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
		20/12/2010

Mr Justice Cranston:

Introduction

1. This judicial review challenges four decisions made on 16 June 2008 by the NHS Litigation Authority, the defendant, as adjudicator of disputes between the claimants, who are dentists, and the Warwickshire Primary Care Trust ("the PCT"), the Interested Party. At the heart of the dispute is the claimants' contention that in addition to receiving value for dental activity performed individually by them pursuant to their individual contracts, they also ought to receive value for work performed by four other dentists, whom they say were their employees or assistants.
2. The application to this court for judicial review is part of a long and bitter dispute between the claimants and the PCT. Both the claimants and the PCT urge that the issues in the present dispute can only be seen against that backdrop and in the light of the fluctuating positions taken by the other side. Reference is also made to wider issues. For example, the claimants say that over several years the PCT has attempted to break up their practice. The PCT refer to the fraud of Dr Hussain, resulting in a criminal conviction, in relation to a dental practice other than those the subject of this judicial review. In my view this is a straightforward judicial review of decisions of an adjudicator for error of law. I intend to treat it as such. There is no need to delve too far into the unfortunate history of the matter to do so.

Background facts

3. For the purposes of this claim the essential facts are that in early 2006 the claimants between them operated from two dental practices in Warwickshire. One was at 206 Camphill Road, Nuneaton ("Camphill"), the other at 60 Long Road, Atherstone ("Atherstone"). At Camphill there were some nine dentists including Dr Hussain (the first claimant), Dr Patel (the second claimant), Dr Mthewetha and Dr Poon. At Atherstone there were some seven dentists including Dr Muller (the third claimant), Dr Hussain (the first claimant), Dr Moloto and Dr Chan. It is accepted that each were registered dentists. In relation to Drs Poon, Mthewetha, Moloto and Chan there are letters from the Dental Practice Board for England and Wales when these dentists were given contracts to provide general dental services at these practices. For example, on 18 August 2004 the Board wrote to Dr Patel regarding Dr Poon.

"General Dental Services – New Contract

Dental List for North East Warwickshire PCT

We have processed a request we received recently for a new contract for the following dentist to provide General Dental Services as your assistant/vocational dental practitioner

Mr KW Poon

I am pleased to inform you that a new contract has been created and will take effect from 23/08/2004. The contract number is

256/754927/000/81."

4. In late 2005 the Dental Practice Board wrote to Dr Hussain and the other claimants letters headed "For the purpose of moving to the planned new contracting arrangements in April 2006." The letters enclosed a profile for each of the dentists at the practices containing details of financial payments, treatment activity and registrations for the period October 2004 to September 2005 inclusive. It would be used, said the letter, in discussing the new dental contracts. A copy of this profile had been sent to the PCT, the letter continued. For each profile there was a calculation of units of dental activity and a contract value.
5. On 20 February 2006 solicitors acting for Dr Hussain wrote to the PCT seeking a practice based contract for both the Camphill and Atherstone dental practices. There was no reply to this and for present purposes nothing more need be said about it.
6. On 10 March 2006 the PCT wrote to Dr Hussain "Re: letter of intent for base contract". The letter said that the PCT had written letters of intent to the individual practitioners at the Camphill and Atherstone practices offering specified contract values. The individuals had been asked to sign and return a copy to ensure they received payment in May 2006. As regards the dentists relevant to this litigation the values in the letter were as follows:

"Camphill Practice

Mr I Hussain £264,905

Miss B Patel £254,672

Mr Chan £174,706

Mr Mthewetha £101,225

Atherstone Practice

Mr I Hussain £97,931

Mr Mthewetha £102,367

Mr Chan £37,767

Miss Moloto £238,570"

There is no mention of Dr Poon.

