part 3 
Public bodies and compensation
3.1	Public bodies become liable to pay compensation to citizens in a multiplicity of circumstances. Even before the advent of judicial review in its modern form, those employed by the executive were liable to pay damages for intentional and unjustified interference with the person or property of the citizen. Indeed such actions were in early days the principal, and sometimes the only, weapon for testing the validity of executive measures and for bringing the executive to account. They retain contemporary significance.
3.2	In considering private law liability, we will primarily cover liability in negligence. It is in relation to negligence that the courts have constructed special rules for public authority liability. However, public bodies can be liable to pay damages under a number of torts; in principle they can be liable for the same range of torts as private individuals. For example, the police might be liable for the torts of battery or false imprisonment; public bodies which own land could be liable for nuisance; any type of public body may potentially be liable for defamation when it makes statements to the media. The torts of breach of statutory duty and misfeasance in public office, which particularly apply to public bodies, are discussed at paragraphs 3.64 to 3.67 below. Different constituent elements must be satisfied for different torts; in particular, the liability of a public body will depend on the fault element required for the tort in question. 
Example 1
3.3	A prison governor releases a prisoner on the day that he believes is by law the due date for release. The governor is wrong because the due date has already passed. The governor is liable to pay the prisoner substantial damages for false imprisonment.
3.4	It is notable in this example that the governor may be blameless in any moral sense. In the actual case the governor relied on a binding judicial decision (later shown to be erroneous) for calculating the due date for release. The governor could not have acted otherwise.
3.5	In other circumstances, however, liability for deprivation of liberty may depend on a showing of fault. For example, a police officer may arrest someone without a warrant if the officer has reasonable grounds for suspecting that the person is about to commit an offence. If there are no such reasonable grounds, there will be liability. Nonetheless exercise of care may not always confer immunity. For example, it is uncertain whether a police officer may deprive a person of liberty in reliance upon a by-law that is invalid, even if the officer has no reason to doubt its validity. The citizen, invoking the rule of law (as now expressed in Article 5.1(b) of the European Convention on Human Rights), may claim that no one should be arrested for an “offence” that does not exist. The police officer, invoking legal certainty, may claim that the arrest is justified if the officer has no reason to believe that the “offence” does not exist.
3.6	However, the liability of public bodies does not require an unjustified intentional infliction of injury to person or property. As a general rule a public authority which without exercising reasonable care directly inflicts physical damage upon a person or upon the property of a person will be liable to pay damages by way of compensation. The really difficult cases in this area of the law are, first, those where the public authority has not caused direct physical damage to the person or property of the claimant, either because the damage was “economic” loss or because the immediate cause of the damage was an act of a third party or a natural phenomenon not brought about by the public authority. The second type of difficult case, illustrated in Example 11 below, is where the immediate cause of the loss is an unlawful administrative measure but the facts do not constitute one of the traditional torts such as false imprisonment. The following examples give an idea of the range of circumstances in which these difficult cases may arise.
Example 2
3.7	The Home Office establishes a Borstal to operate under “open” conditions. Owing to the negligence of the guards several offenders escape, and in the course of the escape damage private property. The owners recover substantial damages, even though they have insured the property against such loss, and the Home Office has arranged voluntarily to pay compensation to those suffering loss in such circumstances that are not insured.
Example 3
3.8	A local authority negligently decides that a child should be placed in care. The child while mistakenly placed in care suffers physical abuse and psychiatric injury. The child may obtain compensation from the local authority for the injuries that the child has suffered. The child’s parents whom the local authority carelessly thought were abusing the child allege that they suffered lasting psychiatric injury. They have no claim for compensation.
Example 4
3.9	A householder, seeing that the house has caught fire, rings 999 for a fire engine. The fire service takes the call but owing to the incompetent driving of a fire officer fails to arrive before the householder has sustained substantial property damage. The householder has no claim for compensation against the fire service.
Example 5
3.10	A householder feeling seriously unwell rings 999 for an ambulance. The ambulance service takes the call but owing to the incompetent driving of an ambulance officer fails to arrive before the householder’s condition has been made worse than would have been the case if the ambulance had arrived on time. The householder has a claim for compensation against the ambulance service.
Example 6
3.11	An authority responsible for the maintenance of the highway does not take steps to secure the removal of an obstacle, which although not on the highway, impairs road visibility. A motorist has an accident and sustains personal injuries, partly because visibility was obscured by the obstacle. The motorist has no claim for compensation against the highway authority, even if the authority had no good reason for not exercising its power to secure the removal of the obstacle and the authority’s inaction could fairly be described as defying logic and reason (that is, “irrational”).
Example 7
3.12	An authority responsible for certifying the seaworthiness of merchant ships negligently certifies that a certain vessel is seaworthy. The ship sinks with the loss of its cargo. A cargo owner has no claim for compensation against the authority.
Example 8
3.13	An authority responsible for certifying that privately owned passenger-carrying aeroplanes are fit to fly negligently certifies that a plane is airworthy. The plane crashes and passengers suffer personal injury. The passengers have a claim for compensation against the authority.
