Jersey Unreported Judgments

Judicial Review - application pursuant to leave given regarding a challenge to decisions taken to refuse registration of the First Applicant in the directory of nurseries.

[2015]JRC067

Royal Court

(Samedi)

31 March 2015

Before     :		Sir Michael Birt, Commissioner, and Jurats Kerley and Liston
Between	Organic Kids Limited		First Applicant
And	Organic Kids (Castle Quay) Limited		Second Applicant
And	Minister for Education Sport and Culture		Respondent

Advocate O. A. Blakeley for the First and Second Applicants.

H. Sharp, Q.C., HM Solicitor General for the Respondent.

judgment

the commissioner:

1.        This is an application for judicial review pursuant to leave given by the Deputy Bailiff on 4^th November, 2014.  It involves a challenge to decisions taken on behalf of the Minister for Education, Sport and Culture ("the Minister") to refuse registration of the second applicant in the directory of nurseries approved to operate under the nursery education funding scheme for the academic year 2013-14 and not to allow either applicant to apply to be so registered for the academic year 2014-15. 

2.        We propose to begin by describing the scheme and then outlining the relevant factual background. 

The Scheme

3.        Since 2009, the Education, Sport and Culture Department ("the Department") has operated a scheme called the Nursery Education Fund scheme ("NEF" or "the scheme") which provides financial assistance to parents in sending their children to private nurseries.  The scheme allows nurseries to provide a certain amount of hours of nursery attendance to children free of charge to parents.  The nurseries are then reimbursed by the Department for those uncharged hours at standard rates set by the Department.  The scheme allows parents to choose which nursery to send their children to but, in order for a nursery to offer NEF places, it must be accepted by the Department as a registered NEF provider.  The scheme only provides assistance in term time.  It covers 20 hours a week for 38 weeks in the year.  If parents wish to place their child in a nursery for more than 20 hours a week in term time or in a period falling outside term time, they have to pay the normal nursery fees themselves. 

4.        The process for registration is as follows.  In about March of each year, the Department makes available to nurseries parent's declaration forms.  A nursery will then make these forms available to any parents who wish to send their child to the nursery and to take advantage of the scheme.  Following completion by the parents, the nursery then verifies certain information on the parent's declaration form.  It will in due course submit a batch of completed forms to the Department.  The purpose of the forms is at least two-fold; first, it gives information about the child to the Department so that the Department can verify that the child is entitled to attend the nursery under the scheme; and secondly, it provides the Department with notice of how many children will be attending under the scheme at each nursery and hence the total number of children to be covered by the scheme in any particular year. 

5.        Sometime after the nursery has submitted the duly completed parent's declaration forms to the Department, it receives from the Department a partnership agreement and a provider's declaration form.  These are usually received in about June/July of each year i.e. before the start of the academic year in question.  Before sending the provider's declaration form to the nursery in question the Department inserts the number of NEF places allocated to that nursery.  This will be based upon the number of parent's declaration forms which have been returned to the Department by the nursery.  The partnership agreement, which is a standard document sent to every nursery which applies, sets out the basis upon which the scheme operates and the nursery will be reimbursed by the Department.  It constitutes the agreement between the Department and the nursery in question.  The provider's declaration form confirms amongst other things that the nursery will comply with the partnership agreement.  Provided that the nursery is happy to be bound by the terms of the partnership agreement, it signs the provider's declaration form and returns it to the Department.  Thereafter no further action is required by the nursery for inclusion in the directory of providers ("the Directory") for the relevant academic year. 

6.        The whole process is repeated each year and a new Directory is established for the academic year in question i.e. a year running from September of one year to July of the following year. 

7.        An issue which lies at the heart of the dispute between the applicants and the Minister in this case is that of "top-up fees".  These are prohibited under the scheme.  In its simplest form, a top-up fee can arise in the following way.  Let us suppose that the standard hourly rate charged by a nursery is £25 but that the set hourly rate ("the Set Rate") payable by the Department under the scheme is £20.  If a nursery provides an hour under the scheme, that hour must be provided without charge to the parent.  The nursery is not allowed to levy a fee of £5 to the parent to make up for the difference between the nursery's normal fee and the Set Rate received by the nursery from the Department.  There are more sophisticated ways in which a nursery might seek effectively to recoup the difference between the Set Rate and its normal rate in respect of the hours provided under the scheme and differences of opinion between the applicants and the Department as to what does or does not amount to a top-up fee play a prominent part in the facts of this case. 

The factual background

8.        With that introduction to the scheme, we turn to outline the relevant factual background.  We have received six affidavits on behalf of the applicants and three on behalf of the Minister.  The affidavits exhibit enormous amounts of correspondence.  It is clear that relations between Mrs Dawn McLachlan (the principal of the applicants) and officers of the Department have been very fraught and the affidavits descend into great detail.  We have read all the affidavits and the correspondence but in this judgment, we propose to describe only those matters which we consider to be strictly relevant to our decision. 

9.        Mrs McLachlan states that she has been involved in setting up and managing nurseries for approximately 19 years.  She began in the Midlands but set up the first of several nurseries in Jersey in 1999.  In 2004 she sold her interest in those nurseries and entered into a restrictive covenant which did not expire until 2007. 

10.      In 2010, she incorporated the first applicant, Organic Kids Limited.  This was established in order to set up and run a nursery school at La Providence, St Peter's Valley.  That nursery opened in June 2011 and has been running since then.  It proved successful and, as a result of its success, Mrs McLachlan decided to open another nursery, this time at the new development at the Waterfront at Castle Quay.  She incorporated the second applicant, Organic Kids (Castle Quay) Limited for that purpose and the new nursery opened in May 2013.  The La Providence nursery has been referred to throughout as "LP" and the Castle Quay nursery as "CQ".  We shall use these abbreviations where convenient to cover both the nursery and the corporate entity which runs that nursery unless it is specifically necessary to draw a distinction. 