7. On 21 March 2006 solicitors for Dr Hussain wrote to the solicitors then acting for the PCT asking for partnership based contracts for Camphill and Atherstone. The dentists at Camphill and Atherstone were listed in the letter, but not Dr Poon. The names of the proposed partners were confirmed by the PCT's solicitors in a letter dated 24^th March 2006 which expressed scepticism about the partnership and requested clear evidence of it. A partnership deed was provided by Dr Hussain's solicitors on 27 March 2006 with Dr Mthewetha's name crossed out from the list of partners. The PCT was not prepared to provide partnership contracts to the practices because it was not satisfied that they were bona fide as opposed to sham arrangements. However, it offered to provide individual contracts to dentists working at the practices.
8. These individual contracts were in fact signed by the dentists, although some were signed "in dispute". The three claimants signed their contracts in dispute as did Dr Chan and Dr Moloto. Clause 77 of each contract set out the units of dental activity ("UDAs") the dentist would provide during the financial year. Clauses 280-281 provided for the references of disputes in connection with the contract to the Secretary of State. A dentist could refer a dispute over the PCT's objection: clause 280.2. The parties agree to be bound by a determination: clause 281. Under clauses 289-291 the parties had to use their best endeavours to agree any proposed variation in the units of dental activity specified in the contract.
9. Dr Hussain instructed his solicitors to refer the dispute about the PCT not accepting partnership contracts to the Secretary of State. On 7 April 2006, in respect of both practices, Dr Hussain's solicitors presented the dispute as being on behalf of him and his partners. By a decision letter dated 2 June 2006 the adjudicator approached by the Secretary of State's NHS Litigation Authority accepted the evidence submitted in support of the practice being run as a partnership. However, in paragraph 5.13 the adjudicator noted that a large number of individual contracts had been signed. He added that no evidence has been put forward as to whether individual contracts in respect of the dentists had been signed. If they had been then whether a contract was awarded to those practising in partnership was at the PCT's discretion.
10. On 17 October 2006 the first claimant, along with other claimants, brought a claim for judicial review in relation to the partnerships issue. The second and third claimants were named as interested parties. Drs Poon, Moloto and Chan were also named as interested parties. On the day of the hearing, by consent, the claimants withdrew their claim.
11. On 30 March 2007, the claimants in the present judicial review registered four disputes with the NHS Litigation Authority, all to the effect that the value of their individual contracts, as stated in clause 77 of each, was incorrectly calculated. It is the decisions of the adjudicator appointed by the Secretary of State's NHS Litigation Authority on these disputes which is challenged in these proceedings.
12. There were similar statements of dispute in each case, on behalf of Dr Hussain in relation to Atherstone and Camphill (referring to Drs Chan and Mthewetha as employees), by Dr Patel in relation to Camphill (referring to Dr Poon as her employee) and by Dr Muller in relation to Atherstone (referring to Dr Moloto as his employee). For example, the dispute about Atherstone, as presented by Dr Hussain was that the contract value and UDAs he had been offered were too low. The claimants put their case on the basis that during the baseline year he had employed Dr Chan and Dr Mthewetha. "Neither Dr Chan nor Dr Mthewetha were providing such services during the baseline year", the document reads. It was accepted by the NHS Department of Health that Dr Chan and Dr Mthewetha were his employees and he was the contractor during the baseline period. Paragraph 2.5 of the Statement of Financial Entitlements ("SFE") made clear, the document continued, that the PCT has to establish who the earnings "of the dentists who are employed or engaged by the Contractor (that is, the gross amounts paid to them) in (the baseline year)". Accordingly, the claimants suggested that the PCT should have added together the total gross fees for Dr Chan, Dr Mthewetha and himself in calculating his contract value for the purposes of his contract. It appeared that contrary to the requirements of the General Dental Services and Personal Dental Services Transitional Provisions Order 2005, SI 2005 No 3435 ("the Transitional Order") and the General Dental Services Statement of Financial Entitlements ("SFE"), the PCT offered individual contracts to Dr Chan and Dr Mthewetha. To do so was entirely a matter for the PCT. However, in doing so the PCT deducted from his contract the contract value and UDAs equivalent to those of Dr Chan and Dr Mthewetha.
13. In its response to the dispute presented by Dr Hussain regarding Atherstone, the PCT contended that he had previously asserted that he was in partnership with Dr Chan and Dr Mthewetha at the material date. Dr Hussain therefore had no statutory right to claim an individual contract under article 4 of the Transitional Order. Thus, asserted the PCT, it had a discretion as to the UDAs offered to Dr Hussain. Moreover, it was entitled to vary the UDAs in the contract under articles 10(5) and 10(6) of the Transitional Order and/or under paragraph 2.8 of the SFE. It was perfectly proper for the PCT to have considered that a dentist who was employed by another dentist, and who was submitting claims for dental work to the Dental Practice Board prior to 30 March 2006, was entitled to a contract in his own name. The PCT were entitled to conclude, on a proper construction of the Transitional Order, that Dr Hussain was only entitled to UDAs for the work that he previously undertook. It had a discretion as to the terms under which a contract was offered.
14. In the course of the response the PCT expressed criticisms of the practices, conceded that there was no dispute about the UDA calculations, and asserted that Drs Chan and Mthewetha had signed individual contracts with it. Under the heading "What is this claim about" the PCT said:

"This appeal appears to be a further attempt by Dr Hussain to gain control over the UDAs which were properly allocated to other dentists under the GDS [General Dental Services] contracts in the reference period and which he now seeks to appropriate. The PCT's position is that the UDAs have already been allocated to dentists who are delivering the services to the public and it should not be under a compulsion to contract twice for the same UDAs."

15. The PCT response to Dr Patel's dispute tracked that for Dr Hussain, although it said that Dr Patel had previously asserted that he (sic) was in partnership with Dr Poon. It also said that individual contracts were signed by Dr Patel and Dr Poon. Dr Patel wrote to the adjudicator on 19 June 2007 that first, she was female, secondly, at no time had she asserted that she and Dr Poon were in partnership, and thirdly, at no time had Dr Poon been given an individual contract or signed one. Dr Poon was her employee. Dr Patel's corrections were never distributed to the other parties in the dispute. In the written statement from the PCT there was no mention of Dr Poon in the lists of those dentists at the practices.
16. Similarly, the PCT response to Dr Muller's dispute said that previously he had claimed to be in partnership with Dr Moloto, who was now claimed as an employee. Both, the PCT said, had signed individual contracts. In the witness statement from the PCT, served in the parallel judicial review proceedings which were still extant at that time, Dr Moloto is mentioned as not wanting a partnership, and as having left Atherstone in October 2006.

The adjudication

17. The adjudicator's decisions on the four dentists are all dated 16 June 2008. These decisions mirror each other. In the decision for Dr Hussain regarding Atherstone the adjudicator noted that the dispute had been referred under regulation 8 of the NHS (General Dental Services Contracts) Regulations 2005, SI 2005, No 3361: para 1.1. He referred to the judicial review having being settled: para 2.3. The dispute was about individual contracts, not partnership contracts: para 2.4. Dr Hussain was disputing the calculation of the number of units of dental activity (UDAs) which was stated to be 5303 units: para 3.1. Dr Hussain stated that he employed two dentists, Dr C[han] and Dr M[thewetha], who provided 1787 and 5616 units of dental activity respectively during the baseline period: para 3.2. The adjudicator continued:

"3.3 The crux of the contractors claim appears to be that the activity carried out by Dr C and Dr M during the baseline period should have been included in his individual contract value. I understand that the PCT has entered into individual contracts with Dr C and Dr M respectively for the activity that they undertook as employees of the contractor during the baseline period."

