Case No: CO/1230/2004
 
Neutral Citation Number: [2004] EWHC 2124 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
ADMINISTRATIVE COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Wednesday, 15 September 2004

Before :

THE HONOURABLE MR JUSTICE SILBER
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Between :

	THE QUEEN ON THE APPLICATION OF 
JENNIFER CAPENHURST, TERENCE KIRBY, IAN KING, TEJAL MISTRY AND LOUISE JOACHIM
	Claimants	
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LEICESTER CITY COUNCIL	
Defendant	

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(Transcript of the Handed Down Judgment of
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040,  Fax No:  020 7831 8838
Official Shorthand Writers to the Court)
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Michael Fordham (instructed by The Public Law Project) for the Claimants
Tim Straker QC and Charles Bourne (instructed by Anthony Cross, Assistant Head of Legal Services of Leicester City Council) for the Defendant

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Judgment
Silber J:

I  Introduction

1.	Jennifer Capenhurst, Terence Kirby, Ian King, Tejal Mistry and Louise Joachim (“the claimants”) are representatives in the sense of being service-users of six voluntary organisations (collectively referred to as “the six voluntary organisations”) in Leicester, which have for some time been funded by Leicester City Council (“the council”).  By six letters dated 25 and 26 February 2004 (collectively called “the decision letters”), the council indicated its intention to cease funding for each of these six voluntary organisations with effect from different dates in 2004.  The Full Council approved those decisions when its budget was approved on 25 February 2004.

2.	By the present proceedings, the claimants are seeking to quash the decisions of the council contained in each of the six decision letters.  The basis of the claimants’ challenge is that the decision-making process of the council was unfair; in particular, it is contended that although the council endeavoured to consult with the six voluntary organisations before making these decisions prior to reaching their decision, it failed to do so properly as it did not explain the criteria which it would apply before making its final decision whether to continue funding for the six voluntary organisations.  It is also contended by the claimants that the council failed to give adequate reasons in each of the six decision letters for its decision not to continue funding.  

3.	As I will explain, one of the voluntary organisations involved in the present proceedings was entitled to an internal review of the decision to terminate its funding.  It invoked that right and the internal review was still under way at the end of the oral submissions.  It is significant that after permission had been given by Richards J to pursue these judicial review proceedings, the council undertook to continue funding of the six voluntary sector projects until after the determination of this application. Furthermore, the evidence shows that since the decision was made by the council to cease funding the six voluntary projects, it has agreed to finance some parts of them and that some further negotiations are or may be proceeding.

4.	It seemed prudent to delay producing this judgment until after determination of the internal review to which I have just referred.  I only   received the report of the internal review in June 2004 upon which counsel chose to make written submissions, rather than oral submissions and these were only completed on 15 July 2004.  I was then unfortunately unable, because of outstanding judicial commitments, to produce this judgment before the end of term. 

II  The Parties

5.	The six voluntary sector projects with which this claim is concerned and for whom the claimants are representatives are:

(i)	The Turning Point Women’s Centre (“Turning Point”), which provides services for women on a large council estate.  The council has provided substantial funds for Turning Point but by the decision under challenge, the council terminated the funding for Turning Point with effect from 31 March 2004.   Turning Point contends that without any of this core funding from the council,  it  “will have to close completely”;
(ii)	Shree Sanatan Community Project (“Shree”) is involved with providing education and development opportunities to its members, many of whom have South East Asian origins.  Shree has also been receiving substantial financial assistance from the council.  By a letter dated 26 February 2004, the council notified Shree that its funding of Shree would terminate on 31 March 2004 and that no funding would be payable thereafter.  If all this funding is withdrawn, it is contended by Shree that it “would almost certainly close”;
(iii)	Ajani Women and Girls Centre (“Ajani”) was established to meet the needs of African Caribbean women to realise their social, economic and personal potential.  Ajani also received financial assistance from the council.  By a letter of 26 February 2004, the council notified Ajani that the funding arrangements would expire automatically on 31 March 2004 and no funding would be payable thereafter.  If no funding is payable by the council, it is averred by Ajani that it “will have to be terminated”;
(iv)	St. Gabriel’s Community Centre (“St. Gabriel’s”) is involved with providing facilities for local groups to meet, as well as running various clubs and communities for the local community.  St. Gabriel’s also received substantial funding from the council and funding by its other provider of funding is only provided on the basis and condition that the council provides core funding for St. Gabriel’s.  By a letter dated 26 February 2004, the council notified St. Gabriel’s that their funding agreement would expire automatically on 31 March 2004 and that no funding would be payable thereafter.  It is said in the evidence on behalf of St. Gabriel’s that the consequence of the withdrawal of all funding from the council “will mean [that St. Gabriel’s] having to close”;
(v)	The Chinese Community Centre (“CCC”) is a project which provides services to the local Chinese community in Leicester and throughout Leicestershire.  It also received substantial funding from the council, but by a letter dated 26 February 2004, the council notified the CCC that their funding agreement would expire automatically on 31 March 2004 and that no funding would be payable thereafter.  If all funding from the council ceases, it is averred by CCC that it “is facing closure as a result”;
(vi) 	Voluntary Action Leicester’s Voluntary Bureau (“VAL”) is involved with the recruitment of volunteers for work with the elderly, with young offenders and those with mental illnesses.  It had also been receiving funding from the council.  By a letter dated 27 February 2004, the council gave formal notice in accordance with the terms of its grant aid contract with VAL that all funding from the council would be terminated with effect from 25 June 2004.  The consequence of that, according to VAL’s evidence, is that it would then face immediate closure.

6.	The six voluntary sector projects thus contend that if the council would cease to provide any funding, they would then face immediate closure, but as I will explain, with reduced funding they would be able to continue to function in a limited way. The projects  are  under the auspices of different departments of the council.  VAL falls within the control of the Social Care and Health Department of the council (“SCH”), while the other five voluntary sector projects (collectively called “the ELL organisations”) are handled by the Education and Lifelong Learning Department (“ELL”).  VAL’s position is also different from that of the other voluntary organisations because first, it has been able to seek an internal review of the decision to cease funding it and second, its complaint about its decision letter is different from that of the ELL organisations.  

7.	The present claims arise as a result of the council elections in May 2003, which led to a change in political control of the council.  The policy of the new administration is to restrict funding to those entities providing services, which were judged to be “core” services in the sense that the council was legally obliged or strongly expected to provide those services. 

8.	The council do not criticise in any form whatsoever the way in which each of the voluntary organisations has performed its services.  That is not surprising because the evidence indicates that they have all performed and are still performing invaluable services for the community.  Indeed, the council’s decision to terminate funding for the voluntary organisations was based on its political priorities.  This application is, of course, not concerned with the merits of the political decisions of the council to cease funding the voluntary organisations, but with the procedure by which the council reached and explained the decisions under challenge and which are set out in the decision letters.  It is now appropriate to explain how the decisions under challenge came to be made.

III  The Chronology

9.	The council is required by statute to set a council tax by 11 March each year (s.30 Local Government Finance Act 1992).  In order to do this, the council must by the same date set a budget in which all its projected expenditure is specified.

10.	The new council elected on 1 May 2003 was pledged to a policy of providing fewer services but services of a higher standard.  On 4 November 2003, the council started a process of public consultation on the services, which were to be provided in the light of the change of control in the council. Subsequently, on 15 December 2003, the council leader and his deputy wrote (“the December 2003 letter”) to all funded voluntary bodies warning them that the council will:- 

“only provide financial support to voluntary sector bodies where they are delivering core services which the council would otherwise wish to provide by direct provision, save for exceptional reasons” (A.79).

11.	On 6 January 2004 (“the January 2004 letters”), the relevant departmental directors wrote to the six voluntary sector projects, stating that they were minded to cease funding them and the letters then set out the reasons for that opinion.  The recipients of the letters were told first that any comments they wished to make regarding this proposal had to be sent to a named official of the council by 3 February 2004 and second that these comments would be considered by the council’s cabinet on 16 February 2004 when it would agree its recommended budget to the council, which would meet on 25 February 2004.  This first part of the selection process setting out the provisional views of the relevant department directors will be referred to as “the first stage”.

12.	Each of the voluntary organisations duly responded and made representations in support of contentions that funding should continue.  These responses were then considered by the respective departments of the council.  On 9 February 2004, the Cabinet members of the council met informally and they considered the analysis of the proposed voluntary sector cuts.  On 23 February 2004, the Cabinet of the council agreed to recommend a budget to the council members after having made some changes to the initial proposal.  On 25 February 2004 at a full meeting, the council agreed the budget with some changes, but it confirmed the provisional view to cease funding for the six voluntary sector projects whose representatives have instituted the present judicial review proceedings.

13.	On 25 and 26 February 2004, each of the ELL organisations received a letter from the council in which it was explained that:-

“I have to inform you that my proposal was accepted and therefore, this letter is a formal notice that your agreement will expire automatically on [the dates when they would terminate] and no funding will be payable after then in any event”.

14.	The letter sent to VAL terminated its funding with effect from 25 June 2004.  It is these decision letters, which are the subject of the present challenges.  This second part of the decision-making process will be referred to as “the second stage”.

15.	The present proceedings were then commenced, but as I have explained, the council’s undertaking given at the permission hearing means that the funding of the voluntary organisations will continue until the determination of this application.  

IV  The Claimants’ Contention

16.	Mr. Fordham on behalf of the claimants accepts that administrative law recognises that multi-faceted budgetary decisions for local authorities involve difficult policy choices as the council as the democratic representatives of the local people has the primary function of exercising judgment and of making choice.  He contends that basic fairness was required in considering whether to discontinue funding because the council was acting as a public authority exercising statutory functions and it was making important decisions involving a radical change of direction by discontinuing benefits, which had been ultimately conferred on the citizens of Leicester.  Mr. Fordham points out correctly that the council recognised that their decision-making was required to be fair and in consequence that there had to be a meaningful consultation in which the council had to be open and transparent about the decisions that it was taking.