Example 9
3.14	A serial killer is at large. The police negligently fail to arrest the killer before the killer claims another victim. The victim (or the dependants of the victim) has no claim for compensation.
Example 10
3.15	A bank regulator negligently but in good faith permits a bank to continue to operate when careful supervision would require the cessation of activities. Depositors whose funds would have been repaid if the bank’s activities had been terminated in good time have no claim for compensation against the bank regulator.
Example 11
3.16	A fishing authority unlawfully denies a fishing licence. The owner of the fishing vessel is wrongfully prohibited from fishing and suffers financial loss. If EU law governs the licensing regime, the owner may have a claim for compensation if the authority is seriously at fault. If not, he has no claim unless the conduct of the authority amounts to misfeasance in public office.
3.17	These examples must, of course, be approached with caution because the complete statutory background has not been stated in the brief summary and the facts have been reduced to a minimum. Nonetheless the examples show the diversity of circumstances in which difficult questions of state liability arise. They also show the complexity of the subject. Save for Example 10, the legislature did not expressly provide that compensation should, or should not, be payable to the claimants. The results were determined by the courts. Very distinguished judges at the highest level have disagreed about the results. In Example 6 Lord Nicholls (with whom Lord Slynn agreed) powerfully dissented from the majority. In Example 3 Lord Bingham in a closely reasoned speech dissented on the issue of liability towards the parents. Someone unfamiliar with the field of state liability might be forgiven for not immediately identifying what coherent and consistent set of legal principles could account for the outcomes described in the examples. Even those reasonably well versed in the subject do not seem to find identification straightforward. Most would perhaps recognise that Examples 10 and 11 concern pure “economic” loss where recovery of compensation for negligent conduct is available as a general rule only under special conditions.
The Position of Public Bodies and the Exercise of Public Functions
3.18	It cannot be said that the courts have been insensitive to the position of public bodies which find themselves exposed to claims for compensation. There appears to be a measure of agreement that, despite Dicey’s arguments, public bodies should not be treated in precisely the same way as private citizens. The authors of a leading textbook identify four reasons for this difference in treatment. First, public finance is not unlimited and the payment of compensation for loss shifts resources from other applications. Second, public bodies do not disappear or become insolvent, which makes them an attractive target for compensation claims. Third, public bodies are not untypically required in their decision-making to balance complex and sometimes competing considerations, and the courts may be loath to have to “second guess” their appraisal. Fourth, the imposition of liability may lead public bodies to change their priorities and become more risk averse, contrary to the public interest.
3.19	It might be argued that public bodies should be treated differently only in so far as they are engaged in “governmental” activities. However the line between “governmental” and “private” activities is not easy to draw. The state may supply services or regulate the supply of goods and services where, for example, what is supplied is in whole or part a public good, or competition is inadequate, or there is a significant information failure, or considerations of equitable distribution of income or wealth dictate. Sometimes the state is the exclusive provider and exclusivity is unlikely to be surrendered (for example, national defence; police; emergency services), or the state is the only regulator. The description of the activity as “governmental” is then relatively easy to justify. It may be that the concept of “governmental” should be confined to those functions uniquely carried out by the state where there is no private analogue. If the private sector supplies similar services (for example, healthcare, education, housing) the public sector may nonetheless have to discharge its functions under different conditions from private enterprise. Even activities perceived as typically “private”, such as the management of land or renting property, may well take on a public interest dimension. However, if the concept of “governmental” were to extend beyond functions uniquely carried on by the state, there would probably be a considerable grey area of dispute.
3.20	It is nonetheless indisputable that, in determining the liability of public bodies in new and controversial areas, the courts are usually assisted if they can find what they perceive to be a strong private analogy. So if the claim is that an educational psychologist employed by a local authority owes a duty of care to a child in diagnosing the child’s special educational needs, the analogy with comparable private professionals is likely to have powerful persuasive force in establishing the duty. However, as the Examples indicate, the most difficult cases of potential state liability concern activities where there is no, or no strong, private analogy.
3.21	The converse situation is where the person from whom compensation is claimed is not a public authority but is arguably carrying out “public” functions. This situation would typically arise where the public authority, for reasons of efficiency, economy and competition, has “contracted out” to the private sector the delivery of services to the public. Contracting out poses challenges to public law, but the correct solutions are not easy to reach, as is shown by the cases where the courts have had to decide whether a private enterprise, delivering services under arrangements with a public authority, is amenable to judicial review or is carrying out  “public functions” for the  purposes of  the Human Rights Act 1998. 

The phenomenon of contracting out seems to be permanent, and the courts are likely, therefore, to be increasingly confronted with private enterprises urging that any restrictions of liability discernible in actions against public bodies should be extended to them in so far as the claim relates to execution of a “public” function.
The Competing Principles
3.22	The underlying tension in the difficult cases of public sector liability was stated by Lord Steyn as follows: 
On the one hand the courts must not contribute to the creation of a society bent on litigation, which is premised on the illusion that for every misfortune there is a remedy. On the other hand, there are cases where the courts must recognise on principled grounds the compelling demands of corrective justice or what has been called the rule of public policy which has first claim on the loyalty of the law: that wrongs should be remedied….Sometimes cases may not obviously fall in one category or the other. Truly difficult cases arise. 
