England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		15 March 2007

Mr Justice Forbes:

Introduction.

1. The Claimant ("Hillingdon") is a local authority which, inter alia, owes a duty under the provisions of the Children (Leaving Care) Act 2000 ("the 2000 Act"), which amended the Children Act 1989 ("the 1989 Act"), to provide after-care services to any person who has been "looked after" by Hillingdon over a prescribed period of time prior to their 18^th birthday (i.e. a "former relevant child": see section 23C (1) of the 1989 Act, as amended).
2. It was originally thought by Hillingdon, in common with many, if not all, other similarly affected local authorities, that the provisions of the 1989 Act, as amended by the 2000 Act (in particular section 23C: as to which, see below), did not apply to former unaccompanied asylum seeking children ("UASCs") who had received services as children in need from the local authority pursuant to section 17 of the Children Act 1989 ("the 1989 Act") which, so far as material, provides as follows:

"17 Provision of services for children in need, their families and others

(1) It shall be the general duty of every local authority … –

(a) to safeguard and promote the welfare of children within their area who are in need; and

(b) so far as is consistent with that duty, to promote the upbringing of such children by their families,

by providing a range and level of services appropriate to those children's needs.

3. However, following the decision of Sullivan J in R (Behre) ~v~ Hillingdon (2003) EWHC 2075 ("the Hillingdon judgment"), it became clear that all relevant local authorities must also provide after-care services to eligible former UASCs pursuant to the provisions of the 1989 Act, as amended by the 2000 Act, as well as to other former relevant children. For the purposes of this judgment, it is unnecessary to rehearse those services in detail. Suffice it to say that the 2000 Act makes provision for what may be described as a comprehensive after-care service for former relevant children who have been looked after by a local authority in order to ease their passage into adulthood: see section 23C of the CA 1989, inserted by section 2 of the 2000 Act. Furthermore, the local authority is obliged to provide the after-care service until the former relevant child attains the age of 21 and to continue it beyond 21 where necessary to complete a programme of education or training: section 23C(6) and (7) of the 1989 Act.
4. The Defendant ("the Secretary of State") is the Secretary of State for and the Head of the Department for Education and Skills ("the DfES"). So far as material, section 31 of the Local Government Act 2003, provides as follows:

"31 Power to pay grant

(1) A minister of the Crown may pay a grant to a local authority in England towards expenditure incurred or to be incurred by it.

(2) ….

(3) The amount of grant under this section and the manner of its payment are to be such as the person paying it may determine."

5. In these proceedings, Hillingdon seeks appropriate relief by way of judicial review of the Secretary of State's decision, published on 11^th January 2006 in LA Circular (2006)1 ("LAC 1 of 2006") and maintained and/or affirmed by letter dated 7^th February 2006, to limit the funding assistance available from the DfES in respect of the cost of former UASCs leaving care ("the UASC leaving care grant") to £100 per week per UASC for the financial year 2005-06.
6. It is suggested that the Secretary of State's decision has had calamitous effects on Hillingdon. In particular, it is said that the result has been a funding shortfall of £3.7m for the financial year 2005/2006, which in turn has resulted in dramatic cut backs in key services (see paragraph 5 of the written skeleton argument prepared by Mr Goudie QC on behalf of Hillingdon). It is said that Hillingdon is in an unique position when it comes to providing after-care services to former UASCs because Heathrow airport is in Hillingdon's area and, as such, Hillingdon has to look after significantly more UASCs than any other local authority. As at 31^st March 2006, the number of former UASCs receiving after-care services is estimated at 967 for Hillingdon, as compared to 486 for Kent and 396 for Croydon – the other two recognised "gateway" authorities. Furthermore, records show that Hillingdon is consistently providing after-care services to a significantly higher number of former UASCs than any other authority and that the number of former UASCs to whom it is providing such services is substantially increasing over time.

The Grounds of Challenge.

7. It is Hillingdon's case that the Secretary of State's decision is unlawful for the following two reasons (see paragraph 3 of Mr Goudie's skeleton argument):

(i) The terms of the UASC leaving care grant for 2005-06 breached Hillingdon's legitimate expectation that the grant in question would provide Hillingdon with a level of funding support comparable to the level of support which had been made available in respect of the preceding financial year, i.e. by means of the UASC leaving care grant for 2004-05 ("Legitimate Expectation");

(ii) Further or alternatively, the Secretary of State thwarted her espoused policy of providing funding assistance to those local authorities "most affected by the Hillingdon judgment" ("Thwarting the Policy").

The Relevant Legal Principles.

8. Legitimate Expectation. The doctrine of legitimate expectation provides that, where a public authority has made a promise or adopted a practice that represents how it proposes to act in a given area, fairness requires that the promise or practice should be honoured unless there is a good (i.e. an overriding) reason not to do so. In Bibi ~v~ Newham LBC (2002) 1 WLR 237 ("Bibi"), Schiemann LJ outlined the Court's approach to analysing legitimate expectation in the following terms:

"19. In all legitimate expectation cases, whether substantive or procedural, three practical questions arise. The first question is to what has the public authority, whether by practice or promise, committed itself; the second is whether the authority has acted or proposes to act unlawfully in relation to its commitment; the third is what the court should do."

9. So far as concerns the first "practical question" identified by Schiemann LJ in Bibi, in order to found a legitimate expectation the conduct or representation/promise of the public authority must be "clear, unambiguous and devoid of relevant qualification": see R ~v~ IRC ex parte MFK Underwriting (1990) 1 WLR 1545, per Bingham LJ (as he then was) at page 1569.
10. The relevant principles are also conveniently set out in the judgment of Laws LJ in Nadarajah ~v~ Secretary of State for the Home Department (2005) EWCA Civ 1363 ("Nadarajah") at paragraphs 68-70, to the effect (inter alia) that:

(1) where a public authority has issued a promise or adopted a practice which represents how it proposes to act in a given area, the law will require the promise or practice to be honoured unless there is good reason not to do so;

(2) a public body's promise or practice as to future conduct may only be denied in circumstances where to do so is the public body's legal duty or is otherwise a proportionate response, having regard to a legitimate aim pursued by the public body in the public interest; and

(3) this approach makes no distinction between procedural and substantive expectations, though statutory duty may more often dictate the frustration of a substantive expectation.

