WAR DAMAGE BILL (Hansard, 25 March 1965)

§ LORD SHEPHERD

My Lords, this is a short Bill consisting of one main clause and two subsections. It is a Bill which has aroused considerable interest and controversy. There are always two sides to every coin, and I am quite sure that any Member of this House will agree that this measure has resulted in a good deal of discussion in the corridors, and that there has been a good deal of correspondence and Press statements. Therefore, from my point of view, I think I must accept the fact that most of those who are listening to this debate this afternoon are likely to have heard only one side of the story. For that reason, I beg forgiveness if, in putting the Government's case, I have to speak at some length.

In view of all the circumstances, of the Press statements and the like, I think I should be right to appeal to your Lordships, as a Parliamentary Assembly, to cast aside any preconceived views or opinions that you may have held, and to judge this Bill after the case has been made. For my part, I shall try to obtain the greatest amount of common ground; and I do not think that will be difficult. The issue this afternoon is really a question of public policy. If we strip the legal argument and the question of retrospection, the issue before this House this afternoon is simple. It is this. How best, after a major war with massive destruction, can a country assess the extent of the damage, assess and obtain the resources that are needed for rehabilitation and to get the economic life of the country going once again, and apportion compensation or make rehabilitation on a basis of need and priority. I would suggest, above all else, that this should be done on a basis of equity. One could have, perhaps, two choices. First, one could leave it to the courts. But I would suggest that they are ill-equipped, and that, administratively, it would perhaps be impossible for them to undertake this task. But I suggest that the real alternative, the only alternative, lies within Government and Parliament: that it is for them to decide and to set up 731 the right machinery for carrying out these major tasks.

Clause 1(1) restores the Common Law of England and of Scotland to what it was understood to be prior to the House of Lords' decision in the Burmah Oil case. The Common Law, as then understood, was that in respect of all war damage which arose where the Crown had acted lawfully in the defence of the Realm no claim lay against the Crown. The decision of the House of Lords, sitting in its Judicial capacity, changed this, and it might be helpful if I were to refer to what was said in their judgment in the Burmah Oil case. The taking or the destruction of property in the course of actually fighting the enemy does not give rise to any claim for compensation. That is the old Common Law. But these demolitions, it was said (those of the Burmah Oil Company's installations) did not fall under the head of battle damage, because although the enemy was approaching, the destructions did not arise out of military operations.

So, my Lords, after the Judgment of our noble friends the Law Lords, we had two divisions, shall we say, in Common Law as regards war damage. We had the case that where damage arose through actual fighting—which is called accidental—there would be no claim; but where property was damaged in order that it should be denied to the enemy, then at Common Law the claimants had a claim against the Crown. The Government have accepted that there is a moral responsibility for compensation, but in this Bill they seek to re-establish the principle of equity over the distribution of compensation, and are anxious that the law should reflect that principle.

We all know the changing character of war. We know the increased firepower of nations and the destruction that arises. But—and perhaps this is more significant when one considers civilian damage—there is the speed and mobility of forces to be borne in mind. In the old days one could say fairly well where a battle would take place; but to-day whole continents can suddenly be embroiled in war.

Let us consider the Japanese aggression in South-East Asia. It was not only British property which was involved. 732 Malays, Chinese, Indians, Burmese, Siamese and Europeans of many countries were all affected, and one could say that they had a moral claim on this country, whose responsibility it was to defend those areas. To give an idea of the extent of the destruction let us just look at Burma, for example. The claims for war damage amount to about£165 million, of which £67 million represents damage to British and European property. Many of us who served in the Forces during the last war and had to undertake acts of destruction might have difficulty to-day, if we did not have it then, in saying what was denial damage and what was strictly battle damage—and I think this is true of all theatres of war. I have no apology to make in referring to the cost of war in human terms. Death and wounds, widows and orphaned children—we all know that we, as a State, like every other State, have never been able fully to compensate the people who suffered. When one turns again to property, it is true that there were many businesses in the Far East that never recovered from the war, and which would never have had a claim arising from war damage.

