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
		25 November 2009

Sir Thayne Forbes:

Introduction:

1. First Essex Buses Limited ("the Claimant") is an operator of local bus services in Essex and the Interested Party ("the Council") is the coordinator of the Essex Countrywide Concessionary Travel Scheme ("the Scheme"). This claim for judicial review concerns the functions of the Defendant ("the Secretary of State") under section 98(2) of the Transport Act 1985 ("the 1985 Act") and section 150(3) of the Transport Act 2000 ("the 2000 Act") in relation to a dispute that has arisen between the Claimant and the Council with regard to the arrangements in 2006/07 for reimbursing operators of the Scheme (in particular, the Claimant).
2. On 28^th March 2006, the Claimant applied to the Secretary of State under sections 98(2) and 150(3) of the 1985 and 2000 Acts by way of appeal against the reimbursement arrangements applicable to the Scheme for the year 2006/07 ("the first application").
3. On 8^th January 2007, by his duly appointed expert, Mr J. S. B Martin ("Mr Martin"), the Secretary of State gave his determination in respect of the Claimant's application, allowed its appeal and (inter alia) directed certain modifications to the reimbursement arrangements and an adjustment of the Council's payments to the Claimant so as to produce a total of £6,379,100 reimbursement for the year as an interim measure ("the January 2007 determination").
4. On 15^th February 2008, the Claimant made a further application to the Secretary of State in relation to the Council's purported implementation (as indicated in its letter dated 21^st January 2008) of the reimbursement arrangements under the Scheme as modified by the Secretary of State ("the second application").
5. By letter dated 13 March 2008 ("the decision letter"), the Secretary of State declined to determine the second application on the basis (i) that it was out of time and (ii) that he had already determined the Claimant's application under the same sections of the 1985 and 2000 Acts in relation to the same scheme for the same period of time. The Secretary of State concluded that it was not open to him to decide whether the Council had correctly implemented the reimbursement arrangements under the Scheme in accordance with its terms, as modified by the January 2007 determination. It was the Secretary of State's view that this was a matter for resolution between the parties (if necessary, with the assistance of an Arbitrator or the Courts).
6. It is the Secretary of State's refusal to determine the second application that is under challenge in these proceedings. Stated shortly, it is the Claimant's primary case that the Secretary of State's January 2007 determination was a lawful but "interim" or "incomplete" determination of the first application and that the decision letter amounts to an unlawful refusal by the Secretary of State to complete his adjudicative function under sections 98 and 150 of the 1985 and 2000 Acts. In the alternative, it is said that the Secretary of State should have accepted that the Council's decision, as contained in its letter of 21^st January 2008, entitled the Claimant to make a further application to the Secretary of State under those statutory provisions.

Legislative History:

7. Under the 1985 Act it was for each individual local authority to decide whether it wished to establish concessionary travel schemes. By 1998, most local authorities had chosen to do so, but the provision of concessionary schemes was neither uniform nor universal.
8. In July 1998, the Government issued a White Paper entitled "A new deal for transport: better for everyone" ("the 1998 White Paper") in which it was proposed to introduce a new national minimum travel concession for elderly people. This proposal was given statutory force, in respect of areas outside Greater London, by the 2000 Act. Section 145 of the 2000 Act entitled holders of statutory travel concession permits issued by local authorities to half-fare travel, if they travelled on eligible services, in the right area and at the right times.
9. On 16^th March 2005, it was announced in the Budget that an order would be made under section 147 of the 2000 Act to extend this mandatory minimum concession from half-fares to zero fares for permit holders. This change was effected by the Travel Concessions (Extension of Entitlement) (England) Order 2005 (SI 2005/3224), which came into force on 1^st April 2006.
10. Accordingly, by the time of the 2006/07 year of the Scheme and of the Claimant's first application, the position under the relevant legislation was that holders of concessionary travel passes were entitled to free travel on their local bus services (pursuant to provisions of the 2000 Act) and to such other concessions as their local authority chose to offer under the provisions of the 1985 Act.
11. Since the first application, the Concessionary Bus Travel Act 2007 ("the 2007 Act) has extended the mandatory concession so that permit holders can travel free on any local bus service (i.e. not just on their own local services). The 2007 Act also introduced a number of amendments to the provisions of the 1985 and 2000 Acts concerning reimbursement arrangements and appeals. Most of the relevant provisions of the 2007 Act came into force on 17^th October 2007, with the remainder coming into force on 1^st April 2008 pursuant to the Concessionary Bus Travel Act 2007 (Commencement and Transitional Provisions) Order (SI 2007/2799).

The Statutory Framework:

12. (a) The Transport Act 1985.

So far as material, section 93(1) of the 1985 Act provides as follows:

"93(1) Any local authority, or any two or more local authorities acting jointly, may establish a travel concession scheme for the provision of travel concessions on journeys on public passenger transport services … by operators of such services participating in the scheme."

