QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| The Queen on the application of London Criminal Courts Solicitors Association and Criminal Law Solicitors Association
|- and -
|The Lord Chancellor
James Eadie QC, Richard O'Brien and Fraser Campbell (instructed by the Treasury Solicitor) for the Defendant
Hearing dates: 8 & 9 September 2014
Crown Copyright ©
The Hon Mr Justice Burnett:
The Underlying Facts
"with fewer and more efficient providers accessing greater volumes of work, whether delivered directly by providers accessing greater volumes of work, whether delivered directly by providers or through some other business structure, for example a joint venture."
Contracts would be available in a series of procurement areas. In deciding on the number of contracts that would be available, the consultation paper identified four broad factors which would be taken into account:
i) Sufficient supply within each procurement area to deal with potential conflicts of interest in multi-handed cases;
ii) Sufficient volume of work to enable the fixed fee scheme to work. This was a feature of the proposals which assumed that some cases would be profitable and some not. A sufficient number of cases should be available to each successful bidder so that the risk of loss on some cases could be managed;
iii) Market agility, a shorthand term to reflect the ability of providers in each procurement area to deal with the additional volumes of work, including by growing or developing new business structures;
iv) Sustainable procurement, a shorthand term for ensuring that there would be competition in future tendering rounds. The proposal was for three year contracts with the possibility of extension for a further two years. The expectation underlying the proposal was that "most successful applicants will be joint ventures or a legal entity using agents".
"In order to help inform our final decision on the number of contracts for Duty Provider Work, we intend to jointly commission with the Law Society a further piece of research exploring the size of contract necessary for it to be sustainable."
"3.33 In order to help inform our analysis of sustainability and the final decision on the number of contracts for Duty Provider Work, we intend to jointly commission with the Law Society a further piece of work to get more detailed information for this purpose. It would be necessary for this work to take into account the proposed size of procurement area.
3.34 Therefore, we propose to determine the appropriate number of contracts for Duty Provider Work on the basis of the four factors … and outcomes of the further research. We would welcome consultees' views on these factors and whether there are any others that we should consider.
3.35 We note that an indicative analysis set out in a report by Otterburn and Ling, supplied by the Law Society in response to the previous consultation, suggested that three hypothetical organisations operating across the proposed CJS procurement areas would have a better chance of sustaining their business after a 17.5% reduction in fees, if they have an annual turnover of around £1m (including VAT). Taking the estimated spend on criminal legal aid services in scope of the proposed new contract after the proposed 17.5% reduction in fees … this would suggest that we should offer, no more than, 570 contracts for Duty Provider Work. Whilst this is a useful starting point, this number does not take account of the other factors set out above, and also presupposes that the providers with Duty Provider Work contract would need to absorb all Own Client Work available in the market during the contract term in order for the contracts to be sustainable. As indicated above, our aim is that Duty Provider Work contracts should be large enough to be sustainable in their own right after the cumulative reduction in fees by 17.5%. We would have regard to all the factors set out above, including further research described at paragraph 3.33 above, in determining the final contract numbers for this work."
The consultation questions asked whether consultees agreed with the model, the proposed procurement areas and the methodology for determining the number of contracts.
"Your letter questions whether the response to the current consultation … should be delayed until the outcome of the research previously mentioned. We do not believe that it is necessary to do so. The consultation paper clearly sets out the factors that we propose to use to determine the number of contracts for Duty Provider Work and invites views on those factors. One of those factors is the sustainability of the Duty Provider Work contracts. We will of course carefully consider all the responses we receive (including any views or evidence on sustainability) as well as the independent research being conducted by Otterburn to help inform our assessment of the number and size of the Duty Provider Work contracts that would be awarded."
"We were asked to research:
- The current financial position of criminal defence firms;
- Firms' views on the size of the contract they would need to deliver a viable duty and own client contract;
- The impact of the proposals on firms that just have an own client contract.
In order to consider these particular issues:
- The volume and value of contract needed to ensure viability and thus the number of contracts that can be awarded;
- The size of the procurement areas and the impact that has on the costs firms incur;
- The ability of firms to expand and to do so quickly enough to the scale that would be required to deliver the contracts."
(i) All firms surveyed had experienced significant falls in volumes in recent years;
(ii) Margins in crime are tight and the effect of previous fee reductions had not yet been fully felt. The supplier base is not financially robust and it is very vulnerable;
(iii) The fee reductions should take place after, and not before, the market had a chance to consolidate;
(iv) Very few firms could sustain a reduction in fee levels of 17.5%;
(v) A number of the proposed procurement areas were too large;
(vi) There should not be a single national contract size across the country;
(vii) The mid-size players in the market were likely to be key to the new system;
(viii) The approach should be different in rural areas where the market was already well consolidated;
(ix) Some firms have the ability to grow rapidly, but the number is limited and their ability to do so is subject to financial constraints.
(x) A 5% profit margin was the minimum needed for financial viability.
