COVID-19: Public Law Right to Compensation When Deprived of Property

It is a well-established principle of English public law that the state should not confiscate property or interfere disproportionately with its quiet enjoyment without paying compensation to those impacted by such steps. A power to confiscate property without adequate compensation should not be “read into” legislation. The recent Coronavirus Act 2020 and the Health Protection (Coronavirus, Restrictions) (England) Regulations 2020 make extensive provision for the authorities to shut down businesses and to direct how such assets should be operated. This note addresses the public law issues that these measures raise and considers what objections, if any, may be available to their exercise.

Public law principles

It is a principle of statutory interpretation that a statute should not be held to take away private rights of property without compensation unless the intention to do so is expressed in clear and unambiguous terms (In re Peacock (Secretary of State for the Home Department intervening) [2012] UKSC 5; Colonial Sugar Refining v Melbourne Harbour Trust [1927] AC 343).

However, this is not an absolute restriction, and the state can and does use statutory powers to restrict property rights that do not provide for compensation. For example, no compensation needs to be paid where planning permission is not granted (Hoveringham Gravels Ltd v Secretary of State for the Environment [1975] QB 754).

The government may also impose restrictions on the use of property in the public interest by passing general regulatory laws. Whether or not this constitutes a deprivation of property for which compensation should be paid can be illustrated by reference to two cases considered to reflect the current state of English law.

In Grape Bay Ltd V AG of Bermuda [2000] 1 WLR 574, the claimant entered into negotiations with McDonald’s to operate restaurants in Bermuda under a franchise agreement. Following a public backlash, legislation was passed prohibiting the operation of restaurants in any manner that suggested a relationship with any restaurant operating outside Bermuda, which prevented the claimant from proceeding with the agreement. The claimant argued that the various contractual rights that it held constituted property, which the new legislation rendered worthless. The Privy Council rejected this argument and held that the legislation constituted a restriction on the use of property in the public interest and so no compensation had to be paid. It also held that the legislature, not the courts, was in the best position to assess the requirements of the public interest and so should be given a wide margin of appreciation.

This may be contrasted with the Canadian case of Manitoba Fisheries Ltd V The Queen [1979] 1 SCR 101, which concerned legislation that gave the monopoly of exporting fish from Manitoba to a statutory corporation. This was held to have deprived a corporation that had been exporting fish of its property, and so compensation was payable because the effect of the law was said to enable the statutory corporation to acquire the claimant’s customers.

There are several key differences between Grape Bay and Manitoba Fisheries that explain the contrast in their outcomes. In Grape Bay, the claimant did not have an existing business but merely contractual rights. In addition, there was also no acquisition of the business by a public body; instead the claimant was simply prevented from operating as it had intended.

Right to the peaceful enjoyment of property

In addition to the general public law principles set out above, claimants have sought to rely on the Human Rights Act 1998 to argue that restrictions on their businesses without compensation constitute a breach of their human rights.

Article 1 of the First Protocol provides that everyone has the right to the peaceful enjoyment of their possessions. Where this right is infringed, it may give rise to a claim for compensation under s.6 of the Human Rights Act 1998. However, states are entitled to control the use of property by enforcing laws as they deem necessary in the general public interest. Any control must be proportionate and strike a fair balance between the rights of the individual and the general interest of the community at large.

An example of these principles in practice is the case R (on the application of Davies) v Crawley BC [2001] EWHC Admin 854, in which the local council, to ease congestion, required several catering vans to relocate from the street on which they had previously had planning permission to operate their business to another street and to start paying a moderate annual fee. The Administrative Court held that this was not unlawful or a violation of the claimant’s convention rights. While economic interests constituted possessions for the purposes of Article 1 of the First Protocol, requiring the catering vans to move did not constitute a deprivation of that property; rather, it was a case of the state exercising its right to control the use of that property. A fair balance had to be struck, but this did not always require the payment of compensation. In this case, a fair balance was struck, and the court considered it would have been even if the council’s actions had been a case of deprivation of property.

The Coronavirus Act 2020

Section 52 of, and Schedule 22 to, the recently passed Coronavirus Act 2020 allows the government to prohibit or restrict

a) the holding of events or gatherings

b) the entry into, departure from or location of persons in premises

in order to protect against the spread of COVID-19 or to facilitate the most appropriate deployment of medical or emergency resources. The Coronavirus Act 2020 does not provide for compensation to be made where the government uses such powers.

The government has used this power to order the closure of a large number of businesses, including restaurants, bars, pubs and gyms. However, while this action has deprived many companies and individuals of their business, they may struggle to argue that this constitutes a deprivation of property, as opposed to a control on their use, such that they should be entitled to compensation. The restrictions are temporary, of a general regulatory nature, and there is, arguably, a clear public interest in seeking to prevent the spread of COVID-19.

The justification for the principle of statutory interpretation referred to above (i.e., when interpreting a statute, it should not be held to take away private rights of property without compensation) is that rights of property are so fundamental to English law that Parliament cannot safely be assumed to have intended to remove them. However, in the case of the Coronavirus Act 2020, it is harder to see that Parliament’s intention was that each business affected by the new restrictions should be able to bring a claim for compensation.

Similarly, under the Human Rights Act 1998, a court may well take the view that the current restrictions strike a fair balance between the rights of the individual and the community at large, especially as this balance can be struck even when there has been a deprivation of property without compensation. This view is likely to be supported by the fact that although the government is not compensating businesses entirely for all losses that the restrictions will cause, it has announced a large number of other measures to support them through this period, as described here.

There have however been some dissenting views that argue that the lockdown is disproportionate to the threat posed by COVID-19. An Oxford University study last week suggested that COVID-19 had already infected far more people than was previously estimated and possibly as much as half the UK population. This would indicate that a far smaller proportion of people requires hospital treatment than previously thought. However, the courts may be reluctant to engage in this debate. In R (Countryside Alliance) v Attorney General [2007] UKHL 52, the House of Lords had to consider whether the hunting ban breached the rights of those dependent on hunting for their livelihood and business. The court held that it did not; while Parliament’s judgment was not immune from challenge, Lord Bingham said that “respect should be paid to the recent and closely-considered judgment of a democratic assembly.” Similarly, the courts may conclude that the response to the COVID-19 outbreak should primarily be a decision for Parliament.