England and Wales High Court (Administrative Court) Decisions

IN THE SUPREME COURT OF JUDICATURE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
SIR ROBIN AULD

		Royal Courts of Justice Strand. London. WC2A 2LL
		04 April 2008

Sir Robin Auld: Introduction

1. This is an application by the Bedfordshire County Council ("the County Council") for permission to apply for judicial review, and, if permission is granted, for judicial review. The County Council's proposed challenge is to provisional decisions of the Secretary of State for Communities and Local Government ("the Secretary of State") of 25^th July 2007 concerning competing proposals for structural change in the local government of Bedfordshire by the replacement of a two-tier structure of county council and district councils with a unitary structure involving a single-tier authority or authorities. The provisional decisions, which were in "minded to decide" form, followed a process of preliminary consideration, consultation and assessment on behalf of the Secretary of State in anticipation of the enactment of a Bill ("the 2007 Bill"), which had been introduced into Parliament in December 2006, and which has now been enacted as the Local Government and Public Involvement in Health Act 2007 ("the 2007 Act").
2. Bedfordshire has, in addition to the County Council, whose remit extends to the whole of the County (except for the existing unitary authority area of Luton), a borough council, Bedford Borough Council ("the Borough Council"), and two district councils, Mid Bedfordshire District Council and South Bedfordshire District Council ("the two District Councils"), all three of which are Interested Parties to this application and join with the Secretary of State in opposing the County Council's application.
3. The provisional decisions of the Secretary of State that the County Council seeks to challenge are written indications that she was "minded not to implement" the County Council's proposal for a new unitary authority for the County in place of itself and the Borough Council and the two District Councils, but was "minded to implement" the Borough Council's proposal for a unitary authority for its area in conjunction with a unitary authority for the remainder of the County. The effect of such decisions, if and when made (as they now have been by an announcement of the Secretary of State to Parliament on 6^th March 2008 and the making on 27^th March 2008 of The Bedfordshire (Structural Changes) Order 2008 ("the 2008 Order")) would be to create a two-unitary structure for the County instead of the one- unitary structure proposed by the County Council.

History and background

4. I take this brief summary of the background and history of events from the skeleton argument of Mr James Eadie and Miss Catherine Callaghan submitted on behalf of the Secretary of State.
5. In October 2006 the Government, in contemplation of proposed legislation in the form of the 2007 Bill, published a White Paper and an Invitation setting out its intention to invite local authorities in shire areas to make proposals for unitary local government, setting out the terms and criteria to which any proposals should conform and identifying a three-stage process for assessment of them. There were five criteria, in summary: broad support, effective leadership, neighbourhood-friendly, equitable value for money and affordability. The three stages were not then statutorily prescribed processes, but, as the Court of Appeal has recently indicated in upholding the judgment of Underhill J in R(Shrewsbury & Atchom Borough Council) v Secretary of State for Communities and Local Government [2007] EWHC 2279 (Admin), at paragraphs 34 - 36 and 68 and 69, they were processes, which, to the extent that they contributed to later, post-enactment decisions, might impinge on the validity of those decisions. The three stages were:

1) invitation and submission of proposals and assessment whether they were worthy of further consideration as to the likelihood of meeting the criteria;

2) stakeholders' consultation on the proposals of those considered worthy of further consideration; and

3) assessment in the light of that consultation and of any relevant further information of the likelihood of meeting the criteria and, in the case of competing proposals, as to which showed the greater or greatest, as the case may be, long term likelihood of benefit,

6. I should note that the invitation required any proposal for the creation of a unitary authority for part of the County also to consider and set out the structural arrangements contemplated for the remainder of the County.
7. Stage 1 produced three proposals from and in respect of Bedfordshire:

l) from the County Council, for a county-wide unitary authority;

2) from the Borough Council, for a unitary Bedford Borough;

3) from the two District Councils, for a unitary authority for their combined area ("District Councils' joint proposal"), stated by them to be complementary to the Borough's proposal.

The effect of those various proposals was that the County Council's proposal would, if successful, rule out the alternative proposals from the Borough Council and the District Councils, and vice- versa, and that the proposals of the Borough Council and the District Councils were intended to be complementary.