17.	The thrust of Mr. Fordham’s submission is that the council did not act fairly in the way in which it conducted its decision-making process.  He says that the evidence adduced by the council falls very far short of demonstrating fair and transparent decision-making as would satisfy public law standards.  He sums up his case by contending that the council failed fairly (i) to explain to the voluntary organisations the case which they had to meet, (ii) to put to those organisations the key points which were held against the projects, (iii) to conduct a proper and transparent appraisal of the projects and (iv) to give adequate reasons for their decision.

18.	It is appropriate now to record two matters on which the parties agree.  First, it is common ground that irrespective of whether the council was obliged to consult with the voluntary sector projects on whether there should be a continuation of their funding, it did in fact decide to consult each of   these bodies and the council thereby  was under an obligation to do so fairly.  The claimants now contend that the council failed to comply with this obligation.  The council disagrees and submits that it has acted fairly.  Second, it is common ground that each of these claimants has proper standing to bring the present applications on behalf of the six voluntary sector projects.

19.	Mr. Fordham attaches particular importance to five particular complaints, namely that:-

(a)	when it sought the views of the ELL organisations on the January 2004 letter, the council failed to inform them that its criteria for determining whether the ELL organisations should continue to receive funding was whether they provided “statutory” services, notwithstanding that they had hitherto regarded as the appropriate criteria for funding those projects was whether the ELL project provided “statutory or strategic services” (“the Strategic Point”);
(b)	when it sought the views of the ELL applicants on the January 2004 letter, the council failed to inform the ELL applicants that it attached crucial or great importance to the number of adults enrolled on courses supplied or commissioned by the local education authority, notwithstanding that this criterion had not been explained to the ELL applicants (“the Provider Point”);
(c)	when seeking views on the January 2004 letter, the council failed to inform the ELL applicants, that it attached crucial or great importance to the issue of the proportion of the “core” services to the project’s overall activities and also to the council’s judgment as to that applicant’s financial viability; this point is not pursued by CCC (“the Viability Point”);
(d)	in the case of VAL, the SCH on behalf of the council adopted a test for determining whether to continue its funding based on the Fair Access to Care Services (“FACS”) threshold, notwithstanding that VAL had not been informed of this by the council when VAL’s views were sought on the January 2004 letter (“the Health Point”);
(e)	the council failed to conduct a proper and transparent appraisal of the projects (“the Appraisal Point”) and 
(f)	the council failed to give reasons for its decision (“the Reasons Point”).

V  The Strategic Point

(i) Introduction

20.	The thrust of this complaint of the ELL organisations is that they were not informed in the January 2004 letter or otherwise of the criteria by which their projects would be appraised by the council’s decision-makers for the purpose of determining whether their grants from the council would continue.  Mr. Fordham contends that the ELL organisations were told that the council would only finance projects which were “core” but he submits that the council crucially did not explain that projects were only “core” if they met the statutory requirements (and not merely the strategic requirements) of the council.  Thus, the consequence of this omission to inform the ELL organisations of the radical change of policy is, according to Mr. Fordham, that the ELL organisations were unable to respond effectively and intelligently to the council’s proposals, which were set out  in the January 2004 letter with the result that the consultation process with those organisations  was not fair.  

21.	The council accepts that the criterion by which the ELL projects were actually appraised was on the basis of whether the projects were “core” in the sense that they delivered  what Mr. Keith Murdoch of the council described as  “the statutory targets” of the council and not merely its “strategic” requirements.  What is at the centre of the dispute between the parties on the present application  is the council’s contention that this new criterion for determining whether projects were “core” of disregarding strategic requirements of the Council were made known to each of the ELL organisations before they each responded to the January 2004 letters with the result that they were able to respond intelligently and effectively to the proposals in that letter.  Mr. Fordham disagrees and submits that none of the ELL organisations had this knowledge and so the consultation process was flawed.

22.	In order to understand the submissions on this point and in particular, on what determined if requirements of the Council were “statutory” or “strategic”, it is necessary now to explain some of the terminology used by the ELL and, in particular, by its relevant sub-department, the Lifelong Learning Community Development Division (“the Division”), which was responsible for the delivery of the “lifelong learning services”.  The strategic planning of this Division was carried out by the production and fulfilment of a Strategic Community Learning Plan, which brought together four different statutory plans, which it was the function of the Division to fulfil.  The four statutory plans comprised the Adult Learning Plan, the Early Years Childcare Development Plan, the Library Plan and the Youth work Plan.  These four statutory plans, together with the Education Development Plan, which focussed on child-age learning, formed the main service plans of the ELL and they contained the targets, which the ELL was obliged to deliver.

23.	Apart from these statutory plans, there was additionally local strategic planning brought together by Senior Community Learning Managers (“SCLM”), who were responsible for achieving those targets within those plans as well as for fulfilling strategic community service priorities, which were to support learning in its wider sense.  Historically, as I will shortly explain, the assessment of projects by the council for the purpose of determining whether any of the ELL organisations should receive funding had previously been considered in the light of not merely and solely the statutory requirements of the council but of  a combination of statutory requirements and of strategic requirements.

24.	In June 2003, after the change of the governing group on the council, the appropriate officers of the ELL were asked to start preparing the appropriate budget of the council for the period from 2004 to 2006 having regard to the views of the incoming council members.  The new governing group’s wish was for the council thereafter to concentrate its resources on what it considered were its  “core” services, which were, in the words of Mr. Mark Noble, the Chief Finance Officer of the Council, “not capable of rigid definition” but they covered those services which the council had a legal obligation to provide as well as those in respect of which there was a “strong expectation that the local authority would provide”. 

25.	According to Mr. Fordham, this new policy meant a radical change of the criterion for funding bodies such as the ELL organisations because the council would discontinue the funding of “non-core” services or services, which had previously been provided or which had previously been funded by the council and which only met the strategic requirements of the council while not also satisfying its statutory requirements.

26.	This new approach of the incoming council constituted a significant change of policy as previously there had been a categorisation for funding purposes by which voluntary projects had been divided into first “Category A”, which applied to those projects, which provided either statutory functions or strategic services of the council and second “Category B” project, which provided neither statutory functions nor strategic services.  The definitions of these categories is set out in paragraph 29 below.

27.	Thus, the effect of the new administration’s new policy was that those bodies which only provided “strategic services” and which were previously categorised as “Category A” projects thereafter became “non-core” under the new classification.  Mr. Keith Murdoch, the Community Services Manager of the council, has explained that most voluntary organisations were affected as they had been previously classified as “Category A” projects solely because they fulfilled strategic rather than statutory functions.  Thus, this change of policy constituted a significantly different approach to the criterion for providing funding and it meant that in the light of Mr. Murdoch’s comment that many, if not most, of the voluntary organisations would cease to be funded by the council as a result of this change of policy.

28.	The council’s evidence shows that the SCLM examined the service specification for each grant-aided project on the basis of the wishes of the new administration and it then made proposals to the senior management team after taking into account the new classification of whether the projects should be defined as “core” (i.e. meeting statutory and not merely strategic plans) or “non-core”.  This process entailed abandoning the previous classification used by the council for classifying projects into “Category A” and “Category B” with the ELL organisations being considered as “Category A”, which meant that they were thereby entitled to funding by the council.

(ii) The Information communicated to the ELL Organisations by the Council during and before the consultation process

29.	The complaint of the ELL organisations is that they were not informed about the totally new criteria that was to be adopted by the council in determining whether their funding would continue before or at the time when they received the January 2004 letters and so they could not participate properly and intelligently in the consultation process.  Mr. Timothy Straker QC, counsel for the council submits that the complaint is misconceived and that the ELL organisations were properly informed.  He contends that support for his submission is derived from the definition of the old “Category A” and “Category B” services, which were:-

“Category A

Mainstream – Priority statutory and strategic services.  These include; Statutory Services reflecting the council’s primary legal responsibilities reflected in core functions of the council’s work delivered through voluntary sector service arrangements.  Strategic Services that specifically contribute to corporate and departmental service priorities and community engagement.  These serve and meet social and/or economic needs contributing to prevention strategies and complementing the core functions of the council.

Category B

Historically funded services.  Other historical, mainly grant aided activity, which no longer conforms to departmental service or corporate priorities”.

30.	Mr. Straker points out that “Category A” in the classification describes services as “priority” not as “vital” while this categorisation made a clear distinction between the “statutory” services and the “strategic” services.  He also says that it was also noticeable that some “Category A” activities “delivered” core functions while others performed the function of “complementing the core functions of the council”.  Thus, Mr. Straker submits at that time of this classification, “core functions” were services “reflecting the council’s legal responsibilities” while “strategic services” were regarded as something different.  

31.	I am unable to accept for seven reasons Mr. Straker’s argument that the “Category A” and the “Category B” classifications, meant that the voluntary organisations would have appreciated first, that “core” functions mean statutory functions or services, second that strategic functions were not “core” functions and third, that both these points should have been appreciated by the ELL organisations.  First, Mr. Straker’s points were not made clear in the classifications as there is nothing which indicates clearly and unequivocally that “core” is synonymous with “statutory” while “strategic services” are automatically deemed to be not “core”.  Second, the term “core” was “not capable of rigid definition” as Mr. Noble has explained in the statement quoted in paragraph 24 above and if he found it vague, the ELL organisations must also be excused for not understanding it.  Third, “Category B” contains the non-funded services but they are not said to include or to be limited to providing strategic services. 

32.	Fourth, the ELL organisations are providers of services and they are not lawyers.  Thus, they could not be expected when reading the January 2004 letters to appreciate the fairly sophisticated points of construction made by Mr. Straker on the construction of the “Category A” and “Category B” classification, which had been set out two years earlier.  Fifth, if the council was abandoning its “Category A” and “Category B” classification by which those projects deemed to be “Category A” received funding, this radical change of policy was of crucial importance to the projects receiving council funding.  So it should have been drawn clearly and comprehensibly to the attention of the ELL organisations. It is only fair that this should be done where as in this case, there is to be a radical change of its funding policy, which could and would affect the very existence of the voluntary projects.

