treaty to defeat that right.

On the issue of estoppel, what the judge said is adopted; but the facts are important. The representation which created the estoppel is that the department supported Lakers in seeking to persuade the United States government to accept the designation of Skytrain and grant the necessary permit to fly to New York. Alternatively, the Crown had for some two and a half years represented to Lakers that their licence was valid and that they could take any steps they saw fit to prepare for Skytrain's operation as soon as the permit was granted by the United States. The incoming government in 1974 appeared to adopt the representation of its predecessor. Where a private citizen spends £7 million on a project, relying on a representation that the Crown is supporting it, and the Crown then proposes to nullify it by an act of the prerogative, all the ingredients of estoppel are present. Though the court cannot investigate matters of foreign policy it is entitled in the circumstances of this case to consider whether there is any element of public policy involved in the revocation of the designation. [Reference was made to In re James (An Insolvent (Attorney-General intervening) [1977] Ch. 41.]

Silkin Q.C., A.-G. in reply. The facts and evidence are relevant only on estoppel and do not touch the issues of ultra vires and the fetter on the prerogative. On the estoppel issue Lakers rely on the existence of the licence and the United States judge's report in March 1974 which led to the United States board recommendation that Lakers be granted a permit. The Crown relies on the evidence which shows that the grant of a licence and a recommendation that a permit be issued would be valueless to Lakers unless and until there was approval on both sides of the Atlantic; and though in February 1975 the Authority confirmed the licence for Skytrain it also said that it would be premature for Skytrain to start for at least a year; it considered that Skytrain's only attraction was its relative cheapness. The key point on estoppel was that the expenditure of money by Lakers was incurred in the full knowledge that the fares issue remained unresolved. The expenditure was a calculated risk; and it is quite wrong to say now that they relied on the representation that the Secretary of State would not withdraw the designation. Any suggestion that the British Government manipulated the withdrawal

of the papers relating to Lakers from the presidential desk is authoritatively denied.

It is not possible to get rid of the prerogative under the Act of 1971. The judge restricted his concept of a fetter on the prerogative to withdrawal of the designation; but it is now suggested that once the licence has been granted the Crown has to designate, which means that, by implication from the grant of certain powers to the Authority, the prerogative in relation to making or implementing treaties and international agreements is fettered. That is a bold submission when the Act is silent about designation. In the sphere of international airways it is impossible to separate domestic from international factors; and the court cannot inquire into the acts or intentions of the Crown under a treaty because it is a matter of international law. Circumstances may arise in which Her Majesty's Government negotiating with another country will put in an early claim for a British airline by making use of the one function which the Crown has, namely, designation. The one thing the court cannot say is "You are not entitled to withdraw the designation": the courts cannot enter into the treaty field, though they may inquire into acts of the executive which are within the control of Parliament: see Blackburn v. Attorney-General [1971] 1 W.L.R. 1037. In the absence of clear words in the Act matters of designation or withdrawal of designation are not cognisable by the courts. The Act of 1971 was passed in a situation in which designation was a well known feature in numerous bilateral agreements. It is not correct that designation is a step taken subsequent to and consequent on a full investigation by the Authority and the grant of a licence; the Authority has frequently issued licences to carriers to operate to overseas points where traffic rights have not yet been negotiated. It is not possible to separate designation from withdrawal of designation, nor to rely on implication in this field. Designation is the classic example of the Crown being able by virtue of the prerogative to influence the position in municipal law which gives certain powers to the Authority. Section 1 (4) of the Act of 1971 declares that the Authority is not to be regarded as the servant or agent of the Crown or as enjoying any status, privilege or immunity of the Crown. The supplemental provisions in section 19 (2) (b) enable the Authority to act on behalf of the Crown in performing such of its other functions as Her Majesty may by Order in Council require. That recognises that unless an Order in Council so provides the Authority is not to enter the field of the prerogative; and no order has been made which vests in the Authority any power to designate or withdraw a designation. Granted that a prerogative power exists under the treaty side by side with the provisions of municipal law, the Crown retains in the international sphere an unfettered power in relation to designation and withdrawal of designation; and that power is no more remarkable than the power, uncontrolled by Parliament, given to the Secretary of State by section 4 to give directions over a very wide field of municipal law.