May I refer to a speech by Mr. Lloyd George on March 10, 1915? He said: Instead of 'business as usual' we want 'victory as usual.' and you cannot have that unless everybody in the community is prepared to suffer all kinds of inconvenience and, if necessary, sacrifice. I do not think you can therefore hope to have the same complete measure of compensation which you would enforce in time of peace, where you take one man's property for the benefit of the public. After all, this is for the general defence of the realm."—[OFFICIAL. REPORT, Commons, Vol. 70, col. 1460.] Those were the words of Mr. Lloyd George in the First World War, when the country, perhaps for the first time, was beginning to understand what were going to be the demands upon it for victory.

Surely the guiding principle in this respect is that the burden of war should be borne by the nation as a whole, and that compensation or rehabilitation should be made to the limit of the nation's ability. But, if you accept that there shall be an equal burden, surely it also arises that no man should be in a privileged position. My Lords, I have had some interest in reading old Hansards, and I picked up these words 733 of the Attorney General on May 3, 1920 —and I should like to read them, because I think they have a bearing on to-day's debate. He said: Are we to have two classes of persons in this country who have given up, voluntarily or involuntarily, their property for the defence and safety of the Realm; those who have taken their compensation at the hand of the Losses Commission, and those who have waited for the ultimate fighting out of certain cases, and then want by Petition of Right to insist upon their pound of flesh, and insist with success! I think that would be a deplorable result. I submit that in this case, as in all cases, the only proper standard for the Government is that there must be one weight and one measure."—[OFFICIAL REPORT, Commons, Vol. 128, col. 1845.] My Lords, I think that those words in 1920, in reference to the First World War, have a great bearing to-day in reference to the scale of damages and the resources available.

May I refer your Lordships to the words of the noble Viscount, Lord Rad-cliffe, in his judgment on the Burmah Oil case? He said: But it is for those who fill and empty the public purse to decide when, by whom, on what conditions and within what limitations such compensation is to be made available. After all, States lose wars as well as win them: and at the conclusion of a war that has seen massive destruction, whether self-inflicted through the medium of a 'scorched earth' policy or inflicted by the enemy, there may well be urgent claims for reconstruction priorities that make it impossible in advance to mortgage the public treasury to legal claims for full individual compensation for such destruction as we have now to consider. He went on: Has the law any principle for measuring compensation as a legal right when an act has been done in circumstances so special that the ordinary conceptions of property do not apply to it? My Lords, individuals and property should be safeguarded against any act of the Crown, and such safeguards do exist.

First, if the Crown or its officers unlawfully carry out some action, there is a right to damages. This Bill in no way affects that position. Where the Crown or its officers do something that is unlawful at Common Law but authorised by Statute, then damages are available within the terms of the Statute. Here we have in mind such actions as requisitioning ships and taking land for military requirements. But, my Lords, let us bear in mind—because it is significant—this 734 fact: over both those things the Executive has some control, whereas war damage is beyond any exercisable or foreseeable control. It arises in an emergency, when all types of action are required; and it was for that reason that, under the Common Law as it was understood, the Crown could act lawfully in the defence of the Realm and no right of action could lie against it.

My Lords, that was the unchallenged view for many years. I will not read the words of the noble Viscount, Lord Radcliffe (I think the judgment is available to most noble Lords), except that passage in which he said: There is not in our history any known case in which a court of law has declared such compensation to be due as of right. I think that statement is clear. I hope that the House will accept from me and the Government the guiding principle that the burden should be borne by the nation as a whole; that no privileged position should be enjoyed by any; but that the Government have a moral responsibility to compensate for war damage within their economic ability and to make proper provision by way of an equitable scheme. And I would suggest that in the last two world wars, Government and Parliament have provided the right sort of mechanism.

The decision of the House of Lords in the Burmah Oil case has brought about a major change, to which I have already referred: that, on the one hand, in respect of damage that arises from battle there shall be no claim, but in respect of damage which arises from denial operations there is a claim against the Crown. This is the first time in our history that there have been two classes of claimants. I think I should also point out that, I think for the first time, the Crown is put in the position that when it acts lawfully it will be in the same position as if it had acted unlawfully. This is a very strange position. My Lords, Her Majesty's Government believe that the law as it now stands, after the Burmah Oil judgment, is utterly wrong; it is opposed to the public interest; it is opposed to any system of equitable distribution towards the war sufferers; it is imprecise; it is arbitrary and administratively unworkable.

