QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| The Queen (on the application of) The Underwritten Warranty Company Limited t/a The Insurance Backed Guarantee Company
|- and -
|The Double Glazing & Conservatory Quality Assurance Ombudsman Scheme
|- and -
|- and -
|Network VEKA LTD
||First Interested Party
|- and -
|Price Bailey Insurance PCC LTD t/a Safeworld Insurance Group
||Second Interested Party
|- and -
|The Secretary of State for Communities and Local Government
||Third Interested Party
|- and -
|United Kingdom Accreditation Service
||Fourth Interested Party
Jamie Burton (instructed by Wedlake Bell) for the Defendant
David Manknell (instructed by the Government Legal Department) for the Third Interested Party
Hearing dates: 29th June 2017 & 21st July 2017
Crown Copyright ©
Mr Justice Dove :
"A(1)Building regulations may—
(a)provide for requiring that, in prescribed circumstances, a person of a prescribed class or description is to give to a local authority or an approved inspector a certificate to the effect that the requirements of building regulations as to matters of a prescribed description are satisfied;
(b)provide for requiring that such certificates be given within such periods or at such times and in such forms as may be prescribed;
(c)provide that a local authority or an approved inspector is not to exercise or perform a prescribed power or duty unless—
(i)such a certificate has been given to them or him; or
(ii)such a certificate has been given to them or him and the certificate has been accepted by them or him;
(d)make provision as to—
(i)the acceptance of such certificates by local authorities and approved inspectors; and
(ii)other steps to be taken by local authorities or approved inspectors in connection with such certificates.
(2)Building regulations may provide for such certificates to be treated as evidence (but not conclusive evidence) of the matters certified."
"20.—(1) This regulation applies to the extent that the building work consists only of work of a type described in column 1 of the Table in Schedule 3 and the work is carried out by a person who is described in the corresponding entry in column 2 of that Table in respect of that type of work.
(2) Where this regulation applies, the local authority are authorised to accept, as evidence that the requirements of regulations 4 and 7 have been satisfied, a certificate to that effect by the person carrying out the work."
|Column 1||Column 2|
|Type of Work||Person carrying out work|
|10. Installation, as a replacement, of a window, rooflight, roof window or door in an existing dwelling
||A person registered in respect of that type of work by BM Trada Certification Limited, […] Certsure LLP, by Fensa Limited under the Fenestration Self-Assessment Scheme, by NAPIT Registration Limited, Network VEKA Limited, or Stroma Certification Limited.|
|11. Installation, as a replacement, of a window, rooflight, roof window or door in an existing building other than a dwelling. This paragraph does not apply to glass which is load bearing or structural or which forms part of glazed curtain walling or a revolving door.
||A person registered in respect of that type of work by BM Trada Certification Limited, Blue Flame Certification Limited, CERTASS Limited, Certsure LLP, by Fensa Limited under the Fenestration Scheme, by NAPIT Registration Limited, Network VEKA Limited, or Stroma Certification Limited|
|Conditions of Authorisations
||Notes on how to demonstrate meeting the conditions|
Scheme operator to have an absence of, or methods for avoiding, conflicts of interest between the commercial interests of any sponsoring or parent organisations and management of the scheme.
|The scheme operator shall document how any conflicts of interest will be managed and demonstrate how risks to impartiality can be minimised or eliminated, as required by ISO/IEC 17065:2012 sections 4.2 and 5.2.
For example: possible conflicts of interest may arise where a scheme is part of or owned by a larger commercial, trade or professional body.
Where a parent or subsidiary company provides financial protection for scheme registrants, this may be acceptable provided there is no conflict of interest with the certification activities performed by the scheme operator.
Scheme operator to ensure consumers are provided with appropriate financial protection to put work to dwellings right, which is non-compliant with the Building Regulations, where the original installer cannot do so (because they are no longer trading).
|Financial protection must be provided for a minimum of six years from the date of completion for work to dwellings, except where the client is a local authority or housing association in which case financial protection does not need to be provided but must be offered. Financial protection does not need to be offered or provided for work to buildings other than dwellings.
No protection is needed where scheme registrants are sub-contractors and the main contractors' liabilities cover the requirements of this condition, for example new house warranties.
Possible mechanisms include guarantees, insurance-backed warranties or, where appropriate, professional indemnity insurance.
Financial protection will be deemed appropriate if:
(a) the fund supporting it is of a size commensurate with the risks involved; and
(b) the consumer has direct access to it even if the scheme operator is no longer running a scheme.
Where a manufacturer's product guarantee is for a shorter period than six years, this period will take precedence for that product.
"We are writing to set out the terms agreed between us relating to your appointment as an approved insurance provider ("Approved Insurance Provider") in respect of the issuance by you of Insurance Backed Guarantees ("IBG") in relation to Installations carried out by FENSA Registered Businesses under the FENSA Competent Person Scheme.
Your appointment by us as an Approved Insurance Provider is subject to the following terms and conditions…
3.2 You shall, save as referred to below, provide to us not less than 30 days' written notice in advance of any proposed amendments to the terms and conditions of the IBG and shall consult with us in relation to the same. Where any proposed changes to the terms and conditions of the IBG are required in order to comply with any applicable laws or regulations or directions of any competent authority, you shall provide written notice as soon as reasonably practicable. If we object to any proposed amendments to the terms and conditions of the IBG (other than those required to comply with any applicable laws or regulations or directions of any competent authority), we shall be entitled to terminate this Agreement by giving not less than 7 days' written notice to you at any time after having been informed of any such changes…
4.7 You agree that you will ensure that each IBG issued by you shall be a protected contract of insurance for the purposes of the UK Financial Services Compensation Scheme and shall be covered by the Financial Ombudsman Service (whether pursuant to its automatic or voluntary jurisdiction)…
4.9 You warrant, represent and undertake that you are and shall throughout the period of your appointment hereunder remain authorised and regulated by the Financial Conduct Authority and/or the Prudential Regulation Authority and/or any equivalent regulatory authority within the European Economic Area. Where you are a protected cell company you further warrant, represent and undertake that the relevant cell within such protected cell company shall throughout the period of your appointment hereunder remain authorised and regulated by the Financial Conduct Authority and/or the Prudential Regulation Authority and/or any equivalent regulatory authority within the European Economic Area."
