Crouch, R (on the application of) v Secretary of State for Health & Anor

The claimant is an orthodontist. These proceedings concern the legality of the termination provisions in the draft agreement which the defendant offered to the claimant for the carrying out of NHS work. The importance of the issue for the dental profession is evidenced by the fact that the British Dental Association has been added as an interested party. The Secretary of State has also been added as an interested party because the legality of the termination provisions depends on the true construction of para 67(1) of Schedule 3 to the National Health Service (Personal Dental Services Agreements) Regulations 2005 (“the PDS Regulations”).

Pursuant to the PDS Regulations, orthodontists and other dental practitioners wishing to carry out NHS work must enter into PDS agreements with “Relevant Bodies” including Primary Care Trusts (“PCTs”). A transitional regime, contained in the Personal Dental Services Transitional Provisions Order 2005 (“the TPO”) applies to dental practitioners who, before the new arrangements contained in the PDS Regulations came into force, were already providing NHS services and who wished to continue to do so. It is common ground that the transitional regime applies to the claimant.

The PDS Regulations set out detailed provisions which must be included in PDS agreements.

Regulation 8 of the PDS Regulations provides:

“(1)

Subject to paragraphs (2) and (3), if in the course of negotiations intending to lead to an agreement the prospective parties to that agreement are unable to agree on a particular term of the agreement, either party may, subject to paragraph (2), refer the dispute to the Secretary of State to consider and determine the matter.”

The Secretary of State has established the Family Health Services Appeal Unit (“FHSAU”) to consider and determine such disputes on his behalf.

Regulation 20(1) provides so far as is material that an agreement must contain terms which “have the same effect as those specified in Schedule 3”.

Part 9 of Schedule 3 to the PDS Regulations is entitled “Variation and Termination of Agreements”. It refers to the contracting parties as “the contractor” and “the Relevant Body”. Para 64 provides that:

“(1)

A contractor may terminate the agreement by serving notice in writing on the Relevant body at any time.

(2)

Where a contractor serves notice pursuant to sub-paragraph (1), the agreement shall terminate three months after the date on which the notice is served (“the termination date”), save that if the termination date is not the last calendar day of a month, the agreement shall instead terminate on the last calendar day of the month in which the termination date falls.

(3)

This paragraph and paragraph 65 are without prejudice to any other rights to terminate the agreement that the contractor may have.”

Para 66 is headed “Termination by the Relevant Body: general provisions”. It provides: “the Relevant Body may only terminate the agreement in accordance with the provisions in this Part”. Para 67 is headed “Termination by the Relevant Body: notice”. It provides:

“(1)

The Relevant Body may terminate the agreement by serving notice in writing on the contractor at any time.

(2)

where a notice is served pursuant to sub-paragraph (1), the agreement shall terminate on the date provided for in the agreement.”

Para 68 is headed “Termination by the Relevant Body for the provision of untrue etc information”. It provides that the Relevant Body may serve notice in writing on the contractor terminating the agreement “forthwith, or from such date as may be specified in the notice”, if after the agreement is entered into, it comes to the attention of the Relevant Body that certain written information provided by the contractor was, when given, untrue or inaccurate in a material respect.

Para 69 is headed “Termination by the Relevant Body on grounds of suitability etc”. So far as material, it provides that the Relevant Body may serve notice in writing on the contractor terminating the agreement “forthwith, or from such date as may be specified in the notice” if one or more of the conditions specified in sub-paragraph (2) is satisfied. The conditions are set out in subparagraph (2)(a) to (l). They include that the contractor is the subject of a national disqualification, has been dismissed from employment, is removed from, or refused admission to, a primary care list by reason of inefficiency, fraud or unsuitability and has relevant criminal convictions.

Para 70 is headed “Termination by the Relevant Body: patient safety and material financial loss”. It provides that the Relevant Body may serve notice in writing on the contractor terminating the agreement “forthwith or with effect from such date as may be specified in the notice” if the contractor has breached the agreement and as a result of that breach, the safety of the contractor’s patients is at serious risk if the agreement is not terminated; or the contractor’s financial position is such that the Relevant Body considers that the Relevant Body is at risk of material financial loss.

Para 71 is headed “Termination by the Relevant Body: remedial notices and breach notices”. It provides:

“(1)

Where a contractor has breached the agreement other than as specified in paragraphs 68 to 70 and the breach is capable of remedy, the Relevant Body shall, before taking any action it is otherwise entitled to take by virtue of the agreement, serve a notice on the contractor requiring it to remedy the breach (“remedial notice”).

