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
		16/01/2013

Lord Justice Toulson:

1. The claimant applies for judicial review of a decision of the Home Secretary, acting through the UK Border Agency (UKBA), to refuse an application by the claimant for Highly Trusted Sponsor (HTS) status and to reduce its allocation of Confirmations of Acceptance for Studies (CAS) to zero. The decision letter, dated 23 August 2012, gave the following reason:

"For a sponsor to be considered for HTS status they must first meet all the mandatory requirements as detailed in the sponsor guidance.

We have been unable to approve your application for the following reason(s): -

Our records indicate that your refusal rate is greater than 20%.

We have identified from our checks that 40 Confirmation of Acceptance of Studies (CAS) issued by your institution were used in an application for entry clearance/leave to remain during 12 months prior to the date your application was received, this being from 27 March 2011 until 26 March 2012. Of these applications 11 were refused which equates to a refusal rate of 27.5%, which exceeds the current mandatory requirements to achieve HTS. "

2. The letter identified the 11 refusals by their CAS numbers.
3. On 28 August 2012 solicitors for the claimant sent a pre-action letter to the defendant drawing particular attention to 6 of the refused applications.
4. On 27 September 2012 UKBA's head of sponsorship, Mr George Shirley, replied stating that the claimant's HTS application had been reconsidered and the 11 refused CAS had been reviewed. The decision to refuse the HTS application was maintained.
5. There are 4 grounds of challenge to the decision:

1. the decision was based on policy guidance which was invalid;

2. if the relevant policy guidance was valid, it was misconstrued;

3. if the relevant policy guidance was neither invalid nor misconstrued, the requirement in the guidance which led to the refusal of the claimant's application was irrational;

4. the defendant fettered her discretion in applying the guidance.

The policy guidance

6. The criteria for determining an application by a non-European Economic Area national, aged over 16, who wishes to enter or remain in the UK for purposes of education are contained in Tier 4 of a points-based immigration system. An application will be granted only if it is supported by an education provider who is authorised by the defendant to sponsor the application.
7. The scheme for authorising sponsors has changed from time to time. Applications for authorisation to act as a sponsor are currently dealt with in accordance with a published policy guidance entitled "Tier 4 of the Points Based System – Policy Guideline", which came into force on 9 July 2012. The background to the introduction of the current policy guidance is described in a witness statement of Mr Shirley.
8. Under the heading "Eligibility requirements for highly trusted sponsor (HTS) status", the guidance provides:

"301. You must meet all of the requirements set out in this section. If you do not meet all of the requirements, you will, in some circumstances be allowed to apply again. In some circumstances your licence will be revoked.

…

306. There are two stages in considering your application.

307. At the first stage we assess you against the mandatory requirements set out in table (iii). We base our assessment only on students sponsored under Tier 4 and whose application to come to, or stay in the UK was supported by a CAS assigned by you."

9. Table (iii) sets out a number of requirements, one of which relates to the past rate of refusal of entry to holders of CAS issued by the applicant. The relevant paragraph states:

"Your refusal rate must be less than 20 per cent.

This means that of all the CAS you have assigned which students have used to support an application for a visa or permission to stay, the total number of applications we refused must be less than 20 per cent. We will assess this using CAS data from the SMS [Sponsorship Management System] for the 12 month period immediately before you apply. We will take into account all CASs that students have used and applications we refused during this 12 month period."

10. The general nature of the scheme and duties of a sponsor appear from other paragraphs of the guidance:

"20. Sponsorship is based on two basic principles. They are that:

(a) those who benefit most directly from migration (employers, education providers or other bodies that bring in migrants) help to prevent the system being abused; and

(b) those applying to come to the UK to work or study are eligible to do so and a reputable employer or education provider genuinely wishes to take them on.

…

25. As a licensed sponsor you must comply with certain duties, including a duty to inform us if:

(a) students do not arrive for their course either following a refusal of entry clearance or leave to remain, or where leave is granted the student fails to enrol;

(b) students are absent without permission for a significant period;

(c) they leave their course earlier than expected; or

(d) you ask them to leave the course.