33.	Sixth, the council itself accepted that the categorisation of services as “A” would have led to the conclusion that they were “core” projects. Mr. Murdoch has admitted that as most voluntary projects had been categorised as “A” that:-

 “[he] can understand that this categorisation may have fuelled their hopes of their services being designated as “core” but it is not inconsistent with a designation as “non-core””.

34.	It follows that Mr. Murdoch appreciated correctly  that the existing  categorisation of projects as “A” would have led those whose projects had been so categorised to believe that they would also be “core” with the result that they would continue to be so regarded in the absence of a clear indication to the contrary.

35.	Finally, there is no reason why the council could not have explained its radical change of funding policy to the six voluntary organisations in the way in which it did in its January 2004 letter to VAL, which stated that:-

“activities are low priority because they are not core to the priorities of the social care and health department because they are not deemed essential in order for the department to meet its statutory obligations”.

36.	Mr. Straker next contends that the ELL organisations would have been aware of the new policy of the council, which was not to fund projects which only fulfilled strategic policy of the council but not its statutory targets from the wording in the December 2003 letters, which were sent to the ELL organisations and which stated that:-

“The new administration’s priorities are strongly focussed on delivering core services well, with a proper level of underlying resource.  In order to do this, we will review services which are “non-core”, and services will not continue to be funded simply because they have been historically….  The council will, however, only provide financial support to voluntary sector bodies where they are delivering core services, which the council would otherwise wish to provide by direct provision (unless there are exceptional reasons to do otherwise).

Inevitably this strategy if eventually approved by the council, would affect a number of voluntary organisations.  Formal proposals will be released after Christmas.  Under these circumstances we consider only fair to forewarn all voluntary organisations that there is likely to be an impact on the overall level of support to the voluntary sector ..”

37.	I agree that the December 2003 letters show that the council would only fund “core” services that, subject to exceptional reasons to do otherwise, the council would otherwise “wish to provide by direct provision”.  Significantly, it is noteworthy that the December 2003 letter does not state (i) what characteristics “core services” would have to have, (ii) what changes, if any, would be made or were being made from the “Category A” and “Category B” classification hitherto in force, (iii) that an organisation that fulfilled “strategic” objectives but did not fulfil “statutory plans” would thereafter be regarded as providing “non-core services” , (iv) that by only meeting “strategic” requirements, projects would not be regarded by the council as providing “core” services and (v) why “Category A” projects  were not “core”, which is an important point in the light of Mr. Murdoch’s sensible acceptance that those so designated would have regarded themselves as “core” in the passage  to which I referred in paragraph 33 above.

38.	As had been promised in the December 2003 letter, the council then as part of the first stage of negotiations sent the January 2004 letters to the ELL organisations, which insofar as is material, stated that:-

“As you are aware the council is planning the overall use of its revenue resources so that it can determine its budget within the resources available to it and that this will affect the amount of financial support available to the voluntary sector.  The purpose of this letter is to inform you that I am proposing to the council that upon review of the amount and purpose of your grant aid funding and the council’s draft revenue and budget policies, that the council does not renew your grant aid when the current Agreement expires on 31 March 2004 at all.

This letter is not formal notice to terminate that Agreement before it expires, nor, even if I am proposing continuation of funding in part, a representation or commitment that this will be so, a formal decision has not yet been made by the council one way or the other.  You will of course be aware that unless the council decides otherwise, your Agreement will expire automatically on 31 March 2004 and no funding will be payable after then in any event.  You are invited, and the council will consider, any representations you may wish to make about future funding by the council and this letter gives you information about the making of such representations, the background to my proposal, how a decision will be made and who by.  It also sets out the process the council is adopting to ensure that all affected organisations are treated fairly and transparently and in accordance with the conditions of the Agreement.

The council has published, on 24 November, a draft Corporate Revenue Strategy that states that:-

The council will, however, only provide financial support to voluntary sector bodies where they are delivering core services that the council would otherwise wish to provide by direct provision, unless there are exceptional reasons to do otherwise.

I have looked at the totality of grant funding for which my department is responsible having regard to the draft Corporate Revenue Strategy and have come forward with proposals including the proposal relating to your grant aid funding.  The reasons for my proposal to the council about your grant aid funding is that the council is unable to provide funding in the light of its draft corporate revenue strategy and the corporate budget strategy (which sets out resources available to the council for the next three years).  In particular the activities are low priority because they are not core to the priorities of the Education & Lifelong Learning Department because they do not directly contribute to the Adult, Early Years, or Youth targets of the department, and there are no other material considerations that outweigh the above.

Any comments you wish to make regarding this proposal should be sent to Steven Andrews, Director of Education, to the above address, by 3 February”.

39.	The January 2004 letter suffers from the same defects as the December 2003 letter in that it contains the same five omissions as I have set out in paragraph 37 above.  Additionally, it does not explain to the ELL organisations the basis on which the council had concluded that the ELL organisations were not “delivering core services”.  It is again noteworthy that the January 2004 letter to the ELL organisations contrasts with the January 2004 letter referred to in paragraph 35 above sent to VAL, who accordingly do not take the strategic point.

(iii)  	What was required of the Council to ensure that there was adequate consultation with the ELL organisations?

40.	As I have explained irrespective of whether the council was obliged to consult the ELL organisations, if it did actually consult those bodies, the council had to do so fairly.  Mr. Noble accepted that the council “was mindful of the need to ensure that the voluntary sector was treated consistently and fairly”.  In a joint report of the Chief Finance Officer and the Assistant Chief Executive dated 8 December 2003, it was stated that “there must be meaningful consultation .. the council must be open and transparent in the decisions it takes” (B–56).  

41.	The test of what constitutes a  fair consultation process was explained by Lord Woolf MR when giving the judgment of the Court of Appeal in R v. North and East Devon Health Authority ex parte Coughlan [2001] QB 213, 258 [108] where he stated that:-

“To be proper, consultation must be undertaken at a time when proposals are still at a formative stage.  It must include sufficient reasons for particular proposals to allow those consulted to give intelligent consideration and an intelligent response; adequate time must be given for this purpose; and the product of consultation must be conscientiously taken into account when the ultimate decision is taken” (italicisation added).

42.	Lord Mustill also explained in R v. Secretary of State ex parte Doody [1994] 1 AC 531, 550 that:-

“(5) Since the person affected cannot make worthwhile representations without knowing what factors may weigh against his interests fairness will very often require that he is informed of the gist of the case which he has to answer”.

43.	In order to determine whether proper consultation in this particular case has taken place, it must not be forgotten that:- 

“.. the precise demands of consultation .. there according to the circumstances .. The extent and method of consultation must depend on the circumstances.  Underlying what is required must be the concept of fairness” (per Keene J (as he then was) in R v. London Borough of Islington ex parte East [1996] ELR 74 at page 88 relying on a passage in the judgment of Simon Brown LJ in R v. Devon County Council ex parte Baker [1995] 1 All ER 73, 92).

44.	In my view, the council had chosen to consult and it was obliged to consult fairly in the light of the Coughlan and Doody guidelines set out respectively in paragraphs 41 and 42 above.  The January 2004 letter stated with italicisation added, that the recipients:-

“were invited to make representations and this letter gives you information about the making of such representations, the background to my proposal, how a decision will be made and by whom.  It also set out the process the council is adopting to ensure that all affected organisations are treated fairly and transparently”.
		
45.	This wording indicates a wish on the part of the council to consult and a wish on its part  to receive meaningful responses provided by the six voluntary organisations, which knew the factors that would determine the decisions to be made.  This would indicate that the consultation would have to comply with the approach stated in  Coughlan and Doody.  Mr. Fordham also contended that the decisions under challenge could be quashed on the grounds that first the council as the decision-maker was not permitted  to use a test that had not been discussed with those consulted and affected by it (R v. Secretary of State ex parte Asif Khan [1984] 1 WLR 1337) and second  that the ELL organisations had a legitimate expectation to be consulted on the criterion to be used by the council for making its decisions.  I do not propose to consider either of these two points further because I do not think that the claimants could succeed on either of these grounds without also succeeding on Mr. Fordham’s primary point that there had not been proper consultation, on which I will now focus.

46.	It is important that any consultee should be  aware of the basis on which a proposal put forward for the basis of consultation has been considered and will thereafter be considered by the decision-maker as otherwise the consultee would be unable to give, in Lord Woolf’s words in Coughlan, either “intelligent consideration” to the proposals or to make an “intelligent response” to it.  This requirement means that the person consulted was entitled to be informed or had to be made aware of what criterion would be adopted by the decision-maker and what factors would be considered decisive or of substantial importance by the decision-maker in making his decision at the end of the consultation process. 

47.	I do not think that a consultee would not have been properly consulted if he ought reasonably to have known the criterion, which the decision-maker would adopt or the factors, which would be considered decisive by the decision-maker but that the only reason why the consultee did not know these matters was because, for example, he had turned a blind eye to something of which he ought reasonably to have been aware.  Thus, consultation will only be regarded as unfair if the consultee either did not know the criterion to be adopted by the decision-maker or ought not reasonably to have known of this criterion.  Of course, what a consultee ought reasonably to have known about the factors, which will be considered decisive by the decision-maker depends on all the relevant circumstances, which may well be different in each case.

(iv) Four Preliminary Matters

48.	It is convenient at this stage to deal with four general points made by the council on the strategic point and which also apply to the other complaints of the claimants concerning flawed consultation by the council.  First, it is said that if the ELL organisations were in any doubt about the council’s criterion, then in the words of the council’s skeleton argument, “they were free to contact the council’s officers with whom they had always been in regular contact”.  That submission presupposes that the January 2004 letter indicated a change by the council of its criterion for funding, which I believe that it did not.  Thus, there would have been no reason for the ELL organisations on receipt of the January 2004 letter, to appreciate that the “Category A” and “Category B” classification had been abandoned and that a radically different criterion had been adopted.  The evidence adduced by the ELL organisations discloses clearly that they did not understand from the January 2004 letter or from  the December 2003 letter that there was to be a radical abandonment of the old “Category A” and “Category B” classification.  For the reasons set out in paragraphs 31 to 35, 37 and 39 above, each of the  ELL organisations was entitled to take that approach, which I regard as fair and reasonable.