11. Accordingly, in the light of Nadarajah, it is clear that, where a public authority's promise or conduct has given rise to a legitimate expectation, the public authority may only refuse to fulfil that expectation either: (i) where it is subject to a legal duty to so, or (ii) where the departure constitutes an objectively proportionate means to achieve a legitimate aim. As Mr Goudie submitted, in such circumstances and irrespective of whether the expectation is procedural or substantive in nature, the issue for the court remains essentially the same, namely: is there a good reason for the expectation being breached on the facts of the particular case?
12. Thwarting the Policy. It was common ground that, where a public authority has a clearly stated policy in relation to a particular matter, any discretion under that policy must be exercised so as to promote the policy and must not be used to thwart or run counter to the policy, unless and until the policy is itself changed: applying, by a parity of reasoning, the statement of general principle expressed by Lord Reid in Padfield ~v~ Minister of Agriculture (1968) AC 997 (a case that involved the exercise of a statutory discretion), in which he said this at page 1030:

"Parliament must have conferred the discretion with the intention that it should be used to promote the policy and objects of the Act … In a matter of this kind it is not possible to draw a hard and fast line, but if the Minister, by reason of his having misconstrued the Act or for any other reason, so uses his discretion as to thwart or run counter to the policy and objects of the Act, then our law would be very defective if persons aggrieved were not entitled to the protection of the court."

13. However, in the circumstances of this case, this second ground of challenge adds nothing to the first for reasons that will become apparent later in this judgment.

Factual Background.

14. The Hillingdon judgment was handed down on 29^th August 2003. As I have already indicated, the outcome was unexpected and of considerable economic significance for all local authorities directly affected by it. However, as Mr Goudie observed, it was inevitable that the judgment would impact more substantially on Hillingdon, Kent and Croydon because, as a result of their position as "gateway" authorities, these authorities inevitably have a disproportionately higher number of eligible former UASCs in their area than other local authorities.
15. In February 2004, the Government, which was obviously mindful of the dramatic and somewhat unexpected consequences of the Hillingdon judgment, decided that it would make available for the financial year 2004/2005 a UASC leaving care grant designed to assist local authorities affected by the judgment (i.e. the UASC leaving care grant for 2004-05): see paragraphs 4 and 5 of the witness statement filed on behalf of the Defendant by Bruce Clark ("Mr Clark": Divisional Manager of the "Looked After Children Division" within the DfES), which is in the following terms:

"4. As a consequence of the [Hillingdon] judgment … the claimant (and other local authorities) found that they faced an unexpected increase in their financial obligations. The Department for Education and Skills decided that it would provide financial assistance to local authorities towards meeting those additional costs. This financial assistance was provided under section 31 of the Local Government Act 2003, which enables a Minister to "pay a grant to a local authority towards expenditure incurred or to be incurred by it".

5. The Rt. Hon. Margaret Hodge MP, then Minister for Children, Young People and Families, met Councillor Ray Puddifoot, the leader of the claimant council, on 11 February 2004 to discuss the matter. In this meeting, which I attended, Councillor Puddifoot described the anticipated impact of the [Hillingdon] judgment, in financial and other terms, on his local authority. …"

16. According to Mr Clark, in early February 2004 Ministers had not yet determined the precise basis upon which the grant to assist local authorities towards meeting the costs arising from the Hillingdon judgment was to be made. However, on 13^th February 2004, the Rt. Hon. Margaret Hodge MP ("the Minister") wrote to the leader of the council, Councillor Puddifoot, in the following terms:

"UNACCOMPANIED ASYLUM SEEKING CARE LEAVERS

Following our meeting on 11 February, I thought that it might be helpful to set out my suggestions about a possible way forward, given your concerns about the financial uncertainties that may impact unhelpfully on your local authority.

I know that you are in the process, through your senior officers, of providing my officials with further information about the actual and anticipated numbers of young people during 2003/04 and 2004/05. Prior to the arrival of this information, I thought that I should explore with you the idea of providing you with certainty about a £140 a week rate (not £130 as previously advised), on the basis that it would be guaranteed for up to 300 full-time equivalent additional Hillingdon care leavers, above and beyond the 253 (of which 209 will be funded) that we have already estimated that you will have next year. This would mean that the £1.4 million already notified to you would rise to £1.5 million. In addition, if the extra 300 eventually fell to your responsibility, we would guarantee an additional £2.2m, in addition to the £1.5 million. All payments would be made in arrears on the basis of verifiable claims

This now means that we would be guaranteeing, at this time, to meet the costs of up to 509 (i.e. 253 – 44 + 300) young people, thus matching your base case scenario of 542, given that we are expecting all local authorities to fund up to the first 44 young people. We are further considering your concern about the rate of payment if numbers exceed this level, and will confirm our intentions in the circular we will issue shortly.

…

In addition, we will continue, in the light of the information that you will provide, to look sympathetically at the representations that you have been making in relation to 2003/04. Given the retrospective (quarterly) nature of payment, following audited claims, we will have the means, after April, to respond to such representations, provided that our contingency reserve has not been exhausted. Our initial consultations about anticipated pressures, above and beyond those anticipated by you, have been encouraging.

I am sure that you will wish to consider these proposals carefully and hope that your response will be prompt, given the time pressures that you have described which affect your budget setting process. …".

