Update: local government

Legitimate expectation and business rates

Local authorities went on the offensive against Whitehall in R (Slough BC and others) v Secretary of State for Communities and Local Government [2008] EWHC 1977 (Admin), challenging the method used by the government to calculate authorities' entitlement to retain part of the business rates under the Local Authority Business Growth Incentives Scheme. This was round two of a continuing battle: in previous proceedings (R (Corby) v CLG [2007] EWHC 1873 (Admin)), the claimant authorities succeeded in challenging the calculation for the first year of the scheme. They relied on a legitimate expectation that the scheme would operate by reference to the actual growth in business rates, whereas the method of calculation had excluded some increases in rates where, for example, there had been changes arising from construction work or occupation of previously empty premises. The exclusion related to a coding used by the Valuation Office Agency, called 'Code 20 growth', data under which had been omitted from the calculation. The authorities' initial victory had produced a substantial amount of additional income for them.

The authorities failed, however, to repeat their success. This time the court held '“ on the evidence relating to the second year of the scheme '“ that the authorities could no longer legitimately expect that Code 20 growth would be included in the calculation. Documents relating to the second year (but issued before the decision in the earlier proceedings was made and known) had made it clear that such growth was not to be included. This conclusion might appear to contradict the outcome of the previous proceedings, but it serves to illustrate the highly fact-sensitive nature of a legitimate expectation claim, which is the public law equivalent of an estoppel.

The court additionally held, however, that even if a legitimate expectation had been established to include Code 20 growth, it would nonetheless have been lawful for the government not to honour it on the grounds of 'compelling and proportionate reasons', that is an overriding public interest. Those grounds concerned the additional cost of carrying out calculations of negative (as well as positive) Code 20 growth, the extent and distorting effect of using only positive growth data (that is potentially overpaying some authorities), and the disproportionate effect of using positive Code 20 data on the operation of the Scheme across all authorities in future years. The court's decision accordingly demonstrates how a legitimate expectation may be defeated, even by reference to broad policy considerations.

The rationale and approach for permitting a legitimate expectation to be defeated by an overriding public interest was previously considered by Laws LJ in Nadarajah v Secretary of State for the Home Department [2005] EWCA Civ 1363. He suggested that the approach could be similar to that taken under the European Convention on Human Rights, that is to consider whether breach of the legitimate expectation was a justified and proportionate response by the decision maker, lawfully in pursuance of a legitimate aim. While the present decision does not refer to Nadarajah, its reasoning appears to be based upon it. It remains to be seen, however, whether the proportionality test is to be adopted: at present, the Wednesbury test remains applicable as a matter of general domestic public law.

Public procurement

The local authority was also the unsuccessful party in Letting International Ltd v Newham LBC [2008] EWHC 1583 (QB), concerning breaches of the Public Contracts Regulations 2006 (SI2006/5) in tendering property management contracts. That case too had a 'prequel': the Court of Appeal (at [2007] EWCA Civ 1522) had previously reinstated an interim injunction preventing the authority from entering into contracts with the claimant's competitors pending trial of the issues in the claim.

The claimant alleged (among other matters) that the authority had breached the requirement of transparency under reg.30 by failing properly to disclose in advance the contract award criteria, sub-criteria and weighting applied to them. The court agreed, holding that transparency required - in itself '“ all criteria to be disclosed, and that the obligation to disclose the information did not depend on whether non-disclosure would have a material impact on the preparation of tenders. The authority was also found to have breached reg.30 by failing to apply the disclosed criteria, because its marking scheme did not award all the available marks to a tender meeting the specification, but reserved additional marks for tenders exceeding that specification. The court also held that, for a claim in damages under the regulations, it was sufficient for the claimant to show it had suffered the loss of a significant chance of obtaining the contract; the claimant did not have to establish actual loss.

The decision accordingly deserves close attention by those involved in local authority procurement procedures. The relative rigour with which the requirement of transparency is to be applied, together with the somewhat lowered threshold for establishing a damages claim, combine to create greater scope for liability of public bodies to be incurred if mistakes are made.

Anti-discrimination duties

Mixed fortunes were experienced by the local authorities in two cases concerning alleged discrimination. In the first of the recent cases, R (Kaur) v Ealing LBC [2008] EWHC 2062 (Admin), the authority decided to stop funding an organisation that provided specialist services to Asian and Afro-Caribbean women, particularly in relation to domestic violence. The authority proposed in future, instead of funding individual organisations, to commission borough-wide services by open competition according to published criteria. The organisation was concerned that the criteria would have a disproportionate impact on women from black and minority ethnic backgrounds, and that there had been no racial equality impact assessment. Although the authority agreed to reconsider, it upheld the earlier proposal.