11.      LP was duly placed on the Directory for the school year 2011-12 for five places.  According to Mr Posner, the head of planning and projects at the Department, who had primary responsibility for the scheme, he received a call in July 2011 from a parent who was proposing to send a child to LP but expressed concern about an invoice received for additional hours charged.  Mr Posner said he would look into it to see if LP was charging a top-up fee in breach of the partnership agreement. 

12.      He arranged a meeting with Mrs McLachlan on 1^st August, 2011, which was attended by him, Mr John Littlewood as head of finance in the Department and Dr Sandra Mountford as manager of day-care registration.  It is clear that this was not a successful meeting, to put it mildly.  Mrs McLachlan considered the meeting to be appalling.  She says that she was threatened, bullied and harangued by Mr Posner and Mr Littlewood during the meeting.  They refused to listen to her, they interrupted her and she found them to be intimidating.  She says that at the end of the meeting Mr Littlewood apologised for threatening her.  She on the other hand was also very forthright towards them.  It is clear that there was a fundamental difference of opinion as to whether what she was doing amounted to the charging of top-up fees or not.  At that stage LP charged sessional rates rather than hourly rates and she did not consider the charges amounted to topping-up.  Mr Posner agrees that the meeting was about whether LP was charging top-up fees but disputes Mrs McLachlan's description of the meeting.  He admits that the discussions became heated at one point between Mr Littlewood and Mrs McLachlan and that the situation became uncomfortable for a short time with both Mrs McLachlan and Mr Littlewood standing their ground on the issue of top-up fees.  He considered that that only lasted for about 10 seconds and otherwise the meeting was carried out in a respectful manner with forthright views exchanged on both sides.  Mrs McLachlan's version of the meeting is however supported by Dr Mountford, who said that what she witnessed was unacceptable behaviour which she could only describe as bullying on the part of Mr Posner and Mr Littlewood.  She said that Mr Littlewood did apologise to Mrs McLachlan at one stage for his earlier behaviour in the meeting.  She said that Mrs McLachlan was putting forward her point of view that the fee structure did not amount to topping-up but this was constantly challenged by the two men aided by the frantic use of calculators. 

13.      In the absence of oral evidence and the testing of such evidence, we are not in a position to resolve these differences.  But it is clear that this unfortunate meeting lies at the root of the rapid deterioration in the relationship between Mrs McLachlan and the Department, with each tending to think the worst of the other.  It is also clear that there was a fundamental difference of view as to whether the charging structure which was then in place at LP did or did not amount to topping-up.  At that time, the relevant partnership agreement for 2011-12 gave very little guidance as to what amounted to topping-up fees.  The only relevant provisions were as follows:-

"10.     Parents must not be charged any additional fees in respect of hours provided under the NEF agreement.  This would be regarded as a top up fee. 

11.      Registered NEF providers must not charge parents for extra-curricular activities which are delivered within the hours purchased by ESC.  This would be seen as a top up fee and contrary to the spirit of the scheme.  Providers may charge parents for extra-curricular activities (at a rate of their choice) if delivered outside the hours purchased by ESC." 

14.      Following the meeting, Mr Posner wrote to Mrs McLachlan on 7^th October, 2011, stating that the Department considered that the charging arrangements by LP (which as stated were on a sessional rather than hourly basis) constituted the charging of top-up fees.  Mrs McLachlan replied and disagreed.  In November 2011, a NEF audit (in accordance with standard practice) was carried out at LP and the child care registration officer who carried it out raised concerns about the invoicing system.  Mr Posner wrote again to Mrs McLachlan on 7^th March, 2012, expressing his concern that top-up fees were being charged.  We have not seen Mrs McLachlan's response of 22^nd March but according to Mr Posner she accused the Department of victimisation and threatened to instruct her lawyer.  This was to become a regular theme.  Mr Posner then suggested a meeting in order to try and obtain a shared understanding, but that was rejected by Mrs McLachlan who wanted everything done in writing so as to avoid any misunderstanding.  It seems clear that this, together with later refusals on her part to meet with officials, was influenced by her experience of the August 2011 meeting, which had clearly upset her very greatly and where she had felt bullied. 

2012-13

15.      No doubt as a result of the disagreement with LP as to what constituted a top-up fee, the Department amended the partnership agreement for 2012-13.  Clause 10 remained as in the previous year's agreement but there was a new Clause 11 which provided as follows:-

"Providers must not charge parents in excess of published rates (whether expressed as an hourly rate or calculable by dividing the cost of a session by the number of hours in that session) in respect of any hours purchased outside the allocation of 20 free hours. 

If a parent purchases a session from a provider (the session being longer than that funded by the NEF), the provider is not permitted to deduct the value of the NEF payment from their published price for this session. 

Although providers are permitted to charge additional hours at their own published rate, they are not permitted to charge in excess of this rate to supplement the value of a session for a NEF child.  Such an approach to billing would be deemed to constitute a "top-up" of fees and would contravene the Conditions of Funding outlined in the Partnership Agreement."

There then followed a "worked example" to illustrate the point being made.  LP duly completed all necessary formalities for 2012-13 and was placed on the Directory with 14 places allocated to it under the scheme. 

16.      Following the NEF audit in January 2013, the auditor again raised concerns as to whether top-up fees had been charged.  As a result, Mr O'Regan (Head of Early Years) at the Department wrote to Mrs McLachlan on 8^th February, 2013, to request information regarding "rates of fees and charges as published to parents and carers". 