8. The Secretary of State accepted the County Council's and the Borough Council's proposals for further consideration as to the likelihood of their meeting the five criteria, But in a letter of 27^th March 2007, the Secretary of State rejected the District Councils' joint proposal because, for want of sufficient details, it did not demonstrate a reasonable likelihood that, if implemented, it would satisfy any of the criteria save for that of broad support. The letter included the following passage:

"In reaching this assessment, the Secretary of State accepts that the aspects of the proposal could only be worked-up by the new council. However, the absence of details, make it difficult, except in very general terms, to have any reasonable certainty that the proposal would deliver the outcomes sought by the criteria. Whilst, therefore, being mindful of the track record of South and Mid-Bedfordshire District Councils, and the support from stakeholders for a unitary solution for Bedfordshire, the Secretary of State was not persuaded that the proposal:

• demonstrated how effective strategic leadership and service delivery would be provided, or how neighbourhoods would be effectively engaged and empowered; nor that

• the costs of change could be readily funded...."

9. For the next stage of the process, stage 2 - stakeholders' consultation, which took place over three months from March to June 2007, the Secretary of State issued two papers indicating that:

1) Any proposal not showing at least a reasonable likelihood, if implemented, of achieving the outcomes specified by the five criteria would not proceed to implementation (paragraph 16 of the consultation paper); and

2) where there were competing proposals, the Secretary of State's assessment would turn on her judgment as to which showed the greater or greatest, as the case may be, long-term likelihood of benefit from meeting certain of the five criteria (paragraph 17 of the consultation paper). Paragraph 17 read:

"In the case of all... proposals... for which the Secretary of State judges there is at least a reasonable likelihood that, if they were implemented, each would achieve the outcomes specified by the criteria ... the Secretary of State will first consider any proposals that are alternatives and reach a judgement as to which of the alternatives would be expected to deliver the long-term outcomes specified by the criteria - namely, effective strategic leadership; neighbourhood empowerment; and value for money and equity on public services - to the greater extent. The other proposal for the area concerned will not proceed to implementation."

During this consultation period the County Council and the Borough Council developed their respective proposals with further submissions, and the County Council also identified and put forward four areas of risk in the Borough Council's financial case.

10. The third - but not the final - stage was the Secretary of State's reassessment in July 2007 of the two Councils' rival proposals in the light of that consultation, their further submissions and other relevant information. Such information included a report of independent financial consultants to the effect that both of the proposals represented "a medium risk" of not meeting the affordability criterion, but that both could be "workable".
11. On 25^th July 2007, the Secretary of State announced that, if and when the Bill was enacted, she was "minded to accept" the Borough Council's proposal and to reject the County Council's proposal. In doing so, she stated that, while both proposals had a reasonable likelihood, if implemented, of achieving the outcomes specified by the criteria, the Borough proposal was likely to be better than that of the County Council in the long term.
12. In her letter to the County Council of 25^th July, the Secretary of State indicated that she favoured a two-unitary rather than a single unitary solution. Here is how she put it:

"... in the Secretary of State's judgment, there is a reasonable likelihood that, if implemented, the proposal would meet the outcomes specified by each of the criteria set out in the invitation. However, the Secretary of State judges that the proposal from Bedford Borough Council would deliver to a greater extent the long-term outcomes specified by the criteria around strategic leadership, neighbourhood empowerment and value for money and equity in public services, provided that there is a unitary solution for the remainder of the county area. Consequently, she is minded not to implement your proposal but instead to implement the two-unitary proposal if and when the Local Government and Public Involvement in Health Bill is enacted.

In judging between the two proposals for Bedfordshire, the Secretary of State considered which of the proposals were likely to deliver to the greater extent the outcomes on leadership, neighbourhood empowerment and public services. She takes the view that the neighbourhood arrangements in your proposal would involve little delegation to communities and hence would be less able to provide effective neighbourhood empowerment. She also takes the view that your proposal is less able to provide effective strategic leadership.

As you are aware, Bedford Borough's proposal for a unitary Bedford, was based on the proposal that the rest of Bedfordshire should also become unitary. Since there is no acceptable proposal for the rest of Bedfordshire, the Secretary of State intends to invite your council, along with the district councils of South and Mid-Bedfordshire to submit proposals for a unitary solution for ... the remainder of the Bedfordshire county area."

13. The Secretary of State's letter to the Borough Council was in like terms:

"... in the Secretary of State's judgment, there is a reasonable likelihood that, if implemented, the proposal would meet the outcomes specified by each of the criteria set out in the invitation. However, the Secretary of State recognises that there are risks to the two two-unitary proposals achieving the outcomes specified by the affordability criterion. You will therefore be invited to undertake further work and to submit additional information on the financial viability of your proposal. The Secretary of State will have regard to this information, together with any other relevant information, before taking a final decision if and when the Local Government and Public Involvement in Health Bill is enacted.