26. You must keep proper records of the students you sponsor, including contact details and a copy of their biometric residence permit (BRP) (previously known as the identity card for foreign nationals (ICFN)), and give them to us when we ask for them.

27. You have a duty act honestly in any dealings you have with us. For example, you must not make false statements and you must ensure you disclose all essential information when you apply for a sponsor licence or assign a CAS.

…

29. If we consider that you have not been complying with your duties, have been dishonest in your dealings with us or you are a threat to immigration control in some other way, we will take action against you. This action may be to:

(a) revoke or suspend your licence; or

(b) reduce the number of CAS's you can assign.

…

32. Highly trusted sponsor status (which we call HTS) is designed to ensure that all education providers are taking their obligations on immigration compliance seriously. It recognises sponsors who show a good history of compliance with their sponsor duties and whose students meet the standards of compliance with the terms of their visa for permission to stay in the UK (known as "leave to remain").

…

35. A confirmation of acceptance for studies (CAS) is your way of confirming, as a licensed sponsor, that:

(a) you wish to bring an overseas student to the UK to study; and

(b) to the best of your knowledge, that student meets the requirements of the rules for a valid CAS and will be able to make a successful application for leave to come to or stay in the UK."

Validity

11. Section 1(4) of the Immigration Act 1971 provides:

"The rules laid down by the Secretary of State as to the practice to be followed in the administration of this Act for regulating the entry into and stay in the United Kingdom of persons not having the right of abode shall include provision for admitting (in such cases and subject to such restrictions as may be provided by the rules, and subject or not to conditions as to length of stay or otherwise) persons coming for the purpose of taking employment, or for purposes of study, or as visitors, or as dependants of persons lawfully in or entering the United Kingdom."

12. Section 3(2) provides:

"The Secretary of State shall from time to time (and as soon as may be) lay before Parliament statements of the rules, or of any changes in the rules, laid down by him as to the practice to be followed in the administration of this Act for regulating the entry into and stay in the United Kingdom of persons required by this Act to have leave to enter, including any rules as to the period for which leave is to be given and the conditions to be attached in different circumstances…"

13. The same subsection goes on to provide that such rules are subject to disapproval by a negative resolution of either House of Parliament within 40 days.
14. The Immigration Rules laid before Parliament under section 3(2) stipulate the requirements for leave to enter or remain in the UK as a Tier 4 (General) student. It is a points based system and points are awarded for having a CAS.
15. The Immigration Rules also deal with the effect on a student's permission to enter or remain in the UK if the sponsor which issued their CAS loses its sponsorship licence before the completion of the student's course. The outcome will vary according to the stage which the student has reached. If the student has yet to enter the UK, leave to enter will be refused. If the student has entered the UK and the course has less than 6 months to run, the Home Secretary will take no action. If the student has entered the UK and the course has longer than 6 months to run, the student will be given 60 days to find an alternative sponsor or face removal.
16. The claimant argues that the requirements in table (iii) of the sponsor guidance amount to "statements of rules laid down by the Secretary of State as to the practice to be followed in the administration of immigration control" within the meaning of section 1(4). Because the policy guidance was not laid before Parliament under section 3(2), the mandatory requirement which led to the refusal of the claimant's application is invalid.
17. The argument that the system of licensing of sponsors fell within the ambit of section 1(4), and therefore required to be laid before Parliament under section 3(2), was advanced before this court but rejected in R (New London College Limited) v Home Secretary [2012] EWCA Civ 51. The core of the court's reasoning is at [48] – [49].
18. Building on the foundation of the Pankina line of cases (Pankina v Home Secretary [2010] EWCA Civ 719), at [48] the court distinguished between a) statements which lay down substantive criteria governing entitlement to enter or remain in the UK (and therefore constitute rules which must be laid before Parliament) and b) policy guidance relating to "extraneous factors", which may indirectly affect a migrant's ability to satisfy the criteria for leave to enter or remain in the UK, but do not alter the content of the substantive criteria themselves (and do not therefore constitute rules which must be laid before Parliament). The court held:

"Whether the sponsor holds a sponsor licence does of course have an indirect effect on an applicant's entitlement, in that it affects his or her ability in practice to meet the criteria; and it follows that the criteria for the grant, suspension or withdrawal of a sponsor licence will also have an indirect effect on an applicant's entitlement. Such criteria, however, are materially different from the substantive criteria for entitlement and do not affect the content of the substantive criteria."