Apart from the need to achieve “corrective justice”, as described by Lord Steyn, it is sometimes argued that an important justification for imposing liability to pay compensation is to deter carelessness, to raise the quality of goods and services, and to make economic operators bear the full costs of their activities
3.23	This raises the very large question of whether tort law in general is effective as an instrument of deterrence, and whether, in particular, the imposition of liability upon public bodies results in efficient risk taking.
How the Difficult Cases are decided
3.24	The willingness of the courts to find public bodies liable to pay compensation has swung to and fro from time to time. It would appear that, perhaps with the advent of the Human Rights Act 1998, the courts have returned to a more expansionist phase. A number of specific mechanisms have been used by the courts in the past to control the extent to which public bodies might be found liable to pay compensation.  These control mechanisms are  briefly described  below. It should

be stressed at the outset that, save for “justiciability” and “ultra vires” (see below), the control mechanisms are of general application in the law of torts; but the focus in the analysis below is on their particular use where the liability of a public authority for negligence is in issue.
Justiciability
3.25	First, the courts have stated that some issues are “non-justiciable” and have struck out claims to compensation against public bodies on that basis. The courts have been concerned not to trespass on areas of public administration where they believe that they lack expertise, or where they believe that under democratic principles the decision should be left to another institution of the state. Example 10 above illustrates the circumstances where the courts would traditionally decline jurisdiction to hear an action for damages, and the language of non-justiciability can be found in the cases noted under that Example. To that extent the rationale is the same as that which led the courts to show in judicial review proceedings reticence when confronted with issues in some sensitive areas of public administration. 
3.26	However, since CCSU the courts in such proceedings have penetrated more extensively and more deeply into areas of public administration which in the past would have been considered judicial “no go” areas. The very concept of judicial deference to the executive has been questioned at the highest level and the scope of the discretionary area of judgement is uncertain. Recent cases dramatically show that even in matters of national security – the traditional “no go” area par excellence – the courts may feel that it is appropriate to intervene. Blanket “no go” areas have ceased to exist as far as judicial review is concerned: whether or not an application is “non-justiciable” will depend on the precise nature of the impugned decision and the precise ground of alleged illegality relied upon by the claimant.
3.27	However, in the context of actions for compensation, as distinct from judicial review, the concept of “non-justiciable” seems to be employed in a potentially broader but uncertain manner.
3.28	It was once thought that questions of justiciability arose if the public authority was exercising a “discretion”, particularly on a “policy” rather than an “operational” matter. However, it was pointed out that the exercise of discretion lies at the heart of government and that the policy/operational distinction was “often elusive….Practically every decision about the provision of such benefits, no matter how trivial it may seem,  affects the budget of the  public authority in either 

timing or amount”. In Barrett and Phelps the House of Lords, departing from X held that the distinction should not automatically determine justiciability. However, it is now somewhat unclear as to how the test of “non-justiciability” should be applied in actions for damages.
3.29	In proceedings for judicial review the concept of the non-justiciable has a clear rationale and reasonably predictable application. Should the concept be applied in the same way if the claim is for compensation? First, if it were, it would meet the criticism that a broadly applicable test of justiciability, aimed at weeding out cases where, for example, difficult issues of resource allocation are at stake, may potentially rule out practically all claims. Secondly, the real concern of the courts seems to focus on a relatively small group of claims where, if closely analysed, the basis of the action for damages constitutes an indirect attack on the validity of the exercise of discretionary powers in a heavily policy-laden area; and where the court believes that such an attack, if it were being assessed on an application for judicial review by reference to public law principles, would be hopeless. A different approach to such cases would be if the court, instead of labelling them non-justiciable, was able to strike out actions for damages where the claim was an indirect attack on the validity of a public law decision in circumstances where, if the attack had been made on an application for judicial review, permission would have been denied.
3.30	An alternative approach would be to stipulate an explicit rule conferring immunity upon public bodies in respect of any discretionary decisions taken in the exercise of a governmental function and positively based upon considerations of, for example, social, political and economic policy. The rationale for an immunity of this nature would not be confined to “non-justiciability” in the sense recognised by public law and applied in proceedings for judicial review. It is not that the judiciary necessarily lacks expertise or institutional competence to evaluate, for example, whether social services have been careless in the formulation of a policy regarding the provision of information to prospective adopting parents. If such an issue arose in proceedings for judicial review, the Administrative Court would have no hesitation in assuming jurisdiction to examine the legal issues. The putative immunity would  be based on a  broader legal policy, namely, that certain 

discretionary decisions by public bodies should not be the subject of actions for negligence because of the implications regarding cost, resource allocation and efficient decision making. There is no doubt, however, that such an immunity would both pose problems of definition, as the debate described above over justiciability has shown, and would be controversial. Nonetheless it may be that this important issue, which is central to the question of public authority liability, should be faced squarely and considered in greater detail.