(2)

A remedial notice shall specify—

(a)

details of the breach;

(b)

the steps the contractor must take to the satisfaction of the Relevant Body in order to remedy the breach; and

(c)

the period during which the steps must be taken (“the notice period”).

(3)

The notice period shall, unless the Relevant Body is satisfied that a shorter period is necessary to—

(a)

protect the safety of the contractor's patients; or

(b)

protect itself from material financial loss,

be no less than 28 days from the date that notice is given.

(4)

Where a Relevant Body is satisfied that the contractor has not taken the required steps to remedy the breach by the end of the notice period, the Relevant Body may terminate the agreement with effect from such date as the Relevant Body may specify in a further notice to the contractor.

(5)

Where a contractor has breached the agreement otherwise than as specified in paragraphs 68 to 70 and the breach is not capable of remedy, the Relevant Body may serve notice on the contractor requiring the contractor not to repeat the breach (“breach notice”).

(6)

If, following a breach notice or a remedial notice, the contractor—

(a)

repeats the breach that was the subject of the breach notice or the remedial notice; or

(b)

otherwise breaches the agreement resulting in either a remedial notice or a further breach notice,

the Relevant Body may serve notice on the contractor terminating the agreement with effect from such date as may be specified in that notice.

(7)

The Relevant Body shall not exercise its right to terminate the agreement under sub-paragraph (6) unless it is satisfied that the cumulative effect of the breaches is such that the Relevant Body considers that to allow the agreement to continue would be prejudicial to the efficiency of the services to be provided under the agreement.

(8)

If the contractor is in breach of any obligation and a breach notice or a remedial notice in respect of that default has been given to the contractor, the Relevant Body may withhold or deduct monies which would otherwise be payable under the agreement in respect of that obligation which is the subject of the default.”

Para 72 is headed “Termination by the Relevant Body: additional provisions specific to contracts with qualifying bodies”. Para 73 is headed “agreement sanctions”. An agreement sanction is defined as “(a) termination of specified reciprocal obligations under the agreement, (b) suspension of specified reciprocal obligations under the agreement for a period of up to 6 months; or (c) withholding or deducting monies otherwise payable under the agreement”. Para 73(2) provides:

“Where the Relevant Body is entitled to terminate the agreement pursuant to paragraph 68, 69, 70, 71(4), 71(6) or 72, it may instead impose any of the agreement sanctions if the Relevant Body is reasonably satisfied that the agreement sanction to be imposed is appropriate and proportionate to the circumstances which provide grounds for the Relevant Body to terminate the agreement.”

Para 75 is headed “Termination and the NHS dispute resolution procedure”. It provides:

“Termination and the NHS dispute resolution procedure

75.—(1) Where the Relevant Body is entitled to serve written notice on the contractor terminating the agreement pursuant to paragraph 68, 69, 70, 71(4), 71(6) or 72, it shall, in the notice served on the contractor pursuant to those provisions, specify a date on which the agreement terminates that is not less than 28 days after the date on which the Relevant Body has served that notice on the contractor unless sub-paragraph (2) applies.

(2)

This sub-paragraph applies if the Relevant Body is satisfied that a period less than 28 days is necessary in order to—

(a)protect the safety of the contractor's patients; or

(b)protect itself from material financial loss.

(3)

In a case falling with sub-paragraph (1), where—

(a)

the exceptions in sub-paragraph (2) do not apply;

(b)

the contractor invokes the NHS dispute resolution procedure before the end of the period of notice referred to in sub-paragraph (1); and

(c)

the contractor notifies the Relevant Body in writing that it has done so,

the agreement shall not terminate at the end of the notice period but instead shall only terminate in the circumstances specified in sub-paragraph (4).

(4)

The agreement shall only terminate if and when—

(a)

there has been a determination of the dispute pursuant to paragraph 56 and that determination permits the Relevant Body to terminate the agreement; or

(b)

the contractor ceases to pursue the NHS dispute resolution procedure,

whichever is the sooner.

(5)

If the Relevant Body is satisfied that it is necessary to terminate the agreement before the NHS dispute resolution procedure is concluded in order to—

(a)

protect the safety of the contractor's patients; or

(b)

protect itself from material financial loss,

sub-paragraphs (3) and (4) shall not apply and the Relevant Body shall be entitled to confirm, by written notice to be served on the contractor, that the agreement will nevertheless terminate at the end of the period of the notice it served pursuant to paragraph 68, 69, 70, 71(4), 71(6) or 72.”

The PDS Regulations do not prescribe a minimum duration for PDS agreements. But regulation 12(1)(b) provides that an agreement must contain a clause specifying its duration.

Part 7 of the PDS Regulations contains detailed provisions for the reference to, and determination by, the Secretary of State of disputes arising out of, or in connection with, the agreement between the contractor and the Relevant Body.