13. Subject to certain caveats and exceptions that are not relevant to these proceedings, section 96(1) of the 1985 Act provides that any operator of an eligible service that runs between places covered by a concessionary scheme has a right to participate in that scheme. Should an operator not choose to participate in such a scheme voluntarily, the local authority responsible for the scheme can impose on the operator an obligation to participate by serving upon it a "participation notice", together with a copy of the particulars of the scheme and the current applicable reimbursement arrangements: see sections 97(2) and 98(1) of the 1985 Act.
14. Section 93(6) of the 1985 Act requires local authorities that administer a concessionary scheme to reimburse operators for participating in the scheme (whether that participation is voluntary or pursuant to a participation notice). Section 94(1) provides for the making of regulations concerning (inter alia) the arrangements for the reimbursement of service operators (see below).
15. Section 98(2) of the 1985 Act contains the right to apply to the Secretary of State for cancellation or variation of a participation notice. An application under section 98(2) is in the nature of an appeal and is commonly referred to as such. So far as material, section 98(2) is in the following terms:

"(2) Subject to the following provisions of this section, a person on whom a participation notice has been served may apply to the Secretary of State for cancellation or variation of that notice on either or both of the following grounds, that is to say –

(a) that there are special reasons why his participation in the scheme in question in respect of the service or any of the services to which the notice applies would be inappropriate; and

(b) that any provision of the scheme or of any such arrangements as are mentioned in subsection (1)(b) above are inappropriate for application in relation to operators other than operators voluntarily participating in the scheme."

16. Section 98(3) provides that an application under subsection (2) must be made in writing to the Secretary of State. At the date of the first application, this had to be done within 28 days of the date of the participation notice. The 2007 Act has subsequently extended the period to 56 days: see section 98(4A).
17. Subsections 98(6) and 98(7) of the 1985 Act provide how the Secretary of State is to proceed if he finds that a complaint under section 98(2)(b) is well founded, as follows:

"(6) Where on any such application the Secretary of State finds the ground mentioned in subsection (2)(b) above established, he shall cancel the participation notice unless he considers that a direction under subsection (7) below would meet the case.

(7) Where on any such application the Secretary of State does not cancel the participation notice, he may direct that the current arrangements for the reimbursement of eligible service operators participating in the scheme shall apply in the case of the applicant or (as the case may require) in the case of any service operated by the applicant to which the participation notice applies with such modifications as may be specified in the direction."

18. Section 99 of the 1985 Act provides for the release of operators from compulsory participation in a scheme. Section 99(2) enables operators to apply to the Secretary of State for release from the scheme

"on the ground that the authority or authorities responsible for the administration of the scheme have failed to comply with their obligation under section 93(6) of this Act."

There is no time limit for such an application.

19. (b) The Travel Concession Schemes Regulations 1986 ("The TCSR 1986").

The TCSR 1986 were made pursuant to (inter alia) section 94(1) of the 1985 Act (see paragraph 14 above). Regulations 4 and 5 apply to reimbursement arrangements generally, whilst regulations 6 to 12 apply to reimbursement arrangements for operators of "eligible services". It is common ground that, at all material times, the services provided by the Claimant were eligible services.

20. Regulation 4 of the TCSR 1986 defines the "objective" of reimbursement arrangements in the following terms ("the objective"):

"4. It shall be an objective (but not a duty) of an authority when formulating reimbursement arrangements to provide that operators both individually and in the aggregate are financially no better and no worse off as a result of the participation in the scheme to which the arrangements relate."

21. Regulation 5 provides that operators' costs of providing concessions must be met by the local authorities (as required by section 93(6) of the 1985 Act) and explains that those costs have two components: i.e. (i) the net revenue forgone by the service operators in receiving concessionary instead of full fares and (ii) the additional costs associated with the provision of concessionary fares.
22. For operators of eligible services (as in the case of the Claimant), regulation 7 adds the requirement that reimbursement arrangements must not only comply with the "objective" but must also be "appropriate", as follows:

"7. (1) Subject to paragraph (2) of this regulation, it shall be an objective (but not a duty) of an authority when formulating reimbursement arrangements to provide that operators receive appropriate reimbursement for providing concessions to the persons eligible to receive those concessions.

(2) In paragraph (1) "appropriate reimbursement" means appropriate in the light of the total number and fares value of the journeys made by persons eligible to receive concessions on the services provided by that operator."

23. (c) The Transport Act 2000.

Since the coming into force of the 2007 Act, the entitlement to the mandatory travel concession in respect of England is to be found in section 145A of the 2000 Act. However, at the time of the first application and all material times, it was section 145(1) of the 2000 Act, as amended by the Travel Concessions (Extension of Entitlement) (England) Order 2005, that made provision for the holders of statutory travel concession permits to travel free on specified public transport services, as follows:

"145(1) Any person to whom a current statutory travel concession permit has been issued by a travel concession authority and who travels on an eligible service on a journey –

(a) between places in the authority's area, and

(b) beginning at a relevant time

is entitled, on production of the permit, to be provided with a concession consisting of a waiver of the fare for the journey by the operator of the service."