The ultra vires test
3.31	Secondly, and very closely related to the issue of justiciability, it was until quite recently thought that, at least in respect of “policy” decisions, liability to pay compensation required a finding that the action of the public authority was “ultra vires” in the sense of “Wednesbury” unreasonable, that is, so unreasonable that no reasonable decision maker could have made it. The distinction between the formulation of “policy” and “operational” activities has been seriously questioned, and a showing of “ultra vires” no longer appears necessary, at least in those cases which do not raise questions of justiciability.
3.32	The ultra vires test has been criticised as too restrictive and difficult to delimit. However, the ultra vires condition is not logically restricted to “Wednesbury” unreasonableness in a way that this first criticism seems to assume. The ultra vires test was designed to ensure that a public authority was not made liable for negligence when it had taken a discretionary decision within the lawful limits of its powers. Consistent with that rationale it would be open to a claimant challenging a discretionary decision in a negligence action for damages to satisfy the ultra vires threshold condition by showing, on any legitimate public law ground, that the decision was not one that the public authority could lawfully have taken.
3.33	The second criticism of the ultra vires test explores cases where such a public law hurdle would be plainly inappropriate. For example, no one would sensibly ask whether a police officer driving carelessly was acting “ultra vires”; nor even whether an educational psychologist negligently misdiagnosing a child’s special educational needs was taking an “ultra vires” decision.
3.34	This criticism has considerable force. However, there would appear to be cases where a finding of public law illegality (not necessarily confined to “Wednesbury” unreasonableness) would appear essential to found a claim for damages. For example, reverting to Example 2, let it be assumed that the claimants’ complaint had been that the Home Office was negligent in establishing an open institution at all, or in designing the safeguards for such a regime. It would seem that no such claim could  succeed unless the impugned decisions were flawed in a public 

law sense (because they were outside the relevant statutory powers, were “Wednesbury” unreasonable or otherwise infringed substantive principles of administrative law) and the Home Office was precluded from acting as it did. That of course would still leave open the question of in what circumstances those suffering loss by reason of the unlawful policy choice of the administration should be entitled to compensation. However, to accept in such a case that the decision to establish an open institution, or in designing the relevant safeguards for such an institution, was a lawful policy choice by the public authority but then to hold the authority liable for negligence in making such a lawful choice would appear a contradiction in terms. The reason for the contradiction is that in such a case all the factors relevant to a finding of negligence have already been taken into account in the assessment of legality. Therefore, notwithstanding the difficulties of delimitation, there appear to be cases where the issue of public law legality cannot be avoided.
Other Control Mechanisms
3.35	Control mechanisms may be seen most strongly where the complaint is that the public authority has failed carelessly to prevent a third party, or some natural cause, from injuring the claimant’s person, property or economic interests. The reason for this is obvious. In these cases the authority may be at a long distance from the immediate cause of the claimant’s injury, whether the cause be the intentional or negligent conduct of another actor or the occurrence of some natural event. Concern is most acute when it is very serious wrongdoing by a third party that has led to the loss, especially if the claimant is insured and the real claimant is an insurer relying upon its right of subrogation. Under English law the principle of joint and several liability means that the public authority is liable for the whole of the loss, with a right of contribution against any joint wrongdoer (if he can be found and is solvent), although its moral responsibility for the damage may seem far less. The well-established rule of subrogation ensures that the beneficiary is an insurance company that has received premiums for assuming the very risk that has materialised. It is in this type of case that recovery of compensation against the public authority can be perceived as promoting a compensation culture and as weakening a common law tradition of robust self-reliance.
3.36	Example 2 above shows that the public authority may nonetheless be found liable to pay compensation in such circumstances. In that case (unlike some of the other Examples) the public authority had created the risk by establishing the open institution, and the risk was arguably of an exceptionally high nature.
Omissions
3.37	In many instances of this type of case liability will be precluded by the “omissions” rule, that is, a public authority may not as a general rule be made liable for failing negligently to exercise a discretionary power. This is so, even if a lawful exercise of the power would have conferred a benefit on the claimant or would have protected the claimant against loss (see, in particular, Example 6 above).
3.38	This rule, which reflects a long common law tradition, has not escaped criticism. First, it is not always easy to distinguish affirmative action from a failure to act. It has been observed that there are many situations in which it is impossible to draw any logical line. Even in Example 6 the conduct of the highway authority, taking account of its statutory responsibilities, could perhaps be described in affirmative terms as careless management of the highway, just as a driver’s failure to apply the car brakes to avoid a child on the road could be described affirmatively as negligent driving. In what is generally seen as the leading private law case on “omissions” Lord Mackay, who gave one of the two principal speeches, avoided relying on the distinction between acts and omissions. In a number of cases concerning public authority liability the courts have not relied on the distinction (see Example 9 above where liability was denied without any reference to the omission rule).