17. Details of the UASC leaving care grant for the financial year 2004-05 were formally set out in Local Authority Circular (2004)6 ("LAC 6 of 2004"), which was sent to Councillor Puddifoot under cover of the Minister's letter dated 19^th February 2004. In her letter, the Minister stated that the Circular should be read "alongside my letter of 13 [February]".
18. So far as material, the terms of LAC 6 of 2004 were as follows:

"Unaccompanied Asylum Seeking Children – Leaving Care Costs: 2004-05

SUMMARY

1. This letter sets out the arrangements for the funding of local authorities most affected by the recent Hillingdon Judgment on the status of unaccompanied asylum seeking children, to assist in meeting the costs of supporting additional numbers of ("former relevant") children under the provisions of the Children (Leaving Care) Act 2000.

2. The grant is to be paid under Section 31 of the Local Government Act 2003.

3. KEY FEATURES

The key features of the grant for 2004-05 are:

a. £12m is available to those local authorities most affected by the Hillingdon Judgment

b. no payment will be made to any local authority in respect of its first 44 … care leavers (based on claims made to the Home Office as at 31 March 2003)

c. for the remaining care leavers above this number, local authorities may claim a flat rate of £140 per week per care leaver, up to the level set out in annex A (this is based on the best estimates available to the Department, as we have no previous experience of costs in this area)

d. …

e. all flat rate payments, based on the number of care weeks, will be made to local authorities quarterly in arrears on receipt of audited returns

f. a contingency fund of £5m has been set up by the Department to assist those local authorities that have to support significantly higher numbers of care leavers than we have estimated.

g. This fund will be distributed among those authorities, who, at the end of the financial year, have provided support to significantly … larger numbers than the indicative figures for their authority, as set out at paragraph 3

4. The Department has decided to focus the available resources on those local authorities with significant numbers of care leaver unaccompanied asylum seeking young people (i.e. former relevant children, within the meaning of s23C of the Children Act 1989). Therefore, only those authorities who support, on average throughout the 52 weeks of the year, 45 or more such care leavers will be eligible to receive payments, and only in respect of young people above the eligibility point of 44. If an authority, in the event, has fewer young people than the indicative numbers and/or for a smaller number of weeks (i.e. fewer than 52), the payments that will be made will be reduced at a rate of £140 per week per child.

5. In addition, beyond the indicative figures in the attached table, we have set aside a contingency provision of £5 million to assist any authority who, in the event, has a greater number of young people than the indicative figure, in particular those who seek support as care leavers. It is recognised that the distribution of young people, and the levels at which they may remain in contact with local authorities as care leavers, or return to seek support as care leavers, is difficult to predict with any confidence. Thus, our intention is that the contingency sum that will be available at the end of the financial year will be focused mainly on those authorities that have experienced, on average, significantly higher numbers … of young people seeking support, above and beyond the indicative figures. …

6. Annex A lists those local authorities where Departmental estimates indicate that the number of care leavers requiring support in 2004-05 will exceed 44 and details the level of funding to which these local authorities are estimated to be eligible. Where local authorities support fewer young people than the number estimated in annex A, funding will be based on the actual number of young people supported, subject to point 3(b) above.

7. …

NEXT STEPS

8. Guidance detailing procedures for claiming funding will be issued to local authorities in March 2004.

9. …

CANCELLATION OF CIRCULAR

10. This Circular should be cancelled on 31 March 2005."

19. Accordingly, the main features of the 2004-05 UASC leaving care grant, as set out in LAC 6 of 2004, can be summarised as follows:

(i) it incorporated a "main grant" of £12 million and a "contingency fund" of £5 million, the latter to be allocated to those authorities "that have to support significantly higher numbers of care leavers" than had been previously estimated by the DfES;

(ii) it set a qualifying threshold of 45 full time equivalent former UASCs (i.e. local authorities would not qualify for assistance in respect of the first 44 eligible former UASCs); and

(iii) provided that funds from the main grant would be distributed on the basis of a flat rate of £140 for every eligible former UASC, but only in respect of a maximum number of eligible former UASCs (in Hillingdon's case the number was 209).

20. On 2^nd March 2004, Councillor Puddifoot wrote to the Minister, thanking her for her letters of 13^th and 19^th February (enclosing the Circular) and continued, so far as material, in the following terms:

"Our discussions with your department have reassured us to the extent that the contingency of £5 million will, given the estimates in the circular, be available to Hillingdon to defray the certain costs we have communicated to you as being due to the Hillingdon Judgment (this is in addition to the £140 per equivalent week rate for the 209 full time equivalents already guaranteed).

…

As discussed with your department it will also be hoped that an early confirmation of the release of the contingency or a reasonable proportion thereof will be made, this is so that the uncertainties in regard to final accounts and budget setting at this time next year will not leave us in a totally uncertain position. …

I would also appreciate some early further guidance on 2003/04 monies, as we are looking at a substantial shortfall this year. … I would be interested in what the DfES can advise on this matter now that we have settled the 2004/05 situation.

… The Hillingdon Judgment has proved a problem for us all and I hope that we may be able to work together during the coming year to deal with the 2004/05 situation as it evolves, but also to work together with the Home Office on this matter in general and specifically on funding for the future."