Events leading to the disputed decision
"The policy conditions and limits are the same. However, I want to highlight this does not currently include access to FSCS. In addition, access to FOS has been replaced by access to the Channel Islands Financial Ombudsman. This is an equivalent independent ombudsman service by way of the Guernsey Financial Services regulations and is recognised by FOS as an equivalent service, so I would not anticipate this provides any concern.
In respect of the required DCLS provision of financial protection, Safe World Insurance Group is an appropriately capitalised international insurance company. This model is similar to the Veka model, that you accept. This model does not meet the DCLG requirement regarding the provision of financial protection. This will also enhance our service further and benefit the consumers who use members by removing the reliance on an insurer whose solvency we cannot control.
The Guernsey Financial Services Commission apply stringent controls to the financial solvency of an insurance company and only one Guernsey Insurance Company has ceased to trade. I am aware of your familiarity with this model and we would be more than happy to discuss this in more detail, should you require this and for you to visit SWIG's office in Guernsey, should you wish to do so.
Whilst FSCS is not a mandatory requirement of DCLG. It is something we have been keen to pursue. Interestingly it is something a consumer can now access following changes in the PRA and FSCS rules regarding sales to UK consumers from organisations in the Channel Islands. We have held several discussions with the FSCS regarding SWIG informing policyholders of their access rights to FSCS on the insurance documentation and appropriate levy. This initially seemed a relatively simple process and SWIG had hoped to have the FSCS consent by yesterday and reflect this in the policy documentation; but it is now evident that this is a longer process than we were first led to believe. As a regulated entity neither we as the administrator or SWIG would include any reference to the FSCS, until they have confirmed their permission, regardless of what the FSCS rules indicate.
Unsurprisingly we also have a number of other insurers that would like to front our insurance, who are authorised in the UK, giving access to FSCS. We may yet consider this option, but this is not something that we could do or would want to do in haste and without appropriate due diligence."
"FENSA has already approved Network Veka under a similar model. Network Veka are no longer registered with FCA and I am assuming that the Insurance Backed Guarantee Company (DGCOS) will probably now allow their registration to lapse."
"How secure is this cell set in comparison to the normal IBG companies we are using.
Is it any weaker. What if the DGCOS should crash and burn how if I am the homeowner, will I be protected ie were (sic) are the funds.
If it isn't as secure as the others regardless of the risk to FENSA and lets assume there is non (sic) then it is possible that the FENSA brand could be damaged by association if there was to be a crash and difficulties started to arise through delays in funds.
Not sure how many companies are with DGCOS but I believe it to be substantial and if they have some big companies in respect of registrations then we have substantial risks.
Is the current agreement we have with the IBG companies structured well and robust enough to accommodate this.
In other words would this cell set up stand a stress test.
Obviously its not my field but I need to satisfy myself these points have been addressed and satisfactorily answered."
In his evidence to the court Mr Vanstone explains that the references to the second claimant should in reality have been references to SWIG.
"The Safe World Cell is a protected cell in Price Bailey Insurance PCC. The PCC as a whole holds the insurance license issued by the Guernsey Financial Services Commission (GFSC), but each cell is separately authorised to transact insurance business by the GFSC.
The Safe World Cell functions in all respects as a standalone insurer, but its administrative costs are lower because it pays a fixed fee representing a share of the operating costs of the PCC.
Each cell is required to maintain funds in excess of the regulatory capital requirements of a Guernsey Insurer. These are formula driven depending on the class of insurance, the level of premium and reserves and the type of assets held and consist of a Prescribed Capital Requirement (PCR) and a Minimum Capital Requirement (MCR). Regardless of the formula calculation, there is an absolute minimum requirement of £100,000. This lower limit applied across the PCC as a whole and does not necessarily apply for a cell. This is not an issue for the Safe World Cell as the formula gives a capital requirement in excess of £100,000.
As the requirement is formula driven it will change but, as a guide, the MCR (the lowest requirement and the point at which the GFSC will invoke its strongest sanctions – see below) will be 12% of the written premium in the last twelve months or 12% of the reserves held. Because the policies written have long durations, the reserves will build up as the cell only recognises the premium on an earned basis pro rata over the term of each policy. In real terms this means that the cell will always hold the bulk of premium for policies currently in force plus a margin of at least 12%...
The GFSC's approach is very much one of not allowing an insurer to fail, rather than providing a limited backup, such as the FSCS, in case one fails."
"10.13 [Mr Gilsenan] and I agreed that the set up simply did not provide consumers with the level of protection on which FENSA prides itself. The cover offered had changed so as to render UWC in breach of the agreed Terms and Conditions. There was no access to the FSCS and no access to FOS. The strength of the financial protection was very different and FENSA was not satisfied it would adhere satisfactorily to its obligations under Condition 17, including that the funds are commensurate to the risk. In that regard, the non-availability of FOS and FSCS was highly relevant. In order to comply with condition 17, FENSA requires it's approved IBG providers to ensure access to the UK FOS and FSCS. The bottom line is that whilst UWC's former insurer, Enterprise, satisfied this, SWIG did not. Ultimately, all of the other approved providers gave FSCS and FOS access. Furthermore, none of them operated through a protected cell structure or used an insurance entity of which FENSA had no prior experience."