3.39	Secondly, the application of the rule produces fine distinctions that do not seem to reflect considerations of policy. For instance, if a rescue service instructs a volunteer to cease a rescue attempt, this is an affirmative act and the service is liable, but if it instructs a rescuer to search in the wrong place, this is an omission and there is no liability. Furthermore, the grounds for excluding liability for omissions in private law do not seem so obviously applicable in the public law context. This appears particularly to be the case where the public authority has no good reason for not exercising the statutory power and under principles of public law would be treated as misusing its discretion if it did not exercise the power. Thirdly, it would appear that in many cases an omission rule is in any event unnecessary to preclude the liability of the public authority. For example, in Stovin (see Example 6) the highway authority did not directly cause physical damage to the claimant and the authority did not know, and had no reason to know, that the particular claimant was at risk if the hazard was not removed. There was, therefore, arguably insufficient “proximity” (see below) between the claimant and the authority. The injured party had a right of action against the other road user, who was insured, and the sole purpose of bringing the authority into the action was to enable the insurer of the other road user to recover from the public authority part of the payment that it had made to the injured party. The claimant would, therefore, not suffer injustice if the claim were denied and it would not obviously improve distributive justice to require the taxpayer to fund the claimant’s insurer.
3.40	In any event the “omission” rule is not absolute. It may be displaced if the public authority has a “special relationship” with the claimant or has assumed “responsibility” for the claimant. The conditions for establishing a special relationship or assumption of responsibility appear to be very similar to, if not the same as, those necessary for establishing that the claimant was sufficiently “proximate” to the public authority, a control mechanism used quite generally to exclude a duty of care in actions for negligent infliction of damage.
Proximity
3.41	Proximity may be denied if there is no prior connection between the claimant and the defendant public authority; Examples 6, 9 and 10 are good illustrations. In this kind of case the public authority may be very seriously at fault but the courts seem concerned not to impose liability where the claimant is simply one of a large and indeterminate class of those who might be affected by the careless conduct. The position is likely to be different if the public authority itself brings about the very source of danger, or if the public authority knows, or ought to know, that a particular person is at risk of serious harm, especially where the public authority had prior contact with the claimant and had either given express assurances of protection or had conducted itself in a way that strongly suggested that the claimant would be protected. Sometimes proximity is denied even if the claimant has been in close contact with the public authority, but in circumstances where a duty of care to the claimant would conflict with the authority’s primary obligations.
3.42	In some cases proximity has been found even though the public authority did not know, and had no reason to know, that a particular claimant was at risk of harm. Important distinguishing factors in these cases seem to be the intensity of control exercised by the public authority, the vulnerability of the claimant, the reliance of the claimant upon the authority acting carefully, and the likelihood of grave harm occurring if care were not exercised. However, extending the duty of care in this way certainly increases the exposure of public bodies, particularly those that are responsible for health and safety even if they are not the primary actors, to very considerable liability. It may also be the case that the courts are more willing to find  proximity if a  smaller group of persons is at  risk than the public generally. A 

good example is Godden v Kent and Medway Strategic Health Authority, where it was held arguable that the authority owed a duty of care to investigate complaints against a general practitioner that he had abused female patients, and therefore to protect subsequent patients from similar abuse. However, the line between a group of persons who may be at risk and the public generally seems somewhat arbitrary: it might be argued that even in Example 9 above the group of those objectively at risk was small.
3.43	It is not easy to predict how these factors will be applied to new situations. For example, a topic of considerable concern is how proximity would be applied if the claimant were a child alleging that a local authority, although it did not know the child’s actual circumstances, ought to have known that it was being abused and should have taken the child into care. It is probable, but not certain, that the authority would be held to owe a duty of care. Relevant factors would be the vulnerability of the child, its dependence on the authority, and the likelihood of serious harm if reasonable care were not taken. In addition, there would be a  distorting effect on decision making if there were no duty in this case but, following D there were a duty to exercise care in taking a child into care.
The Caparo test
3.44	Even if “proximity” is established, the claimant in the kind of case presently under consideration must show on the Caparo test that it would be “fair, just and reasonable” to impose a duty of care on the public authority. Since the case of Osman in the European Court of Human Rights, the English courts seem to have been less inclined to employ blanket public policy grounds to exclude the liability in negligence of public bodies, but a number of fairly general reasons for denying a duty of care seem to remain potentially applicable.
3.45	For example, the courts might hold that a putative duty of care and the liability to pay damages in the event of breach would reduce the resources available to the authority. Such an argument exposes the tension between corrective justice to the individual claimant and considerations of distributive justice to the community – some might well believe that public money is better spent on improving public services than in compensating remote victims of public authority carelessness. The court might also fear that imposing liability could lead public bodies to be overcautious in formulating policies. The latter has been a particular concern. For example, in X v Bedfordshire County Council Lord Browne-Wilkinson, in considering whether a local authority should be held liable for negligently taking a child into care, said:
 If a liability in damages were to be imposed, it might well be that local authorities would adopt a more cautious and defensive approach to their duties….If the authority is to be made liable in damages for a negligent decision to remove a child (such negligence lying in the failure properly first to investigate the allegations) there would be a substantial temptation to postpone making such a decision until further inquiries have been made in the hope of getting more concrete facts. Not only would the child in fact being abused be prejudiced by such delay: the increased workload inherent in making such investigations would reduce the time available to deal with other cases and other children.