24. Section 148(1) of the 2000 Act provides that "[a]n operator commits an offence if he systematically fails to comply with the obligation under section 145(1) during any period."
25. Section 149(1) obliges local authorities to reimburse travel service operators in their areas who provide travel concessions under section 145(1). Section 149(3) empowers the Secretary of State to make regulations for reimbursement arrangements. However, so far the Secretary of State has made no such regulations.
26. Section 150(1) of the 2000 Act requires local authorities to publish proposed reimbursement arrangements at least four months before they come into operation. Section 150(3) provides service operators with a right of appeal in respect of those arrangements by way of an application to the Secretary of State, as follows:

"150(3) An operator who considers that he may be prejudicially affected by the proposals may apply to –

(a) the Secretary of State

(b) …

for a modification of the proposed arrangements, or proposed variations, on the grounds that there are special reasons why they would be inappropriate with respect to one or more local services provided by him."

27. An application to the Secretary of State under section 150(3) of the 2000 Act must be made in writing. At the time of the first application, this had to be done within 28 days of the date when the arrangements came into force: see section 150(4). The 2007 Act has now extended this period to 56 days. Although section 150(6) empowers the Secretary of State to make regulations as to the procedure to be followed with regard to applications under section 150(3), no such regulations have so far been made.
28. Where there is found to be substance in an application under section 150(3), section 150(8) of the 2000 Act provides as follows (so far as material):

"150(8) On an application under subsection (3) the Secretary of State … or (if a person is appointed under subsection (6)(b) to determine the application) the person so appointed, may direct –

(a) that the arrangements, or varied arrangements, are to have effect with such modifications as are specified in the direction from the time so specified, and

(b) that the authority shall make a payment of an amount specified in the direction to the applicant."

29. (d) Ministerial Guidance with regard to the Transport Act 2000.

In November 2005, the Department of Transport published guidance to local authorities entitled "Concessionary fares for older and disabled people: local authority guidance" ("the Guidance"). In relation to reimbursement, the version of the Guidance that was in force at all material times stated as follows:

"Authorities should … proceed on the basis of the 1986 regulations when introducing schemes under the 1985 Act, and use those regulations as a guide for formulating reimbursement for mandatory schemes under the 2000 Act, including the objective (but not as a duty) that the operators should be "no better/worse off" as a result of participating in a concessionary fare scheme."

30. Thus the objective, as stated in regulation 4 of the TCSR 1986 (see paragraph 20 above), applies to both discretionary schemes under the 1985 Act and to mandatory schemes under the 2000 Act. In practice, the Scheme with which this case is concerned was (like most such schemes) a mixture of discretionary and mandatory elements and did not distinguish between the arrangements that were made under the 1985 Act and those made under the 2000 Act.

The Factual Background:

31. The Scheme took effect on 1^st April 2006. As I have already indicated, the Scheme provided for both discretionary and mandatory travel concessions by the Council: see clauses 2 and 14 of the Scheme.
32. The Council first published its proposals for the reimbursement arrangements in relation to the Scheme on 24^th November 2005. Following publication, there were negotiations with service operators that led to some changes being made. These changes did not address all the Claimant's concerns and, consequently, the Claimant did not agree to provide the discretionary elements of the Scheme voluntarily. As a result, the Council served the Claimant with a participation notice in respect of those elements. The obligations in the participation notice came into effect on 1^st April 2006 and expired on 31^st March 2007. Similarly, the reimbursement arrangements applicable to both the mandatory and discretionary elements of the Scheme came into effect on 1^st April 2006 and expired on 31^st March 2007.
33. On 28^th March 2006, the Claimant applied timeously to the Secretary of State under section 98(3) of the 1985 Act (in respect of the discretionary elements of the Scheme) and under section 150(3) of the 2000 Act (in respect of the mandatory travel concessions), i.e. the first application. In support of its application, the Claimant put forward the following nine grounds:

i. The reimbursement arrangements provided insufficient detail to estimate the likely level of reimbursement under the potential service levels, fares and take up of concessions;

ii. The reimbursement arrangements were subject to a fixed "pot" or were, in effect, capped;

iii. The reimbursement arrangements did not reflect the likely generative effect of the Scheme and were therefore not appropriate nor did they satisfy the objective;

iv. The use of the revenue displacement method was not appropriate as the current arrangements did not fairly compensate operators and the modifications to that method proposed in the reimbursement arrangements were not appropriate;

v. There was no proper provision for the treatment of fare increases;

vi. The proposals for the calculation of the average fare did not satisfy the objective;

vii. The reimbursement arrangements did not take into account the likely level of passengers who would transfer from full fare to free travel;

viii. The reimbursement proposals did not make appropriate or sufficient provision for the calculation of the additional costs of providing concessionary fares; and

ix. There was no provision for the detrimental effect of cashflow on the transfer to a free Scheme.

34. The Secretary of State duly acknowledged receipt of the Claimant's application/appeal and sought further information from the parties, as set out in his separate letters to each dated 26^th July 2006. On 8^th September 2006, the Secretary of State wrote to inform the parties that he had appointed an external independent decision maker (Mr Martin) to determine the application/appeal on his behalf, as permitted under the relevant statutory provisions. Having considered all the information/evidence and the submissions made on behalf of the parties, Mr Martin determined the Claimant's application/appeal on behalf of the Secretary of State in a written decision dated 8^th January 2007 (the January 2007 determination). On 9^th January 2007, the Secretary of State wrote to the Claimant, enclosing a copy of Mr Martin's written decision, and stated as follows (inter alia):