The Secretary of State similarly took the view that in respect of the proposal for single unitary authority for Bedfordshire, there was also a reasonable likelihood that, if implemented, the proposal would meet the outcomes specified by each of the criteria set out in the invitation. However, she took the view that, on balance, your proposal would deliver to a greater extent the long-term outcomes specified by the criteria around strategic leadership, neighbourhood empowerment and value for money and equity in public services. Consequently, she is minded to implement your proposal if and when the Local Government and Public Involvement in Health Bill is enacted, rather than that for a single unitary authority - subject, of course, to being satisfied about the risks to your proposal's financial viability.

In judging between the two proposals for Bedfordshire, the Secretary of State considered which of the proposals were likely to deliver to the greatest extent the outcomes on leadership, neighbourhood empowerment and public services. The Secretary of State took the view that, in particular, the creation of a unitary authority for Bedford would enable strong concentration on the differing needs of Bedford and the mid and south of the county, and hence would result in your proposal being more able to meet these criteria.

Your proposal was, of course, based on the proposition that the rest of Bedfordshire should also become unitary. We agree that if Bedford is to become unitary the remainder of the two-tier County would be unviable. Since there is no acceptable substantive proposal for the rest of Bedfordshire, the Secretary of State will be inviting Bedfordshire County Council, along with the district councils of South and Mid-Bedfordshire to submit proposals for a unitary solution meeting the five criteria for the remainder of the Bedfordshire County area...."

14. Over the Autumn of 2007 the Borough Council, in response to a request from the Secretary of State, provided her with further financial information, and she also received an exchange of representations from the County Council and the Borough Council on that further material. In the meantime, on 30^th October, the Bill received the Royal assent, coming into force the next day.
15. On 19^th November 2007 the Government invited the County Council and the two District Councils to make a proposal for unitary local government for Mid and South Bedfordshire, on the acceptability of which the Borough Council proposal, which the Secretary of State was minded to accept, depended - an invitation that Mr James Goudie QC, for the County Council, characterised as "a re-winding of the clock or a further series of stages". The two District Councils submitted a proposal, but the County Council did not. The Secretary of State then embarked on a further exercise of stakeholder consultation as to the extent to which this joint proposal would be likely to produce the outcomes specified in the five criteria and as to which of the two unitary options for unitary local government for the County still in play would better achieve those outcomes, those of the Borough Council and the two District Councils or that of the County Council, which the Secretary of State had indicated that, subject to the outcome of this further investigation and assessment, she was minded to refuse.
16. On 22^nd February 2008, when this application of the County Council for permission to claim judicial review came on for hearing before me, the Secretary of State had not - I am told - taken any decision under the 2007 Act whether to adopt a unitary proposal of any sort for Bedfordshire, and had certainly not indicated any such decision to any of the parties.
17. However, as I have mentioned, the Secretary of State has since done so, on 6^th March 2008, in a public announcement and by the making of the 2008 Order so as to create the two-unitary structure for the County proposed by the Borough and District Councils instead of the single unitary structure proposed by the County Council. Unlike the claimant in the Shrewsbury case, the County Council has not sought to amend its proposed claim to encompass events post-dating the 25^th July 2007 "minded to decide" letters, but reserved its position to make such an amendment in the event of the Secretary of State making a decision before the hearing of this application. It has not, since the making of the 2008 Order on 6^th March 2008, sought to do so by applying to re-open the application.