Similarly in Stovin v Wise Lord Hoffmann remarked that imposition of liability would distort the priorities of local authorities, which he believed would be bound to play safe by increasing their spending on road improvements rather than risk enormous liabilities for personal injuries accidents.
3.46	The courts are here, therefore, concerned that the imposition of liability might over deter the public authority and distort decision making. Such a reaction to liability in certain contexts might not be implausible for public bodies are not ordinarily subject to the kind of market pressures that would make over-cautious private businesses uncompetitive. We refer elsewhere to the importance of establishing an empirical understanding in this area.
3.47	A related concern is that the imposition of a duty of care would distract the public authority from the performance of its primary functions. This has become a strong theme in recent cases. For example, the primary function of the police is the investigation and detection of crime, and the primary function of the CPS is to prosecute suspected offenders. The imposition of a duty of care in the handling of witnesses or potential witnesses, or in respect of pre-trial custody procedures, might impair the efficient performance of the primary functions.
3.48	That concern is all the greater when the imposition of a duty of care towards the claimant would conflict with the duty of protecting the interests of others for whose benefit the statutory regime is primarily intended, and, therefore, might lead the authority to give insufficient weight to those interests. Most notably in D v 

East Berkshire Community NHS Trust (see Example 3 above) the House of Lords held that the local authority did not owe a duty of care towards a parent when it was deciding whether to take a child into care, because the imposition of such a duty would conflict with the paramount obligation of the authority to safeguard the interests of the child.
3.49	Indeed in some cases a duty of care has been denied on the straightforward basis that the relevant statutory regime was established, for example, in the interests of protecting the health and safety of the public, and not to advance the economic interests of those in the claimant’s position. For example, in Reeman v Department of Transport one reason why the claimant failed in his action against the Department for the latter’s negligent issue of a certificate of seaworthiness was that the purpose of the statutory regime was to protect the physical safety of those at sea, not the financial interests of purchasers. The imposition of a duty in those circumstances would not have conflicted with the Department’s primary obligations, but the Court of Appeal was plainly concerned that the claimant should not be able to enjoy what might be seen as a “free ride” on the statutory regime when the claimant had other means of protecting itself against the loss which occurred. Similarly, in Philcox v Civil Aviation Authority the owner of an aircraft, negligently certified as airworthy by the CAA, failed in his action against the CAA: the purpose of the statutory regime was not to protect the interests of aircraft owners.
3.50	In other instances the specific statutory regime may have been established to advance the interests of those in the claimant’s position, but the regime provides a special procedure for challenging the conduct of the relevant public authority. For example, in the fields of social security and planning there are elaborate statutory schemes which provide specific procedures for challenging the decisions of public bodies, and it is very unlikely that the claimant will be able to use an action in negligence as a means of recovering compensation for an adverse decision. The rationale in these cases has been reinforced by the important decision of the House of Lords in Marcic v Thames Water Utilities. In that case the defendant was not a public authority in the strict sense but a privatised undertaking subject to a strict regime of statutory regulation; and the action was for nuisance rather than negligence. Nonetheless the House of Lords held that in the circumstances the only route of complaint was through the statutory regulator who was best placed to evaluate questions of efficiency, capacity and the allocation of resources.
3.51	The use of such procedures may leave the claimant uncompensated for past losses, but the existence of the procedure has nonetheless been held to exclude a common law action in negligence. Other more general alternative remedies, such as complaints to Ombudsmen or recourse to the Criminal Injuries Compensation Board, have only occasionally precluded common law actions. The availability of judicial review has not generally been held to rule out a common law action in negligence. However, in certain circumstances a timely application for judicial review, if successful, would avoid all or most of the loss that the claimant might otherwise sustain. In such cases there seems no good reason why a failure to apply in good time for judicial review should not on ordinary principles of causation exclude an action for damages.
Conclusions on Control Mechanisms
3.52	Some commentators have criticised the way in which the courts have used the foregoing control mechanisms to restrict the liability of public bodies, particularly where the courts’ reasoning seems to rest on factual premises for which the critics believe there is inadequate empirical evidence. They point to other jurisdictions in which the courts have imposed liability more extensively on public bodies, without any reported detrimental consequences on good administration or on society generally. They argue that the courts can limit the liability of public bodies in a manner consistent with public policy by tailoring the standard of care to reflect the complexity of much administrative decision making. They do not believe that either the Ombudsmen or government compensation schemes are an appropriate substitute for legal liability to pay damages for government failure.
3.53	On the other hand there are commentators who believe equally strongly that the courts have already gone too far in extending the liability of public bodies. This is particularly so in cases where the public authority is far removed from the immediate cause of the claimant’s damage, where the authority may have to balance a number of competing interests, taking account of the resources available to it and the opportunity costs of action or inaction, or where the claimant had practicable means of avoiding loss. They are also concerned that liability  in such cases breeds an undesirable compensation culture:  “If the public 

thinks – as some people seem to think – that ultimately the government is responsible for everything that happens in society, then the government (and other public bodies) are liable to get sued, whatever they do or fail to do”.