18. The adjudicator then reached his first conclusion, which is subject to challenge in this judicial review. He noted that a dentist cannot claim another dentist with whom he is in partnership as his employee: para 3.4 (a point he had also made earlier: para 2.4). Although the previous dispute about the status of the parties had been resolved at the material time Dr Hussain asserted that he was in partnership with the other dentists: para 3.5. Thus he was not entitled to a contract by virtue of article 4 of the Transitional Order: para 3.7; 3.10. The individual contract which the PCT had entered with Dr Hussain was instead a contract which the PCT had entered in its discretion. The contract was therefore based on a Negotiated Annual Contract Value ("NACV"): para 3.7.
19. The adjudicator then observed that the dispute related to a General Dental Services Contract, not a Personal Dental Services Agreement: para 3.8. He continued regarding the position of Dr Chan and Dr Mthewetha:

"3.9 Neither Dr C nor Dr M are parties to the individual contract between the PCT and the contractor [Dr Hussain]. There is no entitlement that the activity undertaken by them during the baseline period is included within the individual agreement between the contractor and the PCT … The NACV [Negotiated Annual Contract Value] is to be negotiated and agreed between the parties. No information has been placed before me which states that the activity undertaken by employees (if they were deemed to be employee and not partners of the contractor) of the person with whom the contract is entered into and undertaken during the baseline period must be included in a NACV between the contractor and the PCT (emphasis in original). "

20. Next, the adjudicator rejected in paragraph 3.10 a submission of the PCT that they were entitled to vary the number of units of dental activity in the contract under articles 10(5) and 10(6) of the Transitional Order and/or under the provisions of paragraph 2.8 of the SFE. Dr Hussain was not entitled to a contract under article 4, the adjudicator concluded, so paragraph 2.8 could not apply, since Dr Hussain was entitled to a NACV, not a Calculated Annual Contract Order ("CACV").
21. Finally, the adjudicator noted that under clause 77 of his contract Dr Hussain was to provide 5,303 units of dental activity (UDAs) during each financial year. That was in line with the Dental Practice Board prescribing profile for him and his own submission of the number of units of dental activity that he performed. It appeared to be a reasonable basis for the PCT to have calculated the activity required to be provided by him. Moreover, the contract value, set out at Schedule 4 of the contract, £97,731, was the same as that set out in the Dental Practice Board prescribing profile. It appeared to be a reasonable basis for the PCT to have calculated the NAVC: para 3.10.

Legal Framework

(a) The previous and new regimes

22. For some time, dentists in the United Kingdom provided NHS dental services under section 35 of the National Health Service Act 1977. Section 35(1) provided:

"35(1) It is every Area Health Authority's duty, in accordance with regulations, to make as respects their area arrangements with dental practitioners under which any person in the area for whom a dental practitioner undertakes in accordance with the arrangements to provide dental treatment and appliances shall receive such treatment and appliances. The services so provided are in this Act referred to as "general dental services".

Section 36(a) provided a regulation making power as to the arrangements to be made under section 35 and were to include provision for the preparation and publication of lists of dental practitioners who undertook to provide general dental services. Lists were prepared under the regulations made under this subsection, the National Health Service (General Dental Services) Regulations 1992, SI 1992 No 661, called the dental list, of dentists who undertook to provide general dental services in a locality and who were not disqualified for inclusion. Under the system of the 1977 Act dentists were paid according to a fee-for-item of service system, with remuneration being based on each individual treatment, e.g. a filling, a crown etc.

23. Under section 35 arrangements, it was not necessary for dentists who made the arrangements to deliver all of the dental work themselves. They could lawfully engage or employ assistant dentists to deliver the work on their behalf, and make lawful claims for that work pursuant to the arrangements.
24. A new regime for the provision of NHS primary dental services was provided for by amendments to the 1977 Act, effected by the Health and Social Care (Community Health and Standards) Act 2003, now consolidated in the National Health Service Act 2006. Lists of patients for each practice were abolished. In broad terms, Primary Care Trusts ("PCTs") came under a new duty, amongst other things, to exercise their powers so as to provide primary dental services within their area, or secure their provision within their area. They were empowered to enter into contracts with dental practitioners which were catchment based, i.e. the contract would cover work done within the PCT's catchment area. The contracts are called 'General Dental Services contracts' (or "GDS contracts"). The dental services work performed under the GDS contract with the PCT were to be measured in terms of 'Units of Dental Activity' ("UDAs"). A monetary value would then be attributed to the number of UDAs. In broad terms, the greater the number of UDA carried out under the GDS contract, the greater the sum of money that would fall to be paid to the contractor. The changeover date to the new regime was 1 April 2006.
25. The legislative arrangements implementing this new regime began with section 16CA(1) of the National Health Service Act 1977, now the National Health Service Act 2006, section 99:

"[A] ...Primary Care Trust ...must, to the extent that it considers necessary to meet all reasonable requirements, exercise its powers so as to provide primary dental services within its area, or secure their provision within its area."

Of the two different sorts of dental services agreement to be made between a PCT and dental practitioners, the one relevant to this litigation is the GDS contract, essentially for persons who were, prior to 31 March 2006, included in the dental list of a PCT and who were providing NHS dental services under section 35 of the 1977 Act. Section 28K of the 1977 Act (now National Health Service Act 2006, s.100) provides:

"(1) A Primary Care Trust ...may enter into a contract under which primary dental services are provided in accordance with the following provisions of this Part.

(2) A contract under this section is called in this Act a 'general dental services contract'.

(3) Subject to any provision made by or under this Part, a general dental services contract may make such provision as may be agreed between the Primary Care Trust... and the contractor in relation to -

(a) the services to be provided under the contract...

(b) remuneration under the contract, and

(c) any other matters."

26. Under section 28M there is the possibility of practice based GDS contracts. As explained in Factsheet 9, entitled "Practice-Based GDS Contracts and PDS Agreements", issued by the Department of Health in February 2006, there are various models for what are commonly called "practice-based contracts". In the first model, the GDS contract is with an individual dental practitioner or dental corporation, who employs or engages other dentists as performers to carry out some of the services required under the contract. In another model, the GDS contract is with a recognised partnership: para 6. The Factsheet emphasises that where the first model is to apply, it is important that dentists who perform under the contract or agreement are aware that they do not hold a contract with the PCT, i.e. that they are engaged by, or employed by, the contract holder to perform services under the contract or agreement: para 8. Paragraph 12 of the Factsheet spells out that where a group of dentists with individual GDS contracts wish to have a practice-based contract of the kind described in the first model, the PCT is not obliged to grant such a request, but may do so if it wishes.
27. The relevant regulations giving effect to the new regime are the National Health Service (General Services Contracts) Regulations 2005, SI 2005 No 3361 (the "GDS Contract Regulations"). Three features of these Regulations are of note. First, regulation 8 in part 3 provides a dispute resolution procedure for pre-contractual disputes. It provides, so far as relevant:

"(1) Subject to paragraphs (2) and (3), if, in the course of negotiations intending to lead to a contract, the prospective contracting parties are unable to agree on a particular term of the contract, either party may refer the dispute to the Secretary of State to consider and determine the matter in accordance with the procedure provided for in paragraphs 55(2) and (3) of Schedule 3.