Discussion

18. Before I turn to the proposed issues for appeal, I should say something about the effect, if any, on these proceedings of the enactment of the 2007 Act at the beginning of November 2007 and of the further assessment following the July 2007 "minded to decide" letters culminating in the Secretary of State's decision contained in the 2008 Order. The effect of the Act on anticipatory proposals made and consultation exercises and assessments undertaken before it came into force on decisions made after it did so has been considered in the Shrewsbury case by Underhill J and by the Court of Appeal [2008] EWCA Civ 148 in upholding his decision.
19. The first point to note is that the Act, in section 21, provides that anticipatory proposals and consultation before its coming into force have effect for the purpose of enabling the Secretary of State after it has come into effect, to assess the proposals with a view to implementing them or otherwise. That is how Underhill J appears to have understood it, at paragraph 29 of his judgment, namely to allow certain pre-enactment steps taken by the Secretary of State to be treated for the purpose of associated post-enactment steps as having been taken in accordance with the regime contained in the Act. In the Court of Appeal, Carnwath LJ, with whom Waller and Richards LJJ agreed, clearly took the same view, at paragraphs 34 - 36 and 62 - 69, by reference to the post-enactment decisions under challenge in that case.
20. However, the 2007 Act has no relevance to a challenge of the sort in this case, a provisional indication of intention by the Secretary of State before it came into force, The carry-over effect, if any, on a post-Act decision would only fall to be considered in a challenge to it - here the Secretary of State's Order of 6^th March 2008 - which is not the subject of this application. In short, as Mr Eadie put it, section 21 does not preserve the 25^th July 2007 "minded to decide" indications of the Secretary of State as a target for judicial review. The critical question is whether those indications in their own right are challengeable by way of judicial review in the circumstances of the case.
21. The second point to note is that the process of invitation of proposals, consultation and assessment for which the Act provides and which was, in part, anticipated in this case, is not - and could not sensibly be regarded as - a series of self-contained stages, requiring a final decision to be made at the end of the assessment period where the outcome of that assessment was to call for further consideration, consultation and assessment. The gathering of information enabling the Secretary of State to decide whether or not to implement a proposal or to choose between competing sets of proposals may be, as it was here, an iterative process calling for further enquiry and reconsideration along the way, as Underhill J clearly regarded it in paragraphs 35 and 36 of his judgment in the Shrewsbury case. That is especially so, where the value judgements sought to be challenged are ones depending on the assessment of slippery notions such as reasonable likelihood.
22. Thirdly, as both Mr Eadie and, on behalf of the Interested Parties, Mr Nigel Giffin QC emphasised, assuming for the moment that the Secretary of State's "minded to decide" letters of 25^th July 2007 were irrational or otherwise unlawful and were challengeable despite their provisional nature, it is difficult to see what useful relief could be granted now in the light of the coming into force of the 2007 Act and the 2008 Order made and laid by the Secretary of State before Parliament. This is particularly so in a matter such as this, one of a provisional assessment by the Secretary of State about effective arrangements for the structure of, and use of public resources in, local government in respect of which, in the light of information and professional advice then available to her, she felt the need for further information and consideration. It is, as Mr Eadie and Mr Giffin submitted, by reference to a number of authorities cited by Mr Giffin, an area and a circumstance in which the court should be wary of intruding: see, in particular R v Local Government Boundary Commission, exp Hart DC (CO/1353/86), per Simon Brown J, as he then was; R v Local Government Commission, exp North Yorkshire CC (CO/622/94), per Laws J, as he then was; R(London & Continental Stations & Property Ltd) v The Rail Regulator [2003] EWHC 2607 (Admin), per Moses J, as he then was.

The proposed issues for appeal

23. The County Council's - heavily overlapping - proposed grounds of challenge of the Secretary of State's "minded to decide" indications in her letters of 25th July 2007 are that:

1) they were not made in accordance with the Secretary of State's publicly stated procedures in that the County Council had a legitimate expectation that, if the competing proposals of the Borough and District Councils did not meet the stated criteria, she would not proceed with them;

2) they were irrational: (a) given the Secretary of State's conclusion that the Borough Council's proposal had met the affordability criterion; and/or (b) that that conclusion was in itself irrational in the light of the information before the Secretary of State;

3) in consequence, the Secretary of State's subsequent comparison of the competing proposals was flawed;

4) it was irrational and contrary to the Council's legitimate expectation for the Secretary of State, in making that comparison, to consider the Borough Council's proposal, involving as it did a unitary proposal of the sort made by the District Councils that she had previously rejected; and

5) the "minded to decide" letter in favour of the Borough Council was irrational in the absence of a viable proposal for the remainder of the County.

1) Breach of legitimate expectation

24. This complaint is that the Secretary of State departed from the procedures published in her invitation and consultation papers by allowing the Borough Council's proposal to proceed beyond stage 3 of the October 2006 - July 2007 process by giving further opportunities outside her published procedures to the Borough Council to improve its case and to the District Councils to re-work their proposals notwithstanding their elimination at stage 1. Mr Goudie accepted that the "minded to" decisions of 25^th July 2007 were necessarily provisional, dependent as they were on the enactment of the 2007 Act and the Secretary of State remaining satisfied that the Borough Council's proposal satisfied the published criteria. But he submitted that provisionally did not permit the Secretary of State to cause unfairness to the County Council by departing from her published procedures in deferring her assessment seeking further information and allowing the Borough and District Councils respectively to improve and make good their proposals.
25. For the reasons that I have given in paragraph 21 of this judgment, this complaint has no real prospect of success. It is not supported by the wording of the published documentation, which did not purport to be so restrictive; and it is based on the misconception that the process, directed at assessment of reasonable likelihood of achieving certain outcomes must lead to a decision one way or another, even though, following consultation, the Secretary of State judges that she cannot make such a decision without further investigation.
26. Given the competing proposals, the dilemma for the Secretary of State was plain. She was not satisfied that the County Council's proposal for a single unitary authority for the whole County would work in the long term as well as would the complementary proposals of the Borough Council and the District Councils for a two-unitary solution. But she was also not satisfied on the information before her as to the reasonable likelihood of the District Councils' proposal meeting certain of the criteria, including affordability. Given her view that the two-unitary solution would be a better fit for the needs of the County because of the different character and needs of the Borough and of the rest of the generally more rural area of the County, but unsure, in particular, as to its financial viability, what could more natural than to explore those matters further?
27. In addition, as both Mr Eadie and Mr Giffin pointed out, there was no unfairness to the County Council in the "minded to decide" July 2007 letters and what followed them. The Secretary of State had not by those letters ruled its proposal out of contention; she continued to apply the same criteria and went about her further enquiries, consultation and assessment in the public interest, and did so openly, giving the County Council an opportunity to participate in the process.