(i) volumes of work would remain constant at 2012/13 levels. Source - MoJ;
(ii) Successful bidders could achieve a 15% improvement in capacity due to latent capacity within firms and/or reallocation of staff to crime from other areas of work. Source – MoJ;
(iii) Successful bidders could achieve organic growth of 20% through recruitment. Source - MoJ;
(iv) It was assumed that only 75% of incumbent bidders (i.e. existing firms) were to be 'of scale' to bid for Duty Provider Work contracts and that two new entrants to the market would bid for each contract. Source -MoJ;
(v) Successful bidders could reduce staff costs by 20% of revenue. Source – analysis of differences in staff cost ratios across the sector;
(vi) A firm making any level of profit, however small, was considered viable. Source – (by inference) KPMG judgement.
"3) Will follow recommendation of Otterburn report"
Mr Eadie mused that an observation made in a meeting subject to Chatham House rules was a weak foundation for a legitimate expectation claim, given the need for a clear and unequivocal representation upon which the claimants were entitled to rely. How can one rely upon an unattributable observation? There is more evidence, however. Dr Gibby deals with the meeting:
"In response to a question raised about the number of contracts to be determined, the Lord Chancellor did indeed confirm that "we will accept the Otterburn recommendations". However, this has to be understood in the context, as already explained, that Otterburn Legal Consulting provided one part of a piece of research, in the form of a survey, which was then taken into account by KPMG who were to construct a financial model to help determine the number of DPW contracts to offer in each procurement area. The Lord Chancellor referred to Otterburn as the shorthand for the research, the second part of which was to be undertaken by KPMG."
Applicable Legal Principles
"108. It is common ground that, whether or not consultation of interested parties and the public is a legal requirement, if it is embarked upon it must be carried out properly. To be proper, consultation must be undertaken at a time when proposals are still at a formative stage; it must include sufficient reasons for particular proposals to allow those consulted to give intelligent consideration and an intelligent response; adequate time must be give for the purpose; and the product of consultation must be conscientiously taken into account when the ultimate decision is taken: R v. Brent London Borough Council ex p Gunning  84 LGR 168.
112. …It has to be remembered that consultation is not litigation; the consulting authority is not required to publicise every submission it receives or (absent some statutory obligation) to disclose all its advice. Its obligation is to let those who have a personal interest in the subject matter know in clear terms what the proposal is and exactly why it is under active consideration, telling them enough (which may be a good deal) to enable them to make an intelligent response. The obligation, although it may be quite onerous, goes no further than this."
In Devon County Council v. Secretary of State for Communities and Local Government  EWHC 1456 (Admin) Ouseley J concluded that, whilst it was a matter for judgment for the person carrying out the consultation to decide what information should be contained with a consultation paper
"…Sufficient information to enable an intelligent response requires the consultee to know not just what the proposal is in whatever detail is necessary, but also the factors likely to be of substantial importance to the decision, or the basis on which the decision is likely to be taken."
However, the mere fact that information is 'significant' does not necessarily mean it must be disclosed: see R (Eisai Ltd) v. National Institute for Clinical Excellence & others  EWCA Civ 438 per Richards LJ at .
"50. In R (on the application of Greenpeace Limited) v the Secretary of State for Trade and Industry  ELR 29, it was submitted on behalf of the defendant that the court should interfere with a consultation process "only if something has gone clearly and radically wrong." The claimant had submitted that there was no support for this proposition in the authorities. In paragraphs 62 and 63 of my judgment, I said:
"62. This difference between the parties is one of semantics rather than substance. A consultation exercise which is flawed in one or even in a number of respects is not necessarily so procedurally unfair as to be unlawful. With the benefit of hindsight it will always invariably be possible to suggests ways in which a consultation exercise might have been improved upon. That is most emphatically not the test. It must also be recognised that a decision maker will usually have a broad discretion as to how a consultation exercise should be carried out. This applies with particular force to a consultation with the whole of the adult population of the United Kingdom. The defendant had a very broad discretion as to how best to carry out such a far reaching consultation exercise.
63. In reality, a conclusion that a consultation exercise was unlawful on the ground of unfairness would be based upon a finding by the court not merely that something was wrong but that something went "clearly and radically" wrong."
51. Ouseley J commented on this passage in the judgment in Greenpeace in Devon County Council and Norfolk County Council v the Secretary of State for Communities and Local Government  EWHC 1465 (Admin). In paragraph 70, he accepted the submission of Leading Counsel for the defendant that a flawed consultation process is not always so procedurally unfair as to be unlawful. Having referred to paragraph 63 of Greenpeace, he said:
"Valuable though that contrast is, I have a reservation about treating that contrast between something going merely wrong, which would not suffice to show an unfair and unlawful consultation process, and something going clearly and radically wrong, which would suffice to show such an error as the litmus test.
Not all cases could readily be fitted into one or other category as if they were the only two categories of error available to be considered with no un-excluded middle. That phrase should not become the substitute for the true test, which is whether the consultation process was so unfair that it was unlawful."
I respectfully agree with that observation. The test is whether the process was so unfair as to be unlawful. In Greenpeace, I was not seeking to put forward a different test, but merely indicating that in reality a conclusion that a consultation process has been so unfair as to be unlawful is likely to be based on a factual finding that something has gone clearly and radically wrong."