Article 21 of the TPO deals with the duration of certain (but not all) categories of transitional PDS agreements. It provides “(2) In the case of entitlement to a personal dental services agreement under article 16 or 17, the duration of the agreement to be entered into shall be for a period of not less than five years”. Article 16 of the TPO applies to “individual dental practitioners who provide only orthodontic care and treatment”. The claimant falls into this category.

The PDS agreement offered by the defendant to the claimant contains the following clause:

“301 The PCT may only terminate the Agreement in accordance with this Part.

301A The PCT may terminate the Agreement by serving notice in writing on the Contractor at any time.

301B Where the PCT serves notice pursuant to clause 301A, the Agreement shall terminate on the date specified in the notice served (“the termination date”), save that if the termination date is not the last calendar day of a month, the Agreement shall instead terminate on the last calendar day of the month in which the termination date falls.

301C Clauses 301, 301A, and 301B are without prejudice to any other rights to terminate the Agreement that the PCT may have.”

Clauses 302 to 322 reflect (with modifications) the provisions contained in paras 68 to 75 of Part 3 of Schedule 3 to the PDS Regulations.

The claimant disputed clauses 301A and 301B. The dispute was referred to the FHSAU as required by regulation 8 of the PDS Regulations. By a decision dated 27 July 2006, the FHSAU recorded that the defendant had offered to amend clause 301A to allow for termination on three months’ notice and that this offer had been rejected by the claimant. The FHSAU determined that no amendment was to be made to the clause.

The claimant brought these judicial review proceedings challenging the defendant’s decision to include clauses 301A and 301B in the PDS agreement as irrational and/or ultra vires. The Secretary of State and the defendant accepted that clause 301B wrongly provided for the termination date to be specified in the notice as opposed to the agreement itself (as was required by para 67(2)). They contended, however, that clauses 301A to C were otherwise correct in that they otherwise had the same effect as para 67(2) as required by regulation 20(1) of the PDS Regulations.

The proper interpretation of para 67 lies at the heart of these proceedings. On behalf of the defendant and the Secretary of State, it is said that para 67 gives the Relevant Body a substantive free-standing right to terminate the agreement without cause by giving notice of termination. This is disputed on behalf of the claimant and the British Dental Association (“the BDA”).

Collins J held that para 67 does not give the Relevant Body a free-standing right to terminate the agreement. His reasons are at [48] to [51] of his judgment:

“48.

I recognise the force of those arguments. But it seems to me that I have to construe this in the context of what is the purpose behind the provisions. I have already referred to Article 21 (2) of the Transitional Order. The purpose behind it is the protection of the individual practitioner. There is no good reason why there should be a need to terminate without cause provided, of course, that the practitioner continues to give his services and for those services to be needed. But if there is any question of whether those services are needed there can be a variation. And there is provision there to ensure that there is a proper availability of services to deal with the needs of the local population (the PCT).

49.

If agreement cannot be reached then the appeal body has the power to impose. If the practitioner does not like what is imposed he has the option of continuing or of deciding that he will bring the agreement to an end.

50.

There is a need to provide for termination within paragraph 71 itself in circumstances I have indicated. All, it seems to me, that paragraph 67 is doing is to make it clear that a termination can only be produced by serving a notice in writing, and the termination must be – unless of course any subsequent paragraph of the Schedule provides otherwise – on the date provided for in the agreement. So the agreement must provide for the date on which any termination for breach much occur. It seems to me that that approach accords with the purpose behind the Regulations and provisions in the Schedule. It gives the necessary security to the practitioner, and does not in any way disable the PCT from acting where circumstances change or where the practitioner shows that he is not reliable or in any other way is not fitted to continue to work within the NHS.

51.

If the construction which is argued for by the PCT and the Secretary of State is right then it opens the door to the PCT to get around the specific provisions dealing with the grounds for termination. For example, they cannot prove that the circumstances in paragraphs 68 or 69 or indeed 70 apply. They would not have, if they had a right to terminate without cause, to go through the necessary hoops. They could simply serve a notice terminating. Thus the protection built in by the need to establish the grounds would be removed.”

Miss Demetriou, who has argued this appeal with conspicuous skill, advances a number of reasons in support of the submission that para 67 gives the Relevant Body the right to terminate the agreement without cause by serving notice in writing at any time. First, she submits that this interpretation is compelled by the plain and ordinary language of para 67: the Relevant Body may terminate an agreement by simply serving notice on the contractor.