.......

(3) Before referring the dispute for consideration and determination under paragraph (1), both parties to the prospective contract must make every reasonable effort to communicate and co-operate with each other with a view to resolving it.

(4) Disputes referred to the Secretary of State in accordance with paragraph (1), or section 4(4) of the 1990 Act, shall be considered and determined in accordance with the provisions of paragraphs 55(4) to 55(13) and 56(1) of Schedule 3, and paragraph (5) (where it applies) of this regulation.

(5) In the case of a dispute referred to the Secretary of State under paragraph (1), the determination—

(a) may specify terms to be included in the proposed contract;

(b) may require the Primary Care Trust to proceed with the proposed contract, but may not require the proposed contractor to proceed with the proposed contract; and

(c) shall be binding upon the prospective parties to the contract."

28. Paragraph 55 of Schedule 3, referred to in regulation 8, sets out the procedure to be followed where a dispute has been referred to the Secretary of State. The procedure provides for representations to be made to the Secretary of State by each party and for observations on each other's representations.

"The Secretary of State shall give a copy of any representations received from a party to the other party and shall in each case request (in writing) a party to whom a copy of the representations is given to make within a specified period any written observations which it wishes to make on those representations."

Paragraph 55 of Schedule 3 also permits the Secretary of State to appoint an adjudicator to determine the dispute.

29. Secondly, part 5 of the GDS Contract Regulations contains the "required terms", in other words the mandatory terms, in contracts between a PCT and dentists. Regulation 10 requires the contract to specify the names of the parties. Regulation 12 deals with contracts with individuals practising in partnership.

"Contracts with individuals practising in partnership

13 - (1) Where the contract is with two or more individuals practising in partnership, the contract shall be treated as made with the partnership as it is from time to time constituted, and the contract shall make specific provision to this effect.

Regulation 12 goes on to provide that where the contract is with two or more individuals practising in partnership, the contractor must be required by the terms of the contract to ensure that any person who becomes a member of the partnership after the contract has come into force is bound automatically by the contract.

30. Thirdly, regulation 17(1) of part 5 requires that the contract specify the number of units of dental activity to be provided by the contractor. Under regulation 17(2) a contract must also contain terms which have the effect of those specified in part 1 of Schedule 2 in relation to the calculation of the number of units of dental activity that the contractor will provide under the contract. Part 1 of Schedule 2 contains a table, Table A, which has the units of dental activity in respect of what was called banded courses of treatment. Thus a Band 1 course of treatment (excluding urgent treatment) is 1.0; a Band 1 course of treatment (urgent treatment only) is 1.2; a Band 2 course of treatment is 3.0 and a Band 3 course of treatment is 12.0.

(b) Transitional provisions: existing NHS dentists

31. Under the new regime there were specific provisions to deal with dentists who at the changeover date were already providing NHS dental care and treatment. Section 173 of the 2003 Act provided for the making of transitional provisions in respect of such persons. The transitional provisions are set out in the General Dental Services and Personal Dental Services Transitional Provisions Order 2005, SI 2005 No 3435, ("the Transitional Order"). Factsheet 8, "Understanding the Transitional Provisions Order", issued by the Department of Health in January 2006, referred to the "protected rights" which dentists, who were working under the general dental services contracts under section 35 of the 1977 Act, had to a new contract from 1 April 2006: para 2.1. Paragraph 2.4 of the Factsheet read:

"The Transitional Order gives legal rights to the dentists in para 2.1, but the legal rights, unless otherwise stated in the Order, are in force only at the point of transition. Therefore, in order to be protected by the conditions of the Order a dentist or PDS contractor providing services under the GDS or a PDS pilot scheme must sign a new contract no later than 31 March 2006."

32. Part 2, Chapter 1 of the Transitional Order is headed "Entitlement to General Dentist Services Contracts". Articles 3-9 deal with entitlement to a GDS contract. Article 3(1) provides:

"For the purposes of section 173(2) of the 2003 Act, the circumstances in which a Primary Care Trust must enter into a general dental services contract with a person who, on 31st March 2006, is providing services under section 35 of the 1977 Act are prescribed in articles 4 and 5."

Article 3(2) then goes on to provide that "nothing in this Order shall require a PCT to enter into a general dental services contract with any person, whether as an individual or as a member of a partnership, on more than one occasion.

33. Article 4(1) sets out the circumstances in which a PCT must, if the individual dental practitioner wishes, enter into a GDS contract with that dental practitioner ("an individual contract"). Factsheet 8 refers to them as contracts with dentists practising as sole practitioner.

"4. – Individual dental practitioner

(1) Subject to paragraphs (2) and (3), a Primary Care Trust must, if a person so wishes, enter into a general dental services contract with him as an individual dental practitioner if –

(a) on 31 March 2006 or, if earlier, on the date on which the contract is to be signed, he is included in the dental list of that Primary Care Trust;

(b) on the date on which the contract is to be signed, he is practising as an individual dental practitioner and –

(i) no other dental practitioner, or

(ii) no other person providing services under section 35 arrangements, practises in partnership with him …"

34. Article 4(6) then spells out a dispute resolution mechanism where a PCT and a dental practitioner are unable to reach agreement on the terms of the proposed GDS contract:

"(6) Where the contracting parties are unable to agree on a particular term of the general dental services contract and the dispute is referred to the Secretary of State for determination in accordance with section 4 of the 1990 Act (NHS contracts) or regulation 8(1) of the GDS Contracts Regulations (pre-contract disputes), the determination may if it is made after the contract has been entered into—

(a) vary the terms of the contract; or

(b) bring the contract to an end."