17.      Mrs McLachlan took the view that the Department was not entitled to information relating to periods outside the 38 weeks covered by the NEF scheme and she denied that any top-up fees were being charged. 

18.      As we shall see, correspondence continued between the Department and Mrs McLachlan on this topic but LP remained registered for 2012-13 and therefore the correspondence can more conveniently be considered in relation to 2013-14. 

2013-14

19.      No doubt as a result of LP's assertion that the Minister was not entitled under the partnership agreement to see invoices etc. for any period outside the 38 week period covered by the NEF, the Department sought to amend the terms of the partnership agreement for 2013-14.  On 29^th May, 2013, Mr Posner emailed Mrs Valerie Payne, the Chairman of the Jersey Early Years Association ("JEYA"), which is the organisation of registered child care providers and which worked closely with the Department in the development of the partnership agreement.  According to Mrs Payne, it had apparently been agreed by the Department that JEYA would be consulted in respect of any proposed amendments to the partnership agreement at each annual review of the document. 

20.      Mr Posner suggested two changes to the 2012-13 partnership agreement for inclusion in the 2013-14 agreement.  The first was to add a further 'worked example' in Clause 11 with a view to giving greater clarification as to what was or was not a top up fee.  Secondly, although he said in the email that this was already implicit in other clauses in the partnership agreement, he wished to include a clause to the following effect:-

"All providers must publish rates to parents for additional hours and services charged outside of the NEF.  These charges must be made available to ESC on request."

21.      The Committee of JEYA rejected this latter amendment because, according to Mrs Payne, it felt that, as the NEF scheme related only to term time, the charges applied by nurseries outside that period was a business matter between the nurseries and their clients i.e. the parents.  It is clear from this response that the Committee of JEYA was of the same view as LP, namely that the existing partnership agreement did not entitle the Department to demand this information.  When informed of the Committee's decision, Mr Posner asked JEYA to reconsider as a matter of urgency and accordingly the JEYA Committee decided to ask all its members for their views on the point.  It sent out an email questionnaire to all members on 19^th June, 2013.  With the exception of one member, all members voted against the proposed amendment.  This was communicated to the Department. 

22.      Somewhat surprisingly, Mr Posner states in his affidavit that he was content with the decision taken by JEYA.  He viewed the additional worked example in Clause 11 as the most important change.  He said that the request to include the new clause about making details of charges levied outside the NEF available to the Department was simply to make the partnership agreement more explicit.  He felt that the existing paragraph 27 of the agreement already conferred the right on the Department to request and view documentation about fees outside the NEF funded period.  We have to say that we find this a little difficult to reconcile with his request to include the additional clause in the first place and his further request that JEYA reconsider as a matter of urgency its refusal to agree to the additional clause.  Be that as it may, the upshot was that the further worked example suggested by Mr Posner was included in Clause 11 of the 2013-14 partnership agreement but the proposed new clause referred to at paragraph 20 above was not included. 

23.      LP had applied in the normal way to be entered on the Directory for 2013-14.  CQ had also applied for the first time having just begun business.  However, it appears from Mrs McLachlan's affidavit that the Department did not agree to provide the parent's declaration forms to CQ because of the ongoing difficulty with LP.  Eventually Mrs McLachlan realised that she had the necessary forms on her computer and in due course the parent's declaration forms for both nurseries were submitted to the Department. 

24.      In the meantime, correspondence had continued to take place between Mrs McLachlan and the Department on the vexed issue of top-up fees.  On 28^th May, 2013, Mr Posner had written to Mrs McLachlan recording that it had concerns that top-up fees were being charged at LP and that LP had refused to provide the information requested by the Department.  The letter went on to say:-

"In order to ensure that the two Organic Kids nurseries - at La Providence and Castle Quay - can participate in the NEF scheme in the forthcoming academic year, it is necessary to resolve this issue.  This can be achieved if you provide written confirmation that both nurseries will comply with the Conditions of Funding set out in the Partnership Agreement and undertake to stop charging a top-up fee." (emphasis added)   

25.      Mrs McLachlan replied by email the same day disputing the suggestion of having charged top-up fees and explaining why, but giving the required confirmation in the following terms:-

"Please treat this as written confirmation as requested in your letter that Organic Kids Limited at La Providence and Organic Kids (Castle Quay) Limited at the Waterfront will comply with the conditions of funding set out in the "partnership agreement" and not charge a top-up fee."

26.      With some justification, Mrs McLachlan thought that this had resolved the position for registration for both LP and CQ for 2013-14.  But on 30^th May, Mr Mario Lundy, the Director of Education, to whom the matter had apparently been referred, wrote a rather different letter to Mrs McLachlan.  The letter repeated the concerns about top-up fees and referred in particular to one invoice (which must have been an invoice for the 2012-13 academic year) which the Department had seen and which gave rise to concern.  The letter went on to say that, in order to consider an application for NEF funding from September, the Department needed to receive details of the published rates for all sessions; a clear rationale for the higher charges that applied to the additional 14 weeks (i.e. outside the NEF funded period); and evidence that the fee policy was designed to work within the terms of the partnership agreement. 

27.      Mrs McLachlan's email reply of the same day reiterated her previous stance.  She denied that top-up fees were being charged and said that the Department was not entitled to the information which it was requesting as this related to the period outside the NEF funded period. 

28.      There were further exchanges during the course of which, on 3^rd June, Mr Lundy reiterated why the Department needed information as to the charges outside the NEF funded period and accepted that the Department had no idea what session/day/hours were being purchased in this respect. 