21. In June 2004, the West London Alliance (comprising of the London Boroughs of Brent, Ealing Hammersmith and Fulham, Harrow, Hillingdon and Hounslow) wrote to the Minister, in a letter dated 27^th May 2004, and expressed its various concerns about the effect of the Hillingdon Judgment – in particular, the judgment's estimated financial impact during the current financial year on Hillingdon (£6 million) and the West London sub-region as a whole (£11 million). In her letter in reply, dated June 2004, the Minister confirmed (inter alia) that the reason why the "qualification point" of 45 care leavers had been adopted was that "it was decided to focus the available money on the authorities likely to face the greatest need".
22. In October 2004 a further Local Authority Circular (LAC 21 of 2004) was published. This gave further details of how the 2004-05 leaving care grant would be allocated to local authorities and how claims should be submitted. The terms of LAC 21 of 2004 made it clear that the grant in question was in respect of the costs incurred during the financial year 2004-05 ending on 31^st March 2005.
23. So far as material LAC 21 of 2004 provided as follows:

"1. SUMMARY

1.1. This circular sets out the arrangements for the payment of the UASC Leaving Care Grant, in respect of the year to 31 March 2005, to Local Authorities most affected by the Hillingdon Judgment. Payment is to assist towards meeting the costs of supporting additional numbers of "former relevant children" under section 23C of the Children Act 1989.

1.2 The grant as described in the LAC(2004)6 … is intended to assist local authorities towards meeting additional costs arising from the impact of the Hillingdon Judgment in the 2004/05 financial year.

1.3 There is a total provision of £17 million for 2004/05. This will be allocated to those authorities facing the greatest need. £5 million out of the £17 million total has been set aside into a contingency reserve with £12 million remaining as the Main Grant.

…

KEY FEATURES

1.7 The key features of the guidance are as follows:

A. Main Grant (Authorities listed in Annex A)

…

1.10 No payment will be made to any local authority … in respect of its first 44 FTE [full-time equivalent] eligible care leavers.

1.11 The maximum number of FTE former relevant UASC for whom each local authority may claim is set out in column 3 of Annex A. Local authorities will receive a flat rate of £140 per week, per FTE care leaver, up to the indicated number. The £140 payment is intended to help those authorities most affected by the Hillingdon Judgment and enable the Department to apportion the funds available...

…

B. Contingency Fund

1.13 Payments from the Contingency Fund will be made after the end of the financial year, in arrears, on receipt of certified returns.

…

1.15 As a result of representation from local authorities and local authority representative bodies, the Department will review the criteria for allocating the Contingency Fund outlined in LAC (2004)6. This review will be based on FORM 2, which needs to be received by 12^th November 2004. The Department will issue further guidance and Grant Determination on accessing the Contingency Fund following review. …"

24. On 7^th December 2004 a meeting to discuss the UASC leaving care grant took place between officials from the DfES and representatives from the local authorities (including 3 officers from Hillingdon). According to the written notes/minutes of the meeting "Discussions focussed on the implications of the findings from the analysis of local authority returns for allocation of the Contingency Fund and the allocation of next year's UASC Leaving Care grant". The minutes then recorded the following (inter alia):

"The support offered through the UASC Leaving Care grant is intended to help local authorities to meet additional costs that are being incurred as a consequence of the Hillingdon Judgment. If the current £140 rate were to be reduced, on the basis that it should be related to the levels of cost actually being experienced by local authorities, net of accommodation costs, it would then be possible for the same quantum of grant to be spread across a larger number of young people/local authorities, especially if the qualification threshold were also to be reduced. The rationale for making such a change would be the recognition that the local authorities are able, in a number of cases, to recover housing costs from housing benefit or NASS. However, at this early stage, such representations have not been made to the DfES by local authority representative bodies.

…

It was noted that, although accommodation costs could be covered "in part" by either NASS or housing benefit, in practice there are difficulties experienced by local authorities when accessing benefits, particularly administration difficulties in accessing housing benefit. In addition there are currently time delays associated with NASS payments.

…

Local authority representatives expressed the hope that they would be in a position to feed back to DfES officials early in the New Year, as it was recognised on all sides that it was desirable to arrive, as early as possible, at a conclusion about the use of this year's contingency provision and next year's grant arrangements."

25. In paragraphs 16 and 17 of his witness statement, Mr Clark described what took place at the 7^th December meeting in the following terms:

"16. … I chaired this meeting. The meeting discussed the implications of the findings of an analysis of the local authority returns from the Form 2 Survey … for the 2004-05 contingency fund and the 2005-06 UASC leaving care grant. …

17. The Form 2 survey undertaken by the Department in the period before the meeting revealed that accommodation costs accounted for 53% (54% in London) of the overall cost to local authorities. As stated above, the support offered through the UASC leaving care grant, from its inception, has been intended to assist local authorities towards meeting additional costs incurred as a result of the [Hillingdon] judgment. At the meeting on 7 December 2004 there was some discussion as to whether the current rate of £140 should be reduced to reflect the level of costs actually incurred by the local authorities, net of accommodation costs. The rationale for such a reduction was stated by me at the meeting to be to avoid "double funding" of these costs (i.e. funding both from the UASC leaving care grant and from other sources such as housing benefit or the National Asylum Support Service ("NASS"), thus enabling more local authorities/young people in future to receive support through the UASC leaving care grant. In many cases it was possible for housing costs to be recovered from housing benefit or NASS. All those over 18 years old are, subject to means and certain other criteria, eligible for housing benefit, provided they are not in full time education. NASS provides funding for those young adult asylum seekers who are not in receipt of benefits and who would otherwise be destitute. … [The Form 2 survey return completed by Hillingdon] shows Hillingdon's average costs, net of accommodation costs, to be £77 per week per full-time equivalent care leaver. The costs incurred, net of accommodation, by local authorities ranged from £25 per week per full-time equivalent care leaver in Luton to £316 in the London Borough of Wandsworth. …"

26. On 4^th January 2005, Hillingdon's Head of Children's Services sent an email to Mr Clark in the following terms:

"Steve Liddicott and I have just been catching up on next steps following the meeting in December. Are you expecting individual responses to the issues raised at the meeting (in particular the issue of stripping out accommodation costs)? Or was the intention to see what came out of the meeting with the Minister on the 15^th?