"This communication is to confirm our telephone discussions this morning.
Following a review of its requirements FENSA has taken the decision not to recognise the provision of financial support to consumers via its registrants by the use of the Cell concept.
FENSA would like to thank you for your previous support and patience whilst it considered your proposal. Should your product offering change then please do not hesitate to contact us."
Later that day Ms Crawford called Mr Bond and explained to him that the defendant would continue to recognise all notifications up to and including 30th August 2016 and that the defendant would in that interim period be communicating with registrants to advise them that they needed to transfer to an alternative approved provider by 30th August 2016. On the same date Ms Crawford wrote to Mr Ogilvie at Network Veka advising them as follows:
"Following a review of the arrangements and policies that are being accepted for use by FENSA Registrants it has been decided that FENSA is no longer prepared to recognise provision via a Cell arrangement. As a result I am sorry to advise that this means that FENSA will no longer be able to recognise Network VEKA as an approved provider."
"I realise there has been some movements relating to FENSA and financial protection that may have caused you some concerns for which I apologise.
However what I wanted to say to you is that, putting this position to one side, we are keen as a collective to improve our working relationship with Network Veka.
I know many years ago we spoke of a form of partnership (at the time of Graham Hinett) and nothing came of it, so you know we went in a different direction.
Time has now passed and I wanted to know if there is an appetite from your side to look to the future in a way we can create some collaborative benefits.
We certainly are keen and if you are up for it I would like to meet for a lunch or drink and also introduce you to Liam Gilsenan of FENSA.
The sooner the better as far as I am concerned as I don't want recent decisions to be seen as a move in a different direction."
"RY speaking with Mr Vanstone pursuant to our letter of Friday afternoon and chaser letter of todays date to FENSA. Mr Vanstone explaining that he is not currently associated with FENSA and that therefore he did not receive our letter by email to his FENSA email but that he did receive it by other means, RY explaining that we had also copied the email of Friday to Jacqueline Crawford and Liam Gilsenan
In short, Mr Vanstone explaining that there is an internal meeting tomorrow morning at FENSA following which they will know a lot more as to their response and suggestions to our letter. RY explaining that we will look forward to hearing from Mr Vanstone and the representatives at FENSA following the said meeting, Mr Vanstone confirming that pursuant to our letter, no communications will be sent out to the registrants in question and that nothing further by way of enforcement action will be done until the meeting has taken place tomorrow morning and communications have been sent to ourselves in relation to the responses reached at the meeting."
In response to this communication Jake Pilkington on behalf of the defendant contacted Mr Vanstone to seek a discussion. Mr Vanstone replied in the following terms:
"Thank you for your email.
As discussed with Richard yesterday, the operations of FENSA is not something I am part of but there is a meeting today with the business at 3pm to discuss what has occurred and the next steps.
FENSA has a responsibility to the market and its consumers to ensure the standards of service provided within the industry. The product you propose is very different from the approved model by FENSA for DGCOS and goes against the industry accepted norm so naturally it has raised concerns."
"Further to recent communications regarding the change of circumstances to your insurance provider we have carried out a further review of the changes to your product that you recently submitted to FENSA.
We understand that this matter has come about due to circumstances out of your control, however the fact that your product has changed and does not now, comply fully to the FENSA terms and conditions in particular with section 4.
Therefore in view of FENSA's requirements to protect the consumer in line with the Competent Person Scheme's Conditions of Authorisations (COA) it is with regret we are suspending you from our approved Insurance Backed Guarantee (IBG) approved list of suppliers with immediate effect.
We will in due course be notifying all the FENSA installers directly affected by this decision advising them that due to changed circumstances of The Insurance Backed Guarantee Company FENSA will not accept any notifications with this IBG provider and that alternative choice will need to be made from one of the other 11 FENSA approved IBG providers."
"DGCOS has now set up a fundamentally different protection structure, similar to that used in the Insulation sector. Due to the fact that FENSA cannot confirm adherence to the elements of condition 17 (consumer requirement for direct access to the monies and that the funds are commensurate to the risk) FENSA has had to suspend DGCOS after several weeks of discussion until it returns to the model for which it was approved by FENSA (and uses one of the underwriters who already supply the sector – e.g. Redlands / GPI / Elite – or a comparative provider).
Captive cells with limited liability beyond the scope of the FCA (of which this new DGCOS provision is one), is something I would be very nervous in seeing approved by any scheme without sizeable controls and measures in place to ensure the financial protection of the consumer. I believe it is unreasonable to expect schemes such as FENSA to carry solvency expertise to enable low cost operational models such as that adopted by this provider."
"20. FENSA has decided that it will only approve mechanisms for providing consumers with appropriate financial protection if they constitute protected contracts for the purposes of the UK FSCS and are covered by the UK FOS. For this reason the conditions of approval agreed with UWC include clause 4.7.
21. As of the date of Enterprise becoming insolvent UWC was not complying with clause 4.7. Indeed it is apparent from its email of 3 August 2016 that the change in UWC's IBG did not include access to FSCS and neither was SWIG covered by the UK FOS.
22. For these reasons, on 24 August 2016 Mr Gilsenan, FENSA's General Operations Manager, wrote to Mr Pilkington of UWC/DGCOS confirming that UWC's product no longer complied with the terms and conditions of approval, in particular with section 4. Mr Gilsenan invited a review of the IBG to see if it could be brought back within the conditions of approval. We note that there are many other underwriters with whom UWC could have replaced Enterprise and remained compliant with clause 47.