35. Article 5 contains comparable provisions as the alternative to an individual contract in article 4, a GDS contract with a partnership ("a partnership contract").
36. The Department of Health Factsheet 8 contains guidance on disputed GDS contracts. PCTs should already have entered into discussions with potential contractors with a view to agreeing provisional GDS contracts or PDS [Personal Dental Services] agreements before the end of February 2006. This deadline was important, since it should allow sufficient time for any remaining issues to be resolved during March 2006. The Factsheet continued:

"6.2 If the parties cannot reach provisional agreement potential contractors are strongly advised to complete their Standard Contract with the PCT on a "Subject to Dispute" basis."

37. Under Article 9 (1)-(2) of the Order, a dentist who offered to enter a GDS contract under article 4 or 5, but as a result of a failure to act by the PCT was not able to sign a contract before 5 April 2006, must have appealed to the Secretary of State before 15 April 2006 if he still wished to enter a contract. The appeal procedures imported by article 9(4) include article 7(12).

"The adjudicator may, when determining the appeal require the Primary Care Trust to enter into a general dental services contract with the prospective contractor on terms to be agreed between the parties, or where necessary, determined under the pre-contract dispute resolution procedure in section 4(4) of the 1990 Act (NHS contracts) or under regulations 8 of the GDS Contracts Regulations (pre-contract disputes) (whichever is applicable) but may not require the prospective contractor to proceed with the contract."

Article 7(14) provides that the determination of the adjudicator shall be binding upon the parties.

38. Part 2, Chapter 2 of the Transitional Order contains the "required terms" of the GDS contracts entered into under Chapter 1. Article 10 is the only relevant provision. It deals with the number of UDAs that are to be provided by the dental practitioner under the GDS contract. So far as pertinent, article 10(1) provides:

"(1) The number of units of dental activity to be provided by the contractor under a general dental services contract entered into under Chapter 1 shall be determined in accordance with —

(a) paragraphs (2) to (8) in the case of entitlement to a general dental services contract under article 4 or 5;

Central to this litigation is Article 10(2):

"(2) The Primary Care Trust shall, by—

(a) analysing the data it holds in respect of the care and treatment provided under section 35 arrangements during the year 1st October 2004 to 30th September 2005 by the person or persons with whom the contract is to be entered into;

(b) categorising that care and treatment in accordance with Schedules 1 to 4 of the NHS Charges Regulations, and the principles set out in regulation 4(2) to (5) of those Regulations; and

(c) reference to the conversion criteria to units of dental activity specified in Part 1 of Schedule 2 to the GDS Contracts Regulations,

calculate how many units of dental activity is the equivalent to the care and treatment provided by that person or persons during the year 1st October 2004 to 30th September 2005."

The reference to "Section 35 arrangements" is defined in article 2(1) as "arrangements made under section 35 of the 1977 Act." "NHS Changes Regulations" is also defined in that article, as meaning the National Health Service (Dental Changes) Regulations 2005, SI 2005 No 3477.

39. Article 10(4) then provides that a PCT shall reduce the number of units of dental activity calculated in accordance with paragraphs (2) and (3) by five percent to determine how many units of dental activity the contractor will provide in each financial year. Article 10(5) provides:

"(5) Where –

(a) data does not exist for the period specified in paragraph 2(a); or

(b) data does not exist, but it is appropriate to adjust the data,

the contractor and the Primary Care Trust shall agree the number of units of dental activity to be provided."

Article 10(6) sets out that where the contractor and the PCT cannot agree the number of units of dental activity as provided for in paragraph (5), the general dental services contract shall state this and specify a number of units of dental activity determined by the PCT. Paragraph (7) reads:

"In determining the number of units of dental activity to be specified under paragraph (6), the Primary Care Trust shall have regard to any data it holds regarding the amount of care and treatment provided under section 35 arrangements, or, as the case may be, the pilot scheme agreement by the person or persons with whom the general dental services contract is to be entered into in the period since 1 October 2004."

The General Dental Services Statement of Financial Entitlements ("the SFE")

40. Section 28N of the 1977 Act (now National Health Service Act 2006, s.103) deals with the payments that are to be made under a GDS contract. It provides for the giving of directions by the appropriate authority for the making of payments. On 22 December 2005 the Secretary of State gave such directions, called the "General Dental Services Statement of Fees and Allowances" ("the SFE"). The SFE includes income guarantees for dentists who were transferring from section 35 arrangements to the new contracts. This is explained in para 2.1 of the SFE:

"A Calculated Annual Contract Value ("CACV") is an amount based essentially on historic earnings derived from fees and allowances under the Statement of Dental Remuneration ("SDR") which were received by the dentists who are employed or engaged by the contractor. It is intended that calculations based on this amount will be used to protect income levels for a three year period, starting on 1^st April 2006. The arrangements set out in this Section are therefore due to end on 31^st March 2009."

41. The reference to dentists "who are employed or engaged by the contractor" is defined in Paragraph 1.5, which states:

"At various points in this SFE, reference is made to a dental practitioner being 'employed or engaged' by a contractor…In this SFE, employed or engaged, in relation to a dental practitioner's relationship with a contractor…includes, in addition to dental practitioners who have a contract of service or for services with the contractor –

a dental practitioner who is the contractor;

a dental practitioner who is a partner in a contractor that is a partnership…"

42. Para 2.2 of the SFE explains the conditions which needed to be fulfilled in order for the dentist to have the income guarantee. It provides:

"Entitlement to a Calculated Annual Contract Value [CACV]

2.2 A contractor is only entitled to payments based on a CACV if–

(a) it is entitled to a GDS contract by virtue of Part 2 of the First Transitional Provisions Order;

(b) its GDS contract is entered into pursuant to that Part and the number of

units–

(i) of dental activity to be provided by the contractor is determined in accordance with article 10(2) to (7) of the First Transitional Provisions Order, and

…

(c) its GDS contract takes effect for payment purposes on 1st April 2006; and

(d) thereafter (as a continuing entitlement condition), its GDS contract is not varied to change the number of units of dental activity … to be undertaken by the contractor"

43. Paragraph 2.3 then lays down the baseline number of units of dental activity (the so-called "BNUDA").

"2.3 Each GDS contract must specify the number of units of dental activity to be provided by the contractor… (regulations 17 and 18 of the GDS Contract Regulations…").