On vires the Act of 1971 does not require guidance under section 3 (2) to be in any particular form such as a statutory instrument. The dictionary meaning of guidance in section 3 (2) does not help in construing the subsection, though it includes "direction" in the definition of "guidance." It does not matter whether one calls it guidance or direction, for the word

"guidance" is sufficiently wide to fulfil the duty under subsection (2). The test of guidance under section 3 (2) is subjective, so that if an individual complains about the way guidance given by the Secretary of State is operated by the Authority the latter can answer "Our duty is to perform our function in the manner we consider to be in accordance with the guidance"; whereas the test of a "direction" under section 4 is objective for it contains positive provisions; so that once a direction has been given the court can look at it to see whether it has been complied with. If Parliament had intended that guidance should not conflict with any of the criteria, it could have said so simply by inserting two words so that section 3 (2) began "Subject to the preceding and following subsection"; and there could then have been no doubt that the guidance must comply with the criteria; but those words were not put in. The difficult words "conferred on it otherwise than by this subsection" in section 3 (2) as against those in subsection (1) - "conferred on it otherwise than by this section" - must be given effect. For the purposes of this case you substitute in section 3 (1) for "otherwise than by this section" the words "the licensing function" so that section 3 (1) runs "It shall be the duty of the Authority to perform the licensing function in the manner best calculated" etc. so that it is dealing with the duty to perform something which is not part of section 3 in the manner which is part of section 3. If it stood alone it would require the Authority to carry out that duty in the way best calculated to achieve the criteria. But the crucial words in section 3 (2) - "otherwise than by this subsection" - include the licensing functions and all the various functions of the Authority except the one function arising from the duty placed on it by section 3 (1); that is the only function which is not in subsection (2) but is in section 3. So giving effect to all the words in the section, the duty of the Authority to perform its functions in accordance with the statutory criteria in section 3 (1) is a duty which does not embrace the function conferred on it by guidance under subsection (2). It follows that when guidance is given, the duty of the Authority is to perform its functions, including licensing functions, in accordance with the guidance and that duty is not touched by its duty under section 3 (1), so that where the guidance differs from the criteria the guidance predominates.

Section 3 is not a model section; but, in the light of the matters considered in this case and the delicate situations which might properly be the subject of a direction under section 4, guidance approved by Parliament can override the criteria in subsection (1). In an Act which gives the Secretary of State power to give a direction which can disregard all the other provisions of the Act this is not particularly surprising.

December 15. The following judgments were read.

LORD DENNING M.R. Mr. Laker is a man of enterprise. He has an exciting project for travel by air. He wishes to start a new air service across the Atlantic from England to the United States. It is to be quite unlike the conventional air services. It is to be more like a railway service. Passengers are not to reserve their seats in advance. They are to go to

the airport, buy their tickets, and board the aircraft - all in one sequence - just as passengers go to a railway station, buy their tickets and join the train. So Mr. Laker calls his project "Skytrain." He hopes to attract a hitherto untapped source of traffic. He is going to cut out all the extravagances and frills which the established airlines provide. He is going to cut out all the travel agents and their expensive commissions. He is going to charge fares much lower than other carriers. He is not going to fly from Heathrow, but from Stansted: so there are no in-transit facilities. By these measures he suggests that he will not take away traffic from the established airlines, but will create new custom. He will carry passengers who would not otherwise have travelled at all.

In order to get Skytrain into the air, Mr. Laker had, of course, to get permission from the authorities in England and the United States. In England he was completely successful. The Civil Aviation Authority actually granted him a licence for 10 years - from 1973 to 1982 inclusive. In the United States he got a long way. The Civil Aeronautics Board decided to issue him a permit, subject to approval by the President of the United States. In anticipation of everything going through, Mr. Laker bought three jumbo jets, and trained crews and staff to run them. He expended £6 million to £7 million on the project. It looked as if all would go well. But then on July 29, 1975, the Government of the United Kingdom put a stop to the whole thing. The Secretary of State told the House of Commons that the Skytrain service would not be allowed to start. He followed this in February 1976, by a White Paper - Future Civil Aviation Policy (Cmnd. 6400) - in which he said that the licence for Skytrain was to be cancelled.