23. We note that it is asserted that FENSA changes its conditions of approval so as to exclude protected cell companies. That is incorrect. Where in correspondence, employees of FENSA have used the term "the cell concept" they were referring in a general sense to UWC's proposed use of SWIG as replacement underwriter.
24. For the avoidance of doubt, FENSA is not required to scrutinise in detail the robustness of any proposed IBG. Indeed clause 4.7 is designed to give FENSA the assurance it needs that consumers will be adequately protected without having to evaluate further the sustainability of the mechanism. Whilst we note other CPSs may have different conditions of approval we note that it is not alleged that clause 4.7 is irrational or otherwise unlawful.
25. Of course as is demonstrated by its actions, UWC is free to seek approval of its IBG by other CPSs. Similarly, as far as FENSA is concerned those members of DGCOS who wish to remain or become members of FENSA are free to use any of its 11 approved IBG providers."
Is the defendant's decision amenable to judicial review?
"So I turn to Mr. Alexander's more technical argument. He starts with the speech of Lord Diplock in CCS .U. v. Minister for Civil Service  1 A.C 374 at page 409:
"For a decision to be susceptible to judicial review the decision-maker must be empowered by public law (and not merely, as in arbitration, by agreement between private parties) to make decisions that, if validly made, will lead to administrative action or abstention from action by an authority endowed by law with executive powers, which have one or other of the consequences mentioned in the preceding paragraph. The ultimate source of the decision-making power is nearly always nowadays a statute or subordinate legislation made under the statute; but in the absence of any statute regulating the subject matter of the decision the source of the decision-making power may still be the common law itself, i.e., that part of the common law that is given by lawyers the label of 'the prerogative.' Where this is the source of decision-making power, the power is confined to executive officers of central as distinct from local government and in constitutional practice is generally exercised by those holding ministerial rank."
On the basis of that speech, and other cases to which Mr. Alexander referred us, he argues (i) that the sole test whether the body of persons is subject to judicial review is the source of its power, and (ii) that there has been no case where that source has been other than legislation, including subordinate legislation, or the prerogative. I do not agree that the source of the power is the sole test whether a body is subject to judicial review, nor do I so read Lord Diplock's speech. Of course the source of the power will often, perhaps usually, be decisive. If the source of power is a statute, or subordinate legislation under a statute, then clearly the body in question will be subject to judicial review. If, at the other end of the scale, the source of power is contractual, as in the case of private arbitration, then clearly the arbitrator is not subject to judicial review: see R. v. National Joint Council for the Craft of Dental Technicians, ex parte Neate  1 Q.B. 704.
But in between these extremes there is an area in which it is helpful to look not just at the source of the power but at the nature of the power. If the body in question is exercising public law functions, or if the exercise of its functions have public law consequences, then that may, as Mr. Lever submitted, be sufficient to bring the body within the reach of judicial review. It may be said that to refer to "public law" in this context is to beg the question. But I do not think it does. The essential distinction, which runs through all the cases to which we referred, is between a domestic or private tribunal on the one hand and a body of persons who are under some public duty on the other."
"The public element
Mr. Beloff invites my attention to certain passages in the judgments of the Court of Appeal both in Law's case and in the Datafin case  Q.B. 815 . I need not recite them. Their effect is clear enough. To say of decisions of a given body that they are public law decisions with public law consequences means something more than that they are decisions which may be of great interest or concern to the public or, indeed, which may have consequences for the public. To attract the court's supervisory jurisdiction there must be not merely a public but potentially a governmental interest in the decision-making power in question. And, indeed, generally speaking the exercise of the power in question involves not merely the voluntary regulation of some important area of public life but also what Mr. Beloff calls a "twin track system of control." In other words, where non-governmental bodies have hitherto been held reviewable, they have generally been operating as an integral part of a regulatory system which, although itself non-statutory, is nevertheless supported by statutory powers and penalties clearly indicative of government concern.
Perfectly evidently it was just such considerations which led Popplewell J. (and even then with obvious reluctance) recently to conclude in Reg. v. British Pharmaceutical Industry Association Code of Practice Committee, Ex parte Professional Counselling Aids Ltd., The Independent, 1 November 1990 that the code of practice committee of the British pharmaceutical industry is reviewable. And certainly it is a feature of all these cases that, were there no self-regulatory body in existence, Parliament would almost inevitably intervene to control the activity in question. There is much emphasis on this consideration in the Datafin case itself. That was also the position in Reg. v. Advertising Standards Authority Ltd., Ex parte The Insurance Service Plc., The Times, 14 July 1989 . Even, moreover, in Ex parte RAM Racecourses Ltd., The Times, 6 April 1990 , where the respondent body operated entirely outside any relevant statutory context (albeit under Royal Charter) — and a decision which arguably carries the review jurisdiction to its widest limits thus far — I described the Jockey Club's discharge of its "functions of regulating racecourses and allocating fixtures" as "strikingly akin to the exercise of a statutory licensing power," and its position "holding as it does monopolistic powers in this important field of public life" as "a position which could as well have been enshrined in legislation."