19. At [49] the court expressed concern about the wider consequences if the claimant's submissions in that case were well founded. The logical consequences would be that the criteria for granting a sponsor licence were invalid. There would remain a valid requirement under the Immigration Rules that the sponsor must hold a licence, but there would be no valid system for the grant, suspension or withdrawal of such a licence. The points based system would therefore be brought to a halt until the problem was remedied.
20. Mr Malik made it clear that (in contrast to the argument in New London College) he does not contend that the entire policy guidance falls within the ambit of sections 1(4) and 3(2), but only those parts which are mandatory as distinct from advisory. At first he submitted that only table (iii) of the guidance is affected, but his argument on construction (to which I will come) was that table (iii) cannot be interpreted in isolation. He then included paragraphs 25, 26, the second (but not first) sentence of paragraph 27 and 301 as mandatory provisions.
21. However, Mr Malik rightly did not submit that the decision in New London College can be distinguished on that account. He accepted that the court's decision in that case is fatal, at this level, to his first head of challenge if it remains good law.
22. Mr Malik's central argument was that this decision is incompatible with the later decisions of the Supreme Court in R (Alvi) v Home Secretary [2012] UKSC 33, [2012] 1 WLR 2208, and R (Munir) v Home Secretary [2012] UKSC 32, [2012] 1 WLR 2192, and must therefore be taken to have been overruled.
23. The issues in those cases were different. In Alvi the court was concerned with a provision in an appendix to the Immigration Rules requiring applicants for a migrant visa to be applying for a job in a list of skilled occupations. The Supreme Court held that section 3(2) required the list of skilled occupations to be laid before Parliament. In Munir the issue was whether the power to make immigration rules under the 1971 Act derived from the Act itself or involved an exercise of the Royal prerogative. The Supreme Court held that it derived from the Act.
24. In Alvi Lord Hope said at [53]:

"I make no comment as to whether the decisions that are not before us in this appeal were rightly decided. It should be noted that the New London College Limited case [2012] EWCA Civ 51 is awaiting a decision as to whether permission should be given for an appeal to this court."

25. Permission to appeal in New London College has now been given, but no date has been set for the hearing of the appeal.
26. Mr Malik submitted that notwithstanding Lord Hope's words at [53], and the absence of any reference to New London College in any of the other judgments in that case or in Munir, examination of the judgments shows that it must be taken to have been overruled.
27. Mr Malik relied, in particular, on Lord Hope's analysis of the Pankina line of cases in Alvi at [43] to [53], his adumbration at [57] of a different test for determining whether a provision requires to be laid before Parliament ("any requirement which, if not satisfied, will lead to an application for leave to enter or remain being refused is a rule within the meaning of section 3(2)"), and his conclusion at [66] that the test stated by him at [57] was to be preferred to those applied in the cases referred to in paragraph [46] to [52]. Mr Malik also referred to the slightly (but, according to Ms McGahey, significantly) fuller form of wording used by Lord Dyson at [94]. Mr Malik submitted that under the test as set out in Alvi at [57] and [94], the refusal rate paragraph in the policy guidance is to be characterised as a rule within the meaning of the relevant provisions. It is true that its impact on the migrant is indirect, but Mr Malik submitted that it is nonetheless a significant part of the rules designed for the administration of the Act through a sponsorship system.
28. These points are well arguable but, as the recent judgments of the Supreme Court show, the construction of the relevant provisions of the 1971 Act is not an easy matter. Lord Hope observed in Alvi at [63] that various expressions have been used to determine whether material in an extraneous document is a rule which requires to be laid before Parliament, and that it is not easy to find a word or phrase which can be used to achieve the right result in each case. As a universal touchstone, a test concentrating on the word "substantive" has been found wanting, and in that respect the reasoning in New London College has been disapproved. But it is not a necessary conclusion from the latest decisions that the actual ruling in New London College was wrong. In those circumstances, combined with the fact that the Supreme Court itself expressly refrained from commenting on whether New London College was rightly decided (noting that a decision whether to grant permission to appeal in that case was then awaiting a decision), it would not be right for this court to hold that the Supreme Court has overruled it. Until the Supreme Court decides whether the decision in New London College was right, we are bound by it.