This conduct of the Secretary of State is challenged by Mr. Laker. He says that the Secretary of State has no right to put an end to Skytrain like this. So Mr. Laker has brought this action in the courts of law. On July 30, 1976, Mocatta J. granted declarations in his favour. The Secretary of State now appeals to this court.

To understand the issues, I must describe the legal background.

Designation

In order to get Skytrain across the Atlantic, Laker Airways had to be a "designated" air carrier. This requirement of "designation" arises out of a treaty between the United Kingdom and the United States of America called the Bermuda Agreement. It was made in 1946 and is still in existence. Under it each government is entitled to "designate" one or more air carriers for a specified route from one country to the other: and the other government is then bound to accept that carrier so long as it comes up to standard. Suppose the United Kingdom Government "designates" an air carrier, such as British Airways, for the route from London to New York. The United States of America is entitled to satisfy itself as to the credentials of the carrier so designated. Once satisfied, it is the duty of the United States of America Government to grant the carrier an operating permit (to fly into and out of the United States of America) "without undue delay." But the treaty does not restrict the United Kingdom to one carrier only. It is entitled to designate another

one - or even two - for the same route, then or later. If each of those "designated" carriers satisfies the requirements, it is the duty of the United States of America authorities to grant it an operational permit "without undue delay." It is open, however, to the United States of America authorities to impose conditions in the permit as to type of aircraft, fares, and so forth. If the carrier fails to fulfil the conditions, the United States of America can revoke the permit.

Those provisions of the Bermuda Agreement rest on international agreement only. The agreement is no part of the municipal law of either country. But it may have repercussions with which the courts of law have to deal. More of this later.

Licence

In order to get Skytrain into the air, Laker Airways had also to get a licence from the United Kingdom authorities. Flights into and out of the United Kingdom are regulated under the Civil Aviation Act 1971. This sets up a licensing system. Under it any aircraft beginning or ending its flight in the United Kingdom must have a licence to do so. The licensing body is the Civil Aviation Authority under the chairmanship of Lord Boyd-Carpenter. It is entrusted with the task of granting licences, revoking them, suspending them, or varying them. In doing so, it is under a duty to act judicially. It receives applications and objections. It holds hearings, and takes evidence. It comes to its determination. From its decision a party aggrieved can appeal to the Secretary of State, and he can direct the Authority to reverse or vary the decision.

The four objectives

In carrying out its functions (including the granting of licences) the Authority has to do its best to satisfy four general objectives. They are set out in section 3 (1) of the Act. They lie at the heart of this case. I will summarise them: (a) to secure that the British airlines have their fair share of the market; (b) to secure that the British Airways Board has not a monopoly, but that at least one major British airline has the opportunity to compete with it; (c) to encourage the civil air transport industry of the United Kingdom so as to enable it to help the balance of payments; and (d) to further the interests of users. If the Civil Aviation Authority grant or refuse a licence and there is an appeal to the Secretary of State, he, too, must have regard to those objectives: see section 24 (6).

Guidance

Those objectives are expressed in very general terms. In putting them into practice, Parliament thought that some guidance would be desirable for the Authority. So it provided for it in section 3 (2) and (3). I must set them out. Section 3 (2):

"Subject to the following subsection, the Secretary of State may from time to time, after consultation with the Authority, give guidance to the Authority in writing with respect to the performance of the functions conferred on it ...; and it shall be the duty of the Authority

to perform those functions in such a manner as it considers is in accordance with the guidance for the time being given to it ..."

Section 3 (3):

"No guidance shall be given to the Authority ... unless a draft of the document containing it has been approved by a resolution of each House of Parliament."

(Note: In summarising the statutory provisions, I have missed out the words in section 3 (1) "otherwise than by this section" and in section 3 (2) "otherwise than by this subsection." They are the words of a purist intent upon literal accuracy. But to my mind they contribute nothing but confusion. The best way of understanding the provisions is to omit those words altogether.)