49.	Second, it is said that the council was in day-to-day contact with the ELL organisations and so the council was “very familiar with their activities”.  Even if that claim is correct, that assertion does not obviate the need for there to be proper consultation because, as the evidence shows strikingly, there were some aspects of the activities of the ELL organisations with which the council was clearly not familiar.  In any event, once a consultation process is undertaken, it must be done properly even if there was regular contact between the decision-maker and the consultee so that  each consultee could first focus in his response on the criterion to be adopted by the decision maker including putting forward any relevant facts and matters relating to these criteria and second disabuse the decision-maker of any of his provisional views.  In order to take those steps, it was imperative that the decision-maker knew what factors were to be considered as being important by the decision-maker.

50.	Third, the council contend that upon receipt of the December 2003 letter and of the January 2004 letter “it will have been obvious to [the ELL organisations] that further changes were afoot” (paragraph 16 of council’s skeleton argument with their underlining).  Even if that is correct, the mere fact that there were to be “further changes” would not have assisted  the ELL organisations in responding to the January 2004 letter as they did not know  what factors were to be considered decisive or important by the council; more specifically they did not appreciate and they could not reasonably have been expected to realise that services which only met “strategic requirements” were thereafter to be regarded as “non-core” and thus no longer entitled to further funding by the council.

51.	The stark fact is that the council failed to inform the ELL organisations that, in the words of its Chief Finance Officer Mr. Mark Noble, the “Category A” classification of services was “water under the bridge”.  This failure, which I suspect was a consequence of having to produce a budget in a great rush, was a very serious error by the council because, as I have already explained, Mr. Keith Murdoch has stated, the “Category A” status enjoyed by the ELL organisations “may have fuelled [those organisations’] hopes of their services being designated as “core””.  In those circumstances, the council had a very clear obligation to explain comprehensively this radical change of policy to the organisations, which it funded especially as the loss of their total funding, would, as I have explained in paragraph 5 above, have had serious financial consequences for the ELL organisations.

52.	Finally, I must consider the contention of the council that it did offer the chance to discuss funding of residual “core” services and that some entities took advantage of this opportunity. It is, however, significant that these discussions occurred after the decisions under challenge had been made. I do not consider that these discussions constituted an adequate substitute for proper consultation before the decisions under challenge were made. 

53.	First, there is a difference between, on the one hand, the position and power to influence of a voluntary organisation at the time when it responded to the January 2004 letter and on the other hand, its position after its future funding had been terminated in February 2004. In the former case, the voluntary organisation  was responding against the background of no adverse decision against it while in the latter case, it was faced with the more difficult task of trying to persuade the council to change a considered decision. Second, the  voluntary organisation  did not have available to it details of all the Council’ s criteria for viability and its reasoning until after the council served its witness statements in the present proceedings and so it would not have been able to respond properly to the Council’s proposals even after the decision letters were sent to it. 

54.	Third, after the decision under challenge was made, the council did not on that occasion give the voluntary organisation an opportunity to make worthwhile representations on whether the entire previous funding of the voluntary organisation  should continue; the voluntary organisations could only make representations in respect of part of their funding.  Thus I consider that the council cannot rely on what occurred  after the decision under challenge was made to justify any failure on its part to consult the voluntary organisations and that includes later offers of funding or negotiations made to them by the council.

55.	Against that background, I must now consider the evidence, which has been adduced by each of the ELL organisations in support of their contentions that the consultation by the council was unfair as they were unaware first that their role in satisfying the council strategic priorities was no longer a relevant factor in determining whether their funding from the council should continue and second that the only relevant factor on this funding issue was whether the particular ELL organisations could satisfy the council’s statutory requirements.  I will start by considering what the ELL organisations stated about what they actually knew about these criteria adopted by the council at the first and second stages in determining whether funding would continue and then determining if the decision letter should be quashed on that ground but first I must mention the well-established circumstances in which a decision will be quashed.

(v) When will a decision be quashed?

56.	The parties accepted by their submissions that the mere fact that there had been inadequate consultation did not mean the decisions under challenge had to be quashed.  In R v. Chief Constable of Thames Valley ex parte Cotton [1990] IRLR 344, Simon Brown J (as he then was) said that in order:- 

“to make good a natural justice challenge an applicant  must establish where there is a real, as opposed to purely minimal possibility that the outcome would have been different” (page 348).  

In the same case, Bingham LJ (as he then was) explained at page 352 that:- 

“While cases may no doubt arise in which it can properly be held that denying the subject of a decision an adequate opportunity to put his case is not in all the circumstances unfair, I would expect these cases to be of great rarity.  There are a number of reasons for this:-

1.	Unless the subject of the decision has had the opportunity to put his case it may not be easy to knew what case he could or would have put if he had the chance.

2.	As memorably pointed out by Megarry J in John v. Rees [1970] Ch 345 at page 402, experience shows that what is confidently expected is by no means always that which happens.

3.	It is generally desirable that decision-makers should be reasonably receptive to argument, and it would therefore be unfortunate if a complainant’s position became weaker as the decision-maker’s mind became more closed.

4.	In considering whether the complainant’s representations would have made any difference to the outcome the court may unconsciously stray from its proper province of reviewing the propriety of the decision-making process into the forbidden territory of evaluating the substantial merits of a decision.  

5.	This is a field in which appearances are generally thought to matter.

6.	Where the decision-maker is under a duty to act fairly the subject of the decision may properly be said to have a right to be heard, and rights are not to be lightly denied”.

57.	Furthermore, in a case in which the Divisional Court was considering a refusal by a minister to hear further representations form local authorities with regard to rate support grants, namely R v. Secretary of State for the Environment ex p Brent London Borough Council [1982] 1 QB 593, Ackner LJ said at p 647 that:-

“it would of course have been unrealistic not to accept that it is certainly probably that, if the representations had been listened to by the Secretary of State, he would have nevertheless have adhered to his policy.  However, we are not satisfied that such a result must inevitably have followed …. It would in our view be wrong for this court to speculate as to how the Secretary of State would have exercised his discretion if he had heard the representations … we are not prepared to hold that it would have been a useless formality for the Secretary of State to have listened to the representations …”.

58.	Thus, even if there has been inadequate consultation, there will be cases in which it would not be unfair not to quash the subsequent decision.  I will apply those principles in considering in turn the case of each of the  six voluntary organisations on this and on each of the other grounds of challenge.

(vi)	Shree 

59.	Shree contend that they did not know that the test for funding adopted at the first and second stages meant that it would not receive funding from the Council if it merely satisfied the strategic requirements of the council, but did not also contribute to the statutory plans of the council. 

60.	Shilen Pattni, who had been the Project Co-ordinator of that project for the last two years, explained that in 2002, Shree’s services had been assessed as “providing vital statutory or strategic services”.  At that time, the council drew no distinction between services, which were “statutory” or “strategic”.  Shilen Pattni did not consider that the December 2003 letter indicated any departure from the previous  assessment of Shree of “providing vital statutory or strategic services”; therefore no difficulties were anticipated by Shree with the renewal of its funding contract with the council in March 2004.

61.	Shilen Pattni explained that Shree were “very surprised” to receive the January 2004 letter stating that their funding would be withdrawn from 31 March 2004 because “as far as we were aware we were meeting the council’s priorities”.  In its reply to the January 2004 letter, the Chair of the Management Committee of Shree had explained that hitherto Shree’s services had been placed in “Category A” in line with the divisional objectives as they had “been clearly identified as core to the objectives of the [ELD]” and “we cannot understand your justification for removing such services that have been clearly identified as core to the objectives of the [ELD]”.

62.	It is very surprising that the council did not appreciate that when Shree was responding to the January 2004 letter, it was labouring under a misapprehension, which was that the old classification of “core” activities continued and that this existing classification would have resulted in Shree continuing to receive funding. The council ought to have disabused Shree of its mistaken approach, but unfortunately perhaps because of work, it did not do so.

63.	In my view, Shree clearly misunderstood the criteria that were to be applied in order to determine what was “core” to the priorities of the ELL and this was not surprising because the council failed to explain in the January 2004 letter that a project that only met the strategic requirements of the council was not providing “core” services.   Shilen Pattni also explains that if Shree had known the approach, which the council has subsequently explained that it was adopting, which entailed disregarding contributions to “strategic” plans, Shree would have addressed this test and would have shown how Shree’s activities should be regarded as “core”. 

64.	 Shilen Pattni gives some examples of how Shree would have approached the issue and how it would have considered and shown how its activities could be regarded as “core” in the light of the criteria.  In addition, Mr. Murdoch now accepts Shree’s youth work may well contribute to the council’s early year targets, which is a “statutory” plan.  The project has subsequently been invited to discuss this with the council.  This indicates, at least in the words of Simon Brown J, “a real possibility” first that some of Shree’s work met the “statutory” plans of the council and second that if Shree had been told of the crucial significance of showing the relevance of its projects to the “statutory” requirements of the Council, it would have been able to adduce material, which would have led to some or all of its funding being continued and that there was a “real possibility” that the decision letter under challenge would not have been written.