"Having considered all the evidence, Mr Martin has now made a final determination of the application, on behalf of the Secretary of State for Transport, and I am writing to inform you that the appeal has been upheld. Please see the attached document which provides a summary of the reasons for this decision, signed and dated on behalf of the Secretary of State." (My emphasis)

35. In his January 2007 determination on behalf of the Secretary of State, Mr Martin upheld the Claimant's "appeals" on some, but not all, of the grounds summarised in paragraph 33 above, although he rejected one of the Claimant's main contentions, i.e. that the revenue displacement method of calculating reimbursement provided by the Scheme was not appropriate. However, he modified the Scheme to allow for a recalculation at the end of the relevant reimbursement period, using the Scheme revenue displacement method by reference to actual data from the relevant year, rather than solely by reference to estimates at the beginning of the period. In the following numbered paragraphs I summarise Mr Martin's principal findings on behalf of the Secretary of State, as set out in his January 2007 determination.

i) The revenue displacement method for calculating reimbursement (used in the Scheme) and the Department of Transport toolkit method (preferred by the Claimant) produced virtually the same result.

ii) Insofar as the Scheme had the effect of imposing a fixed "pot" or "cap" on reimbursement, that was impermissible because this could prejudice the effective achievement of the Objective. Furthermore, insofar as the Scheme only allowed for variations in the amounts paid when those variations were "significant", the Scheme was defective.

iii) Since the Scheme largely fixed reimbursement at the start of the period, it involved the risk of an over or an under payment to the operator, being based only on estimates for the year ahead.

iv) Overall additional costs should include an allowance for a rate of return on new capital (this was not an argument that had been put forward by the Claimant).

v) Using the Scheme's revenue displacement method, the Council should review all financial calculations at the end of the year in the light of outturn data and this should be done in consultation with the operator.

vi) Agreement should be sought on additional costs incurred, with figures calculated on an operator specific basis and on average fares.

vii) If the final calculated reimbursement was different from the start of the year estimate, a balancing payment should be made by either the operator or the Council, depending on whether an under or an over payment had been made to the operator.

36. Mr Martin then concluded his January 2007 determination by stating his decision in the following terms:

"Decision

It is not clear that, under the arrangements as at present in effect, the "no better and no worse off" objective will be achieved (or nearly achieved). The arrangements should therefore be extended to require the Authority to re-calculate the reimbursement due on the basis of outturn figures at the year end. Therefore, under the powers delegated to me by the Secretary of State under section 100(5) of the 1985 Act and section 150(6) of the 2000 Act, I find that the reimbursement arrangements under the 1985 Act are inappropriate for application to operators other than those voluntarily participating in the Scheme, and, under the 2000 Act, are inappropriate with respect to the local services provided by the operator. I set out below the remedial action required.

However, I do not find it necessary to cancel the Participation Notice under the 1985 Act, as issued on 1 March 2006. I believe that the current arrangements should continue to apply, but with modifications as specified below.

Remedies

Under the powers contained in section 98(7) of the 1985 Act and section 150(8) of the 2000 Act, I hereby direct that the Authority shall

o modify the reimbursement arrangements to include a requirement on the Authority, as soon as possible after the end of financial year 2006-07 and in consultation with the operator, to re-calculate the reimbursement due to the operator using the revenue displacement method and inputting the most up-to-date trip generation fares and cost figures then available, this calculation also to allow, in assessing additional costs, for the operator making a rate of return on any additional capital expenditure which he has had to make to accommodate generated passengers, at a level which has regard to normal rates of return in the bus industry;

o in the interim, adjust its payments to the operator so that reimbursement to be paid over the full year will total £6,379,100 (an amount higher than its previous offer of £5,731,876 by 20% of the difference between that figure and the operator's claim of £8,968,000); and

o having calculated the year-end figure as above, pay then to the operator the sum calculated by subtracting £6,379,100 from the end year figure. If the figure thus produced is negative, the Authority should deduct the difference from its payments to the operator in financial year 2007-08. If this balancing payment, in either direction, is made more than 3 months after the end of financial year 2006-07, interest should be paid on the same basis as under Regulation 8(4) of the 1986 Regulations.

On behalf of the Secretary of State for Transport."

37. Accordingly, the effect of the January 2007 determination was that the Secretary of State required the Council to make interim payments to the Claimant totalling £6,379,100 during the 2006-07 financial year and he modified the reimbursement arrangements for the Scheme by requiring that reimbursement fixed at the start of the period by reference to estimates be re-calculated by reference to actual outturn data available at the end of the relevant period, with any over or under-payment to be compensated as necessary.
38. Neither the Claimant nor the Council formally challenged the January 2007 determination, although the Council appears to have considered doing so: see, in particular, the Council's letter to the Secretary of State dated 20^th February 2007 asking for the determination to be set aside and threatening judicial review. The Secretary of State duly responded by letter dated 26^th March 2007 and explained that, while he had no objection to clarifying specific points raised in the determination, "determinations as issued are final; there is no power for the Secretary of State to re-open or reconsider them." In the same letter, the Secretary of State went on to state: "the means by which the parties re-calculate, negotiate and reach agreement on suitable reimbursement following directions to make adjustments at the financial year end is not a matter for the Department."
39. In the meantime, by letter dated 28^th February 2007, the Claimant wrote to the Council to propose a "constructive year end reconciliation" and repeated its views (expressed in an earlier letter of 9^th February 2007) that the Council was obliged to comply with the modifications made by the January 2007 determination and to make the interim payments as directed.
40. For its part, the Council appointed MCL, a transport consultant, to consult the Claimant with regard to the implementation of the reimbursement arrangements, as modified by the January 2007 determination. MCL also proceeded to prepare various reports containing (inter alia) its proposals for the implementation of the reimbursement arrangements, as modified. On 14^th September 2007, MCL sent copies of its reports to the Claimant. Having considered the reports, the Claimant wrote to MCL on 2^nd October 2007 (in the letter the Claimant is referred to as "First" and the Council as "the TCA", i.e. Travel Concession Authority), objecting to the implementation proposals contained in the reports and stated (inter alia):

