England and Wales Court of Appeal (Civil Division) Decisions

Douce v Staffordshire County Council [2002] EWCA Civ 506 (19th April, 2002)

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
MANCHESTER DISTRICT REGISTRY
(Mrs Justice Rafferty)

		Royal Courts of Justice Strand, London, WC2A 2LL
		19th April 2002

Sir Denis Henry:

1. This is an appeal from the judgment of Mrs Justice Rafferty, who on 2 February 2001 at the High Court in Manchester refused an application for summary judgment made by the Staffordshire County Council in respect of an action brought against them in their capacity as the local regulatory authority (see the definition of “registration authority” in section 20 of the Registered Homes Act 1984 - “the 1984 Act” - referred to below) responsible for the inspection and the conduct of, and the level of staffing in, local residential care homes in their area. The core duty to provide such homes is to be found at sections 21 and 26 of the National Assistance Act 1948. The homes in question are owned by the claimants, Mr and Mrs Douce, who are private providers of care and who own and manage three of the residential care homes for the regulation of which the defendant county council is statutorily responsible.
2. The outline facts can be shortly stated. The homes are regulated pursuant to the 1984 Act, and the regulations made thereunder, in particular the Residential Care Homes Regulations (SI 1984/1385 - “the Regulations”). The homes provide “residential accommodation with both board and personal care for persons in need of personal care by reason of old age, disablement, past or present dependence on alcohol or drugs, or past or present mental disorder” (see section 1 of the 1984 Act). What the occupants have in common is a degree of vulnerability which requires protection by the regulatory system set up by the Act.
3. The central features of the regulatory system are that the county council is the registration authority. To run a residential care home without being registered is a criminal offence. The numbers and categories of the occupants of the home are set at a maximum in the registration certificate. To exceed those numbers is to break a condition of the certificate. The registration authority may vary any condition of the certificate. An appeal lies against any decision of the registration authority to the Registered Homes Tribunal. The claimants made no such appeal over the years in question.
4. In relation to staffing the home, regulation 10 “Provision of facilities and services” requires the provision of approximately 20 listed facilities and/or services to the extent laid down. The list starts with staff:

“Provision of facilities and services

(1) … the person registered shall having regard to the size of the home and the number, age, sex and condition of residents-

(a) employ by day and, where necessary, by night suitably qualified and competent staff in numbers which are adequate for the well-being of residents”

Statute requires there to be at least two inspections a year, and the Inspection Services Division of the county council deals with them, and routinely appraises the level of staffing and its adequacy. Mr Jarrett, whose witness statement was before the judge, was the Assistant Director responsible for that Division.

5. Once registered, the home was entitled to admit residents up to the maximum number in each category of resident (the category reflecting the resident’s needs). Until the end of October 1996, it was the registration authority’s policy to require staffing up to that maximum occupancy figure: ie “staffing to capacity”. That created no problem when homes were full. But the outline of the scheme was changed in 1993. First, the law was changed so that would-be residents had to be assessed as to their need to be in a registered care home. Second, they were no longer permitted to fund their time as residents of care homes through income support. Consequently the numbers of new entrants dropped, and gradually the occupancy levels fell. We are told that there were divergences of views among local authorities exercising the function of registering authority in other parts of the country as to whether it was necessary to require staffing to capacity, or whether staffing to actual occupancy would suffice. As the occupancy level fell, so the case for staffing to capacity seemed weaker. And following representations from the claimants and others in Staffordshire, it was decided that a proposal should be made to the Social Services Committee that in future managers of homes should only be required by the defendants to have sufficient staff to care for the number and category of residents actually in the home at the time: “staffing to occupancy”. The proposal was embodied in a report of the Director of Social Services dated 23 October 1996, and was accepted by the defendant’s Social Services Committee, who approved the proposals concerning the assessment of staffing levels for immediate implementation.
6. The claimants’ response was to send a letter before action. They contended that it had been “negligent” of the county council to construe the 1984 Act as permitting or requiring staffing to capacity, and that as a consequence of the council’s officers’ insistence on that level of staffing provision until 23 October 1996, a substantial over-payment of wages had been made by the claimant (the figure is put in excess of £300,000), and fell to be recovered from the county council. The defendants replied by a full defence, and some time later, by serving a witness statement from Richard Jarrett, as Assistant Director responsible for that Division with responsibility for ensuring that care home providers complied with their statutory duties under the Act. They relied on the protection afford by their role as statutory regulator. They denied owing the claimants any relevant duty in contract or in tort. They pleaded their policy and the change in their policy. They contend that, acting under the 1984 Act as they assert they were, their actions were matters of discretion founded on policy for which they are liable only if acting so unreasonably as to be outside that discretion, and thus non-justiciable. They take the point that if, in the performance of those statutory duties, they owed a duty to protect the owners from economic loss, that might inhibit them in their performance of their statutory duty to protect the vulnerable residents of such homes. All of those defences would be hotly contested at trial.
7. After delivery of their Defence, the county council applied for summary judgment under CPR 24.2:

“The court may give summary judgment against a claimant or a defendant on the whole of the claim or on a particular issue if-

(a) it considers that-

(i) the claimant has no real prospect of succeeding on the claim or issue; … [and]

(b) there is no other compelling reason why the case or issue should be disposed of at trial.”

8. The rules permit reliance on written evidence on such an application if each item of written evidence relied on contains a statement of truth. Oral evidence may be called if the court so permits. May LJ set out the procedural principles for the hearing in S -v- Gloucestershire County Council [2001] 2 WLR 909 at 936:

“(1) A summary hearing can be a fair hearing for the purposes of Article 6 of the European Convention on Human Rights. A defendant is entitled to a fair summary hearing in a case which once properly investigated has no prospect of success.

(2) Summary judgment may be granted if the defendant can show that four criteria are present:

a) all substantial facts relevant to the allegations of negligence are before the court.

b) Those facts are undisputed, or there is no real prospect of successfully disputing them.

c) There is no real prospect of oral evidence affecting the court’s assessment of the facts.

d) There is no real prospect of the claim succeeding and there is no other reason to dispose of the case at trial.”

By way of commentary on those principles, May LJ made clear that the practical effect of them is intended to be that the court will only give summary judgment on the clearest case (see S -v- Gloucestershire County Council at 936E).

9. In support of their application for summary judgment, the defendants put in the witness statement from Mr Jarrett, who was at the relevant time Assistant Director responsible for the Inspection Services Division of the registration authority. He had had delegated to him the role of Inspection Officer. His witness statement was followed by some 150 pages of exhibits. We are told that full disclosure of documents has been made by the defendants and is exhibited to Mr Jarrett’s witness statement. I tend to doubt this, judging by the documents that have been exhibited. Those documents did not play a significant role at the hearing. We were only referred to a very few of them. They were not introduced (as distinct from merely identified) by Mr Jarrett’s witness statement, and on no topic did they provide a complete archive such as would normally precede a finding of fact. I would expect further documents to be disclosed before any trial of this issue. That statement and its exhibits were delivered over two months before the hearing before Mrs Justice Rafferty. The claimants chose not to reply to that evidence, nor did they seek leave to cross-examine Mr Jarrett. They took their stand on the position that the criteria for summary judgment were not made out by the pleadings, witness statement, and its exhibits.
10. The matter came before Mrs Justice Rafferty. She, having summarised the submissions on each side, concluded:

“Here, the claimants argue that the defendant is sufficiently proximate to the claimants, and there is a tri-partite care agreement arising out of the tender process, to make a duty of care at the very least arguable. In my judgment that is right. This is an area of developing jurisprudence. There seem to me to be issues of fact and of interpretation to be resolved in this matter, and I have no doubt that the application for summary judgment should be refused.”

It will be seen that she refused the application on two grounds. First, that it was arguable that the county council owed Mr and Mrs Douce a duty of care, and second that the issues of fact and interpretation necessitated a trial. That decision is now appealed to us.

11. The judge was clearly right to find that we are here in an area of developing jurisprudence and considerable uncertainty when, as here, we are dealing with the tortious liability of local authorities entrusted with a regulatory function. We are here dealing with such a case where the 1984 Act confers on the county council the statutory duty of, inter alia, ensuring that the owners and managers of registered homes provide adequate staffing. The legislation does not lay down the criteria for adequacy. That has been left by Parliament to the discretion of the county council, as the local social services authority. As Lord Browne-Wilkinson said in X (Minors) -v- Bedfordshire County Council [1995] 2 AC 633 at 736A-B:

“Most statutes which impose a statutory duty on local authorities confer on the authority a discretion as to the extent to which and the methods by which, such statutory duty is to be performed. It is clear both in principle and from the decided cases that the local authority cannot be liable in damages for doing that which Parliament has authorised. Therefore if the decisions complained of fall within the ambit of such statutory discretion they cannot be actionable in common law. However, if the decision complained of is so unreasonable that it falls outside the ambit of discretion conferred on the local authority, there is no a priori reason for excluding all common law liability.”