3.54	In evaluating these arguments it is important to bear in mind the impact of the European Convention on Human Rights and the Human Rights Act 1998. The European Court of Human Rights has held that some of the Articles of the Convention impose positive duties on the state to protect citizens from certain harms. For example, the Court has held that Article 2 requires the police to take positive steps to protect individuals whom they know, or ought to know, are threatened with a real and immediate risk to their lives. Similarly, it has held that under Article 3 local authorities must take reasonable steps to take into care children whom they know, or ought to know, are being seriously harmed by their parents. Decisions of this nature impose duties on public bodies in circumstances where no duty might have been held to exist at common law, because, for example, the omissions rule (see above) might have precluded liability. Furthermore, where the court rejects certain policy arguments against imposing liability on a public authority, the weight of such arguments in other non-Convention contexts tends also to be weakened.
3.55	From the point of view of the public administration, the major concerns would appear to be that tort liability may well have a seriously detrimental impact on decision making, and that large-scale awards of damages divert resources that could more beneficially be otherwise deployed. There are arguably cases where imposition of liability would not give the correct “signals” as to who is principally responsible for the claimant’s loss and would not be an economically efficient outcome. The rules on joint and several liability often leave a public authority that is remote from the immediate cause of the claimant’s loss shouldering the whole responsibility for compensating the claimant.
3.56	These competing arguments raise difficult issues of public policy that are of great importance. The sums of public money at stake are very large and the impact on public administration is considerable. Any evaluation of these arguments must also have regard to the question why citizens resort to actions for damages. We must consider whether there are other remedies which would meet the demands of the citizen, or at least strike a better balance between individual claims of the citizen and the public interest.
Liability for unlawful administrative decisions
3.57	So far the analysis has concerned cases where the claimant alleges that the public authority has negligently injured the claimant, the claimant’s property or the claimant’s economic interests, and the crucial question is whether the authority owes a duty of care. Example 11 raises a different, but closely related, question: should the public authority be liable to pay compensation where it has taken an unlawful administrative decision?
3.58	A decision or other measure is unlawful on public law grounds when, for example, it conflicts with a relevant superior rule of law contained in primary or secondary legislation, or infringes binding EU law, or is contrary to applicable principles of administrative law. Such an unlawful decision or other measure is liable to be quashed in proceedings for judicial review. An unlawful decision or other measure may not have been taken negligently; and not all negligent conduct by public bodies could be appropriately described as unlawful in a public law sense. Negligence and illegality are, therefore, distinct, but overlapping, concepts. 
3.59	In Example 11 it should be assumed for the purposes of the present discussion that the decision to deny a licence was arguably unlawful in a public law sense but was not negligently taken. The claimant could, therefore, bring proceedings for judicial review in respect of the adverse decision in the Administrative Court. The claimant may persuade the Administrative Court that the decision denying a licence is procedurally and/or substantively flawed, and in that event the claimant has open all the remedies available on judicial review. These include a declaration upon any point of law, an order quashing the decision and an order remitting the matter to the decision maker to reconsider in accordance with any legal directions given by the court. If the decision were procedurally flawed because, for example, the claimant had been denied an opportunity to make representations before the adverse decision was taken, the public authority, after hearing representations before taking any fresh decision, might still lawfully deny a licence to the claimant. Even if the decision were substantively unlawful, and were quashed on judicial review, the public authority might be able in certain cases to take a new decision refusing a licence on other lawful grounds. But frequently a quashing of a decision on substantive grounds leads to a favourable outcome for the claimant because the public authority has no alternative legal basis for achieving the same original result.
3.60	However, even assuming a favourable outcome on judicial review, the claimant will not be able to recover for past losses caused by the original unlawful decision. A prompt application for judicial review may in some cases avoid, or at least substantially reduce, any loss. The court has power to grant interim relief pending the hearing of the application and/or to order an expedited hearing of the application. Nonetheless there will be cases where for good reason interim relief is not granted, and even an expedited hearing may not be sufficient to forestall substantial loss, particularly if the matter is taken to appeal, as is likely if a significant point of law is in issue. On the facts of the Example an interim order maintaining  the  status  quo  (that is, the last  uncontested position  between  the 

parties) would not be sufficient for the claimant. The claimant would need to obtain an interim order to change the status quo in his favour, that is, a mandatory interim order requiring the authority to grant a licence. Interim mandatory injunctions are in any event granted only in exceptional circumstances and are particularly difficult to obtain against public bodies where considerations of public interest must be weighed in the scales.
3.61	To allow an action for damages, however, would be a radical departure from the existing law, almost certainly requiring legislation. Such a change would move English law towards the system of French administrative law, where the liability of public bodies is founded upon “fault” and “mere illegality is in itself a fault capable of giving rise to liability without more”, and towards EU law. This would raise a number of issues, including the following.