One of the matters much discussed before us is the scope of the "guidance" authorised by those provisions. In my opinion the Secretary of State can give guidance by way of explanation or amplification of, or supplement to, the general objectives: but not so as to reverse or contradict them.

Directions

Section 4 of the statute confers exceptional powers on the Secretary of State. It enables him to override the statutory requirements as to licences and also to by-pass the general objectives. But only in carefully defined circumstances. Section 4 (1) confers large powers in time of war or great national emergency. Section 4 (3) confers large powers in respect of international relations. For instance, if the Secretary of State thought that one of our airlines was acting in such a way as to affect our relations with another country, he could direct the Authority to revoke its licence. Or if diplomatic pressure was brought for the purpose, he could direct the revocation of the licence. And he could do this without any inquiry or hearing at all. The Secretary of State would have to consult the Authority before issuing a direction, but that is all. Once he gave a direction, it could not be challenged in the courts. The only way would be by a question in the House.

Directions versus guidance

The word "direction" in section 4 is in stark contrast with the word "guidance" in section 3. It is used again in section 24 (2) and (6) (b) and section 28 (2). It denotes an order or command which must be obeyed, even though it may be contrary to the general objectives and provisions of the statute. But the word "guidance" in section 3 does not denote an order or command. It cannot be used so as to reverse or contradict the general objectives or provisions of the statute. It can only be used so as to explain, amplify or supplement them. So long as the "guidance" given by the Secretary of State keeps within the due bounds of guidance, the Authority is under a duty to follow his guidance. Even so, the Authority is allowed some degree of flexibility. It is to perform its function "in such a manner as it considers is in accordance with the

guidance." So, while it is obliged to follow the guidance, the manner of doing so is for the Authority itself. But if the Secretary of State goes beyond the bounds of "guidance," he exceeds his powers: and the Authority is under no obligation to obey him.

The events up to July 1975

Those preliminaries enable me to come to the facts of the case. On August 5, 1971, Parliament passed the Civil Aviation Act 1971. In February 1972, the Secretary of State issued his first policy "guidance" under it. It is Civil Aviation Policy Guidance (1972) (Cmnd. 4899). It Sets out the four general objectives for the air transport industry, and then states quite correctly that it is for the Secretary of State in giving guidance "to amplify and supplement these four objectives." Such amplification and supplement to be expressed "in general terms," leaving "the Authority to work out the detail and apply it in particular cases." That statement is quite unexceptionable. It does not suggest that the guidance can reverse or contradict the four objectives.

The Civil Aviation Authority began their work on April 1, 1972. One of their early tasks was to consider an application by Laker Airways to start the Skytrain service. They held a hearing on three days in April 1972. Lord Boyd-Carpenter himself presided. They heard objections from British Airways and British Caledonian. They took evidence. They heard argument. After consideration they gave a reasoned decision which shows that they had the general objectives well in mind. They granted the application. On October 18, 1972, they issued a licence to Laker Airways for the route Stansted to New York. It was for 10 years, starting on January 1, 1973, and expiring on December 31, 1982.

The British Airways Board did not appeal, but British Caledonian did. They appealed to the Secretary of State; but their appeal was dismissed. On December 22, 1972, the Secretary of State upheld the licence.

Everything was now clear for the "designation" of Laker Airways as a designated carrier under the Bermuda Agreement. On February 20, 1973, our Ambassador in Washington sent this message to the United States Secretary of State:

"Her Britannic Majesty's Ambassador hereby designates Laker Airways Ltd. for operations on United Kingdom Route 2 ... The purpose of the designation is to enable Laker Airways Ltd. to operate air services between London (Stansted) and New York and vice versa ... Her Britannic Majesty's Ambassador has the honour to request that processes associated with this designation be expedited to the maximum degree possible."

Laker Airways then made application to the United States authorities for a permit. This was followed by an inquiry by the Administrative Law Judge Greeg M. Murphy. He held hearings at which all the big airlines were represented. On March 8, 1974, he made a long report, in which he recommended to the Civil Aeronautics Board of the United States that "it is in the public interest to issue a foreign air carrier permit to Laker Airways Ltd." The Civil Aeronautics Board accepted this recommendation. They ordered that a permit be issued to Laker Airways Ltd., but said that

this was not to become effective until it was approved by the President of the United States. So the board prepared the permit, completed it in due form, and sent it to the White House for the approval of the President. There it stayed. The United Kingdom authorities pressed hard for it to be signed, but somehow it did not get done.