The court held that the authority had acted unlawfully. There had been no full impact assessment until after proceedings were started, in breach of (among other requirements) s.71 of the Race Relations Act 1976. In reaching a decision before that assessment had been undertaken, the authority had acted unlawfully. Furthermore, the authority had identified a risk of an adverse impact from their proposal but failed to consider how to avoid that risk other than by monitoring in the future. Finally, they had not only perversely decided that the data showed no correlation between domestic violence and ethnicity, but they had also misconstrued s.35 of the 1976 Act as amounting to a prohibition on the provision of services to only a section of the community. In summary, therefore, the case exposed several serious shortcomings on the part of the authority.

The boot was on the other foot, however, in O'Brien v South Cambs DC [2008] EWCA Civ 1159. The authority resolved to apply for an injunction under s.187B of the Town and Country Planning Act 1990 to restrain breaches of planning control involving the stationing of gypsy mobile homes or caravans.

The judge below had granted the injunction, but the appellant contended that the authority's decision to apply for the injunction had been ultra vires, having failed (among other matters) to take into account their duties under s.71 of the Race Relations Act 1976 and the requirement for a racial equality impact assessment. It was argued that there was no valid application for an injunction, or alternatively that that the judge should have refused the application because of the authority's failings.

The Court of Appeal dismissed the appeal. No case law was relied on by the appellant to support the argument being advanced. Both the authority and the court were given a very wide discretion under s.187B, the authority being able to apply to the court where it considered it necessary or expedient to restrain a breach of planning control by injunction.

The court was not deprived of jurisdiction merely because the authority had left out of account a material consideration '“ the court could itself take into account any matter overlooked by the authority. In any event, the authority had not failed to take relevant matters into account.

The judge had, however, made an error of law in granting the injunction, because he had wrongly held that s.71 had not applied at all to the authority's decision to seek the injunction. That had been incorrect (and would have been a potentially significant limitation of the extent of the anti-discrimination duty), but the authority had not themselves failed in their statutory duties. The ethnic status of the occupiers of the land and their personal needs had been taken into account during a planning appeal, which was part of the context in which the authority's decision had been taken. In the circumstances, the judge's error of law had not vitiated the conclusion that the judge arrived at in granting the injunction.

The two cases demonstrate '“ notwithstanding their contrasting results '“ the width and significance of the duty under s.71 and of the requirement to carry out an impact assessment.

In O'Brien, the appellant's argument was somewhat technical and lacked the underlying merits in Kaur, where the authority was found to have made serial errors. If they are to avoid challenge, authorities will need to be able to demonstrate clearly how they have complied with their important anti-discrimination duty.

Turf wars: Wednesbury or not?

In St Helens BC v Manchester Primary Care Trust [2008] EWCA Civ 931, the parties fell out over which of them should be responsible for the costs of providing constant care for a mentally disabled woman in her home. It was a form of turf war, as to whether the woman's needs were primarily for social care or health care, which the court deprecated. The local authority contended that the care required was such that their social services department should not have to provide it. The primary care trust (PCT), however, decided that the woman's need was not primarily for health care and that, with certain exceptions, it should not fund her care either. The local authority challenged the PCT's decision by way of judicial review, and were unsuccessful at first instance ([2007] EWHC 2391 (Admin)).

On appeal, the local authority argued that ordinary judicial review principles did not apply in a case where there was a contest between two public authorities that had reached apparently competent but opposite conclusions. The authority contended that the right approach was for the court to decide in substance which of the respective conclusions was correct.

The Court of Appeal rejected this argument: The PCT had made a decision, which was the primary decision. The health service legislation, including the National Health Service Act 2006, was the dominant scheme. The PCT's decision under that legislation was determinative, whereas the local authority's functions under s.21 National Assistance Act 1948 provided assistance as a last resort if a person's needs were not primarily health care needs.

The PCT's decision-making process was highly structured, and involved consideration of matters of expertise which were or were likely to be beyond the normal capacity of the court in judicial review proceedings. In contrast, the local authority did not have an equivalent or similarly structured decision-making process.

There could not be any 'gap' between the provision undertaken by the respective bodies. There were not two primary decision-makers, and accordingly there was no head-on collision between two comparable decisions.

The PCT's decision was accordingly amenable to judicial review on ordinary principles. The case is an affirmation of orthodox judicial review, albeit in the particular context of the present case. It is, however, established that there can be exceptional situations where judicial review does have to be adapted '“ for example in challenges to the compulsory medication of mental patients, in which judicial review has to provide for substantive resolution by the court of issues such as the correct diagnosis, prognosis and medication, in order to be compliant with the Human Rights Act 1998 (see for example R (PS) v Responsible Medical Officer [2003] EWHC 2335 (Admin)). The present case was not, however, exceptional.