2) Irrationality in the Secretary of State's assessment that the Borough Council met the criterion of affordability, given her request for more information from it and the lack of any viable complementary proposal from the District Councils

28. Mr Goudie characterised this assessment, not only as irrational but also as a "fundamental distortion of the decision-making process", However, as he acknowledged and Mr Eadie submitted, this complaint of irrationality is essentially a reformulation of the complaint of breach of legitimate expectation, based, as it is, in part, on the suggested inconsistency of the Secretary of State in seeking more information from the Borough Council on affordability when she had professed herself satisfied with its case on that aspect. For the reasons I have given in the immediately previous paragraphs of this judgment, there is no prospect of the County Council succeeding in an irrationality argument.
29. The second basis for the complaint is a submission by Mr Goudie that the Secretary of State could not have rationally concluded, on the information before her, that the Borough Council's proposal met the affordability criterion. In my view, it is no closer to irrationality than the first half of this complaint. As I have indicated, the papers before the Court, including the report from the independent financial consultants, show that the Secretary of State was advised that the County Council's proposal and the Borough Council's proposal both represented a "medium risk" of not meeting the affordability criterion, but that both could be "workable". The Secretary of State was entitled to give weight to those reports and the other further information before her, and to conclude from them that the Borough Council, as well as the County Council, met the affordability criterion.

3) Flawed comparison of the competing proposals

30. Mr Goudie submitted that the return of the Secretary of State to the two District Councils in November 2007 inviting them to re-work and re-submit their complementary proposal to that of the Borough Council had not cured the unlawfulness of the July 2007 "minded to decide" letters, since she remained "minded to" implement the Borough Council's proposal on the basis of her gathering of further information subsequent to those letters.
31. The potential arguability of this complaint depends on that of the previous two complaints, and, for the reasons I have given in relation to them, must fail with them. As I have indicated in paragraph 9 of this judgment the June 2007 consultation paper expressly stated that the Secretary of State would compare alternative proposals and assess which would be likely better or best to provide long-term outcomes specified in the criteria.

4) Irrationality/breach of legitimate expectation in considering the two District Councils' proposal of a joint unitary area after having rejected such a proposal

32. The basis for this complaint is the Secretary of State's letter to the two District Councils of 27^th March 2007 informing them that their joint proposal would not proceed to stakeholder consultation because of the low likelihood, if implemented, of achieving the outcomes specified in the five criteria. However, as I have indicated in paragraph 8 of this judgment, one of the main concerns of the Secretary of State leading her to that decision was want of sufficient detail from the District Councils on, inter alia, the criterion of affordability. Her letter does not indicate that she regarded a proposal for a unitary structure for the area of the County for which the two District Councils were responsible to have been incapable of meeting the criteria. And when she came in July 2007 to decide provisionally that the Borough Council's decision should proceed, it was clearly sensible to invite the District Councils to revive their proposal, but, this time, with properly detailed information in its support, an invitation also extended to the County Council.

5) Irrationality in reaching a "minded to" decision in relation to the Borough Council part of the county area in absence of a viable proposal for the remainder of the County

33. Mr Goudie stressed, in his submissions on this potential ground of claim, the complementary nature to the two-unitary solution of the Borough Council's and the District Councils' proposal, requiring a proper understanding and application by the Secretary of State of the latter in her assessment of the affordability of the Borough Council's proposal.
34. This complaint, as Mr Eadie observed, amounts to an assertion that the Secretary of State's published procedures, required her to have made a decision in relation to the whole of the county area at the same time. If the 25^th July 2007 "minded to decide" letters had amounted to a firm decision affecting the local government structure of only part of the County without regard to the remainder, there might be something in this point. But, as is plain, that was not their effect; they were, at the highest, provisional decisions reached on the way to making final decisions for the County when the Secretary of State properly equipped to do so and when the 2007 Act came into force.
35. For all those reasons, I refuse the County Council's application for permission to claim judicial review.