Construction

29. The claimant argues that the policy guidance is to be construed in accordance with the approach to the Immigration Rules summarised by Lord Brown in Mahad v Entry Clearance Officer [2009] UKSC 16, [2010] 1 WLR 48, at [10]:

"The Rules are not to be construed with all the strictness applicable to the construction of a statute or a statutory instrument but, instead, sensibly according to the natural and ordinary meaning of the words used, recognising that they are statements of the Secretary of State's administrative policy."

30. In the context of the policy guidance as a whole, it is submitted that for the purposes of calculating an applicant's refusal rate under table (iii), a refusal should be discounted if there was no breach of the sponsor's obligations under the policy guidance.
31. In my judgment the language of the "refusal rate" paragraph in table (iii) is unambiguous and is not open to the construction advanced by the claimant. Moreover, the implication of the claimant's construction is that the defendant was content to regard an applicant as complying with the relevant mandatory requirement even if during the previous 12 months nearly 1 in 5 of applications sponsored by it had been refused in circumstances which involved a positive failure to comply with its duties set out in the guidance. That is an improbable idea.

Rationality

32. The claimant submits that it is irrational to penalise a sponsor on account of refusals for reasons in respect of which it had no control or means of control. Put another way, it is irrational to impose a mandatory requirement which the applicant may be unable to satisfy through no want of diligence on its part.
33. In response to that argument, Mr Shirley has explained the history and reasoning which led to the formulation of the policy.
34. A paper published by UKBA in March 2011showed a disturbingly high rate of refusals of entry to holders of Tier 4 visas, i.e. student visa holders. Tier 4 visa holders were responsible for 41% of the port refusals linked to visa holders in 2010. Tier 4 applicants were also responsible for 41% of all forgery detections in visa applications in 2010.
35. After a period of public consultation, a policy decision was taken to try to improve immigration control by ensuring that sponsors carried out a high level of due diligence, in order to check that CAS holders would meet the requirements for entry clearance, or leave to remain, including the requirement of being able to maintain themselves. Mr Shirley's statement explains, at paragraph 55, the thinking behind the setting of a refusal rate as part of the criteria for the approval of sponsors:

"…the strength, robustness and thoroughness of a sponsor's recruitment will largely dictate how many of its prospective students are refused by UKBA. The link between a rigorous recruitment policy and a low refusal rate is clear and logical. The fundamental expectation that a sponsor will undertake a rigorous recruitment process links to the core principles of sponsorship, in that those who benefit most from immigration should play a vital role in making the system work for everyone involved."

36. The alternative would have been to increase the amount of checking done by UKBA staff. This would have had cost implications and would have been liable to delay the process for genuine applicants.
37. Moreover, there would be serious practical problems if UKBA had to investigate in the case of every refusal whether the sponsor could be shown to have failed in its duties.
38. It was recognised, however, that even with a high level of due diligence there might be refusals in situations which an educational provider could not have been able to anticipate, for example, where a person's financial circumstances had changed after the issue of a CAS but before attempting to enter the UK. Data showed that the average refusal rate across Tier 4 (General) in the year to May 2011 was 15.3%. Mr Shirley explained, in paragraphs 56 to 57, the reason for setting the refusal rate at 20%:

"By setting the refusal rate at 20%, higher than the average refusal rate percentage, this allowed sponsors some further, reasonable, leeway which allowed for refused applications that a sponsor could not reasonably anticipate.