29.      Eventually, on 8^th July, Mr Lundy wrote again reiterating a number of matters but concluding by enclosing the appropriate provider's declaration form and partnership agreement for 2013-14 for both LP and CQ (with 12 places allocated to LP and 7 to CQ), but going on to say that, in order for the applications to be successful, the applicants would need to demonstrate that the system for invoicing parents met the terms of the partnership agreement for 2013-14. 

30.      There then followed various exchanges in which the Department continued to seek the information which it had requested and to have a meeting, and Mrs McLachlan protested that she was wrongly being asked to provide information that was not being requested of others.  She declined to meet but repeated that both nurseries would comply fully with the terms of the partnership agreement.  On 19^th July, Mr Posner wrote informing Mrs McLachlan that the Department was commencing the process for removal from the Directory as laid down in the partnership agreement 2013-14.  On 27^th July Mrs McLachlan confirmed by email that she had decided to charge NEF children on an hourly basis and there would be a published rate in compliance with the partnership agreement.  She said that therefore the provider's declaration for both LP and CQ would be sent in to the Department, and this occurred shortly afterwards. 

31.      Mr Posner replied on 2^nd August stating that, as had been indicated previously, the process for the removal of LP from the Directory for 2013-14 had commenced and would continue at a meeting to be held on 13^th August.  He also confirmed that CQ was not registered under the NEF scheme and therefore parents should not be provided with application forms for the NEF through that nursery.  He said that the application for registration of CQ would also be considered on 13^th August. 

32.      On 11^th August Mrs McLachlan emailed the fee structure for LP and CQ for the 2013-14 academic year to the Department.  She also provided calculations of how the fee structure would be applied.  The Department accepted that, if the structure suggested were to be applied to parents' invoices, then both nurseries would be complying with the conditions of funding as contained in the partnership agreement.  Accordingly, at the meeting on 13^th August, the Department decided that LP could remain on the Directory subject to three conditions being met and that half the grant would be paid at the beginning of September.  Mr Lundy wrote a letter to that effect on 14^th August which reiterated that the Department did not agree with Mrs McLachlan's refusal to provide the information requested but stated that it had taken into account the proposed fee structure which had been provided on 11^th August.  The letter concluded by saying the following:-

"Paragraph 25 of the Agreement provides for a grant to be withheld.  Consequently, only one half of the grant will be paid at the beginning of September subject to the following conditions: 

1)        The Provider agrees to meet with the Director of Education to ensure a clear understanding exists as to requirements placed upon the Provider under the Partnership Agreement;

2)        The Provider agrees to engage with the Department in a constructive manner and promptly provide any information that the Department is entitled to receive under the terms of the Partnership Agreement;

3)        Invoices for NEF children accessing additional hours in September 2013 are made available to Department of Education to clarify the proposed fee structure.

Once the Department is assured that, as the provider of La Providence, you are prepared to work in a constructive partnership and comply with the terms of the Agreement, the second half of the grant will be paid on 4^th November, 2013."

33.      Mrs McLachlan emailed back on 16^th August confirming that both CQ and LP accepted the terms of the letter of 14^th August. 

34.      On enquiry from Mrs McLachlan, the Department clarified on 15^th August that CQ's application had not been considered and would only be dealt with once the dispute in relation to LP was resolved. 

35.      It appears that Mrs McLachlan then instructed Advocate Blakeley because he wrote on 28^th August reiterating the dissatisfaction with the Department and asserting that both companies intended to make a formal complaint and if necessary issue legal proceedings. 

36.      There then appears to have been further correspondence between Advocate Blakeley and the Law Officers' Department, but we have not been shown that.  However, on 14^th October, 2013, Mr Woodside of the Law Officers' Department emailed Advocate Blakeley rejecting various criticism which had clearly been made of the Department, and going on to say this:-

"(4)      If your client had disclosed the fees that were being charged for hours outside the NEF - enabling a view to be taken on the issue of "top-up" fees - this matter could have been resolved much earlier.  The DfECS accepts that the proposed fee structure that you have provided appears to be aligned with the terms of the Partnership Agreement, so long as all fees and billing procedures are presented clearly to parents and they are made fully aware of all charges for additional services. 

(5)       If your client is content to provide, as and when requested, the information set out in paragraph 27 of the Partnership Agreement (including copies of invoices raised for any additional hours, including hours outside the NEF which could be used as a mechanism to introduce "top-up" fees), I understand that the DfESC would be prepared to reinstate funding for NEF places at Organic Kids La Providence and to register Organic Kids (Castle Quay).  I would be grateful to receive confirmation at your earliest convenience."    (emphasis added)

37.      One might have hoped that a simple positive response to this would have brought matters to a conclusion but there was further email correspondence between Advocate Blakeley and Mr Woodside which did not take the matter very far.  In due course on 20^th December, 2013, Mr Woodside repeated what he had said in the email of 14^th October as follows:-

"Therefore, to bring this to a conclusion, can you confirm that your client accepts the terms of the partnership by stating clearly:

'My client agrees to provide, if requested, copies of invoices raised for any additional hours, including hours outside the NEF which could be used as a mechanism to introduce "top-up" fees.' 

Once I have received this confirmation, I am advised that the DfESC, subject to your client meeting all other terms and conditions contained in the partnership agreement, will continue to procure nursery places for OK Kids - La Providence until July 2014 when the partnership agreement comes up for renewal."

38.      Advocate Blakeley replied to that email on 8^th January, 2014, and gave the confirmation requested in the following terms:-

"With regard to your comment "my client agrees to provide, if requested, copies of invoices raised for any additional hours, including hours outside the NEF which could be used as a mechanism to introduce "top-up" fees. 

This has already been confirmed by my client to you on numerous occasions and also you and ESC were provided with the example invoice which NEF parents have including all additional weeks/hours.  ESC confirmed that this was sufficient in August so you are asking confirmation of already given previously given confirmations.  To conclude, my client continues to agree to provide, if requested, copies of invoices raised for any additional hours, including hours outside the NEF." 