In the case of contractors who are entitled to payments based on a Calculated Annual Contract Value ("CACV"), for the start of the financial year 2006 to 2007 a calculation must be made of a baseline number of units of dental activity, which is to be calculated in accordance with article 10 (2) to (7) of the Transitional Order. The total number of units of dental activity determined in accordance with article 10 (2) to (7) is the contractor's Baseline Number of Units of Dental Activity (BNUDA).

44. The next step in the process is described in paragraph 2.4, the requirement to establish the contract's first CACV.

"2.4 Once the contractor's BNUDA…have been established…the PCT will need to establish the first value of the contractor's CACV. The first value of the contractor's CACV is the amount that is properly attributable…to the contractor's BNUDA…subject (where appropriate) to the adjustments that are set out below. This amount is to be determined by as follows."

45. Paragraph 2.5 is headed "Calculation of the baseline value of the contractor's CAVC". It reads, so far as relevant:

2.5 Firstly, the PCT is to establish the earnings received by the dentists who are employed or engaged by the contractor, (that is the gross amounts paid to them)…pursuant to the following provisions of the SDR…"

Paragraph 2.6 continues that this initial baseline value is subject, potentially, to four types of adjustment so as to produce the first value of the contractor's CACV. One is a vocational trainee earnings adjustment: para 2.7. Another is a practice configuration adjustment, dealt with in paragraphs 2.8-2.9.

"In determining the contractor's BNUDA…the PCT may take into account changes to the configuration of the dental practice which the contractor was, or which the dentists who are employed or engaged by the contractor worked for, during the baseline year. Examples of factors that may be taken into account include: vacancies or absences during the baseline period….Where a PCT adjusts a contractor's BNUDA…a parallel adjustment must also be made to the baseline value of the contractor's CACV…"

Time lag adjustments are covered by paragraphs 2.10-2.11, and an adjustment for 2006/7 is dealt with in paragraph 2.13. Paragraph 2.14 concludes:

"2.14 The contractor's initial baseline value for its CACV, as adjusted (as appropriate) in accordance with paragraphs 2.7 to 2.13, is the first value of the contractor's CACV. "

46. If a contractor is not entitled to a CACV then the number of UDAs and the price to be paid for those UDAs are negotiated between the contractor and the PCT. The NACV is explained in paragraph 3.1 of the SFE:

"3.1 Except where the contractor remains entitled to a CACV and is paid on that basis, payments under the a GDS contract in respect of the agreed number of units of dental activity and orthodontic activity specified in the contract is to be based on a Negotiated Annual Contract Value (NACV)"

Preliminary matters

47. It is convenient at this point to dispose of two points raised by the PCT, the interested party in these proceedings. The first is that judicial review is not available to the claimants. In their contract the claimants agreed, pursuant to regulation 8(5)(c) of the GDS Contract Regulations, that a determination of a dispute referred to the Secretary of State "shall be binding upon the prospective parties to the contract": see also clause 281. Where parties to a contract agree that their disputes will be determined outside the courts by an alternative dispute resolution procedure, Mr Lock for the PCT submits, the court should uphold the results of a third party adjudication unless a party seeks to set aside the determination under the limited grounds provided for within the Arbitration Act 1996: see Mustill & Boyd, The Law and Practice of Arbitration in England (London, 1989), 41; David Wilson Homes Ltd v Survey Services Ltd & Anor [2001] EWCA Civ 34. It therefore follows that, once the claimants agreed to refer their dispute to the Secretary of State, they were bound by the outcome of the determination. Their only way to challenge such a finding, if it were treated as an arbitration rather than an expert determination, would be to use the limited powers to seek to persuade the court to intervene under the Arbitration Act 1996.
48. The submission that I should decline relief to the claimants in judicial review, and oblige them to proceed on the more restrictive grounds for an appeal under the Arbitration Act 1996, was not one advanced by Mr Coppel QC for the Secretary of State. Coming from a public body, the argument that somehow a term compulsorily imposed in a standard form contract between it and other parties should exclude those parties from accessing the public law remedies they would otherwise have is distinctly unattractive. In any event, it is in my judgment wrong. In entering the contract and acting under contractual provisions mandated by the regulations, the PCT as a public body is obliged to act consistently with public law principles.
49. Further, the process of adjudication which arises under regulation 8 of the GDS Contract Regulations, and compulsorily incorporated in a contract, is a public law process. As with any statutory tribunal an adjudicator appointed by the Secretary of State under paragraph 55 of Schedule 3 exercises public law functions and is subject to judicial review for error of law.
50. Secondly, the PCT contends that the claimants were out of time in making their applications for resolution of the disputes. Properly construed, the submission runs, the right of dentists to apply to an adjudicator under regulation 8 is limited to applications which were made before the contract was concluded. Once the contract was signed it was possible for a dentist to refer any on-going dispute under the contract in accordance with paragraphs 55 and 56 of Schedule 3 of the GDS Contract Regulations. But, in this submission, the regulation 8 right is different, because it arose by virtue of the negotiations and was extinguished once a contract was concluded. Alternatively, the PCT submits, regulation 8 could be construed as meaning that there was required to be a dispute in existence about a particular term before the contract was signed. There was a dispute as to whether the contracts provided to the claimants should be partnership contracts or individual contracts, but there was no dispute about the number of UDAs in the individual contracts prior to March 2007. That was long after the time period specified in the Transitional Order had expired: see Tomkins v Knowsley Primary Care Trust [2010] EWHC 1194.
51. These submissions are puzzling, to say the least. They have no support from the Secretary of State. The fact is that the PCT participated fully in the proceedings before the adjudicator. It now seeks to argue that the reference to the adjudicator for determination, which was accepted by the adjudicator and in which the PCT participated, was out of time. If there was merit in the argument it should have been raised at the time. In my view this is one of those instances where in judicial review a public authority will be prevented from relying on a breach of a procedural formality.