65.	My conclusions are that (i) the council failed to explain to Shree that funding would in future be dependent on meeting the “statutory” priorities of the council and that, in contrast with the existing position, meeting “strategic” requirements would no longer suffice so as to ensure that Shree continued to receive funding, (ii) Shree did not know and ought not reasonably to have known of that change in the council’s funding policy from the January 2004 letter, (iii) if Shree had known of the meaning of “core” projects as used and understood by the council, it would or could have been able to address this point, (iv) there was a “real possibility” bearing in mind the principles spelt out by Simon Brown J and Bingham LJ (as they then were) in Cotton’s case and set out in paragraph 56 above first that some of Shree’s work was or may be “core” as I explained in the last paragraph and second that the council would have reached a different decision if representations had been made by Shree on the basis that it had to show to the council that Shree met the “core” requirements of the council, which were after all in the words of Mr. Mark Noble, which I have set out in paragraph 24 above “not capable of rigid definition” and (v) if I had been in any doubt, I would have reached that conclusion in the light of the approaches of Bingham LJ and of Lord Ackner to which I referred in paragraphs 56 and 57 respectively above relating to the “forbidden territory of evaluating the substantial merits of the decision”.  Thus, it follows that the decisions under challenge affecting Shree must be quashed.

(vii)  Turning Point 

66.	Ms. Sarah Davies, the Project Co-ordinator of Turning Point since 1998, explains that the January 2004 letter was the first indication given to Turning Point that its activities were not regarded by the council as “core” and that they  would no longer be funded.  She then says that after Turning Point had received the January 2004 letter, Mr. Keith Murdoch was contacted by Turning Point and that  he then  sent to Ms. Davies an “information pack”.  She explains that she no longer has it but she recalls that the pack included the departmental plans for Adult Learning, Early Years and Childcare Development and Youthwork, on which she then focussed.  

67.	Ms. Davies explains that in these documents, first that there was no definition of “core” services and second that there was certainly no distinction drawn between the existing criteria of “core” as falling within the “Category A” definition which included meeting “statutory” or “strategic” targets.  She says that during the last funding review in 2002, Turning Point had been placed in “Category A” but she cannot recall being given any explanation that this classification was on the basis of Turning Point meeting either “strategic” or “statutory” targets or both.

68.	Ms. Davies stated that she drafted the response of Turning Point to the January 2004 letter and she sought to address the council’s corporate strategic aims in the plans which she had been sent as it was her understanding that it was those aims which had to be met by Turning Point in order to continue to obtain funding.  She considered and she still considers that the services of Turning Point were “core” to those aims.  Indeed, the response of  Turning Point shows that and she explains that Turning Point did not receive a reply to their representations or any indication that it was somehow applying the wrong approach or that it was addressing the wrong issues.  It appears clear that Turning Point did not understand that strategic services were being excluded from funding.  In my view, that was a reasonable view for them to hold in the light of the January 2004 letter and the previous classification.  Ms. Davies also points to errors contained in Mr. Murdoch’s statement relating to the information on which the decision to end funding was based.

69.	Ms. Davies contends that Turning Point’s work is contributing to the council’s “core” “early years” work and thus it is entitled to funding.  Mr. Murdoch in a witness statement served just before the hearing has now accepted that:-

“Turning Point’s early years work is core to the council’s business and is negotiating with them about continued funding”.

70.	It seems clear that Turning Point did not appreciate and that it had no reason to appreciate that “core” projects were limited to meeting statutory objectives.  If Turning Point had appreciated the true position, there was a “real possibility” that it could have shown that it met the statutory objectives in relation to its Early Years work as is now apparently accepted by the council and possibly because of the errors it has made.  An alternative route to the same conclusion would be reached by adopting  the approach of Lord Ackner and of Bingham LJ, which I have set out in paragraph 56 above.  Thus, the decision under challenge relating to Turning Point must also be quashed.

(viii)  Ajani 

71.	Ms. Pamela Campbell the Project Manager of Ajani, explains that Ajani was “very shocked” to receive the January 2004 letter as they were not told the reason for the decision to stop its funding or why their services were not regarded as “core”.  She states  that Ajani had not been aware that the council was distinguishing between “strategic” and “statutory” service.  Ms. Campbell explains that if Ajani had been aware of this approach to “core services”, Ajani would have been in a position to address their representations specifically to show the significance and the relevance of its work the council’s “statutory plans”, but Ajani was also not aware of the basis on which consultation would take place.  Ms. Campbell also points to errors in the information used by the council in its decision-making process.

72.	Ajani is in a similar position to Shree as in my opinion it did not know or ought not reasonably to have known of the council’s abandonment of the “Category A” classification as the criterion for continuing funding.  Again, if Ajani had known the true position, it asserts that it “would have been in a position to address our representations specifically to the council’s statutory plans”. Ms Campbell has also explained that the Council has belatedly “accepted that some of the services we provided were “core” or potentially “core””. I have no reason to doubt these statements  or indeed not to believe there is a “real possibility” that those representations might not have led the council to reach a different decision on Ajani’s continued funding and the approach of Bingham LJ and Lord Ackner fortifies that conclusion.  Another reason why I would if necessary reach that conclusion is that it is noteworthy that Ms. Campbell also explains “by contrast with what the Council’s letters indicated, the Council accepted that some of the services we provided were core or potentially core”.  Thus, the decision under challenge in relation to Ajani must also be quashed.

(ix)  St. Gabriel’s 

73.	Mr Roy Bastock, the Chairman of the Management Committee of St. Gabriel’s, explains in a witness statement that its services had been classified as “Category A” in 2002, from which St. Gabriel’s understood thereafter that their services were regarded by the council as “core”.  Mr. Bastock said that he cannot accept the council’s logic that its services are not “core services” as there is no other youth service provision in the area.

74.	The council has now accepted after the decision letters were sent that at least a part of St. Gabriel’s early year activities are “core” and this has, in Mr. Murdoch’s words, “led to an offer [by the council] to recommission £11,000 of early years and infrastructure costs”.  

75.	Again, I am satisfied that St. Gabriel’s neither knew nor reasonably ought to have known that the council would regard its strategic activities as non-core.  Thus, the consultation with them was defective and this has been shown by the change of attitude of the council referred to in the last paragraph, which proves that St. Gabriel’s could show that they were satisfying at least some of the statutory objectives of the council.  It seems that in their case, there is at least a “real possibility”` that if there has been proper consultation with the council’s criterion for funding being explained, the decision letter would have been sent to St. Gabriel’s.  If I had been in doubt, I would have reached the same conclusion in the light of the approach of Bingham LJ (as he then was) and of Lord Ackner to which I referred in paragraphs 56 and 57 above.

(x)  CCC 

76.	Dr. Paul Ng, the Chair of the Management Committee of the CCC explains that as recently as January 2003, CCC had been categorised by the council as “Category A” and CCC was therefore confident that it was providing “core services” for the council.  Thus, CCC was “very surprised” when it received the January 2004 letter stating that its activities were no longer “core”. Again, it is implicit in that statement that he regarded  projects such as CCC, which had been categorised as “A” by the council as providing “core” services for the council.

77.	CCC clearly did not know or could not reasonably have known when it responded to the January 2004 letter that strategic services provided by it  were then  to be regarded as “non-core” with the consequence  that CCC would have  to focus on its “statutory services” and to disregard its “strategic services” in its response.  If CCC had known of this change of policy by the council, it could have focussed on, for example, its lunch facilities for the elderly, which Mr. Murdoch now accepts that “the provision of lunch clubs for the elderly is a core service of the social care and health department”.  In consequence, if the council had explained its change of policy, CCC might well have been able to submit a response to the council to show that it provided “core services” with the consequence there is at least “a real possibility” that CCC would have persuaded the council not to send the decision letter.  Again, if I had been in any doubt on this point, the approach of Bingham LJ and Lord Ackner would have led to the same conclusion.

78.	In conclusion on the strategic point, I suspect that the council failed to consult properly with the ELL organisations because its officers were very stretched with the change of policy of the new council. As I have explained, it is unfortunate that the ELL organisations did not receive the same letter as that sent to VAL, which stated that its “activities … are not core  … because they are not deemed essential in order for the council to meet its statutory obligations”.  If they had done so, the strategic point might well have failed.  As it is, it succeeds and the decisions under challenge concerning the ELL organisations   will have to be quashed. I will deal with Mr. Fordham’s other complaints concerning the ELL organisations more briefly than I would otherwise have done if they were to determine the result of this application.

VI  The Provider Point

(i)  Introduction

79.	Mr. Fordham complains that when determining whether to continue funding for the ELL applicants, the council was only concerned with the number of adults enrolled on courses supplied or commissioned by the local education authority (“LEA”), even though this criterion had not been explained to the ELL applicants in the January 2004 letter, which I have quoted in paragraph 34 above.  Thus, the council accepts that it  was no longer prepared to continue funding for the ELL applicants if the delivery of those courses was provided by another entity, which was itself contracted with the Learning and Skills Council.  The council has now explained that this requirement was imposed simply as an application of its “core” and “non-core” criteria so as to exclude from further funding projects, which did not deliver statutory targets.  Mr. Fordham contends that the ELL applicants were not aware of the provider point when they responded to the January 2004 letter.

80.	In their evidence, the council contend that it was correct to apply the test of determining the number of adults who were enrolled on courses supplied or commissioned by the LEA in order to decide if it should continue funding for the ELL organisations.  The reason for this policy, according to the council, was that the relevant statutory plan, which was the Report on Adult Learning Plan 2003 – 2006.  It is the plan of the LEA submitted to secure funding and it “outlines the [LEA’s] priorities for City Council managed Adult Learning”.  This plan:- 

“outlines the key targets agreed with the Leicestershire Learning and Skills Council as part of our contract to draw down funding for Adult Learning.  The Division aims to achieve a total of 22,000 adult learners.  We are further required to set targets for particular learner categories as specified by the LSC”.

81.	The council stated that the existence and the importance of these targets was a crucial part of the plans of the ELL and thus, of necessity, of the council, which had to direct its scarce resources towards achieving targets.  It is also contended by the council that all these projects had the opportunity to seek further information and that the ELL department prepared an  information pack of plans to send to projects, which did not already have these documents.  