It cannot be suggested, Mr. Beloff submits and I accept, that the Chief Rabbi performs public functions in the sense that he is regulating a field of public life and but for his offices the government would impose a statutory regime. On the contrary, his functions are essentially intimate, spiritual, and religious — functions which the government could not and would not seek to discharge in his place were he to abdicate his regulatory responsibility. "
"35. Section 17 of the Local Government Act 1988 provides as follows:
(1) It is the duty of every public authority to which this section applies, in exercising, in relation to its public supply or works contracts, any proposed or any subsisting such contract, as the case may be, any function regulated by this section to exercise that function without reference to matters which are non-commercial matters for the purposes of this section…
(4) The functions regulated by this section are—
(a) the inclusion of persons in or the exclusion of persons from—
(i) any list of persons approved for the purposes of public supply or works contracts with the authority, or
(ii) any list of persons from whom tenders for such contracts may be invited;…
36. Section 17(5), which I will not read out, lists a number of matters which are classified as non-commercial. Section 19 of the 1988 Act provides:
(7) The duty imposed by section 17(1) above does not create a criminal offence but—
(a) in proceedings for judicial review, the persons who have a sufficient interest or, in Scotland, title and interest in the matter shall include any potential contractor or, in the case of a contract which has been made, former potential contractor (or, in any case, any body representing contractors), as such; and
(b) a failure to comply with it is actionable by any person who, in consequence, suffers loss or damage…
(9) Nothing in section 17 above or subsection (1) above implies that the exercise of any function regulated by that section may not be impugned, in proceedings for judicial review, on the ground that it was exercised by reference to other matters than those which are non-commercial matters for the purposes of that section.
37. Section 20 of the 1988 Act provides:
(1) Where a public authority exercises a function regulated by section 17 above by making, in relation to any person, a decision to which this section applies, it shall be the duty of the authority forthwith to notify that person of the decision and, if that person so requests in writing within the period of 15 days beginning with the date of the notice, to furnish him with a written statement of the reasons for the decision.
(2)This section applies to the following decisions in relation to any person, namely—
(a) in relation to an approved list, a decision to exclude him from the list
38. In R v London Borough of Enfield ex parte T F Unwin (Roydon) Ltd  46 BLR 1, the Divisional Court of the Queen's Bench Division considered the operation of these provisions. The court also considered the nature of a local authority's public law obligations when removing building contractors from an approved list. The contractors in that case ("Unwin") had worked for the council over many years. In September 1988 Enfield suspended Unwin from its list of approved contractors on suspicion of improper conduct, which was being investigated. The council failed to give reasons for its decision. Unwin applied for an order quashing the council's decision on three grounds. Those three grounds are set out in some detail by Glidewell LJ at pp 11-16 of the report. In essence the grounds were:
39. (1) The council's failure to give reasons for its decision was a breach of section 20 of the 1988 Act.
40. (2) The council had acted unfairly. The argument ran that Unwin had a legitimate expectation that they would not be removed from the list of approved contractors and would be entitled to tender for the renewal of the maintenance contract unless Enfield had communicated to them some valid and sufficient reason to the contrary. Thus Enfield were under an obligation to supply to Unwin reasons for their intended action, to give Unwin a reasonable opportunity to make any response they wished, and to consider that response fairly before deciding either to remove them from the list of approved contractors or to refuse to allow them to tender for the renewal of the maintenance contract. The council, it was argued, had not complied with those obligations.
41. (3) The council's decision to suspend Unwin from the list was irrational.
42. The Divisional Court held that Unwin succeeded on the first two grounds and that it was not necessary to adjudicate upon the third. At page 18 of the report, Glidewell LJ (with whom Pill J agreed) said this in relation to Unwin's first two grounds:
"Accordingly I conclude that the circumstances here were not such as to deprive Unwin of their entitlement to be told of the accusations against them, and given a chance to answer, before the decisions were made. Though I do not suggest that in every case a local authority which terminates its relationship with a contractor will be obliged to do more than the 1988 Act requires, nevertheless on the facts of the present case I accept Mr Pardoe's submission that Unwin had a legitimate expectation of fair treatment outside the Act. This expectation was not met and there was a clear breach of section 20. Decisions made unfairly should not normally be allowed to stand, and I would therefore quash both the decisions which are the subject of these proceedings."
43. Of course the facts in the Enfield case were different from the facts of the present case. The allegations in the Enfield case were particularly serious because they related to possible criminal conduct. Nevertheless the Enfield case illuminates the principles which this court should apply when considering the legality of a local authority's decision to exclude contractors from an approved list of tenderers.
44. At this point I should mention an argument advanced on behalf of the council by Mr Bowsher. Mr Bowsher submits that a local authority's decision to exclude contractors from an approved list of tenderers is not susceptible to judicial review. So long as the local authority gives reasons, and those reasons are of a commercial character, that is an end of the matter. It is immaterial whether those reasons are good or bad. The local authority has complied with its obligations under section 20 of the 1988 Act…
45. I am afraid that I do not agree. What Glidewell LJ said about unfairness and legitimate expectation forms part of the ratio of the decision in ex parte Unwin. It is binding upon me and I must follow it. See R v Manchester Coroner ex parte Tal  QB 67 at 81D-E. Furthermore, as a matter of general principle, a decision by a local authority to strike a contractor off an approved list of tenderers does not contain a public law element. This view is reinforced by the provisions of section 19 of the Local Government Act 1988, which contemplate the possibility of judicial review in respect of such decisions."
"28 Furthermore, I consider that there is considerable force in the submission that there is a pronounced public law element to the decision which is challenged in this case. The Council was not simply exercising a contractual power to require the removal of a sub-contractor. It was not merely a matter of commercial assessment and its economic consequences. It was taking a policy decision in pursuit of its public duties as an education authority as to the suitability of the claimant to act on behalf of the Council in the discharge of these particular functions. The Council, in exercise of its public law powers, has set up an elaborate structure to enable it to give effect to its policy decisions as to the suitability of individuals to provide services."