Nature of the claimants' contracts

52. In essence, the claimants contend that the adjudicator was wrong to rule in his decisions that the PCT did not award the claimants' GDS contracts under article 4 of the Transitional Order, but rather exercised a discretion to award the contracts outside the scope of Part 2 of the Order.
53. For the PCT Mr Lock defends the adjudicator's conclusion. None of the claimants were entitled to an individual contract by reason of article 4 because each claimant was in a partnership with other dentists on the date when the contract was to be signed, namely in the days leading up to 31 March 2006. The dentists had lawyers acting for them and made decisions to enter into partnership agreements. It follows as a matter of statutory construction that the adjudicator was correct that they were outside the scope of article 4. The adjudicator's finding did not depend on whether the other persons who performed services pursuant to the section 35 arrangements referred to in the claims were, or were not, within any partnership.
54. It also follows, submits Mr Lock, that the adjudicator must also have been correct to conclude that the PCT had a discretion to enter into GDS contracts with the claimants. If it had no statutory obligation under article 4 to enter into an individual contract with the claimants, the PCT must have had a discretion to decide to do so. If it decided to do so, it could also choose the terms upon which it proposed to offer to enter into any GDS contract. Thus the adjudicator was correct to find at paragraph 3.9 that there was no statutory obligation on the PCT to include the activity of the employed dentists in the contract to be offered to each of the claimants.
55. In my view the adjudicator was wrong in this part of his decisions. The background to the Transitional Order, as the Department of Health Factsheet 8 explains, was to confer on existing section 35 dentists protected rights. A PCT was obliged to enter into a GDS contract with such dentists. It was under a mandatory duty to enter with section 35 dentists either an individual contract under article 4 of the Order or a partnership contract under article 5. The rights of section 35 dentists were thus protected. The claimants asserted that they were in partnership. The PCT refused to accept that they were. Whether or not they were in partnership the crucial fact is that the PCT entered individual contracts with them. Those contracts could only have been entered pursuant to article 4. There is no legal basis in the Transitional Order for the PCT to enter a "discretionary" contract in these circumstances.
56. It follows that the adjudicator was also wrong to find that the claimants were entitled to Negotiated Annual Contract Values (NACV) as opposed to Calculated Annual Contract Values (CACV) under the Statement of Financial Entitlements ("the SFE"). Under paragraph 3.1 of the SFE, GDS contracts are NACV based "except where the contractor remains entitled to a CACV". Under paragraph 2.2(a) of the SFE, a contractor is entitled to payments based on CACV if it is entitled to a GDS contract by virtue of Part 2 of the Transitional Order. Part 2 of the Transitional Order covers both individual contracts granted under Article 4 and partnership contracts granted under Article 5. Unlike NACVs, CACVs are determined in the manner prescribed by paragraphs 2.5 to 2.13 of the SFE, detailed above. It was on that basis that the adjudicator should have proceeded, not by reference to the reasonableness of the calculation as a NACV. The adjudicator was in error to do so and on that basis his decisions must be set aside.
57. Before the adjudicator the claimants challenged the lawfulness of the PCT's determination of contract values on the basis of paragraph 2.5 of the SFE. Because he focused on the reasonableness of the calculations under NACV, the adjudicator failed to deal with this aspect of the claim. This gives rise to further grounds of challenge by the claimants.