82.	It has been explained by the council that where activities are formal adult learning, they are actually often usually provided by another adult learning provider contracted to the Learning and Skills Council (“LSC”).  The reason for that was that the LSC subsidised adult learning through a number of adult learning providers, which either delivered their courses by operating directly in their own building or by contracting with another agency to do it for them or by directly running it in another agency’s building.  It has been stated by the council that it is only the specific adult-learning provider, which receives the subsidy irrespective of the method of delivery.  So, when a provider uses a building of another agency, it is the provider, who receives the subsidy and not the organisation whose premises are used.  It was that approach which was used by the council in 2004 in order to determine if the ELL organisations were providing a service, which was “core” to the priorities of the ELL.

83.	The issue between the parties on this issue as on the strategic and viability points is not whether this policy of the council was justified but whether the ELL organisations were consulted properly in accordance with the approach in Coughlan and Doody.

84.	Mr. Straker points out that in the supporting information document, it was explained by the council that it was obliged to submit an Adult Learning Plan to the LSC detailing its plans for the period 2003-2006.  It is said that the January 2004 letter “fairly put forward the test including direct contribution to statutory plans”.  The council’s case is encapsulated in the words contained in a helpful written schedule supplied to me by its counsel during oral submissions that the council in the January 2004 letter “did not need to explain/interpret the plans”.  In his second witness statement served shortly before the present hearing commenced, Mr. Keith Murdoch said that he believed that any project would have been aware of the significance of those targets and that each of them had the opportunity to seek information from the council. The ELL organisations contend that they were not aware of this approach and that it has been held against them and that if they had known the true position, there is a realistic possibility that they could have caused the Council to reach a different decision.

85.	Thus my task is to determine first if the ELL organisations knew or ought  to have known that the Council would apply  the provider point  and ,if not, second whether the decision under challenge should be quashed, which requires me to consider the principles set out in paragraphs 56 and 57 above

(ii) What did the ELL know or what ought they to have known about the use by the Council of the provider point as a criterion for continuing funding?

86.	It is correct that the January 2004 letter to the ELL organisations explained the reasons why funding for them would not continue and that  was because their:- 

“activities are low priority because they are not core to the priorities of the Education and Lifelong Learning Department because they do not directly contribute to the Adult, Early Years, or Youth targets of the department and there are no other material considerations which outweigh the above”.

87.	Nothing, however, is stated in the January 2004 letter, which indicates that a critical feature for determining whether an ELL applicant received funding would be the number of adults, who were enrolled on courses supplied or commissioned by the local education authority.  The mere reference in the January 2004 letter to the priorities of the department or the targets of the department did not in my opinion enable the recipients of the January 2004 letters to appreciate what those targets were, especially as first the plan was not included, second more importantly, it was not stated that there would be a change in the criteria for funding organisations and third the letter failed to explain as it should have done  that the council had abandoned or changed in any way its previous categorisation of projects as being either “A” or “B” in accordance with the criteria which I have described in paragraph 29 above. As I have explained the ELL organisations contend that they did not know and could not reasonably have known of this change of policy on funding adopted by the council. I consider that submission to be correct as the council had failed to indicate in the January 2004 letter or at all the precise policy which it was then applying or that there would be any changes from the previous criterion for funding voluntary organisations, let alone the nature of those changes.

88.	I must also reject the submission that the ELL organisations could have asked the council for further details but there was no reason for them to do this as there was nothing in the January 2004 letter or elsewhere to alert them to any change (let alone a radical change) from the “Category A” and “Category B” system which then determined if the council would fund an ELL organisation.  In any event, the ELL organisations would have been very much pre-occupied with trying to fulfil their respective objectives to assist in the community.  Each of them would have been entitled to assume that the council would have drawn their attention clearly and unequivocally to any fundamental changes in the funding criteria; a very important aspect of which would have been the meaning that the council gave to “core” projects, especially if that was different from the previously held view.  

89.	If I had been in any doubt on this point, I would have reached the same conclusion because as I have already explained in paragraph 51 above, the council’s officers now realistically accept that the fact that any particular ELL organisation held the “Category A” designation would first have fuelled the hopes of that ELL organisation for a continuation of its funding and second, that the “Category A” designation was “water under the bridge”.  These two significant concessions ought to have meant that the council was obliged to inform the ELL organisations clearly that the basis for funding by the council had changed radically and that a “Category A” classification did not entitle an ELL organisation to continue to receive funding.  Thus, I conclude that the ELL organisations ought not reasonably have known of this approach of the council or to have been obliged to make any further inquiries.

90.	Having determined that the ELL organisations cannot be said to have known or to have reasonably known of the council’s approach, I must now consider if the decisions under challenge should be quashed in respect of each of the ELL organisations.

(iii)  Shree 

91.	Mr. Murdoch said that in Shree’s case, adult learning classes were supplied by another provider.  Shilen Pattni explains in his witness statement that Shree thought that they were meeting the council’s priority when they received the January 2004 letter.  An example is then given of why Shree does provide “core” activities within the framework of the Adult Learning Plan and if it had known the true position about the provider point, it would have then explained to the council why its activities were “core”.  Mr. Murdoch in answer contends that even if that was correct, this example did not contradict the council’s position that the adult classes of Shree did not meet the council’s Adult Learning targets. 

92.	 Shree had explained that this was just an example but in any event, I am not prepared to conclude that Shree could not have put forward a sensible case on the provider point, which might have had a real prospect of showing that Shree could have met the council’s criterion for “core” services on the provider point.  As Bingham LJ explained in the judgment quoted in paragraph 50 above, I must not stray into “the forbidden territory of evaluating the substantial merits of a decision”.  I do not regard this as a case of what Bingham LJ describes as being “great rarity”, in which the failure to put the case was not unfair.  That means the decision under challenge relating to Shree has to be quashed.  If I had been in any doubt on this, my view would have been fortified by the fact that the council now accept that some of Shree’s work was “core”, this suggests that the council did not consider Shree’s case properly on the viability point and that there might be similar defects on the provider point.

(iv)  Ajani 

93.	The provider point was also held against Ajani but Ms Pamela Campbell contends that if Ajani had been made aware of the council’s approach to its services, Ajani would have been in a position to address representations specifically relating to the council’s statutory plans. She also explains in some detail why there are errors in the factual basis upon which the council appraised Ajani’s case.  Having read all the evidence on this issue, I have no reason to doubt Ms. Campbell’s assertions on either of these points. Nevertheless as I understand her witness statement, she does not specifically deal with the provider point  in the sense of explaining what Ajani would or could  have said if it had known that the council was attaching importance to it . Thus, on that basis, there is no real possibility that if Ajani had been told how the council would approach the provider point, it might have led to representations from Ajani which would have led to the council reaching a different conclusion. This ground of challenge therefore fails.

(v)  Turning Point 

94.	The council held the provider point against Turning Point but Ms. Sarah Davies of Turning Point has  explained that she had drafted representations to address the council’s corporate strategy aims as it was her understanding that these was the criteria which Turning Point had to satisfy in order to obtain funding.  She points out that the representations submitted by Turning Point repeatedly to the council’s strategy aims and priorities and how the services of Turning Point contributed to them directly.  Turning Point did not receive a reply to their representations from the council nor any subsequent   indication from the council that they had applied the wrong approach or that they had addressed the wrong issues.  

95.	Turning Point is in a similar position to Ajani as its evidence does not show any new point of substance, which it could have raised (but did not raise) to answer the provider point if it had known that it was a matter to which the council attached importance. It would therefore seem that that there are no matters on which representations could have been made by Turning Point on the provider point, which might have assisted Turning Point’s position and more significantly which might well have led to a different decision from the one under challenge from the council.  That means that Turning Point’s challenge on the provider point must fail.

(vi) St. Gabriel’s 

96.	The provider  point was held against this  project, but it has not been contended in the witness statements that St. Gabriel’s could have answered the contention of the council that their services were in respect of the provider point “non-core”.  Thus, St. Gabriel’s are not entitled to have the decision letter quashed on this point.

(vii)  CCC 

97.	The council applied the provider point against CCC.  Dr. Ng stresses that CCC provided interpreter for its adult classes  and it seems possible that if CCC had been told of the criterion adopted by the council, it might have been able to show that it satisfied the criterion because of its supply of the interpreters.  It must not be forgotten that, as I have explained in paragraph 77 above, the council has altered its view on the core nature of some of CCC’s services.  This supports my view that there is a real possibility that the council might have reached a different decision on the provider point if, as it should have been CCC had been told of the criterion applicable. Thus CCC is entitled to have the decision under challenge quashed on the provider point as well as on the strategic point.

VII The Viability Point

(i) Introduction 

98.	In respect of each of the ELL organisations, with the exception of the CCC, Mr. Fordham contends that the council has accepted that some of each of those organisations’ projects was “core” by reference to the council’s statutory targets but that in spite of this, the council refused to continue funding of the projects because of their viability. Mr Fordham submits that the reason for that refusal to continue was that the Council applied additional tests before it would conclude that a project was “core” as it proceeded first to attach substantial importance to the proportion of such “core” services to the particular project’s overall activities and then second to make a judgment on the financial viability of the particular project.  

99.	Thus, funding was rejected to these ELL organisations because of the financial viability of the organisations, even though Mr. Fordham contends that these financial viability conditions for their continuing funding had not been explained to the relevant ELL organisations in the January 2004 letter or at all.  In other words, his complaint is that there was inadequate consultation by the council on this issue because it failed to notify these organisations of the tests, which it was applying in order to determine if funding by the council should continue.

100.	The response of Mr. Keith Murdoch is that the viability of residual “core” services was not a separate judgment taken by the council but rather that it formed part of the overall assessment made by the council of whether the grant-funding to the particular ELL organisations was being devoted substantially to “core” services.  He explained that the aim of that assessment was not to assess projects as being “100% core” or “non-core” because a decision to discontinue funding projects did not necessarily mean that there might not be some funding for some residual “core” services of that project.

101.	In answer to the contention that the consultees were not aware of this criteria, the council submits   that they were once again applying their test of determining whether projects of the ELL organisations were “core” projects with the consequence that if most of the services provided by the relevant ELL organisations were “non-core”, it would follow that it would not be appropriate in the eyes of the council to renew existing funding projects.  It has now been explained by the council that if there were some residual “core” services, those specific services could then be considered for further funding and that indeed some of them have now been offered it.  