Consider for one moment the situation that arises from this judgment. Is it not 735 a fact that it is the duty of all to defend the Realm, to deny to the enemy comfort and support? If the owners of an installation were to destroy their property to deny it to the enemy, and did so voluntarily, there would be no claim; but if they were to wait, perhaps to the very last moment, for an instruction, then they have a claim. Is that right or is that just? Consider that property if it is occupied by the enemy. If you were to destroy it by artillery, if you were to destroy it by bombers based 1,000 miles away with the clear intention that you will deny it to the enemy, then, as I understand the judgment, no claim would arise. Suppose you were to destroy it by saboteurs after it had been occupied by the enemy for some months or perhaps some years. It is questionable whether a claim would arise or not. Consider a factory. If you destroy it as a tank obstacle there is no claim; if you destroy it for denial then there is a claim; but if you mine it and wait for the enemy to occupy it, it is still questionable whether there would be a claim or not. That is why I said the decision that has now been made is imprecise.

I think that greater difficulty will occur when one considers the number of claimants that arise in war damage. How can the courts judge whether a piece of property had been destroyed for denial? It may well be that the person who had authorised it was dead. Perhaps in the case of an oil installation like that of the Burmah Oil Company, it is relatively easy to decide. But the law and judgments should be just to all. How are you to apply this to a rubber factory, a tin dredging factory or a godown? I think it would be very difficult indeed. Therefore I believe, and the Government believe, that all war damage arising in the face of the enemy should be treated alike under an equitable scheme. I think I have said enough in regard to this clause, at least to convey to the House the necessity of subsection (1), which would restore the Common Law to what it was generally understood to be. This would mean that all war damage would be treated alike and there would be a moral obligation on the State to provide compensation.

My Lords, I will now turn to subsection (2). If I may, I will leave aside the question of the principle of retro 736 spective legislation. This issue has now become one between the Burmah Oil Company and Her Majesty's Government. I am sorry for that. Therefore your Lordships must judge to-day whether the Burmah Oil Company has been treated fairly or unfairly by previous Administrations. I think I should say that, apart from the Burmah Oil Company and its associates, there are eight other companies in Burma who have taken proceedings against the Government. It is only that number, out of the many thousands of manufacturers and traders who had claims for war damage, who have proceeded and who have not accepted what the Common Law was then understood to be. I hope I can satisfy the House —in fact I am sure that I shall—that the Burmah Oil Company and its associates have been treated neither better nor worse than any other claimant by the home Government.

The claims arose from the events of 1942. With the Japanese advancing through Burma, certain of the installations were, for economic and military purposes, destroyed on March 7, and the Japanese entered on the following day. Other installations were destroyed later; and, if my reading of the book of the noble Viscount, Lord Slim, is correct, they were destroyed under his orders. May I say how pleased we are to see him in his place and to know that he is going to take part in our debate this afternoon? There was massive damage in South-East Asia, and not only in Burma. These figures will give your Lordships an idea of the extent of the damage: in Burma, £165 million; in Malaya, £160 million; in Borneo and Sarawak, excluding oil damage, £8 million. At that time His Majesty's Government, the Coalition Government, would not be aware of what the full figure would be. They might have had some idea of what the damage had been in our retreat, but they could have had no idea of what the damage would be when we reoccupied.