39.      By now, the correspondence had become side-tracked by an issue about certain nurseries with which Mrs McLachlan was or may have been connected in the UK.  Nothing eventually turned on that and we do not propose to refer further to it. 

40.      There then appears to have been periodic exchanges between Mr Woodside and Advocate Blakeley with Mr Woodside seeking a meeting to try and resolve differences and Advocate Blakeley not agreeing to this and periodically threatening legal proceedings. 

41.      Eventually on 30^th May, 2014, Mr Woodside wrote to Advocate Blakeley giving notice that the Department intended for the second time to institute the process of removal of LP from the Directory in accordance with the procedure set out in the partnership agreement.  The reasons given were that first, LP/Mrs McLachlan had declined to meet with the Department; secondly, that although the Department had various remedies available to it, it had sought to maintain a constructive dialogue with Mrs McLachlan/LP; and thirdly that in contrast, Mrs McLachlan had, in the Department's view, been aggressive, intimidating, erratic and recalcitrant towards officers of the Department and shown no willingness to work in a constructive partnership.  The email concluded by pointing out that LP had 15 working days in which to respond.  The email also said that the Department was not minded to consider the registration of CQ whilst the process of possible removal of LP was ongoing. 

42.      Advocate Blakeley replied on 12^th June saying that LP was unaware of any reasons to justify its removal from the Directory and the Department had not produced any details to justify the removal. 

43.      The senior management team of the Department met on 24^th June and decided to remove LP from the Directory.  The Law Officers' Department wrote on 1^st July in order to communicate this decision and pointed out that LP/Mrs McLachlan had failed to meet the three conditions contained in Mr Lundy's letter of 13^th August, 2013, and that she had declined to meet on a number of occasions.  This had led to increasing concern that the accounting officer of the Department had been unable to exercise his responsibility in respect of LP to ensure that public funds were used appropriately. 

44.      There was then some confusion as to whether the response from Advocate Blakeley amounted to an appeal or not but in the event no appeal was heard. 

45.      Surprisingly, given the previous statement that CQ's application would not be considered, the senior management team decided at its meeting on 24^th June to reject CQ's application to be registered in the Directory and this was confirmed in the letter of 1^st July from the Law Officers' Department. 

46.      There was one other significant event which we should mention in connection with the 2013-14 period.  The Department arranges an annual NEF audit of nurseries which are in the scheme.  The audit is intended to check whether there is compliance with the terms of the partnership agreement.  In November 2013 the Childcare Registration Manager attended at the premises of LP to conduct that audit.  Mrs McLachlan asked her whether she would be inspecting the NEF paperwork.  The Childcare Manager replied that she had been told not to do this.  This was confirmed in the affidavit of Mr Posner who, whilst agreeing that the NEF audit is the vehicle for checking compliance with the partnership agreement, said that the Department had decided not to undertake the NEF audit of LP that year until there was a positive dialogue with LP about its fee structure and adherence to the partnership agreement. 

47.      The Childcare Registration Manager attended at the premises of CQ for a registration inspection in March 2014 and disclosed that she was worried that LP was being paid when the NEF audit had not been carried out. 

2014-15

48.      LP and CQ have attempted to be included in the Directory for 2014-15.  The Department decided this year to send out the relevant forms to nurseries interested in being on the Directory by email.  This was done in respect of all other nurseries in March 2014, but none were sent to LP or CQ.  On 9^th April Mrs McLachlan emailed the Department to say that she anticipated there being 13 children under the scheme at CQ and 15 at LP.  However she did not receive any response and repeated attempts between March and August 2014 (including a personal visit to the Department by a member of her staff) to obtain the necessary forms were unsuccessful.  That is confirmed in paragraph 41 of Mr Posner's affidavit where he states that, because the dispute in respect of 2013-14 had not been resolved, it had been decided not to provide LP or CQ with parent's declaration forms until the dispute was resolved, as to do so would only raise expectations with parents that the two nurseries would be registered for 2014-15. 

The decisions under challenge

49.      Although LP was originally going to challenge its removal on 23^rd June, 2014, from the Directory for 2013-14, it has not done so because it would be academic.  The Department has in fact reimbursed LP for all the children who attended the nursery under the scheme during that academic year.  However, CQ does challenge the decision of the same date to reject its application to be placed on the Directory for that year.  We were told that that decision was not academic in that, if the decision were quashed and CQ were eventually placed on the Directory for that year, it would seek reimbursement of the fees for the children on the NEF scheme who attended that nursery during that academic year.  The parents of those children have not been charged for that year and the cost has therefore been borne by CQ, which provided the places free of charge. 

50.      LP and CQ both challenge the decision not to allow them even to apply to be registered as members of the Directory for 2014-15.  Again, children are currently attending both nurseries and are not being charged for the NEF period.  We were informed that the cost is being borne by CQ and LP. 

CQ's application for 2013-14

51.      Advocate Blakeley argued (correctly) that CQ was a completely separate legal entity from LP.  He therefore further submitted that, as CQ was applying to be registered for the first time for the year 2013-14, there was no pre-existing history of concern about top-up fees and it was wrong to link CQ's application with LP's position.  It should have been considered entirely on its own.  The Solicitor General, on the contrary, argued that this was to ignore reality.  Mrs McLachlan was the principal of both companies and was clearly the driving force behind them.  It was reasonable for the Department to assume that CQ would be run in the same way as LP and therefore LP's history was a material factor in considering CQ's application.  It was therefore reasonable to defer consideration of CQ's application until the outcome of the dispute with LP was known. 