102.	As I have already stated, my task is to see whether the decision letters should be quashed and that entails considering whether there was a proper consultation process of the kind to which I have referred in paragraphs 41 to 43 above.  Of course, even if there was not a proper consultation process and the result of a proper consultation would inevitably have been that no further funding had been given to the project, there would then be no point in now quashing the decision letter.  Each of the ELL organisations, which pursued the viability point, contended first that they were not aware of what I have described as the viability point but second that if they had been aware of it, they would then have been able to make worthwhile representations, so that there was in each of their cases in the words of Simon Brown J (as he then was and which I have quoted in paragraph 56 above) “a real and not merely a purely minimal possibility that the outcome would have been different”. I now turn to consider the case of each ELL organisation, save of course for CCC, who do not rely on this point. 

(ii) Shree 

103.	The documents provided by the council show that this viability point was considered as very significant in Shree’s case by the council.  Shilen Pattni explained that Shree has now been told that the council does accept that the work of its project with eight to fourteen year olds would support the joint youth service and was “core”, but that the council concluded that “support for this element alone may not make the project viable”.

104.	Shree has stated that this point was never put or explained to it by the council before it made the decisions under challenge. Shree has stated that it would have remained viable if it had received funding solely for this part of the project, which was “core”. Indeed, Shree’s complaint   is that it would have wished to explain this and other matters to the council, but that it was not given the opportunity to do so before the decision under challenge was taken.  

105.	So the position before the decision under challenge was made is that the council had purported to consult properly with Shree but that in my view, it had not done so because Shree had not, in Lord Mustill’s words which I have quoted in paragraph 42 above, been “informed of the gist of the case which [it had] to answer”. I reach that conclusion because Shree had not been told of the viability test applied by the council and more particularly that the viability of residual “core” services was not a separate judgment taken by the council but rather that it formed part of the overall assessment made by the council of whether the grant-funding to the particular ELL organisations was being devoted substantially to “core” services.  If Shree had been informed of this approach, there was the in Simon Brown J’s words “a real possibility” that the council would have reached a different decision.

(iii) Ajani

106.	 Mr. Murdoch explains that the crèche of Ajani “was identified as potentially a core service”, but that it operated for only three hours a day and that it “could be recommissioned if the group were to continue”.  The council also concluded in respect of the after-school club that “due to relatively short opening hours and the expectation of income generation [it] would again account for only a small percentage of their current grant”.

107.	Furthermore, the “special events” of Ajani, such as women’s drop-in social evening and community meetings were predominantly community services and so they were considered by the council to be “non-core” but with the potential of limited recommissioning from the Early Years budget, but according to Mr. Murdoch, “that would be a small percentage of the existing grant aid”.  It was then said by Mr. Murdoch that this level of recommissioning did not justify “on the grounds of value for money” renewing the project’s grant aid contract.  It was also judged that a reduction in the level of grant aid would not make the project viable on its own with the result that public funds could be put at risk if the project were to fail. 

108.	The view of the council was that if these services were to be recommissioned, this would be in the context of a funding package and a viable business plan, which would enable the council to purchase services with confidence using the council’s procurement procedures.  It is said by the council that this last point – the viability of any residual “core” services – was not a separate judgment which was made about the project but rather that it was made as part of the overall assessment of whether the grant funding was being devoted substantially to “core” services.  The aim of that assessment was not to assess projects as being 100% “core” or “non-core” and therefore a decision to discontinue these major contracts did not necessarily mean that there might not be funding for some residual “core” services.

109.	In response, Pamela Campbell on behalf of Ajani explains that the issue of Ajani’s “viability” with reduced funding only came to Ajani’s attention during the course of the present proceedings.  She says that first, if Ajani had known the approach of the council and second, if it had:-

“been subject to fair assessment, in my view [Ajani] would have been able to secure funding for other services and would have continued to exist even with reduced staff”.

110.	Ms. Campbell also explained that Ajani would have remained viable even if they were only funded to run the crèche and the after school clubs, particularly as several of their sessional workers were only employed to provide those services.  She also stated that Ajani would also have wished to discuss this question of reduced funding and any other “recommissioning” with the council but it was not given the opportunity.

111.	The council point out that in a subsequent telephone conversation, Ms. Campbell said that Ajani had no other sources of funding, but that does not meet Ms. Campbell’s point that Ajani would have continued to exist providing the crèche and the after-school clubs with reduced staff if it had received reduced funding.  Again, the main point remains that Ajani were not aware of the basis upon which consultation had taken place and that it could have put forward arguments such as those referred to in the last paragraph. There was a “real possibility” that those arguments might have led  the council to reach a different conclusion in respect of the decisions under challenge. The conclusions, which I have reached in respect of the post-decision discussions and which I have set out in paragraphs 52 to 54 above also apply to Ajani Thus, the decision has to be quashed.

(iv) Turning Point 

112.	Mr. Murdoch explains that although Turning Point was delivering “core” services in the area of Early Years and Out of School childcare, this would only be a proportion “estimated between 10% and 25% depending on negotiations of the original grant aid and would not justify the retention of the overall grant”.

113.	Sarah Davies on behalf of Turning Point states that the viability point was not raised by the council with Turning Point at any stage.  She points out that no financial viability exercise was conducted and that Turning Point were not asked to comment or were invited to discuss it, even though they were providing other services with sources of funding other than from the council.  She concluded that she believes that Turning Point “could and would have remained viable if funding had continued for these core activities along with our other work”.  The response of the council is that negotiations are now taking place with Turning Point and it seems that the council has since the making of the decisions under challenge been able to offer some financial support to Turning Point.  

114.	The stark fact is that Turning Point was not given an opportunity to comment on the viability point as they were not told that it would be taken into account.  If it had been told of this point, it might well have been able to address and there is a realistic possibility that this might have led to a different decision. As I explained, subsequent discussions and offers do not mean that the complaint of Turning Point fails.  In my view, the decision against them has also to be quashed on the viability point.

(v) St. Gabriel’s

115.	Mr. Murdoch accepts that the early years activities of St. Gabriel’s were “core” services but were of lower volume, with one day per week for a maximum of 20 and “the majority of the out-of-school provision is funded by another agency”.  He then stated that the recommissioning was at a level, which would amount to a small percentage of the existing grant aid with the consequence that “a reduction of grant aid to this level would not leave the project viable and therefore public funds could be put at risk if the project failed”. 

116.	In response, Mr. Roy Bastock, the Chairman of St. Gabriel’s points out that these points were not put to St. Gabriel’s, which were therefore not given an opportunity to respond about low volume, availability of funding or the issue of “our ongoing viability”.  He explains that the funding from sources other than the Council is provided on the basis that funding from the Council would continue. Thus Mr. Bastock complains that before the decision under challenge was taken, St Gabriel’s was not given the opportunity to explain the true position on this or other matters to the Council even though they were of substantial, if not crucial importance to for the decision-makers. 

117.	The council’s response is that in the decision letter, the council only decided not to renew the existing contract but that it was nevertheless still prepared to and   did enter discussions, which resulted in an offer to recommission infrastructure costs from St. Gabriel’s so as to support the Early Years Service in the amount of £11,000 plus rent.  The council add that discussions were still continuing when the witness statements were being prepared in order to see if the council could make further funding available.  It seems clear, however, that the existing funding has been reduced as a result of the consultation started by the January 2004 letter.  

118.	My task is to determine if the decision under challenge has to be impugned because the Council did not consult properly with St. Gabriel’s. I have concluded that the council did not inform St Gabriel’s in Lord Mustill’s words in Doody which I have quoted in paragraph 42 above of  “the gist of the case which [it had] to answer” because it was not told of the importance attached by the Council to St Gabriel’s alleged funding or its ongoing viability.  If the council had done so, there is at least a realistic possibility that St. Gabriel’s would have obtained funding.  Thus the decision under challenge relating to St. Gabriel’s has also to be quashed.

VIII The Health Point

(i)	VAL’s complaint

119.	 The complaint of VAL is that the January 2004 letter sent to it by the council did not inform it accurately and clearly of the criterion, which was to be adopted by the council in deciding whether to continue VAL’s funding and so it could not participate properly in the consultation process.   VAL contends that it was only when it read the witness statements of the council served in the present proceedings that VAL first realised that in deciding to end the funding for VAL, the SCH on behalf of the council had adopted a test of using the Fair Access to Care Services (“FACS”) as the appropriate criterion for deciding if VAL should continue to receive funding.  VAL submits that if it had known that the council was using the FACS criterion, it could have, and would have, “responded specifically on this point”.  This contention is disputed by the council, which contends that VAL was properly informed of the issue which would determine if VAL received further funding with the result that VAL was consulted properly.

120.	As I have explained, VAL is an umbrella organisation assisting voluntary groups in Leicester   with their development.  The January 2004 letter, which was sent to VAL, came from the SCH and, as I have already pointed out, it was different from the letters sent to the ELL applicants.  The January 2004 letter to VAL indicated that there was a proposal not to continue to fund VAL after 30 June 2004 and that:-

“… the council is unable to provide funding in the light of its draft corporate revenue strategy and the corporate budget strategy (which sets out the resources available to the Council for the next three years).  In particular, the activities are low priority because they are not core to the priorities of the Social Care and Health Department because they are not deemed essential in order for the department to meet its statutory obligations”.

121.	This statement, according to Mr. Fordham, does not indicate that the FACS test was to be applied by the council.  In consequence, VAL responded to the January 2004 letter by explaining how its voluntary recruitment service provided “core” services.  VAL did not receive any reply to its response indicating that any special or different criteria would be used to determine if its funding would continue.  Under its grant aid contract, VAL had a right to appeal against the decision to case funding and it duly exercised it.  As I have explained, that appeal was eventually dismissed. I propose to reach a provisional conclusion on the complaint of VAL on the health point  before considering what emerged on its appeal and then I will consider from paragraph 134 below if what emerged on the appeal by VAL effects my provisional conclusion.