"It is apparent (and acknowledged) in the report, that there remains significant disagreement between us on appropriate reimbursement. It was of course these very issues that led our operators to appeal those schemes in the first place. It follows that First does not accept that the TCA can now impose a recalculation without the agreement of the operators whilst the same dispute remains. The legislation clearly does not provide that the TCA should be able to determine an appeal against its own scheme.

…

We will review the report in detail and consider our position. In the meantime, however, I can say on early analysis that First has very serious concerns about the fundamental basis on which these reports appear to be based. In particular:

1 First does not accept that the determinations of the Secretary of State's expert allow for re-basing of 2005/06 reimbursement for the purpose of recalculation by revenue displacement. … Ultimately, the expert's expressed requirement to adopt the revenue displacement method must prevail. Indeed, the requirement of revenue displacement suggests that the expert was satisfied with the reimbursement level in 2005/06. …"

41. On 4^th October 2007, the Claimant wrote to the Council, enclosing a copy of its letter to MCL of 2^nd October, and expressing its serious concerns about the process. The Claimant stated that it was considering its position in detail and noted that:

"… in the light of [the Council's] adviser's:

1. demonstrable misinterpretation of the Secretary of State's expert directions;

2. failure to take account relevant evidence which we have provided in good faith; and

3. unexplained application of different passholder trip rates for similar scheme areas;

as well as a number of other issues, this matter cannot be considered to be concluded."

42. Thereafter, further detailed negotiations between the Claimant and the Council (or MCL on its behalf) took place and further submissions were made. These included detailed written submissions by the Claimant dated October 2007 as to what the modifications to the reimbursement arrangements made by the Secretary of State required. On behalf of the Secretary of State, Mr Jonathan Swift suggested that these submissions were clearly written on the assumed basis that the January 2007 determination was "final", not that it was an "incomplete" or "interim" one. I agree with that suggestion: see, for example, the terms of paragraph 1.2 of those submissions.
43. However, on 21^st January 2008, the Council wrote to the Claimant to state that it had decided to accept MCL's recommendations, as follows:

"I write to advise you that, following extensive consideration, the Travel Concession Authorities have decided to accept the conclusions drawn by MCL and set out in their report, a copy of which has been sent to you. It will therefore be necessary to deduct the sum identified as being overpaid to you by the scheme from payments due to your company in the current financial year. This sum amounts to £359,369.

In view of the fact that this has been a protracted process and that delays have arisen from both parties we do not propose to seek payment of interest. …"

44. On 29^th January 2008, the Claimant responded to the Council in the following terms:

"As we have previously explained to both yourself and to your agents, MCL, First does not accept the conclusions of MCL as set out in their report. Specifically we have produced a detailed written submission and provided relevant evidence as to why we do not so agree to all parties concerned. Overall we do not believe that First's submissions were reasonably taken into account.

You will also know that First does not accept that it was the Secretary of State's intention to permit one party to the application which we issued to, in effect, finally determine the outcome of that application. That is plainly not just.

For the above reasons, I must inform you that First does not consider this matter to be closed and must reserve all its rights at this time to take further action to ensure that it receives what it considers to be fair reimbursement for concessions provided in 2006/07. We are considering our options with our advisers and will contact you in due course. …"

45. However, although the terms of its 29^th January letter suggested that the Claimant was considering the possibility of taking some form of legal action against the Council in respect of its decision of 21^st January, no judicial review or other proceedings were commenced, despite the Claimant's expressed concerns as to whether MCL's proposals properly implemented the January 2007 determination and/or were otherwise lawful. Furthermore, the Claimant did not pursue arbitration as provided for under clause 21 of the Scheme.
46. Accordingly, instead of taking proceedings against the Council, the Claimant made a further application to the Secretary of State in respect of the 2006/07 concessionary travel scheme/reimbursement arrangements by notice dated 15^th February 2008 and purportedly pursuant to sections 98(2) of the 1985 Act and 150(3) of the 2000 Act (the second application). The grounds relied on by the Claimant were to the effect that the Council had failed to comply with the reimbursement arrangements as modified by the January 2007 determination (referred to as "the Decision"), as follows (see paragraph 12 of the Claimant's notice of appeal):

"(a) [The Council] has not conducted the proposed reimbursement arrangements with the methodology directed by the Secretary of State in the Decision;

(b) The recalculation has not been agreed by the parties in accordance with the Decision;

(c) [The Council] has failed to properly consult [the Claimant] as part of the Recalculation process and in particular has failed to reasonably take into account evidence and submissions provided by [the Claimant]; and

(d) In any event, [the Council] has assumed variables within the Recalculation which are not supported by evidence or are unsustainable."