As you can imagine, we will be completely opposed to any proposal to remove accommodation costs from the amount payable and would view this as a departure from the conditions set out in the circular with very serious financial consequences for LB Hillingdon. However, I want to be clear on how you foresee the next steps before I start the formal representation process to DfES on this issue."

27. On 5^th January 2005, Mr Clark replied to Hillingdon's 4^th January email as follows:

"The DfES is expecting this month to hear from representative bodies, such as the LGA, the ALG and the ADSS. Individual local authority members of these bodies might, of course, make additional or separate representations.

The issues about which we expect to hear are the handling of contingency matters this year and next year's grant. There is currently no DfES proposal to alter the terms of LAC (2004)6, in relation to the removal of accommodation costs which, I hope, you find reassuring. However, the issue of "double funding" needs to be considered in the context of contingency payments and the future of the grant."

28. On 17^th January 2005, Ms Anne Mason, on behalf of the Secretary of State, emailed local authorities (including Hillingdon) seeking views "on allocating this year's Contingency Fund and next year's grant." Ms Mason went on to state that these views were sought in order to "fully inform Ministers of the options available in making their decisions."
29. It appears that Hillingdon did not make any specific representations in response to Ms Mason's email. However, I accept the submission, made by Mr Brown on behalf of the Secretary of State, that it is clear from the representations made by others, such as the Association of Local Government (see the Chairman's letter to the Minister dated 5^th April 2005), that it was widely understood that the £140 per week figure was under review.
30. In March 2005, Hillingdon set its budget in respect of the financial year 2005-06 (i.e. 1^st April 2005 to 31^st March 2006). At the time the budget was set, there had been no announcement made by the Secretary of State with regard to the terms and amount (i.e. the funding formula) of the UASC leaving care grant for the year 2005-06. It appears that, in setting its budget, Hillingdon assumed that the Secretary of State's funding formula for the 2005-06 UASC leaving care grant would, in all material respects, be the same as that adopted for the 2004-05 grant.
31. In April 2005, the Secretary of State decided to make a payment of £710,940 to Hillingdon in respect of the financial year 2003-04. However, unlike the financial year 2004-05 (i.e. the subject year of LAC 6 of 2004), the payment was calculated by reference to a rate of £82 per week per full time equivalent care leaver. The figure of £82 represented the cost of support incurred by Hillingdon, net of accommodation costs, as set out in the claim for additional funds that Hillingdon had sent to the DfES. The email, dated 15^th April 2005, informing Hillingdon of the Secretary of State's decision, expressly stated that the £82 figure was "based on the information provided by your authority regarding costs."
32. On 17^th October 2005, the Secretary of State published Local Authority Circular (2005)15 ("LAC 15 of 2005"), setting out the basis on which the 2004-05 Contingency Fund was to be distributed. By paragraph 2(1) (b) of the circular, payments out of the 2004-05 Contingency Fund were to be made at a rate of £100 per week. Paragraph 2.3 of the circular explained that:

"The Department has arrived at the view that the rate of £100 per week reflects the reasonable costs incurred in supporting UASC care leavers, on the basis of returns from 62 local authorities that completed a FORM 2 as requested in LAC (2004)21."

33. In January 2006, the Secretary of State published her decision with regard to the UASC leaving care grant for 2005-06 as the "Unaccompanied Asylum Seeking Children Leaving Care Costs Grant Determination 2005-2006" ("the UASC Grant Determination 2006"). The Secretary of State expressly made the Determination pursuant to section 31 of the Local Government Act 2003 and, in paragraphs 3 and 4, stated as follows:

"3 The purpose of this grant is to provide additional funding support to those local authorities most affected by the [Hillingdon judgment], to assist towards the costs of supporting additional numbers of eligible care leavers, as defined in the Schedule to this Determination.

4. Pursuant to section 31 of the 2003 Act the Secretary of State hereby determines that the local authorities to which these grants are to be paid and the manner in which the amounts of these grants are to be calculated, are the local authorities and the manner of calculation described in the Schedule to this Determination and that the conditions which the Secretary of State intends to impose on the payment of these grants are the conditions set out in that Schedule."

34. In the same month, the Secretary of State also published Local Authority Circular (2006)1 ("LAC 1 of 2006") setting out "the arrangements for the payment of the UASC Leaving Care Costs Grant in respect of the year to 31 March 2006" (see paragraph 1.1). LAC 1 of 2006, as subsequently affirmed by letter dated 7^th February 2006 (as to which see paragraph 36 below), is the decision under challenge in these proceedings. The opening paragraph goes on to state that the circular should be read "in conjunction with the Unaccompanied Asylum Seeking Children Leaving Care Costs Grant Determination for 2005-06." So far as material, LAC 1 of 2006 continues in the following terms:

"1.2 The UASC Leaving Care Costs Grant … is intended to assist local authorities towards meeting leaving care costs of supporting unaccompanied asylum seeker children (UASC) who are "former relevant children" under section 23C of the Children Act 1989.

…

1.4 The key features of the guidance are as follows:

(a) Payment will be made retrospectively to those local authorities that have supported more than 25 full time equivalent … eligible UASC care leavers, based on actual audited numbers of these young people.

(b) Payment will be made at a flat rate of £100 per week per FTE care leaver over the threshold of 25.

…

…

1.7 The total £11 million funding set out in this guidance is in addition to other sources of support that may be available to individual former relevant young people aged 18 or over. It will not impact on individual entitlement to any other assistance.

1.8 Other sources of funding may include benefits provided by the DWP. Such benefits include income-based Jobseeker's Allowance, Income Support, Housing Benefit and Council Tax Benefit. Alternatively, some young people may qualify for support from NASS (provided they are not eligible for mainstream DWP benefits and have an outstanding asylum claim) and NASS may provide the relevant local authority with financial assistance towards the cost of providing accommodation, utilities and support to such young people."