(ii)The council’s response

122.	Ms. Susan Talton, the contracts officer of the Services and Contracting Procurement Unit at SCH has explained in a witness statement that in determining whether to continue providing funding for VAL, the SCH had to determine whether its services were “core” or “non-core” and that:-
“For this department, core services for adults are services (care packages) provided following the community care assessment process which includes Fair Access to Care Services (FACS) threshold eligibility criteria of substantial or critical.  Legislation requires the Department to provide these.  A service is “non-core” if it is either insufficiently specific to the Department’s core statutory responsibilities or if it is not a direct service, meeting assessed needs, within the context of the FACS threshold eligibility criteria of substantial or critical.  The FACS threshold of substantial or critical refers to the criteria set by the Council to determine the eligibility for services in reference to the Department of Health Guidance issued by the Secretary of State under section 7(1) of the Local Authority Social Services Act 1970”.

123.	The council also relies on a reminder letter sent by Ms. Talton to VAL on 21 January 2004 reminding VAL that it had to submit its comments on the proposal on the January 2004 letter by 3 February 2004.  This reminder letter also set the matters in respect of which “it would be helpful if the response could focus” and these were: -

“		Why you think the service affected provides core services.
	How the service does this.
•	How this can be evidenced e.g. how many service users are receiving your service as a result of an assessment by the department for community care/children in need services, how many service users, in your view, would be eligible for community care/children in need services following an assessment by the department, how many service users are already receiving community care services in addition to your service.  You may also want to add a service user profile stating the gender, age, disability, frailty e.g. housebound and isolated, or your service users.
•	What impact the loss of the service would have on this department”.

124.	It is said on behalf of the council that the FACS test was not put to VAL because it was not the test to be applied on eligibility for funding but that the FACS test was, in the words of the council’s helpful written response to a written schedule provided by the claimants with the council’s original underlining,  “for eligibility to receive services (not eligibility to receive funding)”.

(iii) Discussion of the health point 

125.	I am unable to agree with the council’s contention because Ms. Talton’s approach was, as I have explained, that the criterion for services to be  “core” services for adults applied by the council included consideration of whether those services which are:-

“provided following the community assessment process which includes  ...FACS threshold eligibility criteria of substantial or critical”.

126.	I consider that this indicates that a critical test in the opinion of the Council for determining what was a “core” service for the purpose of eligibility for funding was the FACS criteria and this  was a matter of significance, which VAL needed to know when responding to the January 2004 letter from the Council. If I had been in any doubt on this issue, I would have been fortified in reaching that conclusion by Ms Talton’s explanation in her second witness statement that:-

“the [January 2004 letter] stated the department’s wish to concentrate its statutory obligations and FACS merely provides a framework within which this is done”.

127.	This statement provides additional support for my conclusion that proper consultation with VAL required VAL to appreciate that the FACS framework was being used by the Council to determine VAL’ entitlement to future funding.

128.	Before it responded to the January 2004 letter, VAL was unfortunately  not informed of the importance attached by the Council to the FACS criterion. It is noteworthy that the Council did not refer to the FACS criterion in the January 2004 letter or in the reminder letter, which I have quoted in paragraph 123 above. This is a significant omission, which may well have been caused by work pressure or time pressure on the part of the council, but it impaired VAL in its efforts to respond meaningfully to the council’s January 2004 letter for the simple reason that they could not have reasonably  contemplated and did not contemplate the importance attached by the council to the FACS criterion. 

129.	The detailed and careful response of VAL to the council’s January 2004 letter did not refer to the FACS criterion and indeed I would have been surprised if it did, as VAL’s attention had not been drawn to it.  I consider that in response to the January 2004 letter, VAL could not, in Lord Mustill’s words in Doody, which I have already quoted in paragraph 42 above:-

“make worthwhile representations without knowing what factors may weigh against [its] interests, fairness will very often require that [it] is informed of the gist of the case which [it] has to answer”. 

130.	In the present case, I consider that fairness required VAL to be informed of the importance attached by the council to the FACS criterion in order for it to give an intelligent response to the council’s proposals in order to show why funding for it should continue. Mr. Kevan Liles, the Chief Executive of VAL has explained in his witness statement that if VAL had been told of the importance attached by the council to the FACS criterion, VAL could and would  have responded specifically on this issue and it could have highlighted relevant aspects of its work. He gives some examples.

131.	I have no reason to doubt this assertion, which leads me to the conclusion  (subject to the consideration of the appeal process) that if VAL had been told, as it ought to have been informed, about the significance attached by the Council to the FACS criterion, there is a real possibility that the outcome of VAL’s funding might have been different. I am very conscious that my task is not to evaluate the substantive merits of the council’s decision to end funding for VAL.

132.	That conclusion (subject to the consideration of the appeal process) means that the decision letter has to be quashed. I have not overlooked the point made by Ms Talton to the effect that VAL could not have satisfied the FACS criterion because my task is not to consider the merits but merely to consider if there is a “real possibility” that the council would have come to a different decision if, as I consider to be the case, VAL had been properly informed of the use, which the council intended to make of the FACS criterion.

133.	I am fortified in coming to that conclusion because, as I have stated in paragraph 56 above, Bingham LJ as he then was has explained in Cotton’s case that a court considering applications for judicial review should not:-

“unconsciously not stray from its proper province of reviewing  the propriety of the decision-making process into the forbidden territory of evaluating the substantial merits of a decision”.

(iv) The Effect of the Appeal and the Views of the Panel

134.	As I have explained, I must now consider if my provisional conclusion that the decision letter has to be quashed has to be altered in the light of the appeal made by VAL . This appeal was brought because the terms of the contract of VAL contained provisions, which provided that if VAL had any dispute or difference concerning the operation of the termination procedure of their agreement, it could make a written complaint to the council, which would then trigger the holding of an inquiry. 

135.	On 11 March 2004, VAL invoked this procedure in relation to the termination by the council of its contract. In consequence, the council was then required to appoint a senior manager independent of the Head of Service responsible for the contract together with a representative nominated by VAL to carry out a review of the circumstances in which the agreement had been terminated.

136.	The two nominated representatives, who formed the Panel, were required to consider the provisions of clause 20 of the contract, which provided that:-

“The council may terminate this agreement by giving three months notice in writing if:-

a)	the council decides there is no longer a continuing need for the service or that the need of the service has been significantly reduced or
b)	the council is unable to provide funding or
c)	the Organisation fails to remedy any default as detailed in clause 19”.

137.	The Panel concluded that the terms of the contract had been complied with and that the appropriate period of notice had been given.  The two members of the Panel disagreed on whether sufficient information had been given to VAL for them to be in a position to make reasonable representations.  The representative of the council felt that the council had complied with this obligation, whereas the representative of VAL disagreed.

138.	The independent member of the Panel, who had been nominated by VAL, considered that the process could have been more “transparent and robust” because:-

“At the outset of the process, it might have helped to share the criteria that were to be used and the assessment process that was to be followed.  Once the assessment had been completed, it would have been more transparent to have shared this with the organisation concerned and to give them the chance to respond”.

139.	In the light of this report of the Panel, both parties then made further helpful written submissions to me, which I duly  received in mid-July 2004.  The council contended that the contents of the report should not affect the outcome of the present application because the report of the Review Panel contained no new evidence or facts to which the court should have regard.  The council also submitted that to the extent that the report contained opinions, I should ignore them because it is for the court to form its own opinions on the legal issues before it.

140.	VAL relies strongly on the view of the expert that he was not satisfied that there had been a reasonable opportunity to make representations.  They point out that the expert in this case was a senior member of the voluntary sector being the Chief Executive of “Engage E Midlands”, which is a voluntary sector network organisation for the East Midlands.

141.	In my view, the opinion of the expert is of no help to me because my task is to see if the decision letters can by impugned on public law grounds in the light of the established authorities.  The expert did not have the benefit of the helpful legal submissions, which I have received.  Nor did he have to address or to  answer the same questions as those with which I am concerned on this judicial review application.

142.	Thus, the views of the expert and the Panel have not helped me or been used by me in making my decision, although I have noted that even though he took a different route, the expert  also takes the view that insufficient evidence was provided to VAL for them to be in a position for them to make reasonable representations to the Council.

143.	For the purpose of completeness, I should add that VAL have contended that the decision letter should be quashed for a number of other reasons including that the test applied by the council to VAL was not applied to the council’s own volunteers. The council dispute this contention but it is unnecessary for me to reach a conclusion on this complaint because, as I have already explained, the decision letter has in an event to be quashed because of the failings in the consultation process.

IX  The Reasons and Appraisal Points

144.	For the reasons which I have sought to explain, the claimants succeed in their challenges to the decisions contained in the six decision letters to which I referred in paragraph 1 above. In the light of these conclusions, it is unnecessary for me to make this very lengthy judgment even longer by considering the appraisal point and the reasons point as my views on them will not have any effect on the order, which has to be made on this application.

X  Conclusion

145.	The six decision letters have to be quashed because of the failure of the council to consult properly with the six voluntary organisations.  I stress that I have not been concerned with the merits of the political decision of the Council to cease funding the six voluntary organisations but with the procedures by which the decisions under challenge were reached. So nothing contained in this judgment constitutes any comment or opinion on how the council should fund or should not fund any of the voluntary organisations with which this application has been concerned.  I also have some sympathy for the council officers whose decisions are under challenge as I suspect that they were under great pressure as a result of the change of policy of the incoming governing body of the council.

146.	The consequence of this judgment is that if the council now wishes not to fund the six voluntary organisations in the way that it had done prior to making the decisions under challenge, it will have to engage in what should be a relatively swift process of consulting afresh with those organisations.  The council must ensure that it explains clearly and comprehensively the criteria that it will adopt.  I must express my gratitude to all counsel for their helpful and thoughtful oral and written submissions.  

147.	Thus, the council’s decisions contained in the letters dated 25 and 26 February 2004 to the organisations represented by the claimants must be quashed.