52.      We agree that, in the particular circumstances of this case, the Department was entitled to consider LP's history when considering CQ's application.  That requires us therefore to consider the circumstances of the decision to remove LP from the Directory in June 2014 and how that affects the decision to reject CQ's application on the same occasion. 

53.      The Solicitor General submits that the position is very simple.  The Department had reasonable grounds for concern as to whether there had been top-up fees charged for 2011-12 and 2012-13.  When endeavouring to ascertain whether this was the case, it had been met with a blank refusal by Mrs McLachlan to provide the necessary documents (including invoices outside the NEF hours) to show whether top-up fees had been charged and she had also refused to meet to discuss the position.  It was therefore entirely reasonable for the Minister to make LP's continued participation in the Directory for 2013-14 conditional upon LP complying with the three conditions set out in the letter dated 14^th August, 2013.  

54.      Those conditions had not been fulfilled.  As to condition (1), there had never been a meeting despite many requests by the Department for this to occur.  As to condition (2), there had continued to be aggressive and unhelpful correspondence, with lawyers being brought in and threatening court proceedings.  As to condition (3), the invoices in question had never been provided to the Department.  In those circumstances, the Minister was acting entirely reasonably in removing LP from the Directory and rejecting CQ's application to be included in the Directory.  

55.      As always, the Solicitor General put forward his arguments most persuasively.  Nevertheless, we have concluded that the decision to reject CQ's application to be included in the Directory for 2013-14 was unreasonable (in the judicial review sense of being Wednesbury unreasonable) and was reached in an unfair manner.  We summarise our reasons as follows. 

56.      We begin by accepting that it was entirely proper for the Department to wish to ensure that the partnership agreement was adhered to by nurseries (including LP and CQ) and that top-up fees were not charged.  We also accept that the Department was entitled to be concerned as to whether top-up fees had been charged by LP for 2011-12 and 2012-13. 

57.      That was of course denied by LP and it is clear that there was a difference of opinion as to what constituted top-up fees.  Accordingly the partnership agreement was progressively amended in succeeding years in order to clarify the position.  Thus the 2011-12 agreement said very little other than that top-up fees could not be charged, the 2012-13 agreement expanded upon this and also contained a worked example, and the 2013-14 agreement contained a further worked example to make the position clearer. 

58.      There was also room for doubt as to whether the Department was entitled to call for sight of invoices outside NEF hours.  LP (together it would appear with the JEYA Committee) considered that the Department was not entitled to seek such information whereas the Department felt that paragraph 27 of the partnership agreement (which committed the nursery to make certain documents available to the Department for inspection) was wide enough to cover invoices for periods outside the NEF hours.  We also accept that, rather than acting in a co-operative manner by meeting with the Department and providing any documents which they wished to see, LP stood on its rights and refused to supply anything which it felt it was not legally obliged to.  Mrs McLachlan would say that she was bruised by the first meeting with officials from the Department and did not wish to be bullied by them again.  She was clearly determined to stand up to what she considered to be overbearing behaviour. 

59.      Contrary to Advocate Blakeley's submission, the Department does not start with a wholly clean sheet of paper each year, having to ignore anything that had gone before.  When considering the position for 2013-14, the Department was entitled to have regard to the position in relation to preceding years.  Nevertheless, the critical issue was whether top-up fees were likely to be charged for 2013-14 given that what the Department was concerned with was the proper application of public funds for that particular academic year. 

60.      In this respect, the Department got off to a bad start.  On 28^th May, 2013, Mr Posner stated that LP and CQ could be included in the Directory for the 2013-14 academic year if Mrs McLachlan provided written confirmation that both nurseries would comply with the conditions of funding set out in the partnership agreement for that year and undertake to stop charging a top-up fee.  That confirmation was given the same day by Mrs McLachlan.  It was therefore reasonable for Mrs McLachlan to believe that both nurseries would be included in the Directory. 

61.      However the Department immediately moved the goal posts because on 30^th May, Mr Lundy demanded additional information before their applications could be considered.  As we shall see, this was not the last occasion upon which the Department was to assert that inclusion in the Directory would be forthcoming if a specific confirmation was given only to fail to honour that assertion when the confirmation was so given. 

62.      The next significant event is the letter of 14^th August, 2013, when the Department set out the three conditions (described at para 32 above) for allowing LP to remain on the Directory for 2013-14.  The Department had by then seen LP's proposed fee structure for the forthcoming year and accepted that, if fees were charged in accordance with that structure, the partnership agreement would be complied with and there would be no top-up fees.  The only issue for the Department therefore was whether fees would in reality be charged in accordance with the fee structure.  To that end, clearly the most important of the three conditions was condition 3, because the Department needed to see what parents were actually charged so as to ensure that charges for periods outside the NEF hours were not in some way being used to obtain a top-up fee. 

63.      It is therefore somewhat astonishing to discover that, on the basis of the evidence produced to us, not a single request was made of LP to produce any of its invoices for 2013-14 at any time after the commencement of that academic year.  More than that, when the NEF audit was carried out in November 2013 - which would have been the natural time to look at all the paperwork (including all the invoices) to see if all was well in relation to top-up fees - the Department specifically instructed the person carrying out the audit not to look at the NEF paperwork despite it being clear that Mrs McLachlan was happy for this to occur.  Thus, this was not just a case of the Department not having asked to see the invoices, it was a case of the Department positively rejecting the opportunity to do so. 

64.      Subsequently the Department, through the Law Officers' Department, stated unambiguously on two occasions that, provided the two nurseries confirmed that they would provide, as and when requested, the information set out in paragraph 27 of the partnership agreement (including copies of invoices raised for any additional hours, including hours outside the NEF which could be used as a mechanism to introduce top-up fees), both nurseries could be included in the Directory.  This was stated in the email from Mr Woodside dated 14^th October, 2013, and repeated in a further email of 20^th December.  The requested confirmation was given in Advocate Blakeley's email of 8^th January, 2014. 