"76…Does Section 26 enmesh provision of residential accommodation by Servite into a statutory system of community care for those in need of such accommodation? Servite and Wandsworth argue that Section 26 has precisely the contrary effect. It empowers a local authority to make arrangements which divorce a private service provider from the public law obligations to which the local authority is subject when making arrangements under that section. It has the effect, in short, of disentangling Servite from any statutory embrace with Wandsworth. Section 26 has the effect of permitting a local authority to discharge its public duty by entering into a private arrangements, Section 26 was introduced for the purpose of creating what Miss Laing on behalf of Wandsworth described as a 'mixed economy' provision of community care services. Section 26 has the consequence that both the public and private sector provide such services. It follows that not only is the relationship between Servite and Wandsworth governed solely by the terms of the contract between them, but the relationship between Servite and the Applicants is solely a matter of private law. Servite, so it is argued, provides accommodation as a matter of private law and that accommodation is paid for by Wandsworth at the rates for which the arrangements provide (see Section 26(ii) of the 1948 Act). In short, the provision of residential accommodation is taken outside the scope of the public function by virtue of Section 26. In my judgment, Wandsworth and Servite are correct. The Applicants cannot rely upon Section 26 as the foundation for submitting that Servite's function is a public function. In most, if not all cases of "privatisation", legislation is necessary to enable that which had hitherto been provided by government or local authority to be provided by the private sector. It does not seem to me that reliance can be placed upon the very legislation which enables privatisation to take place...
77. Servite is a private body which does not owe its existence to Section 26. Its power to enter into a contract with Wandsworth does not depend upon Section 26, but upon its own private rules…It is the distinction between legislation which adds a public function to the private functions of a private body and legislation which permits a public law duty to be discharged by entry into private law arrangements. It does not seem to me that the Applicants can successfully contend that because legislation permits a public authority to enter into arrangements with a private body, the functions of the private body are, by dint of that legislation, to be regarded as public functions. I conclude that the Applicants cannot rely upon Section 26 as establishing a sufficient statutory underpinning of Servite's functions to enable their functions to be identified as "public functions"."
"But it was not, in his Lordship's judgment, appropriate to equate tendering conditions attendant on a common law ability to contract, with a statement of policy practice or policy decisions in the spheres of inland revenue, immigration and the like, control of which were the special province of the state. His Lordship said that although the applicants had his sympathy and had been treated unfairly, it was impossible to give them the relief they claimed by way of judicial review because the decision challenged lacked a sufficient public law element."
"26. Condition 17 is not prescriptive as to the type of financial protection provided so long as that protection meets the conditions set out in the previous paragraph of this statement. Some schemes have set up their own protected fund but the most common way of providing the necessary financial protection is through the provision of insurance-backed warranties. UKAS as part of monitoring the accreditation of schemes has the responsibility of checking that, whatever type of personal financial protection is provided, the protection satisfies the conditions in Condition 17.
27. I wrote to FENSA to explain the Department's understanding of the Condition on 31 August 2016 … saying "In our view it is entirely a matter for FENSA who is on the list so long as Condition 17 is being complied with. If FENSA wished to remove a provider from this list that is entirely a matter for FENSA so long as Condition 17 remains satisfied.
28. Condition 17 is not prescriptive on whether a scheme should have one, or more than one, financial protection product available, nor on whether a product should be provided in house or by an external supplier. Nor does Condition 17 prevent a scheme operator from removing a product from its list of approved products for whatever reason, even if the product complied with Condition 17. These choices are left to the scheme operator with no Departmental intervention. The Department's only concern is that the scheme operator has at least at least one product or arrangement meeting the requirements of Condition 17 available."
"23. The question whether a body is susceptible to judicial review is not always easily answered. The principles are tolerably clear, albeit stated at a high level of abstraction, and they are not in dispute in this case. But their application in any particular case can be problematic and it is the application of the principles to the circumstances of this case which divides the parties."
The claimant's Grounds of challenge
The decision which the defendant reached was irrational and perverse
"8. In accordance with the Conditions of Authorisations set by DCLG, Network VEKA provides a 10-year workmanship insurance backed guarantee, deposit and staged payment insurance. We produce this policy on behalf of our members from Mannequin Insurance PCC Limited, of Heritage Hall, PO Box 230, Le Merchant Street, St Peter Port, Guernsey, GY1 4JH ("Mannequin"). Mannequin is a protected cell company authorised and regulated by the Guernsey Financial Services Commission (registration number 127372). They operate on Network VEKA's behalf, a protected cell called the 'NV39 cell' to provide our insurance policies. I refer to a copy of the Network VEKA policy at pages 1 to 8.
9. Policies issued for Network VEKA are subject to Insurance Business (Bailiwick of Guernsey) Law, 2002 and the Network VEKA cell is required to meet the capital adequacy requirements of Guernsey Law. Policy holders have access to the Channel Islands Financial Ombudsman Scheme, but due to Guernsey being outside the EEA, do not presently have access to the UK Financial Services Compensation Scheme.
10. Some Network VEKA members were also members of FENSA Ltd, another Competent Person Scheme. This was for their own commercial reasons, but recognised by us and FENSA Ltd. This dual membership existed from April 2002, when FENSA Ltd was first established. Since the provision of an insurance backed guarantee became mandatory in April 2014, FENSA Ltd have twice recognised the Network VEKA guarantee which, throughout that period, has been supplied by Mannequin in Guernsey. The Network VEKA IBG was most recently accepted by FENSA on 16 December 2015. A copy of this e-mail is at pages 9 to 11."
"With the thought of trying to work constructively it would be appreciated if you could look at the NV IBG again in the light of the latest DCLG draft Conditions of Authorisations.
I am attaching our insurance policy in confidence (all I have deleted is the premium) and you will see reference (in red) to the insurers continuing to meet claims in the event NV was ever to cease to trade.
Our claims triangulation which is regulation reviewed by the Cell managers is designed to ensure there are sufficient funds in the cell to meet all liabilities based on past claims experience within the cell and also before it was set-up.