Meanwhile, in England, the British Airways Board tried again to stop Skytrain. They applied to revoke the licence. Their application was made on December 23, 1974. They said that there had been a material change in circumstances since the licence was granted in 1972. The volume of air traffic was falling instead of increasing. The costs, especially for fuel, had risen greatly, so the existing operators were suffering substantial losses. They submitted that the need for low fare traffic was clearly being adequately met.

In January 1975 the Civil Aviation Authority sat to hear this application to revoke. It was again presided over by the chairman, Lord Boyd-Carpenter. They heard witnesses. They received representatives from interested parties On February 5, 1975, they refused the application to revoke. They gave a well reasoned decision in which they again showed that they had the general objectives well in mind. They pointed out that Laker Airways Ltd. had already expended some £7 million on the strength of the Authority's decisions, and they said:

"It would be wrong to render nugatory Laker Airways' expenditure so far of up to £7 million by going back on these decisions without the most compelling reasons ... We are conscious, also, that the only reason why Skytrain services have not already been in operation for the past two years is that the United States authorities have engaged in unconscionable procrastination. Having exhausted long since the procedural opportunities for inaction that the Civil Aeronautics Board has at its disposal, the United States authorities have sought final refuse in silence ... In sum, notwithstanding the weighty and well argued case advanced by British Airways, we conclude that it would be wrong to revoke the licence, and we decide accordingly ... We regard the 'Skytrain' experiment as one to be launched in propitious circumstances when the operator and the public can have confidence that the experiment will prove successful."

There was no appeal from that decision of the Authority. British Airways seem to have accepted it at that stage. The position, therefore, in the first six months of 1975 was that Laker Airways were in possession of a good and effective licence for Skytrain from the United Kingdom authorities for 10 years. They had also obtained the necessary permit from the United States of America authorities, subject only to the approval of the President. It was on his desk for signature. According to the terms of the Bermuda Agreement, he should have signed it "without undue delay." For some reason or other he had not signed it. But Laker Airways Ltd. were not without hope that he might sign it some day. Even if it was at the bottom of the pile, it might get to the top some time. Laker Airways were prepared to wait. After all, they had spent £7 million on Skytrain and did not want it wasted.

The complete reversal in July 1975

On July 29, 1975, the Secretary of State made an announcement in the House of Commons on future civil aviation policy. He said that it was the result of a review by his department. It was a complete reversal of the previous policy. He declared:

"in future it should be our general policy not to permit competition between United Kingdom airlines on long-haul scheduled services and therefore not to license more than one United Kingdom airline on any given long-haul route."

He added:

"I have ... looked carefully at the Skytrain service ... it would divert traffic away from the existing services and in particular damage British Airways. I have accordingly told Laker Airways that in these circumstances the Skytrain service cannot be allowed to start."

So we have this remarkable position. British Airways had failed to get the licence of Laker Airways revoked by the duly constituted authority - the Civil Aviation Authority. Six months later the licence was rendered useless by the minister's statement in the House of Commons. The news of the minister's statement soon reached Washington. The Civil Aeronautics Board there learned that the British Government had decided not to permit Laker Airways to perform its proposed trans-Atlantic service. The board thereupon acted. They got their permit back from the White House - before it had been signed by the President. In a letter they described what they did:

"The board has been advised that the British Government has decided not to permit Laker Airways to perform its proposed trans-Atlantic service. Based upon such circumstances, the board requested the White House to return the boards' decision in the Laker case since it was apparent that the above-noted circumstance would have a critical bearing upon the board's action with respect to Laker Airways' application. In response to the board's request, the White House has returned the board's decision."

To come back to England. The Secretary of State considered how to effect here his complete reversal of policy. He considered whether an amendment to the Civil Aviation Act 1971 would be required. He decided that it was not necessary. But that it could be done by issuing a new policy "guidance" for the Civil Aviation Authority.