The Coalition Government made a statement in the House of Commons on February 18, 1943, and I think the House should have it before them: It will be the general aim of His Majesty's Government after the war that, with a view to the wellbeing of the people and the resumption of productive activity, property 737 and goods destroyed or damaged in the Colonial Empire should be replaced or repaired to such an extent and over such a period of time as resources permit. If the resources of any part of the Colonial Empire are insufficient to enable this purpose to be achieved without aid, His Majesty's Government would be ready to give what assistance they can in conjunction with such Common fund or organisation that maybe established for post-war reconstruction."—[OFFICIAL REPORT, Commons, Vol. 386, col. 1942, February 18, 1943.] When we re-occupied the Far East we returned the property to its owners and set up the War Claims Commissions to assess the amount of damage. But it is perfectly clear from all the papers I have seen that there was no liability, either to His Majesty's Government or to the local Government. It may be of interest to the House to know of the procedure in Malaya. I have already mentioned that claims were assessed at £160 million. Payment was made from two sources:£20 million from the home Government and £35 million raised by taxes and levies upon businesses within the country. All types of damage in that claim were assessed and paid for on a basis of equity; and, to the best of my knowledge, as I was living there at that time, this basis was acceptable to all there.

The Burma War Claims Commission was set up in 1946, again to register and assess. The total claims were £165 million. The British Europeans' claims were £67 million, of which £60 million represented denial damage. Burma obtained her independence in 1948 and immediately disclaimed any responsibility for damages that arose out of the war and signified that she had no intention of setting up a war damage scheme—although it is interesting to note that she was prepared to accept reparations from Japan. It became clear that a war claims scheme was unlikely, in view of the attitude of the Burma Government. Her Majesty's Government took the view that there was a claim in equity and there were strong moral grounds for assistance to be given, particularly as the Government were giving assistance to other colonial territories. They offered, and finally paid, £10 million as a final settlement to the British community only. The Burmah Oil Company received some £4,600,000.

How did this gesture by Her Majesty's Government compare with that to other 738 territories? In Malaya, our contribution represented one-eighth of the claims; in Burma, it was about one-seventh of the British European claims; and in Borneo it was one-sixth. So one might say that in Burma the British Europeans were slightly better off than those in Malaya and slightly worse off than the Borneo claimants, but generally one could say that they were treated equally. It might now be said that what was given was too small. I think that your Lordships should remember the circumstances under which we came out of the war. We were economically exhausted, with severe economic and balance-of-payments difficulties and with heavy demands on our economic resources. I think that in what we did, not only in the Far East, but also in other colonial and Commonwealth territories, we acted generously. Again I must stress that, apart from these twelve companies, all the claimants in Malaya, Borneo, Sarawak and Burma accepted the schemes and all were prepared to work on the basis of Common Law as it was then understood.

The Burmah Oil Company and others lodged claims against the Government of Burma. In 1960 the Burma High Court rejected those claims, on the ground that the Military Governor had acted under military necessity and in a national emergency, and that this gave no right to a claim in law. In the following year the Burmah Oil Company and eight other companies took proceedings in the Scottish courts. They were able to do so—I say this in no way as criticism, but merely to show the particular advantage these companies enjoyed over others —because they were registered companies in Scotland and therefore not time-barred. The Government of the day decided that the Crown should defend on an important point of law—whether or not claims at Common Law should lie against the Crown for actions lawfully carried out under the Prerogative. No evidence was called for in any of the hearings and, in spite of the judgment of noble and learned Lords, sitting in their judicial capacity, there is still a long way to go in legal proceedings. The previous Government felt it right to warn the Burmah Oil Company of their intention in this matter. Since the question might arise, I think I should read that letter. 739 It is addressed to the Burmah Oil Company and signed by a Deputy Treasury Solicitor: I have been instructed to inform you that Her Majesty's Government, having carefully considered the action now pending in the court of session at the instance of your Company against the Crown, have been advised that the claim in this action is wholly unfounded in law and that it is likely to be rejected by the courts. Her Majesty's Government are moreover satisfied that the claim made is not in any event one which ought to be met by the British taxpayer. Her Majesty's Government have accordingly decided that, in the unlikely event of your company succeeding, legislation would be introduced to indemnify the Crown and its officers, servants and agents against your company's claim. If your company should decide to abandon its claim at this stage, Her Majesty's Government are prepared to consider the question of contributing towards the expenses which your company has incurred up to this date in the course of the present legislation. This has proved to be a controversial letter. I have read it for two reasons. First, in it the Government clearly established their intentions. They may be criticised for that, but equally they would have been criticised if they had decided to take action should the company succeed and had done so without giving warning to the company. The Government can be attacked from both sides. I think that the Government were right in warning the company of their intentions. Secondly, this is a political decision involving policy, and this warning could not have been sent without the highest possible authority within the Government of the day.