If you feel it would be helpful I can seek written assurance from VEKA Plc along the lines of staff resource being allocated to administer claims in the event NV was not there.
We feel the proposed Conditions of Authorisations are or would be met by the above and therefore should be recognised by Fensa, thus allowing any of our members wishing to be in Fensa to do so."
Network Veka have a mandatory requirement for their members to provide an IBG via Mannequin Insurance PCC Ltd who are based in Guernsey. The IBG is branded Network Veka. This insurance company sits outside of UK FCA. Clause 5.1 of the agreement states "must comply with all applicable laws and regulations and all relevant codes of practise and guidance in relation to your activities under this agreement including without limitation all and any regulations of the Financial Conduct Authority and/or Prudential Regulations Authority." Since this company is based in Guernsey it is not covered by the FCA and therefore confirmation of how this company is regulated is requested to allow a comparison to be conducted to ensure the Network Veka demonstrated their independence from Assure, which is the VEKA Group CPS…
Subject to the confirmation of the regulation controls of the insurance provider and details of how consumer protection is provided it is recommended that Network Veka be recognised by FENSA as an IBG provider for their members who are also FENSA registered. Network Veka will not be added to the public register of approved providers."
"Onto your last point, Artex as a licensed insurance manager is regulated by the GFSC under the Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002. Mannequin and the Cell as licensed insurance companies are again regulated by the Guernsey Financial Services Commission (GFSC) but under the same insurance law, regulations, guidelines, code and rules mentioned above and as a licensed insurance company Mannequin cannot cease to trade as long as it has active cells."
Following the receipt of this and other information Ms Crawford wrote back to Mr Ogilvie in the following terms:
"Please find attached the summary report for the audit that I carried out. Thank you for the follow up details and confirmation of operating practices. I can confirm that Network Veka have been added to the approved suppliers list for the provision of IBG"
"11.9 It seems that once JO [Mr Ogilvie] provided further information requested by JC [Ms Crawford] FENSA entered into a hybrid agreement with Network Veka on the understanding that any insurance policy was to be procured under Assure through the Network Veka IBG, meaning that there would be no direct exposure of FENSA. If an Assure member who was also a member of FENSA actually wished to have a particular job processed through the FENSA system it was still required to use an IBG provider on FENSA's approved list, although this rarely happened. The hybrid and one off nature of this agreement also meant that Network Veka was not added to the publicly approved list of IBG providers. I refer again to Exhibit JV8 which is a document that displays the amendments made from time to time to the approved insurance suppliers list. This does not show any addition or subsequent removal of Network Veka. I believe that this arrangement came about essentially due to pressure from some installers for permission to use the FENSA logo.
11.10 I do not think that when JC informed JO that Network Veka had been added to the approved list she was referring to approval of Network Veka as a broker as such. My understanding is that FENSA recognised that there were CPS members who were sitting in both the FENSA camp and the Assure Camp and that FENSA recognised Network Veka in the sense that Network Veka members could continue to use the FENSA logo but that any insurance certificate arising from a notification for an installation would come from Assure and any relevant building control checks would be conducted by Assure.
11.11 I also note that in his witness statement JO does not state that Network Veka was an approved broker but that the Network Veka IBG was approved by FENSA. This reinforces my understanding of the bespoke arrangement that Chris Mayne and JC reached with Network Veka. The fact is that the Network Veka IBG was not being offered to FENSA's members on the approved list of IBG providers. The agreement merely meant that members of the Assure CPS could benefit from some association with FENSA whilst for all extents and purposes the continued to operate within the Assure scheme. As JO states, this was in fact "only a small handful" of installers.
11.12 Therefore Network Veka was a special case for the reasons set out above.
11.13 Ultimately, given that I was not involved in this decision/agreement I am unable to comment much further about the Network Veka arrangement. However, I am sure that the Claimants' attempt to analogise itself with Network Veka is a complete red herring. The Claimants' say that the Network Veka was no different to the new model DGCOS adopted. This is not the case. Whilst Network Veka's IBG was based on a cell, its model offered a far greater degree of financial stability. Network Veka operates a closely linked structure whereby the whole business would need to go down before the insurance policy became void. It also had a strong and long standing track record in the industry. To put this simply, Network Veka's IBG is backed by Network Veka itself, which is a multi-million pound company. For Network Veka to use a protected cell instead of an established underwriter may have made financial sense. DGCOS on the other hand is a much smaller company and does not offer anything like the same degree of financial stability.
11.14 When JC communicated the Decision to DB, she informed him that FENSA would be removing Network Veka from the approved list of IBG suppliers. This was not something that JC had discussed with me. The first that I heard of this decision was when I was copied into an email to JO on 19 August 2016… JC took the decision to cancel the bespoke agreement with Network Veka without (to my knowledge) any involvement from anyone at FENSA. I believe JC sent the 19 August email because she understood the basis on which the Decision was made meant that FENSA should not continue the bespoke arrangement with Network Veka. DB had already highlighted what he considered to be differential treatment which may have contributed to JC acting in the way that she did and it was JC's view that the Network Veka and the SWIG models were essentially the same. For the reasons set out above that is not in fact correct. The superficial similarities disguised a very different commercial reality."
"Their website uses the term "composite insurance company" which is an accepted market term to denote a range of insurances across the general insurance and financial services sectors.
The site also states that it is regulated and authorised by both the Isle of Man Financial Services Authority and the (UK) Financial Conduct Authority – Number 142307. This is in line and meets the requirements of Clause 4.9 of your Approved Insurer Provider Agreement.
I have looked at the Financial Conduct Authority (FCA) register of approved companies and Isle of Man Assurance are indeed on this and have been authorised for "regulated products and services" since 1/12/2001 via the predecessor regulatory body the Financial Services Authority (FSA). As such, should it be necessary, policyholders will have access to the Financial Services Compensation Scheme.
