R (Dudley MBC) v SoS for CLG [2012] EWHC 1729 (Admin) concerned a decision by the SoS to change the way in which he would make payments pursuant to s88B of LGFA 1988/s31 of LGA 2003 under a PFI scheme. There were five grounds of challenge. The first, procedural fairness, relating to consultation, succeeded. The other four failed. They were breach of a substantive legitimate expectation; application of a rigid and inflexible policy; failure to take relevant facts into account/error of fact; and breach of the PSED under s149 Eq A 2010.
As to the first ground, Singh J considered both whether there was a duty of consultation, and, on the basis that there was, the requirements of a lawful consultation. As to the former, there were two bases on which the Council argued that it was entitled to be consulted before the decision was taken to withdraw the PFI grant on a declining balance basis and to replace it with the annuity basis. The first was that it had a legitimate expectation that there would be consultation based on the defendant’s past practice. The second was that, quite apart from such a procedural expectation, the claimant had an expectation that its grant would continue to be paid on the declining balance basis and that fairness required that, before it was withdrawn, it would be consulted on this issue. Singh J observed that it was important to note that, in making the second of those arguments, the Council for this purpose relied on its expectation not to argue that the SoS was not entitled to reach the decision he did at all (that was the subject of a separate ground, based on the doctrine of substantive legitimate expectation), but that, before he did so, he had to follow a fair procedure. In other words, for this purpose, the Council submitted that its expectation gave rise to procedural rights, not substantive rights.
So far as the Council’s first argument was concerned, Singh J observed that in principle a legitimate expectation of consultation (i.e. a procedural expectation) can arise either from a promise that there will be consultation or from a past practice of such consultation. In the present case, the Council did not suggest that there was any promise of consultation. However, it did contend that there had been a past practice of consultation. Singh J, however, was not persuaded by that argument. All that the Council was able to rely on was the fact that in 2004 the SoS did consult when consideration was given to introducing the annuity basis as an alternative to the declining balance basis. In Singh J’s judgment, one incident of consultation of that type could not amount to a practice of consultation such as to give rise to a legitimate expectation of such consultation in the future.
However, the Council’s second argument did not depend on either a promise or a past practice of consultation. The starting-point is that, if a decision-maker intends to take a decision which affects a person’s rights, the duty to act fairly (in earlier parlance “natural justice”) will usually be required by public law, which will imply such a duty into a statutory scheme even when none is expressly laid down.
Singh J considered a number of previous authorities, concluded that the SoS’s decision “fundamentally altered the nature of the commitment” which had previously been made by the SoS to fund capital projects, that the impact on the Council was “pressing and focussed”, that there was a small and limited class of local authorities that were affected by the SoS’s decision, and that (para 69): “To make the decision abruptly without consultation would, in the circumstances of the present case, be so unfair as to amount to an abuse of power”.
Singh J went on to consider whether the requirements of a lawful consultation had been met. He concluded that they had not. Consultation had not been at a formative stage of the decision-making process. The decision letter invited representations only as to how the impact of the decision might be mitigated in the Council’s case, but not about the principle of the decision itself.
As regards the PSED, Singh J said:
“93. I accept the defendant’s submissions in relation to this ground of challenge. As the authorities have frequently stressed, what is “due regard” is such regard as is appropriate in all the circumstances. In my judgement, the defendant was not required to have regard to the matters set out in section 149 of the Equality Act for two main reasons.
94. First, the suggested impact is a contingent and indirect one. The defendant’s decision was a financial one. It will frequently be the case that the central government makes financial decisions of a general kind which leave up to individual local authorities the manner of their implementation. The relevant authorities may have a choice about whether they cut or reduce a particular service or how they find alternative funding for it if they feel that service should continue. The local authority concerned may well have to perform the Public Sector Equality Duty itself before it decides which of various courses it should take in order to implement the financial decision of the central government.
95. Secondly, and in any event, the defendant was entitled to take the view that he did, that the detrimental consequences which the claimant suggests would flow from the decision under challenge are not only contingent but lie some years ahead in the future, given the funding that the defendant has made available to the claimant until 2015. The defendant’s simple submission was that, in those circumstances, the duty may arise in 2015 but cannot be said to have arisen now. There are too many vicissitudes in life for a court to be able to say that the defendant has breached the Public Sector Equality Duty as things stand at present. I accept that submission by the defendant.”