We know the story of the judgment. The Burmah Oil Company obtained judgment in the first court, then the case went to the Appeal Court in Scotland, which found unanimously in favour of the Government. Then the question came to your Lordships' House where, on a three-to-two judgment, the first judgment was reinstated. May I, as a layman, say that, of all the Judges who considered this matter, six found one way and four the other? It is true that your Lordships' House is the highest court and its decision is binding, but, from the layman's point of view, I think it is still a matter of doubt.

It is not only a question of the principle involved; I think that account must be taken of the size of the claim. The figure I have shows that the Burmah 740 Oil Company's claim amounted to £31 million, plus 5 per cent. per annum from 1942—and there are eight other companies who are now commencing to take action. It might well be, if these claims were sustained in the courts and judgment was given to the full, that the Exchequer would have to find a sum of between £100 and £160 million. This is a matter to which I think Parliament must give very careful attention.

In a Press statement the Burmah Oil Company said that if they had been in Sarawak or Borneo they would have been treated on a different basis than they were in Burma. I am glad they have said this, because it gives me the opportunity of giving to your Lordships the conclusive evidence that the Burmah Oil Company were in fact treated as well as, if not better than, other claimants. But the circumstances were different, because the Anglo-Saxon Petroleum Company at Miri and Seria destroyed their property under contract. It was clear very early on, before the Japanese came into the war, that these properties were militarily untenable, and therefore a contract was made.

I would ask your Lordships to remember the claims of the Burmah Oil Company. They claimed £31 million, but their claims were assessed by an independent body—namely, the Carter Committee—set up by the Government, not only to consider their claims but also to consider the other claims in Burma. They assessed the assets of the Burmah Oil Company that were destroyed at £17 million. The Burmah Oil Company received from the Government just on £4¾ million; that is, 27 per cent. of their damages. Consider the Anglo-Saxon Company, who had their property destroyed under contract. Their contract was for rebuilding and carrying out improvements, and the total figure was £12½ million. We contributed £2½ million towards that, which, if my arithmetic is correct, is 20 per cent. So you have two installations, both destroyed for the same economic and military purposes. The one that is content and did it under contract received 20 per cent., and was satisfied; and the Burmah Oil Company, who received 27 per cent., are dissatisfied.

There has been some discussion as to whether the Burmah Oil Company did, in 741 fact, receive compensation. I believe it is maintained that they received it as rehabilitation, and that this is not compensation. I should judge—and I think most of your Lordships would—that if a figure was given strictly for rehabilitation there would be some strings to it as to the manner in which it was to be used and spent. In the case of Burmah Oil, and in all other claims in Burma, there were no strings whatsoever: the company could spend, deploy and use that money as best they could. In fact, there was a marine club that decided to retain the money in the United Kingdom, and we have recently heard that it used it to provide a provident fund for its secretary. There were no strings. So whether or not it is described as rehabilitation—perhaps for reasons that the Burmah Oil Company were carrying on litigation—it is, in the view of the Government, compensation.

In conclusion on this particular side, I would put these questions to your Lordships. Do you accept the view that the Common Law on war damage should be restored to what everyone believed it to be? Do you accept that the Burmah Oil Company and their associates have been treated on the same basis by the home Government as all the other British-European claimants in Borneo, and all the other claimants of all nationalities in Malaya and Borneo, both in regard to denial and battle damage? Do you accept that other Burma claimants, and claimants from Malaya and Borneo, have accepted the equitable schemes offered either by the home Government or the local Government? I think the answer, on the facts I have given, can be only, Yes.

Therefore we now have to make up our minds whether this company, or group of companies, should be permitted to enjoy a privileged position which they have obtained. No doubt we shall hear words about justice. I am not a lawyer, and therefore I looked up the definition of "justice". I looked up Jowitt's Law Dictionary, and it says this—no doubt many noble Lords who are lawyers will remember it: The virtue by which we give to every man what is his due; opposed to injury or wrong. I use a layman's phrase: "To one man no more and no less than his due as 742 compared with another man". There are all these many thousands of sufferers of war damage who have been content with the arrangements that were made under the Common Law at it was then understood. I would ask the House not only to take the view that the law should be restored, but that there should be no special privileged position.