12. He then quoted the leading authorities and summarised the next steps in the argument - namely where there might be room for common law liability:

“If the decision complained of falls outside the statutory discretion it can (but not necessarily will) give rise to common law liability. However, if the factors relevant to the exercise of the discretion include matters of policy, the court cannot adjudicate on such policy matters and therefore cannot reach the conclusion that the decision was outside the ambit of the statutory discretion. Therefore a common law duty of care in relation to the taking of decisions involving policy matters cannot exist.” (738G-H)

13. So, from the claimants’ point of view, success in the action might be difficult if the court were to decide that the county council’s duties under the statute were matters of policy. But the claimants would argue that the complaint

“alleges carelessness, not in the taking of a discretionary decision to do some act, but in the practical manner in which the act has been performed”, and in those circumstances the question whether or not there is a common law duty of care falls to be considered by applying the usual principles, ie those laid down in Caparo Industries plc -v- Dickman [1990] 2 AC 605, 617-618. Was the damage to the plaintiff reasonable foreseeable? Was the relationship between the plaintiff and the defendant sufficiently proximate? Is it just and reasonable to impose a duty of care? … However, the question whether there is such a common law duty and if so its ambit, must be profoundly influenced by the statutory framework within which the acts complained of were done. … Similarly … a common law duty of care cannot be imposed on a statutory duty if the observance of such a common law duty of care would be inconsistent with, or have a tendency to discourage the due performance by the local authority of its statutory duties.” (739 A-D)

14. Later in his judgment, Lord Browne-Wilkinson said (at 751C-G):

“Here, for the first time, the plaintiffs are seeking to erect a common law duty of care in relation to the administration of a statutory social welfare scheme. Such a scheme is designed to protect weaker members of society (children) from harm done to them by others. The scheme involves the administrators in exercising discretions and powers which would not exist in the private sector and which in many cases bring them into conflict with those who, under the general law, are responsible for the child’s welfare. To my mind, the nearest analogies are the cases where a common law duty of care has been sought to be imposed upon the police (in seeking to protect vulnerable members of society from wrongs done to them by others) or statutory regulators of financial dealings who are seeking to protect investors from dishonesty. In neither of those cases has it been thought appropriate to superimpose on the statutory regime a common law duty of care giving rise to a claim in damages for failure to protect the weak against the wrongdoers. … In my judgment, the court should proceed with great care before holding liable in negligence those who have been charged by Parliament with the task of protecting society from the wrongdoing of others.”

15. At the time of that decision, as we see from 751B-E, there was little or no authority dealing with the liability in negligence of regulatory bodies, where one might expect to see the courts aiming to “… limit the range of matters over which negligence suits may be brought in order not to divert such bodies from the efficient performance of their allotted tasks” (see Tort Law by Markesinis and Deakin, 4^th Edition page 150). Certainly I find it counter-intuitive to imagine a situation where the regulatory body responsible by statute for the protection of the vulnerable residents in the homes owed a duty both to protect the vulnerable and at the same time a duty to avoid causing economic loss to the claimants. Since X (Minors) was reported, there have been (at least) three authorities which repay study: Marc Rich & Co AG -v- Bishop Rocks Marine Co Limited [1996] AC 211; Harris -v- Evans [1998] 1 WLR 1285; and Welton -v- North Cornwall District Council [1997] 1 WLR 570. The last two cases come to superficially opposite conclusions, the attempted reconciliation of which suggests that in this type of case the decision may often fall to be determined on its facts. At this stage of the law’s development, the distinctions are often fine ones.
16. Support for that view is given by S (Minors) -v- Gloucestershire at page 924E-H. The problem there dealt with is where (as here) the law is not settled but in a state of development. Where that is the case, the normal rule is that novel questions should not be decided on hypothetical facts. Sometimes this can be done where the point is simply dependent on the construction of a statute. But in considering whether a discretionary decision is justiciable, as will be likely to be the case here, “the answer will often depend on the exact nature of the decision taken and the factors relevant to it” (ibid 924G) - ie the answer will often be fact sensitive.
17. Later in the same authority, May LJ dealt with the consequence of these cases being fact-sensitive - namely that extensive investigation may often be required. One consequence of such investigation is that the case requires more investigation and so is less suitable for summary treatment. The passage in question is to be found at 932E and 933A of S (Minors) -v- Gloucestershire which may be summarised as follows. The cases concern persons claiming to have been damaged by the failing of the local authority responsible. Because the border-line between what is justiciable and what is not may be unclear, the demarcation between the two may require an extensive investigation. The existence of a duty of care, and the question whether there was negligence in the course of exercising that discretion may both require a detailed factual inquiry. And as for the suitability of the procedure for a defendant local authority’s application for summary judgment, at 933F we have a salutary reminder:

“The conclusion that cases of this kind may often be capable of being formulated as viable causes of action in negligence says little or nothing about whether they are likely to succeed on the facts.”