65.      Thus the position as at January 2014 was that:-

(i)        no request to see any of the relevant invoices had been made by the Department since the imposition of the condition on 14^th August;

(ii)       the Department had specifically rejected the opportunity of looking at the invoices during the audit in November 2013;

(iii)      the Department, through its lawyers, had confirmed on two occasions that, provided CQ and LP agreed to provide the relevant invoices outside the NEF period to the Department as and when requested, they could be included in the Directory; and

(iv)      that agreement had been given by LP and CQ. 

66.      It is further conceded by the Solicitor General that no request to see any of the invoices was made by the Department to LP or CQ at any time thereafter until the decision to remove LP and reject CQ's application on 24^th June, 2014. 

67.      In those circumstances, we have no hesitation in concluding that the decision to remove LP from the Directory was an unfair and unreasonable decision.  It is true that LP had not met the condition about attending a meeting (and much of the correspondence revolved around that) and there could clearly be room for debate as to whether Mrs McLachlan had acted in a constructive manner as per condition 2, although she was not in breach of the latter part of condition 2 because no request for any information in respect of 2013-14 had been made.  In our judgment, a mere failure to meet with the Director of Education cannot of itself be a valid ground for refusing to include a nursery in the Directory.  The fact is that the fee structure of both nurseries for 2013-14 was accepted by the Department as being in accordance with the partnership agreement.  Both nurseries had agreed to comply with the terms of the 2013-14 partnership agreement and had agreed to provide any invoices etc. for periods outside the NEF hours so that the Department could satisfy itself that top up fees were not being charged.  In those circumstances, in the absence of any request to see the relevant invoices, and given the refusal by the Department to investigate the position as to top-up fees during the November 2013 audit, there can be no valid grounds for the Department to remove LP and to reject CQ's application for inclusion in the Directory merely because it feared that top-up fees might be charged.  Whilst the Department was entitled to have concerns as to whether top-up fees had been charged in earlier years when the terms of the partnership agreement were not the same, that concern did not entitle it to refuse registration (or order removal) when the Department had not investigated the position for 2013-14 by inspecting the relevant invoices despite the agreement to make these available.  It was also unreasonable of the Department to renege on the assurance given twice by its lawyers that, provided agreement to provide the relevant invoices was forthcoming, registration would follow. 

68.      There is an additional reason for concluding that the decision to reject CQ's application was unfair.  The Department informed CQ on 30^th May, 2014, that the Department would not be considering the registration of CQ whilst the process of possible removal of LP was continuing.  In our judgment, CQ was entitled to believe therefore that it would have an opportunity of arguing its case for registration after the decision in relation to LP had been taken. 

69.      However, the Department did not adhere to what it had stated.  It decided to reject CQ's application at the same meeting as it decided to remove LP from the Directory despite having said that it would not do so.  It therefore denied CQ any opportunity of putting forward its case and behaved in a procedurally unfair manner.  As can be seen from paragraph 67, there were plenty of arguments which CQ could have made as to why its application should not be refused.  Regardless of that fact, we remind ourselves of the observation of Beloff JA in Re X Children [2009] JLR 143 at para 36:-

"In our view, Mr Pollard's candid testimony constituted (unusually) an admission of a breach of the primary rule of natural justice, namely that a person potentially affected in his rights or interests by a decision should have a reasonable opportunity to see and comment on matters which might be deployed to his disadvantage.  Save in exceptional circumstances, such a breach inevitably flaws the decision.  The court should not, other than in such circumstances, assume that the disadvantaged person would have been unable to influence the decision if he had enjoyed the opportunity denied to him...".

70.      We should add that, although Advocate Blakeley's skeleton argument ranged far and wide and included an assertion that the decision to reject CQ's application should be quashed on the grounds that it was unreasonable, he volunteered during the course of the hearing - although without abandoning his other submissions - that he did not need to rely on that argument as he felt he could get home purely on the ground of unfairness.  As can be seen, we prefer to base our decision on the ground that the decision was indeed Wednesbury unreasonable as well as being unfair. 

71.      The Solicitor General argued that the application for judicial review was in any event too late.  He submitted that the real decision which CQ was objecting to was the deferral of a decision on its application until after the decision in respect of LP.  That approach of the Department was communicated to CQ as long ago as 15^th August, 2013.  Judicial review proceedings normally have to be brought within three months of the decision under attack. 

72.      However, we do not agree that 15^th August, 2013, is the material date.  What is challenged is the decision to reject CQ's application; and that occurred on 24^th June, 2014.  The Solicitor General argues that CQ is still out of time because the application for judicial review was not submitted until 22^nd October, which is outside the period of three months provided for in the Royal Court Rules.  He referred to R (Burkett) v Hammersmith and Fulham London Borough Council [2002] 1 WLR 1593 at 1600 where it is emphasised that, if parents are to bring judicial review proceedings in relation to the allocation of places at secondary school for their children, the matter must be heard, absent very exceptional circumstances, before the school terms starts.  However, it seems to us that the position is different here.  The current proceedings do not affect attendance by children at the CQ nursery.  What is at issue is whether CQ should have been on the Directory for 2013-14 and therefore whether it would be entitled to be funded by the Department.  The time critical factors envisaged in Burkett do not therefore apply and in our judgment, it would be wrong to reject this otherwise well merited application on the grounds of delay because the application is one month out of time. 