I appreciate that there will be some discussion on retrospection. I must admit that when I heard of the Bill, before I started to read of the circumstances, I shared the repugnance of perhaps all Members of a British Parliament towards retrospective legislation. It is certainly not a regular feature of our proceedings. I think it is true that any Government of any political persuasion would hesitate before introducing such legislation and only do so when there is a great piece of public policy involved.

It has been said that this and other retrospective legislation is a contempt of the law and of the courts. Her Majesty's Government do not accept that view. The Government would not be party to it. I am quite sure that the noble and learned Lord on the Woolsack would not be party to it. I am sure that Lord Birkenhead, when he introduced the Indemnity Bill in 1920, would not have been party to it. And I am sure the noble and learned Viscount, Lord Dilhorne, would not have been party to it when he introduced and defended Clause 39 of the Finance Bill, 1960, and used the words: There are occasions when it is right and proper that it should be done. I think I should quote a precedent for the present Government's action. I, in my readings, have taken the view that the Indemnity Act, 1920, has a very close relationship to the measure now before your Lordships' House. Both arise from events of war; both are retrospective; and both intervene in legal cases and declare null and void any further proceedings. Section 1(1) of the Indemity Act, 1920, says: No action or other legal proceeding whatsoever whether civil or criminal, shall be instituted in any court of law for or on account of or in respect of any act, matter or thing done, whether within or without His Majesty's dominions, during the war before the passing of this Act, if done in good faith.… 743 Its concluding words are these: … and, if any such proceeding has been instituted, whether before or after the passing of this Act, it shall be discharged and made void.… This Act dealt with other cases, and I would refer your Lordships to Newcastle Breweries v. The Crown. This action arose because the Admiralty had acquired rum under Defence Regulation 2B. The judge found that the Regulation was ultra vires, and he maintained in his judgment that Newcastle Breweries had a right, in the event of a dispute which had arisen as to the amount of the market price, to have the same fixed by a county court judge.

To pause here for one moment, Newcastle Breweries had established a point of law, but had not got its full fruits because it had still to establish a case against the Crown. The same position applies in this Bill. It is clear if your Lordships read the Hansards of the day, and I will quote the Attorney General. He was asked: Does the Act have the effect of overriding a judgment given by His Majesty's courts of law? And the Attorney General replied: It would override the decisions of the Newcastle Breweries case. In his words: Certainly the intention of this Bill is to say that, although proceedings have been taken and have gone so far as to be heard in the court of the first instance and in the Court of Appeal, the persons who have got judgment are not entitled to have any priority or difference in payment. The Government of the day decided to act, and took retrospective action.

There are many other cases. The noble Earl, Lord Swinton, drew attention to his own Bill which he piloted through the House, the War Charges Validity Act, 1925. The Act to which I have referred, the Indemnity Act, was wide and sweeping—far wider and far more sweeping than the Bill before your Lordships to-day. I would put this question—because it will no doubt arise: Can it be said that the courts and the British law stand in less regard because of the passing of the Indemnity Act? I do not believe so; and I do not accept the view that the passing of this Bill will in any way diminish respect for British law and the British courts in this country.

But, my Lords, as I said in my first words, there is another side to the coin, 744 Remember those many people, those many thousands of companies and individuals, who were prepared to accept the law as it was then understood; who received payment for war damage; who contributed to schemes from which war damage was paid, and who accepted all these schemes. What would they say of British law, of British Parliament, if, 23 years later, a small group of individuals and companies were able to proceed and continue in a privileged position? I would suggest that that would bring into the eyes of those people far greater disrespect for British law and British Parliament than any action which we might take this afternoon.

This is a matter of public policy. This is no attack, no criticism, of the Judges or of the noble and learned Lords who sit in a Judicial capacity. Her Majesty's Government believe that, as a matter of public policy, the Common Law, as it was understood, should be restored, and that no individual should stand in a privileged position above all the other claimants. I beg to move.