47. By letter dated 13^th March 2008, the Secretary of State rejected the material elements of the second application in the following terms (the Claimant is referred to as both "First" and "FEB" and the Council as "ECC"):

"Thank you for your letter of 12 February regarding the unresolved issues from the appeal determination upheld for First in the Essex County-wide concessionary travel scheme for 2006/07.

We have received and considered the Notice of Application given by First Essex Buses Ltd (FEB) to the Secretary of State, and made in accordance with section 98(3) and/or section 99(2) of the Transport Act 1985 (the 1985 Act), and section 150(3) of the Transport Act 2000 (the 2000 Act).

Section 98(2) of the 1985 Act

It is our view that the application under section 98(2) of the 1985 Act for the cancellation/and or variation of the Participation Notice dated 1 March 2006 and issued by Essex County Council, is invalid. Under section 98(3) an application to the Secretary of State has to be made before the end of the period of twenty eight days beginning with the date of the Participation Notice. Leaving to one side the application that has already been made and determined in this case, the time in which to make an application has clearly elapsed. As such, this aspect of FEB's application will not proceed to determination by the Secretary of State.

Section 150(3) of the 2000 Act

FEB's notice of appeal includes application, "for a modification of reimbursement arrangements under Section 150(3) of the 2000 Act as finally determined by ECC on 21 January 2008". It is our view that this aspect of the application is invalid. The recalculation set out by Essex County Council in their letter dated 21^st January does not constitute "proposed arrangements" within the meaning of sections 150(1) and 150(3) of the 2000 Act. The recalculation has its origins in the Secretary of State's earlier determination and is a matter entirely for the parties. By considering the recalculation, the Secretary of State would necessarily have to re-open the previous determination and consider the 2006-2007 Participation Notice and Scheme. The legislation does not contain powers enabling the Secretary of State to do so. This aspect of the application will not therefore proceed to determination.

…"

The Parties' Submissions.

48. As I have already indicated, in these proceedings the Claimant challenges the lawfulness of the Secretary of State's decision of 13^th March 2008, whereby he refused to determine the material elements of the Claimant's second application.
49. However, on behalf of the Claimant, Mr Jonathan Crow QC made it clear that there was no challenge to the lawfulness of the Secretary of State's January 2007 determination (i.e. his decision in relation to the Claimant's first application). It was Mr Crow's submission that (for the reasons given below), the January 2007 determination was a lawful decision that was "final" in some respects, but was interim or "incomplete" in others: i.e. that, so far as concerns the determination of the amount of reimbursement to which the Claimant was entitled under the Scheme as modified, it represented a lawful, but interim step, in the Secretary of State's overall adjudicative function to specify (inter alia) the correct reimbursement under the legislation in question.
50. Further, Mr Crow emphasised that the Court was not being asked to prefer the Claimant's expert evidence over that of the Council with regard to the most appropriate way of implementing the principles set out in the January 2007 determination or as to the actual amount of the reimbursement that should be paid to the Claimant under the Scheme as modified by that determination. Mr Crow stressed that it was the Claimant's case that it is for the Secretary of State to determine the dispute between the parties as to these matters in order to complete his adjudicative function under the statutory regime. Accordingly, to adopt Mr Crow's terminology, the "target" of the Claimant's claim in these proceedings is the Secretary of State's refusal, by his decision of 13^th March 2008, to complete that adjudicative function.
51. Mr Crow pointed out that both sections 98(7) of the 1985 Act and 150(8) of the 2000 Act empower the Secretary of State, when allowing/granting an application/appeal, to direct that the arrangements shall take effect with such modifications as are "specified in the direction": see paragraphs 17 and 28 above. He submitted that the legislative provisions in question must be construed in a manner that is both procedurally fair and compatible with the European Convention on Human Rights ("the ECHR"): see section 3 of the Human Rights Act 1998. As I have already indicated, Mr Crow accepted that the January 2007 determination was final, insofar as it dealt with such matters as removing the fixed "pot" or "cap" and in providing that the reimbursement was to be calculated by reference to real data. However, he submitted that where, as here, the statutory application/appeal involves a dispute as to the correct amount of reimbursement to which the service operator is entitled under the relevant proposed arrangements, on a proper construction of sections 98(7) and 150(8) the Secretary of State is obliged to specify (i.e. clearly identify) the amount of that reimbursement or to provide a formula whereby the amount can be unambiguously calculated, when directing the necessary modifications to the reimbursement arrangements in question. It was Mr Crow's submission that unless and until that is done by the Secretary of State, his adjudicative function under sections 98(7) of the 1985 Act and 150(8) of the 2000 Act remains incomplete.
52. In support of that submission, Mr Crow referred to and relied upon the judgment of Beatson J in Centro Ltd v Secretary of State for Transport (2007) EWHC 2729 (Admin) ("Centro"), when summarising the Secretary of State's power to modify reimbursement arrangements under sections 150 of the 2000 Act and 98 of the 1985 Act, where he said this at paragraph 11:

"11 The powers under section 98(2) are similar [to section 150(8)]. The [Secretary of State] is entitled to modify a reimbursement arrangement and to direct an authority to pay a specified amount to the operator where the [Secretary of State] considers that the reimbursement arrangements are inappropriate in terms of discharging the authority's duty to reimburse as laid down in section 93 of the 1985 Act, section 149 of the 2000 Act and regulations 4 and 5 of the 1986 Regulations."