Secondly, this interpretation is supported by para 64 which confers on the contractor the right to terminate the agreement by serving a notice in writing on the Relevant Body at any time. At [34] of his judgment, the judge said that the fact that para 64 was drafted in this way was “not in the least surprising because there is no compulsion upon practitioners to do NHS work.” Miss Demetriou submits, however, that it is striking that paras 64 and 67 are expressed in the same terms. They should be interpreted in the same way and the observations of the judge are not a proper basis for interpreting them differently.

Thirdly, unless para 67 provides a free-standing substantive right to terminate the agreement without cause, it serves no useful purpose.

The BDA expresses its purpose in the “speaking note” prepared for the appeal by Mr Supperstone QC in the following terms: “unless the cause and date are provided for in the agreement, and the cause and date fall, in the circumstances of the case, within the provisions of Part 9, a notice served under paragraph 67(1) will not effect the termination about which it purports to notify the contractor and will not comply with paragraph 67(2). The purpose is to exclude any possibility of other grounds of termination and/or notice periods being (purportedly) used.” Miss Demetriou responds that on this interpretation para 67 adds nothing to paras 68 to 72. Moreover, it would mean that para 67 was inconsistent with those other paras since (i) a notice may be given under para 67(1) “at any time”, whereas a notice may only be given under paras 68 to 72 when the circumstances permitting the giving of a notice exist and (ii) para 67(2) provides that the agreement shall terminate on the date provided for in the agreement whereas paras 68 to 72 provide that the agreement shall terminate “forthwith or from such date as may be specified in the notice”.

Fourthly, there is a good reason why the Relevant Body should wish to have the right to terminate the agreement at any time. In making this submission, Miss Demetriou acknowledges that the para 67 right to terminate cannot be exercised in a way which overrides or is inconsistent with the rights to terminate given by paras 68 to 72. But, she contends, it creates a residual right to terminate in circumstances that are not covered by paras 68 to 72 or indeed any other express provision of the PDS Regulations. She submits that it is important for the Relevant Body to have such a residual power so as to enable it to arrange for the provision of services flexibly. She gives as an example a situation where there are a number of dental practices in an urban area, but none in a rural area; a dental practitioner wishes to establish an NHS practice in a rural area; and the Relevant Body’s budget is insufficient to fund a rural practice unless an agreement with one of the urban practitioners is terminated. In such a situation, she submits, it is valuable for a Relevant Body to have the flexibility to terminate its agreement with one of the urban practitioners mid-term rather than waiting until it expires by effluxion of time. Further, such a residual right enables the Relevant Body to terminate an agreement in the event that there is a reduction in demand for services of the type provided by the contractor or the contractor is not providing services of an adequate quality.

Fifthly, the judge was wrong to hold that to construe para 67 as conferring a free-standing right to terminate would be inconsistent with article 21(2) of TPO. First, it is inappropriate to construe para 67 by reference to the TPO, since the TPO contains transitional provisions. Secondly, there is no contradiction between a fixed term agreement and a provision which allows a contracting party to terminate it mid-term.

Sixthly, Miss Demetriou relies on para 100 of the National Health Service (Personal Medical Services Agreements) Regulations 2004 (“the PMS Regulations”) which provides:

“(1)

Either the contractor or the Relevant Body may terminate the agreement by serving notice in writing on the other party.

(2)

Where notice is served pursuant to sub-paragraph (1), the agreement shall terminate on the date provided for under the agreement.”

Paras 102 to 107 of the PMS Regulations then set out specific grounds for termination in the same way as paras 68 to 72 of the PDS Regulations. The Department of Health (“DOH”) policy document published with draft PDS Regulations and PMS Regulations stated that they both “include similar sanctions and variation and termination provisions for the PCT and contractor”.

Miss Demetriou submits that it is beyond doubt that the contractor has a free-standing right to terminate the agreement under para 100 of the PMS Regulations. Since para 100 couples the right of the Relevant Body to terminate with that of the contractor, it must follow that the Relevant Body also has a free-standing right to terminate. In the light of the DOH intention that the termination provisions in the PMS Regulations and the PDS regulations should be substantially the same, it must follow that para 67 is intended to give the Relevant Body a free-standing right to terminate and should be construed as having that effect.

It is no tribute to the drafting of the PDS Regulations that such a fundamental question as to whether the Relevant Body has a free-standing right to terminate the agreement without cause should have given rise to so much debate and difficulty. At first sight, there seems to be much to be said for Miss Demetriou’s simple submission that the language of para 67 is clear and should be given its ordinary and natural meaning: the Relevant Body may terminate the agreement by serving a notice in writing on the contractor without cause at any time.