Calculation of contract values

58. The essence of the claim before the adjudicator was whether the PCT was entitled in the determination of the contract value of the three claimants' General Dental Services (GDS) contracts to omit the value of the activity carried out by the contractors' employees or assistants during the base period. In other words, if the claimants were entitled to individual GDS contracts, how pursuant to Transitional Order and the SFE ought their values to have been calculated flowing from the total care and treatment provided by them under section 35 arrangements during the baseline period of 1 October 2004 to 30 September 2005. In particular, to what extent can the treatment provided by Drs Chan, Mthewetha, Moloto and Poon be taken into account in undertaking the calculation. It will be recalled that although the adjudicator wrongly approached the calculation issue through the NACV lens, he did decide in paragraph 3.9 that there was no entitlement in Dr Hussain's case for the activity of Drs Chan and Mthewetha to be taken into account in calculating Dr Hussain's activity in the baseline period. The same applies to the adjudicator's findings about the other claimants, Dr Patel and Dr Muller, in respect of their employed dentists, Drs Poon and Moloto respectively.
59. For the claimants Mr Sinai forcefully and cogently contends that when applying the Transitional Order and the SFE the activity of employees and assistants can be taken into account in calculating the contract value of dentists in the baseline period. The Transitional Order refers to the activity which was carried out by the contractor during the baseline period pursuant to section 35 arrangements, which would include the activity carried out by its employees and assistants in that period. As paragraph 2.1 of the SFE makes clear, the CACV was intended to provide a three year income guarantee to qualifying dentists, based on historic earnings. The calculation is not intended to be forward looking. That is made clear in paragraph 2.5, continues Mr Sinai, with its focus on earnings in the baseline year.
60. Moreover, paragraph 2.5 provides that the PCT was "to establish the earnings received by the dentists who are employed or engaged by the contractor, (that is the gross amounts paid to them)" during the baseline year. Article 1.5 defines those employed or engaged to include contractors themselves. All paragraph 2.3 does is to repeat the requirements in regulation 17 of the GDS Contracts Regulations, that GDS contracts must contain a term stating the amount of UDAs to be provided under the contract. That has no bearing on how the amount is to be calculated. The use of the words "properly attributable" in paragraph 2.4 of the SFE does not take the matter any further. That paragraph simply confirms that the amount which is properly attributable must be determined in accordance with paragraphs 2.5 to 2.9. Therefore paragraph 2.4 only states that a monetary value must be given to the contractor's baseline number of UDAs and is not concerned with the calculation of the CACV. Paragraph 2.5 provides the method for calculating the baseline value. As paragraph 2.6 SFE makes clear, the four types of adjustment to the baseline value are made by paragraphs 2.7 to 2.13. Therefore the baseline value must be determined by computing the value of the treatment provided by the contractor and any employees during the baseline period. The only adjustments permitted are those provided under paragraphs 2.7 to 2.13 of the SFE.
61. Taking into account the employees' activities during the baseline period is consistent, Mr Sinai's submits, with the intention of the legislation. It provides an income guarantee to dentists until 31 March 2009 on the basis of their activity, including the activity of their employees, in the baseline period. The rationale is that the size and value of the practice is protected so as to ensure funding is in place for the number of patients serviced by the practice, including its employed dentists. When a particular employed dentist leaves the practice ought to be able to replace the departing employee with another dentist so as to continue to honour the demand of its patients. If the departing employee effectively takes his NHS funding with him, the employer's practice is being diverted. The intention of the legislation could not have been to encourage employed dentists to leave their employer taking with them the goodwill which the employer has built up.
62. In my view the calculation of contract values is relatively straightforward. First, units of dental activity needed to be calculated under article 10 of the Transitional Order equivalent to the care and treatment provided by the person in the baseline period. Article 10(1) refers to units of dental activity to be provided by the contractor. In other words, article 10(1) is concerned with the activity to be performed by the contractor pursuant to the contract. That is reinforced by the wording in article 10(2), which refers to data in respect of care and treatment provided by "the person or persons with whom the contract is to be entered into". Under article 10(2) the PCT must also "analyse" the data relating to the section 35 arrangements, as the paragraph puts it, to determine the extent to which the volume of treatment under section 35 represents the UDAs to be provided by the person with whom the contract is to be entered into. Article 10(2) specifies the starting point for the PCT in calculating the UDAs; it does not state that the PCT simply imports the volume of treatment provided under the section 35 arrangements into a determination of UDAs. Once the UDAs are calculated then the further steps described in article 10 are taken to render a calculated annual contract value (CACV).
63. That the activity carried out by the contractor during the baseline period, pursuant to section 35 arrangements, cannot include the activity carried out by employees or assistants in that period if they themselves have contracts with the PCT, is even clearer in the SFE. Paragraph 2.3 is the first stage in the process and sets out how the baseline number of UDAs ("BNUDA") are to be calculated. When paragraph 2.4 states that the value should be 'properly attributable' to the contractor's BNUDA, it means that the value should bear a direct relationship to the amount of dental activity to be provided under the contract. The last two sentences of paragraph 2.4 – especially the phrase "subject (where appropriate) to the adjustments set out below" – make certain that it is only the adjustments to the amount attributable to the contractor's BNUDA that are to be determined in accordance with the succeeding paragraphs, namely paragraphs 2.5 – 2.9.
64. As for paragraph 2.5 of the SFE it provides, where appropriate, for an adjustment to the amount properly attributable to the contractor's BNUDA. It does not mandate a departure from what is properly attributable to the contract, which is defined in paragraph 2.4. Paragraph 2.5 is concerned to adjust that figure, where appropriate, for the level of earnings for dentists engaged or employed by the contractor during the specified period. In other words, in calculating the financial value that is properly attributable to the contractor's BNUDA, as required by paragraph 2.4, regard is to be had, where appropriate, to the earnings received by dentists who are performing the BNUDA being commissioned under the contract. If a dentist has a separate contract with the PCT, then his services are not being commissioned pursuant to the contract with the contracting dentist. Any earnings received by that dentist are not taken into account when calculating the contract value under any other dentist's contract. If, however, services were performed in the baseline period by a person who does not have a contract with the PCT then the value of that activity may be properly attributable to the BNUDA of the contracting dentist who is commissioned to provide services under it.
65. All this is consistent with the legal policy behind the new regime introduced in 2006, of which the Transitional Order and SFE are part. Contrary to Mr Sinai's assertion, the legal policy is that lists of patients for each practice were abolished. Whether or not particular dentists or a particular dental practice were provided with contracts for dental activity, the PCT funding for dental services is ring fenced.  If contracts are offered but not taken up, or are taken up by dentists and then came to an end, that does not have a material effect on the quantity of NHS dentistry services available to the public. Where NHS dentistry contractual capacity becomes available, contracts are signed following a procurement process by the PCT with those suppliers who are successful in gaining new contracts.  While changes may affect the level of dental services which any particular practice can deliver, it should not adversely affect the overall provision of dental services to the public.

Factual error

66. Before the adjudicator neither party distinguished itself in the accuracy of the factual assertions made. On behalf of the PCT Mr Lock rightly apologised for the errors it had made (Mr Sinai has only been involved after the adjudicator). Whatever the adjudicator consequently assumed to be the case, the position now accepted by all sides is that Dr Chan signed two contracts, both "in dispute". He left both practices this year and both his contracts have been terminated. Dr Moloto signed one contract "in dispute" for Atherstone but she left around October 2006. Dr Mthewetha was offered contracts by the PCT but did not sign either contract and left both practices around April 2006. Dr Poon was not offered and accordingly never signed a contract and left Camphill after April 2006.
67. Given that the award must be set aside for error of law, the issue arises as to the course to be taken. Mr Coppel QC submits that post-decision facts are brought into consideration through the contract itself. There is an express term of the claimants' contract with the PCT, clause 289, that they are entitled to give notice to the PCT to amend the contract in the event that there needs to be a variation to the level of dental activity to be provided under the contract. In his submission this is the correct means by which to resolve any issues arising from the new facts. The claimants argue that any such attempts at variation would be futile given the attitude of the PCT towards them.
68. In my view, this dispute has gone on far too long. To put it in as neutral a way as possible, any attempt at an agreement to vary the contracts pursuant to clause 289, as suggested by Mr Coppel QC, is likely to be fraught. It seems to me that the appropriate course is to attempt to resolve the matter once and for all, as expeditiously and inexpensively as possible

Conclusion

69. The adjudicator's award must be set aside for error of law. These claimants were entitled to, and were given, individual contracts under article 4 of the Transitional Order. However, the legislative regime does not empower the PCT to pay them under their contracts for dental services work being performed by other dentists pursuant to those dentists' separate individual contracts with the PCT. However, where work was undertaken in the baseline period by employee or assistant dentists who did not enter a separate individual contract with the PCT, that is potentially includable within the contract value of the contracting dentist. I invite submissions from counsel as to how the matters can be finally resolved in the light of my conclusions and earlier remarks.