53. Mr Crow stressed the importance of the use of the words "specified amount" and the degree of precision with regard to the amount that is embraced by the use of such an expression. In support of that submission, he referred to the judgment of Nourse J (as he then was) in Re Green's Will Trusts (1985) 3 All ER 455, where at page 460F he said:

"There is plenty of other authority, including that of common sense, to the effect that "specified" merely means "unambiguously identified" or made clear."

Mr Crow also referred to the judgment of Kennedy LJ in Lower Street Properties Ltd ~v~ Jones (1996) 28 H.L.R. 877 at page 882 and the observations of Scarman LJ in Sheffield City Council ~v~ Graingers Wines (1977) 1 WLR 1119, where he stated (at page 1126E):

"The word "specified" … means no more than "made clear"."

54. Mr Crow suggested that, as part of the process of determining the first application and in order to carry out the complex task required to calculate the specified amount to which the Claimant was entitled under the reimbursement arrangements as modified, it had been open to the Secretary of State, in the first instance, to adopt the approach that he did, namely to determine the broad principles that were to be applied and then to invite the parties to agree how those principles should be implemented in the final calculation.
55. However, it was Mr Crow's submission that, although it was perfectly lawful for the Secretary of State to adopt the approach that he did, it necessarily resulted in an incomplete or interim decision on this particular aspect of the application/appeal, because the determination did not specify the modifications that needed to be made to the reimbursement arrangements in order to specify (i.e. unambiguously identify) the amount of reimbursement to which the Claimant was entitled. Mr Crow contended that, in such circumstances and where there was disagreement between the parties as to the amount to be paid and/or how the principles in question were to be implemented, the parties must have the right to apply to the Secretary of State to "complete" his adjudicative function and direct the modifications that must be made to the reimbursement arrangements so as to "specify" the amount in question. He submitted that if that were not so, it would be open to the local authority (as in the present case) to act as the judge in its own cause by imposing its views unilaterally upon the Claimant and thus to determine the Claimant's civil rights in a manner that would be both procedurally unfair and an infringement of Article 6 and Article 1 First Protocol of the ECHR.
56. Thus, it was Mr Crow's contention that, in directing the Council to perform the necessary recalculation of reimbursement "in consultation with" the Claimant, as he did in the January 2007 determination, the Secretary of State made an incomplete or interim (but lawful) decision that assumed that the parties would be able to reach agreement on the implementation of that decision. Mr Crow stressed that, when the matter was referred back to the Secretary of State on 15^th February 2008 (i.e. by the second application), the Claimant was not asking the Secretary of State to reopen the January 2007 determination. Mr Crow submitted that the failure of the parties to agree the final reimbursement payable or how to implement the January 2007 determination meant that the interim approach adopted by the Secretary of State on this aspect of the application/appeal had not succeeded in finally determining the matter. Mr Crow argued that, in those circumstances, the Secretary of State was obliged to complete his determination by directing the Council to pay a clearly identified amount or by specifying a formula whereby that amount could be unambiguously ascertained and that the second application was directed to precisely that end. Accordingly, it was Mr Crow's submission that the Secretary of State's decision of the 13^th March 2008 amounted to an unlawful refusal to complete his adjudicative function under the statutory regime in question.
57. For his part, Mr Swift pointed out – as did Mr Timothy Corner QC on behalf of the Council – that the January 2007 determination did not require the parties to agree the recalculation of the reimbursement. To the extent that the parties were enjoined to reach agreement, this was limited to additional costs: see paragraphs 35 and 36 above. I agree with those observations because it is perfectly clear from the words used in the determination that what was required was that the Claimant should be consulted with regard to the necessary re-calculation. As Mr Corner observed, any process of consultation will no doubt seek agreement, but that is not the same as saying that the parties were required to agree.
58. I also agree with the submission that the January 2007 determination modified the reimbursement arrangements so as to require the Council, in consultation with the Claimant, to re-calculate the reimbursement due, in accordance with the provisions of the determination itself. I accept the submission that this was wholly lawful and entirely compliant with the statutory language. It is very important to note, as both Mr Swift and Mr Corner pointed out, that there is nothing in any of the relevant statutory provisions that requires the Secretary of State to direct particular kinds of modification be made to any scheme or to order that any particular sum is to be paid, as submitted by Mr Crow.
59. As it seems to me, it follows from the conclusion reached in the previous paragraph and from the evidence generally that the modifications directed by the Secretary of State in the January 2007 determination were in no sense "incomplete" or "interim". In my view, it is clear from its terms that the January 2007 determination was a "final" determination of the first application by the Secretary of State and was plainly so regarded by the parties at the time.
60. As Mr Corner pointed out, fundamental to Mr Crow's argument that the January 2007 determination was an incomplete or interim decision is the submission that the Secretary of State was obliged to identify the precise amount of the reimbursement to which the Claimant was entitled (or to specify a suitable formula for ascertaining it) in order to discharge his adjudicative function in full. As I have already indicated in paragraph 58 above, there is nothing in the language of the relevant statutory provisions that supports such an argument. As both Mr Swift and Mr Corner observed, there is nothing in the statutory language that requires the Secretary of State to go further than he did in the full and proper discharge of his adjudicative function under the relevant statutory provisions.
61. I also agree that the observations of Beatson J in Centro do not support Mr Crow's submission. There is nothing in the decision in Centro that suggests that the Secretary of State is prevented from modifying the reimbursement arrangements in the manner that he chose to adopt in the January 2007 determination. As Mr Corner observed, Beatson J did not seek in his judgment to set out any requirements relating to any direction by the Secretary of State. He simply made the point that, as is clear from the terms of the legislation, the Secretary of State has the power (but not the obligation) to direct the local authority to pay a specified amount.
62. Furthermore, I agree with Mr Corner that there is nothing in the use of the word "specified" to support Mr Crow's arguments. What has to be specified, in the sense of made clear, is the modification to the arrangements. In this case, the modification to the arrangements was the requirement that the Council recalculate the due reimbursement in consultation with the Claimant and in accordance with the provisions of the remainder of the directions. I agree that it does not follow that a "specified" modification must make the amount of the recalculated reimbursement "readily identifiable".
63. Finally, on this aspect of the matter, I agree with Mr Swift that, whatever the terms of the January 2007 determination, it cannot be illogical or unreasonable for the Secretary of State to refuse to determine the second application when neither section 98(2) of the 1985 Act nor section 150(3) of the 2000 Act requires the Secretary of State to determine applications concerning whether reimbursement arrangements (either as originally made by a local authority or as modified following application/appeal to the Secretary of State) have been correctly implemented by the parties. As both Mr Swift and Mr Corner observed, this is entirely a matter for resolution between the parties, if necessary by having resort to litigation or arbitration in order to do so.
64. As for the submission that the Secretary of State's refusal to entertain the material elements of the Claimant's second application has had the effect of leaving the determination of the Claimant's civil rights to the Council in a manner that is both procedurally unfair and contrary to Article 6 and Article 1 First Protocol of the ECHR, I am satisfied that there is no substance in this particular submission for the reasons stated in the following numbered subparagraphs.