35. On 31^st January 2006, Councillor Puddifoot wrote to Maria Eagle MP, the Parliamentary Under-Secretary of State for the DfES, as follows (inter alia):

"DfES Asylum Support Grants

Local Authority Circulars (2005)15 published 17/10/05; and

(2006)1 published Jan 2006

I refer to the above circulars which set out the basis of reimbursement by the DfES of the costs incurred by this Council for 2004/05 and being incurred in 2005/06 for this national service in respect of Leaving care support to Unaccompanied Asylum Seeking children.

Applying the terms set out in these circulars would result in the council tax payers of Hillingdon themselves needing to fund £1.6m for the year 2004/05 now past and not planned; £3.7m in 2005/06, and an estimated on-going future annual impact of £4.8m. DfES paying this grant in full some 6 months after the end of the financial year will cost the council tax payers of Hillingdon some £250k per annum in financing costs.

…

Clearly the funding of this service cannot be provided locally. The Council finds itself in a very serious financial position for which there is cross party agreement in this matter. I therefore request confirmation that this shortfall and associated financing costs until payment will by funded by the DfES. …

This is a serious strategic financial matter needing your personal attention to resolve satisfactorily and as quickly as necessary."

36. On 7^th February 2006, on behalf of the Secretary of State, Ms Eagle replied to Councillor Puddifoot in the following terms:

"Thank you for your letters of 3 November 2005 and 31 January 2006, in which you describe funding pressures currently being experienced by Hillingdon. I am of course aware of your concerns.

In the interests of fairness to all local authorities, I do not consider that there is scope in the UASC Leaving Care grant to provide Hillingdon with any additional funding in relation to 2005-06, beyond the existing terms of the grant determination.

The terms of the UASC Leaving Care grant, as set out in LAC (2004)6 and subsequent Local Authority Circulars, make clear that this grant is intended to help towards the costs of supporting additional UASC care leavers, as a result of [the Hillingdon judgment], rather than to meet the full costs.

My Department continues to work collaboratively with local authority representative bodies in refining the future/basis of the UASC Leaving Care grant, within the £12 million boundaries of the 2006-07 UASC Leaving Care grant … We are currently working with the LGA and the ALG to ascertain the actual costs that are being experienced by local authorities in supporting the UASC care leavers, building on the similar exercise carried out in Autumn 2004. We also continue to work, with the Home Office and the local authority representative bodies, to develop an improved model for forecasting future numbers of UASC care leavers. I expect that the survey will again enable the terms of the grant to be adjusted as necessary, in the way that the earlier survey led to the lowering of the qualification threshold for the contingency element of the 2004-05 grant, to the benefit of Hillingdon and other local authorities."

37. I now turn to deal with the submissions of the parties and to my conclusions.

The Parties' Submissions

38. Having referred to the relevant provisions of the UASC Grant Determination 2006 and LAC 1 of 2006, Mr Goudie identified and emphasised the following main changes that had been effected thereby to the funding formula adopted for the 2004-05 UASC leaving care grant (i.e. as set out in LAC 6 of 2004), as follows: (i) the total amount of money available for grant purposes was reduced from £17 million to £11 million, (ii) the qualifying threshold was reduced from 45 to 26 and (iii) the flat rate available in respect of each eligible former UASC was reduced from £140 to £100.
39. Mr Goudie acknowledged that the 2005-06 UASC leaving care grant still expressly purported to be designed to assist local authorities "most affected" by the Hillingdon judgment, but submitted that the changes to the existing 2004-05 funding formula produced a result that singularly failed to serve that objective, because the changes amounted to a "dramatic shift of funding away from those authorities which are genuinely most affected by the judgment to those which are less affected": see paragraph 12(12) of Mr Goudie's written skeleton argument. Mr Goudie argued that, as a matter of pure logic, if a qualifying threshold of 45 is needed to ensure that money is focussed on the local authorities "likely to face the greatest need" when the total funding available is £17 million, then a halving of that threshold, at a time when the total funds available have been reduced by more than one third and only £100 is available in respect of each qualifying former UASC, is bound to have a "decimating effect on authorities facing the greatest need." Mr Goudie submitted that, as the local authority with the greatest need of all in funding terms, the effect on Hillingdon of the reformulation of the grant has been "disastrous."
40. Mr Goudie made it clear that Hillingdon's case was primarily put on the basis of legitimate expectation. Mr Goudie maintained that Hillingdon's case was simple and to the following effect.

(1) Taken as a whole, the Secretary of State's conduct over the period February 2004 to December 2005 plainly amounted to an implicit promise, alternatively an adopted practice, that the funding formula adopted in the 2004-05 UASC leaving care grant would not be altered to the detriment of "the most affected authorities" like Hillingdon.

(2) In the course of his oral submissions, Mr Goudie accepted that the Secretary of State's promise/practice upon which he relied could be broken down into the following constituent elements, namely: (i) that an appropriate UASC leaving care grant would be provided by the Secretary of State on an annual basis, (ii) that the Secretary of State's decision with regard to each annual grant (in particular, the funding formula to be adopted) would be announced/published in advance of the commencement of the financial year in respect of which the grant was to be provided and (iii) that in calculating the grant, the Secretary of State would not depart from the currently adopted funding formula unless an appropriate announcement to that effect had been incorporated into the published decision referred to in (ii) above.