18. Ultimately, what the judge was confronted with was a case management decision: was this a trial which could safely be conducted on the papers alone, or was she entitled to take the view that the overriding objective was best achieved after the discipline of proper trial enabling the court to make secure findings of fact after hearing all the evidence.
19. I am of clear opinion that this is not a case that can be safely and satisfactorily tried on paper. In paragraph 8 above I set out the criteria justifying summary process such as here envisaged. They are not here made out. We are not here in a situation where the whole scenario (ie all facts relevant to the allegations of negligence) is before the court. Those facts are not undisputed or indisputable; and there is a real prospect of oral evidence affecting the court’s assessment of the facts. The county council, in their pleadings and Mr Jarrett’s witness statement, made certain admissions, essentially that until October 1996 they had operated a policy of staffing to capacity, and afterwards changed to staffing to occupancy. The consequent issues turn on questions of mixed law and fact, namely whether the staffing levels fell within the band of what could reasonably be regarded as adequate and not more. To answer that question requires more factual evidence than is to be found in the broad outlines which make up Mr Jarrett’s statement. And as Latham LJ said when considering the grant of permission to appeal:

“The mere fact that the applicants [the county council] had put forward, in the evidence of Mr Jarrett, a case which could justify the conclusion that they have a strong case for defeating the claim, did not of itself impose an obligation upon the respondents [Mr and Mrs Douce] to submit evidence in answer, nor did it mean that in the absence of any evidence from the respondents, the judge was bound to deal with the matter on the basis that Mr Jarrett’s evidence was uncontraverted. If that were the right principle, a party could always require a mini-trial.”

20. Here the reality is that the facts that go to the issue are hotly disputed, and there is every prospect that that evidence will or may affect the court’s assessment of the facts. There is not sufficient evidence as to the working of the county council’s policy, neither as to the actual or expected occupancy, nor as to the required level of staffing. Nor is there a full account of the county council’s policy and exercise of its discretion. In short, the court did not have (and does not yet have) the evidence required to demonstrate the “clear case” which would be necessary to justify giving leave to the defendant council to obtain summary judgment against this claim.
21. By way of example, Mr Jarrett in paragraph 18(5) of his witness statement raised the statutory regulator’s defence:

“The correspondence illustrates, I hope, the amount of officer time expended by the defendant in dealing with the claimants over the years, not just in relation to staffing but to a host of issues. I believe that if the court rules that a LSSA [Local Social Services Authority - as the county council is] owes a duty of care to the owner of a care home in the way it conducts its regulatory and inspection functions, the LSSA is likely to be inhibited in carrying out those functions properly so as to ensure that the persons who are supposed to be protected by the LSSA through the exercise of these functions, namely the vulnerable residents, receive the protection to which they are entitled.”

22. The claimants protest that the factual basis for that assertion is not there and contend that therefore there is an issue as to the facts and a need for Mr Jarrett to give evidence on the preliminary issue. The issue would be one of significance to the trial judge, who would use his undoubted powers of persuasion to ensure that the factual basis for that issue was properly before the court. The issue encapsulates the question whether it can be right in this particular regulatory situation for the LSSA to owe a duty to the regulated, the owners and managers of the care homes, to avoid negligently caused economic loss. The court would use its powers to get the issue decided in court, on the factual evidence. That is another reason for not granting summary judgment now. Accordingly, this appeal must fail.
23. Finally, the claimants originally put their case both in tort (negligent mis-statement) and in contract. As I understood Mr Bartley Jones QC his final position was to claim in tort alone. That course seemed to me realistic. If his clients were finally to succeed (and there are many obstacles in their path) it would be in tort.
24. I wish to say that I am grateful to counsel for their assistance in this matter, in a changing legal landscape.

Lord Justice Potter:

25. I agree. The appeal will therefore be dismissed.
Order: Appeal dismissed with costs payable in the sum of 90% of total sum as assessed by the taxing judge whom the matter goes for detailed assessment. (Order does not form part of the approved judgment)