1. To the extent that the Secretary of State made any determination of the Claimant's civil rights and obligations, the relevant decision on the part of the Secretary of State was the January 2007 determination. Although Mr Crow was at pains to point out that there was no suggestion that the January 2007 determination was unlawful, it is worth noting that the requirements of Article 6 of the ECHR are plainly met by the availability of proceedings to challenge that determination by way of judicial review. However, as I have already observed, no such challenge was ever mounted.

2. To the extent that the Claimant contends that it was and is entitled to an Article 6 compliant determination of its civil rights and obligations arising by reason of the reimbursement arrangements as modified by the Secretary of State, any such requirement is plainly satisfied by the fact that it is and was open to the Claimant to bring proceedings in an independent and impartial Court or before an independent and impartial Arbitrator against the Council directly for any failure to implement the reimbursement arrangements as modified by the Secretary of State. In my view and as Mr Corner observed, having regard to the foregoing it cannot possibly be said that the Claimant is the victim of procedural unfairness and/or that it lacked or was deprived of an effective means of challenge to the Council's decision to accept and implement MCL's recommendations as stated in its letter of 21^st January 2008.

65. Accordingly, for all the foregoing reasons, I am satisfied that the Claimant's first and principal ground of challenge fails. I therefore turn to consider, briefly, the Claimant's second and alternative ground of challenge.
66. Mr Crow submitted that even if the January 2007 determination was final, its implementation by the Council in the manner indicated in its letter of 21^st January 2008 constituted a "variation" of the Scheme for 2006/07, such that the Claimant was entitled to make a fresh application/appeal to the Secretary of State in respect of that variation, under the relevant provisions of the 1985 and 2000 Acts, which the Secretary of State was then obliged to determine. On that alternative basis, Mr Crow submitted that the second application amounted to a fresh application/appeal in respect of the Scheme as varied and that the Secretary of State's letter of 13^th March 2008 amounted to a wrongful refusal to determine that fresh application/appeal.
67. Again, I am satisfied that there is no substance in this alternative ground of challenge. I agree with Mr Swift's submission (supported and endorsed by Mr Corner) that, whether it was correct or incorrect, it is abundantly clear that what the Council purported to do in 2008 was to give effect to the reimbursement arrangements as modified by the Secretary of State. I accept the submission that, as an ordinary matter of language, the purported implementation of reimbursement arrangements, as modified consequent upon a previous application/appeal to the Secretary of State, cannot itself amount to any form of "variation" of those reimbursement arrangements by the local authority. As Mr Swift observed, if the purported implementation of the Secretary of State's determination constituted a "variation" of the reimbursement arrangements in question, there would effectively be an ever-renewing right of application to the Secretary of State. The second ground of challenge must therefore, for those reasons, also fail.

Conclusion:

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