(3) The discussions that took place at the meeting of 7^th December 2004 did not culminate in a change in the current representation/practice in question (i.e. in particular, the funding formula adopted in LAC 6 of 2004) because:

(a) the speculative possibility of a change in the current funding formula which was raised at the meeting was stated to depend on: (i) what any reliable data revealed about local authority funding arrangements and (ii) local authority representations on the funding formula;

(b) in fact: (i) there was no reliable data that would have warranted the potential change in the formula and (ii) the formula which local authority representatives supported was a move to a full reimbursement model and not to a model that gave limited protection to a wide range of authorities at the expense of the most affected authorities; and

(c) at no point was there any concrete notification of any change in the crucial elements of the funding formula, i.e. the use of the qualifying threshold of 45 coupled with a rate of £140, prior to the publication of the UASC Grant Determination 2006 and LAC 1 of 2006, which came long after the commencement of Hillingdon's 2005-06 financial year.

(4) The Secretary of State has failed to honour the representation/practice in question because the grant for 2005-06 represents a significant departure from the funding formula adopted in the grant for 2004-05, a departure that was not announced or published before the commencement of the financial year 2005-06 and thus could not be taken into account by Hillingdon when setting its budget for that year. The changes in the funding formula have been very detrimental to the most affected local authorities like Hillingdon.

(5) There is, in this case, no good or overriding reason why the representation/practice made/established by the Secretary of State should not have been honoured.

(6) In the circumstances of this case, 2005-06 is the only financial year that has been directly affected by the Secretary of State's failure to honour the representation/practice in question. However, the detailed breakdown of the representation/practice set out in (2) above shows that its proper observance has significant implications for future financial years.