The new policy guidance

So in February 1976 the Secretary of State issued a Command Paper (No. 6400) on Future Civil Aviation Policy. It was in two parts. The first part stated the new policy. It contained a special section dealing with Skytrain, and said (para. 15):

"The Secretary of State has accordingly decided that Laker Airways' designation as a scheduled service operator under the United Kingdom/

United States Air Services Agreement should be cancelled. The Skytrain licence will be dealt with in accordance with paragraph 7 of the policy guidance."

The second part stated the new policy guidance. In paragraph 7 it said:

"In the case of long-haul scheduled services ... the Authority should not ... license more than one British airline to serve the same route. ... The Authority should review existing licences and exemptions in the light of this paragraph and take appropriate action. ..."

In paragraph 8 there was a qualification saying that:

"Nothing in paragraph 7 should, however, prevent the licensing of: ... (b) ... another British airline to provide a scheduled service within British Airways' sphere of interest ... provided British Airways has given its consent; ..."

In paragraph 12 it said that those provisions "should remain substantially unchanged for a considerable period of years."

This new policy guidance had a direct impact on Laker Airways. They were not to be allowed to operate the Skytrain service because it was feared that it would divert passengers from British Airways. So the Authority was to revoke the licence it had granted for Skytrain; or, at any rate, not allow it to start without the consent of British Airways. And the minister would cancel the designation of Laker. It was just as if the minister had called out: "Stop. Skytrain shall not take off from England. Its licence should be revoked. And I will see that it does not land in America. I will cancel the designation."

The minister could not, however, do it entirely on his own. He had to get the approval of both Houses of Parliament before he could call upon the Civil Aviation Authority to follow his new policy guidance. He got their approval. The Commons on February 26, 1976. The Lords on March 15, 1976. (It should be noted, however, that the Lords were not very whole-hearted about giving their approval. They coupled it with a request which showed that they did not much like the policy guidance so far as Skytrain was concerned. They agreed, by a majority of 83 to 68, to a motion calling upon Her Majesty's Government "to withdraw the instruction" to the Civil Aviation Authority to revoke the Laker Airways Skytrain licence. The minister took careful note of this view, but, nevertheless, decided to keep on his course.)

But, mark you, this approval, even by both Houses, was not the equivalent of an Act of Parliament. It could not override the law of the land: see F. Hoffmann-La Roche & Co. A.G. v. Secretary of State for Trade and Industry [1975] A.C. 295, 365 by Lord Diplock; and at p. 372 by Lord Cross of Chelsea. It was to the law that Mr. Laker appealed. On the very next day following the approval of both Houses, Laker Airways issued a writ claiming that the Secretary of State was acting unlawfully. Mocatta J. heard the case with expedition. On July 30, 1976, he delivered judgment. He found that the Secretary of State had exceeded the powers granted to him by the statute, and was not entitled to withdraw the designation of Laker Airways. The Secretary of State appeals to this court. There are three issues of law.

Ultra vires

The first is whether the Secretary of State was acting beyond his lawful powers when he gave the new policy guidance to the Civil Aviation Authority.

In determining this point. I have found much help from the well reasoned decisions of the Civil Aviation Authority, not only in 1972, when they granted the licence to Laker Airways, but also in 1975 when they refused to revoke it. It is plain that they applied most conscientiously and sensibly the four general objectives set out in section 3 (1) (a), (b), (c) and (d) of the statute, as amplified and supplemented by the 1972 policy guidance. The new policy guidance of 1976 cuts right across those statutory objectives. It lays down a new policy altogether. Whereas the statutory objectives made it clear that the British Airways Board was not to have a monopoly, but that at least one other British airline should have an opportunity to participate, the new policy guidance says that the British Airways Board is to have a monopoly. No competition is to be allowed. And no other British airline is to be licensed unless British Airways had given its consent. This guidance was not a mere temporary measure. It was to last for a considerable period of years.

Those provisions disclose so complete a reversal of policy that to my mind the White Paper cannot be regarded as giving "guidance" at all. In marching terms it does not say "right incline" or "left incline." It says "right about turn." That is not guidance, but the reverse of it.