The list of regulated products on the FCA register relates purely to the Financial Services side of the authorisation (investments, pensions etc) but you will also note the additional authorisation for "Insurance Mediation". This is an all embracing term which relates to a firm that offers or sells insurance products or services. The register confirms that the firm is able to undertake insurance mediation.
I am therefore satisfied that Isle of Man Assurance are correctly authorised and regulated in relation to the issue of insurance back guarantees/extended warranties. In fact, IOMA were one of the first, if not the first, insurers to operate in the extended warranty field."
"This document provides key information about the Guarantee Insurance Policy, underwritten by Isle of Man Assurance (IOMA). If you have any additional questions, then please contact Insured Window Guarantees (IWG).
IWG is covered by the Financial Services Compensation Scheme (FSCS). You may be entitled to compensation from the scheme if we cannot meet our obligations to you. Further information about the compensation scheme arrangements is available from the FSCS."
Whilst the claimants are entitled to dispute that claim, firstly, the court is not in a position to resolve the differing contentions between them and IWG (not least because the court has not heard from IWG) and, secondly, the evidence does not show that the defendant has forsaken either its policy on requiring access to FSCS or its contract which requires the IWG IBG to provide access to FSCS. It is clear that once this issue was raised by the claimants active enquiries into the circumstances of IWG were instigated with a view to seeking to enforce the contract. This does not, as Mr Burton points out, provide any evidence of differential treatment on the basis that the defendant has abandoned its approach of requiring access to FSCS. Mr Ward further complains that in the circumstances it shows differential treatment in that IWG have not been suspended. However, on the basis of the material available to the defendant, namely what appears on the face of the IWG policy documentation coupled with their own expert enquiry as to whether or not there has been a breach of the contract, their decision not to suspend IWG is defensible. Clearly, as Mr Vanstone has set out in his evidence, the claimants' contentions will undoubtedly require careful further scrutiny by the defendant. However, the need for that careful scrutiny in the light of the issues which the claimants have raised in relation to IWG does not in my judgment amount to a demonstration that the decision to suspend and then remove the claimants was irrational on the basis that the defendant have not been treating like case alike.
The inadequacy of the defendant's reasons
"34. In my judgment, the following propositions appear from the above authorities…
(ii) In other cases, the Court will be cautious about accepting late reasons. The relevant considerations include the following, which to a significant degree overlap:
(a) Whether the new reasons are consistent with the original reasons.
(b) Whether it is clear that the new reasons are indeed the original reasons of the whole committee
(c) Whether there is a real risk that the later reasons have been composed subsequently in order to support the tribunal's decision, or are a retrospective justification of the original decision. This consideration is really an aspect of (b).
(d) The delay before the later reasons were put forward.
(e) The circumstances in which the later reasons were put forward. in particular, reasons put forward after the commencement of proceedings must be treated especially carefully. Conversely, reasons put forward during correspondence in which the parties are seeking to elucidate the decision should be approached more tolerantly."
"10.11 In an email of 5 August 2016, DB addressed the query raised by JC by detailing that there was a minimum capital requirement of only above £100,000.00 (page 168 Claimant's Bundle) but did not address the question of what would happen if SWIG collapsed. Nevertheless, JC emailed both LG and me on 9 August 2016 (attached at JV14) stating that, in her opinion, the risk of exposure to FENSA was low. I did not share her level of certainty. The capital requirement of £100,000.00+ was in no way adequate to ensure sufficient cover and I was wary of the concept, predicated as it seemingly was on the notion that SWIG would not be allowed to stop trading irrespective of its financial position. Ultimately, this email did not give FENSA any additional comfort as to the security available in the event that the cell failed…
10.16 As a result of this, and some further discussions, including on the afternoon of 23 August, the decision was made that FENSA could not offer the interim cover until 30 August 2016, as had been envisaged by JC in her email of 19 August 2016 and it should be suspended straight away. The suspension had to be immediate because every installation made after Enterprise's demise would have had no ultimate safeguard in place for the consumer."
Failure to make reasonable enquiries in relation to the arrangements which had been put in place following the collapse of EIC
"35 In my judgment the CREEDNZ Inc case (via the decision in In re Findlay) does not only support the proposition that where a statute conferring discretionary power provides no lexicon of the matters to be treated as relevant by the decision-maker, then it is for the decision-maker and not the court to conclude what is relevant subject only to Wednesbury review. By extension it gives authority also for a different but closely related proposition, namely that it is for the decision-maker and not the court, subject again to Wednesbury review, to decide upon the manner and intensity of inquiry to be undertaken into any relevant factor accepted or demonstrated as such. This view is I think supported by the judgment of Schiemann J in R v Nottingham City Council, Ex p Costello (1989) 21 HLR 301 , to which Mr Luba referred us. That case concerned the degree of inquiry which an authority was obliged to undertake into issues of priority need and intentional homelessness. Schiemann J said, at p 309:
"In my view the court should establish what material was before the authority and should only strike down a decision by the authority not to make further inquiries if no reasonable council possessed of that material could suppose that the inquiries they had made were sufficient."
This approach is lent authoritative support by the decision of this court in R v Kensington and Chelsea Royal London Borough Council, Ex p Bayani (1990) 22 HLR 406 , which was concerned with the authority's duty of inquiry in a homelessness case. Neill LJ said, at p 415:
"The court should not intervene merely because it considers that further inquiries would have been sensible or desirable. It should intervene only if no reasonable housing authority could have been satisfied on the basis of the inquiries made.""
Procedural unfairness preceding the decision to delete the claimants from the approved list