By setting the refusal rate at 20% this was, therefore, a more than reasonable and generous allowance to set allowing for a margin of error in an application for leave to enter or remain made by the prospective student. UKBA recognises that there may be situations in which an educational provider may not be able to anticipate the refusal of an application for leave to enter or remain. However, anything more than 1 in 5 refusals indicates a complete failure of a sponsor's recruitment process, and demonstrates that for every 5 individuals who present to UKBA 1 does not meet the basic criteria for leave. This is therefore a threat to immigration control, and a sponsor with this level of refusal cannot be categorised as "highly trusted"."

39. The claimant's evidence in response is that it is unrealistic and unfair to expect a sponsor to ensure that a student will meet the requirements of a visa. The sponsor has limited resources and means of enquiry. In practice, all that it can do is to rely on the student's confirmation of the veracity of financial and educational documents. Moreover circumstances may change after the sponsor has issued a CAS. A CAS is valid for 3 months and the student's bank statements at the date of intended entry may show a different picture from the bank statements provided to the sponsor. The defendant's reply is that it should not be assumed that the sponsor cannot check the veracity of information provided by the applicant, that in some cases careful scrutiny of the information should itself put the sponsor on inquiry, and that the 20% margin is designed to provide a fair margin for matters beyond a sponsor's ability to anticipate or monitor.
40. I am not persuaded that there is a sustainable objection, on grounds of unfairness, to the use of a refusal rate as a basis for concluding that the sponsor's recruitment procedures are not sufficiently robust to merit classification as highly trusted. The reasons given by Mr Shirley for adopting it make sense. The points made by the claimant about possible reasons for refusal of entry (change of financial circumstances since the issue of the CAS, forgery of documents and so on) would apply equally to all sponsors. If a particular sponsor's refusal rate is significantly higher than average, it may not prove but it does tend to suggest that there has been a less rigorous approach to selection. The policy adopted by the defendant is a strong incentive to strict scrutiny. I agree with the observations of Thirlwall J in R (WGGS) v Home Secretary [2012] EWHC 2076 (Admin) at [34]:

"Mr MacDonald submitted in the skeleton and in oral submissions that the use of a refusal rate is irrational. To my mind, the opposite is the case. It is surely powerful evidence of [lack of] robustness of recruitment procedures if a significant number of those recruited do [not?] gain entry clearance. In the absence of such an approach the Secretary of State would, as Mr MacDonald submits she should, be bound to examine the reasons for each refusal: a task which the partial delegation of immigration powers to colleges was designed to avoid. The claimant has undertaken the exercise at some length in these proceedings, for reasons I understand, but the length and detail of the exercise underlines why the use of a refusal rate cannot be said to be irrational. There can be no in principle objection to the use of a refusal rate as the basis upon which a decision can be made that recruitment procedures are not sufficiently robust."

41. There being no sustainable objection in principle to the use of a refusal rate, I can also see no ground of objection to the rate set of 20%. As Mr Shirley said, the figure allowed significant leeway for matters which the sponsor could not reasonably anticipate.

Fettering of discretion

42. It is alleged that the defendant unlawfully fettered her discretion. I am not persuaded of that on the evidence. According to Mr Shirley's statement, UKBA recognise that there may be instances when the circumstances of a case are so compelling that rigid application of a mandatory requirement may be disproportionate to the overall aim. In such cases UKBA would consider applying some form of discretion, but those instances would be limited to a small number of cases where the application of discretion can be clearly justified. Mr Shirley has given an example of one such case where the applicant did not strictly meet the terms of the policy but discretion was exercised in its favour because the numbers involved were very low.
43. In the present case UKBA reviewed its decision after receiving the claimant's pre-action letter and could see no good reason for not applying the policy. 5 of the 6 refusals highlighted in the pre-action letter were ones where the applicant failed to meet the maintenance criteria. The claimant did not seek to persuade the defendant that there was anything special about them. (By way of example, in the case of the first refusal highlighted in the pre-action letter, the applicant submitted a bank statement which was undated – an obvious deficiency.) It is not unreasonable to expect a sponsor to satisfy itself that an applicant will be able to meet the maintenance criteria before issuing a CAS.

Conclusion

44. For those reasons each of the grounds of challenge fails and I would dismiss the application.

Mr Justice Simon:

45. I agree.