41. Mr Goudie stressed that there was no issue with regard to the principle of additional financial support being provided by the Secretary of State to local authorities for the extra costs incurred in respect of UASC care leavers. However, he submitted that, in the light of the contemporaneous discussions and correspondence together with the terms of LAC 6 of 2004, there was a legitimate expectation that the basis of calculating the amount of grant to be provided for the next financial year (i.e. 2005-06) would remain the same, absent any change in the existing funding formula being effected sufficiently in advance of the setting of the budget for 2005-06 so as to enable Hillingdon to take it properly into account.
42. Mr Goudie emphasised the Minister's use of expressions such as "providing you with certainty" and "would be guaranteed" in her letter of 13^th February 2004 and also Mr Clark's assurance that there was "currently no DfES proposal to alter the terms of LAC (2004)6, in relation to accommodation costs." It was Mr Goudie's submission that expressions such as these had made it clear that the Secretary of State was fully alive to the need for Local Authorities like Hillingdon to be made aware of the terms of the next year's grant sufficiently in advance of the financial year so as to be in a position to take the grant into account when setting its budget (as was done in the case of 2004-05 by the publication of LAC 6 of 2004 in February 2004). In short, the terms of the Secretary of State's promise or adopted practice were such that, once the time for setting the budget for the coming financial year had passed, it was not open to the Secretary of State "to move the goal posts" with regard to the current funding formula in respect of that financial year to the detriment of Hillingdon. Mr Goudie stressed that, absent any published or announced change in the current funding formula, that formula was all that local authorities like Hillingdon had to go on when setting its budget for the coming financial year. He submitted that there was no rational basis for Hillingdon to set its budget other than by reference to the status quo, if no change had been announced. Unless Hillingdon was entitled to rely on its legitimate expectation that the status quo would be maintained in such circumstances, it was Mr Goudie's submission that Hillingdon would have had to budget for a zero grant and make appropriate cuts in expenditure in other services et cetera in order to achieve the necessary balance.
43. Mr Goudie readily accepted that the funding formula adopted for the 2004-05 UASC leaving care grant was not set in stone and thus incapable of alteration in the future. Nor did he suggest that the Secretary of State was bound to continue providing such an annual grant indefinitely. It therefore became apparent that the key element in Hillingdon's legitimate expectation case was that the local authority was entitled to rely on the Secretary of State's implied promise or adopted practice to the effect that the status quo would be maintained (in particular, the current funding formula), unless any change was announced or published sufficiently in advance of the relevant financial year, so that such a change could be taken properly into account by the local authority when setting its budget (see paragraph 40(2) above). Absent such a change, the local authority was entitled to assume that the status quo would be maintained.
44. Of course, any such change would be a matter of political judgment and decision. Accordingly, it can be seen that the central core of Hillingdon's case is concerned with the timing of any such change in funding arrangements or policy, if there is to be one, rather than with the existence of the Secretary of State's right to decide to make such a change. As it seems to me, therefore, the essential issue is the same, whether Hillingdon's challenge to the decision in question is considered by reference to the first ground of challenge (Legitimate Expectation) or the second (Thwarting Policy). It is my understanding of Mr Goudie's submissions that he did not take issue with that analysis. It follows that Hillingdon's grounds of challenge stand or fall together. If the Legitimate Expectation challenge fails then, by a parity of reasoning, so too does the Thwarting Policy challenge.
45. For his part, Mr Brown submitted that Hillingdon's case on legitimate expectation clearly failed to satisfy the first of Schiemann LJ's "practical questions" in Bibi (see paragraph 8 above). It was Mr Brown's submission that the Secretary of State has never promised that the UASC leaving care grant would be paid at the rate of £140 per week for any year other than for 2004-05 and that the decision to pay the grant in that amount for 2004-05 cannot sensibly be characterised as an adopted practice or course of conduct, particularly having regard to the express terms under which the 2004-05 UASC leaving care grant was made. For the reasons I give below, I agree with those submissions.
46. Mr Brown also submitted that it was or should have been clear to Hillingdon that the Secretary of State was likely to review the amount (i.e. the funding formula) in future years. It was Mr Brown's contention, therefore, that Hillingdon can have had no legitimate expectation that the UASC leaving care grant would continue to be paid at the rate of £140 per week in future years and/or in accordance with the funding formula adopted for 2004-05. Mr Brown also submitted (correctly, in my view) that, on any view, there has been no change in the Secretary of State's declared policy that assistance will only be provided to the local authorities most affected by the Hillingdon judgment.
47. Mr Brown rightly stressed that the UASC leaving care grant was a discretionary payment made by the Secretary of State pursuant to section 31 of the Local Government Act 2003, which empowers the Secretary of State to make such a payment to a local authority prospectively or retrospectively. Mr Brown acknowledged that it might well be useful for a local authority to know the amount of a particular year's grant before setting its budget for that year, but stressed that the terms of section 31 make it clear that it is a perfectly lawful exercise of the statutory power for the Secretary of State to decide on the conditions and amount of the grant after the expenditure has been incurred by the local authority (see the terms of section 31(1) quoted in paragraph 4 above). Mr Brown also submitted (correctly, in my view) that it is clear from the evidence that the UASC leaving care grant was only ever intended "to assist local authorities in meeting the costs" of supporting additional former relevant children who were UASCs. It was not intended to cover the entirety of such additional costs.
48. In my view Mr Brown's submissions are correct for the reasons that I summarise in the following paragraphs.
49. The Minister's letter of 13^th February 2004 was sent to Hillingdon before the publication of LAC 6 of 2004. Although the letter did contain the expressions upon which Mr Goudie placed reliance, I agree with Mr Brown that, on a fair reading of the entire letter, it merely indicates that the Minister wished to "explore" the idea of providing Hillingdon with certainty about a weekly rate of £140 for 2004-05. Far from offering certainty ad infinitum, the letter was exploratory and expressly indicated that the Secretary of State's intentions would be confirmed in the circular that was to be issued shortly. I agree with Mr Brown that the letter did not amount to a clear and unambiguous promise to the effect or nature alleged.
50. As I have already indicated, LAC 6 of 2004 was sent to Hillingdon under cover of a letter dated 19^th February 2004. On its face, LAC 6 of 2004 did nothing more than set out the relevant figures for the 2004-05 UASC care leavers grant. It went no further than that. It made no statement whatsoever as to what was to happen in future years. It expressly provided that it was to come to an end (i.e. that it should be cancelled) on 31^st March 2005 (see paragraph 10 of the circular). The limited duration of LAC 6 of 2004 was also emphasised by the terms of LAC 21 of 2004. Furthermore, paragraph 3c explained that the figure of £140 was "based on the best estimates available to the Department, as we have no previous experience of costs in this area". I agree with Mr Brown's submission that, in the light of paragraph 3c of the circular, it should have come as no surprise to Hillingdon that the Secretary of State might seek to review the situation in the light of experience.
51. I also accept Mr Brown's argument that, as events during 2004 unfolded (in particular the carrying out of the Form 2 survey and the meeting of 7^th December 2004), it became clear that the Secretary of State was likely to review the funding formula to be adopted for 2005-06 in the light of the local authority returns, and that consideration was being given to reducing the amount payable whilst spreading payments across a larger number of affected authorities.
52. I agree with Mr Brown that Mr Clark's email dated 5^th January 2005 made it clear that, although there was no proposal to alter the terms of LAC 6 of 2004 (which, by its express terms, related only to the UASC leaving care grant for 2004-05), the issue of "double funding" would need to be considered in the context of both the contingency payments and "the future of the grant". Mr Clark's email then went on to indicate expressly that the Secretary of State expected to receive representations concerning "next year's grant" (i.e. the grant for 2005-06), although it appears that, in the event, none were actually forthcoming from Hillingdon.
53. Furthermore, Ms Mason's email of 17^th January 2005 expressly sought the views of local authorities (including Hillingdon) "on allocating this year's Contingency Fund and next year's grant" (my emphasis). This information was requested in order "to fully inform Ministers of the options available in making their decisions." I agree with Mr Brown's submission that, if Hillingdon had not been aware of the position by that stage then, as Mr Clark observed in paragraph 21 of his witness statement, "… this email should have alerted Hillingdon to the fact that any assumption which they might have made that the terms of the grant for future years … would not be changed was ill-founded."
54. All these events took place before March 2005. I therefore accept Mr Brown's submission that, when it set its budget in March 2005, Hillingdon had no proper basis, in all the circumstances, for believing that the funding formula adopted for the 2004-05 UASC leaving care grant would remain unchanged for 2005-06 by reference to any promise (express or implied) or adopted practice of the Secretary of State or to any clearly stated policy to that effect.
55. Furthermore, in my view, the events that occurred both before and after Hillingdon set its budget for 2005-06 clearly showed that the 2004-05 funding formula was not only under review, but that it was likely to change. Thus, in addition to the events already identified, in April 2005 the Secretary of State paid Hillingdon the UASC leaving care grant for 2003-04, which was calculated by reference to the cost of support incurred by Hillingdon, net of accommodation costs (i.e. at a rate of £82 per week). Furthermore, LAC 15 of 2005 was published on 17^th October 2005 and provided that the 2004-05 contingency fund was to be distributed to eligible local authorities at a rate of £100 per week.
56. I am therefore satisfied that there was no express or implied promise or adopted practice on the part of the Secretary of State during the relevant period that is capable of giving rise to the legitimate expectation upon which Hillingdon relies in its first ground of challenge, which therefore fails. As I have already indicated, by a parity of reasoning the second ground of challenge must also fail. However, it is perhaps worth noting in relation to the second ground that I also accept Mr Brown's submission that, in any event, lowering the qualifying threshold to 25 and the weekly rate to £100 does not, ipso facto, represent a departure from the Secretary of State's policy of directing assistance to the authorities "most affected", it simply means that the class of authorities "most affected" is now somewhat wider than it was.

Conclusion

57. For the foregoing reasons, I have come to the firm conclusion that this application must be and is hereby dismissed.