There is no doubt that the Secretary of State acted with the best of motives in formulating this new policy - and it may well have been the right policy - but I am afraid that he went about it in the wrong way. Seeing that the old policy had been laid down in an Act of Parliament, then, in order to reverse it, he should have introduced an amending Bill and got Parliament to sanction it. He was advised, apparently, that it was not necessary, and that it could be done by "guidance." That, I think, was a mistake. And Laker Airways are entitled to complain of it, at any rate in its impact on them. It was in this respect ultra vires and the judge was right so to declare.

Prerogative

The Attorney-General contended that the power of the Secretary of State "to withdraw" the designation was a prerogative power which could not be examined in the courts. It was a power arising under a treaty which, he said, was outside the cognizance of the courts. The Attorney-General recognised that by withdrawing the designation, the Secretary of State would put a stop to Skytrain, but he said that he could do it all the same. No matter that Laker Airways had expended £6 million to £7 million on the faith of the designation, the Secretary of State could withdraw it without paying a penny compensation.

The Attorney-General relied on Rustomjee v. The Queen (1876) 2 Q.B.D. 69 and Civilian War Claimants Association Ltd. v. The King [1932] A.C. 14, but those were cases where a subject was seeking to enforce obligations arising under a treaty. To my mind they have no application to a discretionary power arising under a treaty, to which I now turn.

Much of the modern thinking on the prerogative power of the executive stems from John Locke's treatise on the True End of Civil Government, which I have read again with much profit, especially chapter 14, "Of Prerogative" (1764 ed.), pp. 239-348. In was the source from which Sir William Blackstone drew in his Commentaries, vol. I. 8th ed. (1778), p. 252; and on which Viscount Radcliffe based his opinion in Burmah Oil Co. Ltd. v. Lord Advocate [1965] A.C. 75, 117-118. The prerogative is a discretionary power exercisable by the executive government for the public good, in certain spheres of governmental activity for which the law has made no provision, such as the war prerogative (of requisitioning property for the defence of the realm), or the treaty prerogative (of making treaties with foreign powers). The law does not interfere with the proper exercise of the discretion by the executive in those situations: but it can set limits by defining the bounds of the activity: and it can intervene if the discretion is exercised improperly or mistakenly. That is a fundamental principle of our constitution. It derives from two of the most respected of our authorities. In 1611 when the King, as the executive government, sought to govern by making proclamations, Sir Edward Coke declared that: "the King hath no prerogative, but that which the law of the land allows him": see the Proclamations Case (1611) 12 Co.Rep. 74, 76. In 1765 Sir William Blackstone added his authority, Commentaries, vol. I, p. 252:

"For prerogative consisting (as Mr. Locke has well defined it) in the discretionary power of acting for the public good, where the positive laws are silent, if that discretionary power be abused to the public detriment, such prerogative is exerted in an unconstitutional manner."

Quite recently the House of Lords set a limit to the war prerogative when it declared that, even in time of war, the property of a British subject cannot be requisitioned or demolished without making compensation to the owner of it: see the Burmah Oil case [1965] A.C. 75. It has also circumscribed the treaty prerogative by holding that it cannot be used to violate the legal rights of a British subject, except on being liable for any damage he suffered: see Nissan v. Attorney-General [1970] A.C. 179, 211, by Lord Reid.

Seeing that the prerogative is a discretionary power to be exercised for the public good, it follows that its exercise can be examined by the courts just as any other discretionary power which is vested in the executive. At several times in our history, the executive have claimed that a discretion given by the prerogative is unfettered: just as they have claimed that a discretion given by statute or by regulation is unfettered. On some occasions the judges have upheld these claims of the executive - notably in the Ship Money case, Rex v. Hampden (1637) 3 State Tr. 826 and in one or two cases during the Second World War, and soon after it - but the judges have not done so of late. The two outstanding cases are Padfield v. Minister of Agriculture, Fisheries and Food [1968] A.C. 997, and Secretary of State for Education and Science v. Tameside Metropolitan Borough Council [1976] 3 W.L.R. 641, where the House of Lords have shown that when discretionary powers are entrusted to the executive