Decision Making and Contracts

May 2nd, 2013 by James Goudie KC

Were a decision and an impending decision by Barnet Council, to outsource a high proportion of its functions and services to private-sector organisations, lawful? That was the issue in R (Nash) v Barnet LBC, [2013] EWHC 1067 (Admin), a judicial review challenge brought by a local resident.  The challenge failed at a rolled-up hearing. There were three grounds of challenge: non-compliance with best value consultation obligations; breach of the PSED; and breach of fiduciary duty to council tax payers. A procurement challenge was not pursued.

The first question was whether the claim was in time.  The Claimant sought to rely on the House of Lords decision in R (Burkett) v Hammersmith & Fulham LBC [2002] 1 WLR 1593, where planning permission had been preceded by a resolution approving the award subject to certain conditions.  However, the Judge said, at para 41:

… I do not believe that Burkett is authority for the proposition that in every situation in which a public-law decision is made at the end of a process which involves one or more previous decisions – what I will refer to as “staged decision-making” – time will run from the date of the latest decision, notwithstanding that a challenge on identical grounds could have been made to an earlier decision in the series. In my judgment it is necessary in such a case to analyse carefully the nature of the latest decision and its relationship to the earlier decision(s). I believe the true position to be as follows. If the earlier decision is no more than a preliminary, or provisional, foreshadowing of the later decision, Burkett does indeed apply so that the later, “final”, decision falls to be treated as a new decision, the grounds for challenging which “first arise” only when it is made. But if the earlier and later decisions are distinct, each addressing what are substantially different stages in a process, then it is necessary to decide which decision is in truth being challenged; if it is the earlier, then the making of the second decision does not set time running afresh. I accept that the distinction may in particular cases be subtle, but it is in my view nonetheless real and important.

On that basis, the challenge on the basis of failure to consult was out of time. Nor was it appropriate to extend time.  The same applied to breach of fiduciary duty, and to the primary case on the PSED.  Permission therefore was largely refused, but the Judge went on to express his views on the substantive issues. 

As to the best value consultation duty, under Section 3 of the Local Government Act 1999, as amended by the Local Government and Public Involvement in Health Act 2007, the Judge said, at paras 74 and 75:

“74 …  It is hard to see why authorities should be entitled to fulfil their duty to consult in a way which avoided seeking views on the central issues raised by the substantive duty.

75.   I do not believe that the view which I have taken would put authorities under any unreasonable burden. The statutory language leaves them with a very broad discretion as to how to satisfy the obligations under section 3, as indeed it appears that the Government intended. I would make four particular points:

(1)        I fully accept that it cannot have been the statutory intention that every time that an authority makes a particular operational decision, by way of outsourcing or otherwise, it is required by section 3 to consult about that decision simply because that could be said to be part of “the way in which” it performs its functions. … in this context that phrase connotes high-level issues concerning the approach to the performance of an authority’s functions, and it is about those and not about particular implementation that consultation is required.

(2)        Because here the Council never set out to consult about its outsourcing programme at all, the present case is not a good occasion to offer guidance on the form that such a consultation might have taken. The essential is simply that the representatives should have been given the opportunity to express views or concerns about outsourcing the functions or services in question that could inform the Council’s decision-taking both on whether to proceed and on matters requiring attention in the arrangements eventually made. I repeat that that does not mean that it should have consulted on all the particular decisions, great or small, that fell to be taken by way of implementation …

(3)        … useful responses are most likely to be obtained if consultees are informed of the broad context in which outsourcing decisions have to be taken, …  consultation is best timed as part of the annual budgetary process. …

(4) The statute provides for consultation with representatives “of the four classes specified.”                                                                                                                                                                                                                

As to the PSED under Section 149 of the Equality Act 2010, the Judge said, at para 80:  

“The Claimant submits first that the Council should have conducted an EIA prior to making the 2010/2011 decisions. … If I had granted permission I do not believe that I would have found a breach of the public sector equality duty in this respect. Such impact as the outsourcing of the functions and services in question might have on persons with protected characteristics was not liable to affect the basic decision to proceed: detailed consideration would only be required when the details of the outsourcing arrangements were being worked out.”

As regards a particular contract and the PSED, the Claimant’s case was that the Council had inadequate information about the potential impact of the changes.  The Judge did not believe that there was an arguable breach of duty.  The Judge observed, at para 85:

“Public sector equality challenges are rather too easily advanced in vacuo. …”

Finally, as regards breach of fiduciary duty, the Judge said, at para 88:

“Views can no doubt legitimately differ about the degree of financial analysis appropriate before taking a decision to proceed with outsourcing as opposed to the other options which were appraised.  But the evidence does not come close to establishing the kind of reckless disregard of the principles of financial planning or management that is necessary to make good a claim of this kind.”

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