3.62	First, it would be necessary to specify precisely what kind of “fault” would be sufficient to ground liability. If illegality as such were sufficient to give rise to liability, there would be concern that public bodies might become liable to pay very large amounts of compensation in respect of economic losses where they had made excusable errors of law. That would be likely to be the case even if the claimant was required to take all reasonable steps to mitigate any loss arising from unlawful administrative action, including, where appropriate, the bringing of timely proceedings for judicial review to have the unlawful decision or other measure set aside. Public law today is often complex and uncertain, and error in its application is inevitable, even if the public authority has exercised reasonable care. This real concern might be addressed if liability to pay compensation for illegality was restricted to cases where the loss was significant and clearly established, and where the public authority had made a manifest and serious error, for example, where the applicable law was precise and clear and the public authority had failed to apply it correctly. This is the test developed by the Court of Justice in Luxembourg for determining whether a member state should pay damages for breach of EU law. Several commentators have urged that the domestic principles governing liability for unlawful administrative measures should be brought into line with the principles of state liability for breach of EU law, contending that there is no good reason for distinguishing illegality under domestic and EU law. Others have argued that the Court of Justice developed the doctrine of state liability as a response to a perceived failure of political will on the part of certain member states to implement EU law correctly or at all, and that 

this rationale for state liability has no application in the UK context. However, the approach of the Court of Justice to state liability may arguably be examined on its own merits whatever the precise motivation that led the Court to develop its jurisprudence. 
3.63	Secondly, it would be necessary to harmonise the relationship between an action based on “fault” and existing remedies. For example, a successful application for judicial review leads typically to the quashing of an unlawful decision. It does not lead automatically to the result desired by the claimant because the public authority may be able to retake the same substantive decision after a successful judicial review. This would give rise to two concerns. First, the public authority could be made potentially liable to pay compensation following the quashing of an unlawful administrative decision or other measure, even though it could lawfully retake the same substantive decision. Some would argue that it would be wrong to require the public authority to pay compensation where the prejudice to the claimant was in reality a consequence of an ultimately lawful decision or other measure. Secondly, if the public authority was not made liable in those circumstances, public bodies might be induced to seek alternative justifications for the substantive decision, or to achieve the same result through a fresh decision, with a view to avoiding the payment of compensation. In other words, decision making might be distorted in a manner not consistent with the public interest.
3.64	There would also be an uneasy tension with the existing tort of breach of statutory duty. Breach of statutory duty would appear to be an obvious “fault” in any fault-based system, but “claims for breach of statutory duty are unlikely to be permitted in relation to public bodies complying with statutory duties to provide public services. Indeed, other than in cases of industrial safety, or those relating to statutes which expressly create a right to a remedy in damages, it is hard to find any cases in which the courts will recognise that breach of statutory duty ought to give rise to a remedy in damages”. The principal reason is that the courts have construed the relevant legislation imposing a statutory duty as not conferring rights on individual claimants. If the same approach were taken on a putative “fault” based claim in respect of the facts in Example 11 above, it is far from clear that the claimant would succeed in obtaining damages from the public authority. It could plausibly be argued that such licensing legislation was intended to conserve a common property resource in the public interest and was not intended to promote the commercial interests of any particular fisherman. 
3.65	So if the law were changed to allow an action for compensation in respect of unlawful administrative decisions or other measures, the new right could be frustrated if the courts required the claimant to show, by reference to the strict tests  currently  applied, that  the  infringed rule of  law was intended to  confer an 
3.66	
individual right on the claimant. But if there was no such requirement, or a significantly weaker test were applied, claimants could potentially recover compensation in situations where in the past the courts have denied that breach of statutory duty gave rise to a private cause of action for damages. 
3.67	Similarly, the relationship between any new fault-based action and actions for negligence would not appear clear cut. For example, some actions in negligence have been based upon allegations of administrative error or delay leading to loss. However, the courts have rarely held that public bodies owe a duty of care in their administrative procedures to avoid infliction of economic loss. Such cases are considered suitable par excellence for Ombudsmen or specific compensation schemes. It has sometimes been suggested that unreasonable delay should be a fault giving rise to liability to pay compensation. However, if a putative fault-based system of liability were to include careless administrative error or delay within the scope of fault, potential liability would be much enlarged from the present position.
3.68	Any fault-based scheme would also raise questions about the continuing utility of the tort of misfeasance in public office. There would be considerable overlap between the two forms of liability, but it would in general be much easier to establish liability on the basis of fault than on misfeasance, and the principal reason for preferring the latter would be the hope of obtaining punitive damages. However, even if liability for unlawful administrative action were based upon serious and manifest error, as mentioned above, it would not be necessary to show that the public authority had either maliciously targeted the claimant or had intentionally acted unlawfully, as it is with the tort of misfeasance. It might be thought that malicious targeting or intentional wrongdoing by a public authority remained in a separate and distinct category of fault and that the historic tort of misfeasance in public office should be retained as a residual remedy in the very rare cases of such exceptionally serious illegality. On any view any new remedy for unlawful administrative action would in practice much reduce the importance of the traditional tort.