73.      For these reasons, we quash the decision of the Minister to reject CQ's application to be placed on the Directory for 2013-14 on the grounds both that it was Wednesbury unreasonable and that it was reached in an unfair manner.  We direct the Minister to reconsider the application. 

Refusal of Minister to allow CQ and LP to apply for inclusion in the Directory for 2014-15

74.      In our judgment, the position in relation to 2014-15 is very straightforward.  It is not lawful for the Minister to prevent a nursery from even applying to be placed on the Directory for any given year.  It is of course open to the Minister to reject such an application once it is made if he has valid grounds for so doing.  But he cannot refuse to allow a nursery even to apply.  The Solicitor General conceded that it might have been better to have explained that, although an application could be made, it would not be successful unless the applicant was willing to provide the required information, but that did not mean that the failure even to allow an application was unlawful. 

75.      We disagree.  There is an important distinction between allowing a person to apply but subsequently rejecting that application and not even allowing the person to apply and put his or her case. 

76.      The Solicitor General further argued that the 'decision' not to allow the applicants to apply (by refusing to supply the relevant forms) took place in March 2014 and the application for judicial review is therefore well out of time.  Even if that is correct, we think it proper to extend the time for applying for judicial review.  In any event, it could be said that the failure to allow any application to be made has been a continuing one and as a result the application is not out of time. 

77.      For these reasons, we quash any 'decision' to refuse to allow LP and CQ to apply to become registered in the Directory for 2014-15 and we direct the Minister to supply them with all the necessary forms to enable them to make an application. 

The way forward

78.      The outcome of these proceedings is that the Minister must reconsider CQ's application for 2013-14 and must consider the applications of both CQ and LP for 2014-15.  We would not wish to see the parties back before the Court arguing much the same points all over again and accordingly, having had the benefit of full argument, we hope it may be of assistance if we attempt to give some guidance. 

79.      As we have already stated, it was reasonable for the Minister to have concerns as to whether or not top-up fees might be charged for 2013-14 given his concerns as to whether such fees had been charged in previous years.  We emphasise that LP has denied any such fees were charged and clearly there was scope for some difference of opinion.  We make no finding one way or the other on this aspect. 

80.      However, given the history, it seems to us that it would be reasonable for the Minister, before considering the applications for inclusion in the Directory for 2014-15, to hold CQ and LP to the confirmation which they have both given and, if he thinks fit, to demand to see the invoices for 2013-14 (including outside the NEF funded period) so as to satisfy himself that top-up fees were not charged in 2013-14.  Mrs McLachlan has been keen to assert that LP and CQ have not charged top-up fees for 2013-14 and have complied with the terms of the partnership agreement for that year.  Assuming that is the case, there can be no valid ground for rejecting the applications of LP and CQ for inclusion in the Directory for 2014-15 (and CQ for 2013-14).  The fact that she has been somewhat difficult and that the relationship with the Department is not an easy one is not a valid ground for rejection.  Conversely, should she fail to supply the requested invoices in accordance with the previous assurances or should it transpire that, contrary to her assertions, LP or CQ has been charging top-up fees for 2013-14, then that is clearly a matter which the Minister can properly take into account when deciding whether to include LP or CQ (as the case may be) in the Directory for 2014-15.  It would however not be reasonable for the Minister now to go back any further and seek to investigate whether top-up fees were charged in the years prior to 2013-14.  The fee structure of LP was different then, as were the terms of the partnership agreement. 

81.      Assuming that both companies are registered for 2014-15, the Department should thereafter (as for other nurseries) rely on the NEF audit process to check continuing compliance with the partnership agreement.  Should any issues arise from an audit, it would then be reasonable to request Mrs McLachlan to attend a meeting to discuss the position.  It would in those circumstances be unreasonable for Mrs McLachlan to refuse to attend, although she could of course request someone to accompany her so as to give her comfort that there would not be a repetition of the bullying which she alleges took place at the first meeting on 1^st August, 2011. 

82.      We trust this gives the parties some assistance on the way forward.  We hope very much that matters can be resolved.  On the one hand we can understand the Department's frustration with Mrs McLachlan.  She has in many ways been her own worst enemy.  As against that, the evidence suggests that she provides excellent nursery facilities which are in demand by parents.  The stated intention of the NEF scheme is to allow parents to choose which nursery they wish to send their children too.  Provided that LP and CQ comply with the terms of the partnership agreement, they are entitled to be treated as any other nursery and to be included in the Directory regardless of the state of personal relations between Mrs McLachlan and officers of the Department.  

Postscript

83.      In his written submissions, Advocate Blakeley submitted that there was no practical difference between Wednesbury unreasonableness for the purposes of judicial review and determining whether a decision was unreasonable for the purposes of an appeal where the relevant statute gave that as a ground of appeal.  At the hearing, he did not pursue this aspect but we wish simply to point out that this was an argument which he had sought unsuccessfully to run in the case of Clear Mobitel (Jersey) Limited v Jersey Competition Regulation Authority [2011] JLR 718 and which the Court had specifically rejected at paragraphs 68-72, endorsing an earlier decision of the Court to similar effect in Anchor Trust Company Limited v Jersey Financial Services Commission [2005] JLR 428.  Advocate Blakeley's failure to refer to either of these cases in his written submission was a breach of counsel's duty to ensure that, when arguing a point of law, all relevant authorities are brought to the Court's attention whether such authorities support or are against counsel's argument. 

Authorities

Re X Children [2009] JLR 143.

R (Burkett) v Hammersmith and Fulham London Borough Council [2002] 1 WLR 1593.

Clear Mobitel (Jersey) Limited v Jersey Competition Regulation Authority [2011] JLR 718.

Anchor Trust Company Limited v Jersey Financial Services Commission [2005] JLR 428.