If para 67 had stood alone, it would have been clear that the only provision which entitled the Relevant Body to terminate the agreement was one which gave it the apparently unfettered right to give a notice of termination at any time. The period of notice would have to be negotiated and specified in the agreement and, in the absence of agreement, determined under the pre-agreement dispute resolution procedure provided by regulation 8.

On any view, para 67(2) is not happily drafted. It requires that the agreement should specify the notice period for a notice served under para 67(1). In my view, if para 67 stood alone, para 67(2) would mean that the agreement would have to contain a specific provision stating the notice period for a notice of termination.

But para 67 does not stand alone. Indeed, it is the existence of the elaborate set of provisions for termination by the Relevant Body in paras 68 to 72 that led Miss Demetriou to concede that the apparently unfettered right to terminate is subject to the implied limitation that it may not be invoked to circumvent them. She also concedes that the Relevant Body cannot exercise the right to terminate under para 67 unlawfully, ie in circumstances in which it would be unlawful for a public body (subject to public law obligations) or for a “public authority” within the meaning of section 6(1) of the Human Rights Act 1998 to exercise the right.

I start with two general observations. First, the residual right to terminate for which Miss Demetriou contends is exorbitant. It would allow the Relevant Body to terminate in any circumstances not covered by paras 68 to 72. This means that, subject to any successful public law or human rights challenge, the Relevant Body could terminate the agreement at any time and in any circumstances not covered by paras 68 to 72, even where the contractor’s performance was beyond criticism. Such a contractor would be worse off than one who breaches the agreement, but whose breach does not permit the Relevant Body to terminate under paras 68 to 72, and in particular under para 71 (either because he has remedied the breach or because, although the breach is not capable of remedy the contractor does not commit a further breach or the Relevant Body cannot terminate by reason of the restriction in para 71(7)).

Secondly, it seems to me to be inherently unlikely that the draftsman of the PDS Regulations who created such a detailed code for termination by the Relevant Body would have intended to confer on it an additional residual right to terminate at any time without cause. If this had been intended, one would have expected it to be made clear in explicit terms. This could have been done by stating that the right in para 67 was additional to the rights in para 68 to 72; or that the rights in paras 68 to 72 were without prejudice to the general right to terminate in para 67. The notion of an express right to terminate being without prejudice to other rights to terminate was present to the mind of the draftsman when drafting the provisions for termination by the contractor: see para 64(3).

With that introduction, I turn to Miss Demetriou’s arguments. As I have said, I acknowledge the force of her points about the language of para 67. It can also be said that the reference in para 67(2) to a notice being served “pursuant to sub-paragraph (1)” supports the idea that para 67(1) provides for the service of its own notice and is not merely a reference to the service of a notice under paras 68 to 72. A further point in support of her argument is that, if para 67 had been intended to do no more than be a signpost to paras 68 to 72, it would have been sufficient to say that the Relevant Body may terminate the agreement by serving notice in writing at any time in accordance with paras 68 to 72. I also acknowledge the force of the argument based on the contrast between paras 64 and 67 (see [25] above).

Nevertheless, for the reasons that follow I consider that the judge reached the right conclusion on the interpretation of para 67. First, I consider that the force of Miss Demetriou’s linguistic points can be overstated. The heading to para 67 is of some significance: “Termination by the Relevant Body: notice”. Each of paras 68 to 72 is concerned with a substantive right to terminate in defined circumstances and each requires the service of a notice of termination. The heading to para 67 suggests that this paragraph is concerned only with notices. In other words, it is not concerned with a substantive right to terminate in defined circumstances, but with the procedural provisions for termination where those circumstances exist. The content of para 67 is consistent with such an interpretation. The procedural provisions are that (i) an agreement must be terminated by service of notice (ii) the notice must be in writing and (iii) the notice can be served at any time. Unlike paras 68 to 72, there is nothing in para 67 to suggest that it is concerned with matters of substance as opposed to procedure.

Secondly, I do not accept that, if para 67 is no more than a signpost to paras 68 to 72, it is mere surplusage, adds nothing and, therefore, serves no useful purpose. It makes clear that a notice may be served at any time. Nor do I accept the submission of Miss Demetriou that this is inconsistent with the notice provisions in paras 68 to 72, although it must be read subject to those provisions. The Relevant Body may not, therefore, serve a notice until the relevant condition for service of a notice specified in paras 68 to 72 has been satisfied. But once that condition has been satisfied, it may serve a notice at any time. It is not obliged, for example, to serve a notice as soon as the condition is satisfied. Thus, for example, para 68 provides that the Relevant Body may serve notice of termination if “after the agreement has been entered into, it comes to the attention of the Relevant Body that written information provided to it by the contractor before the agreement was entered into.....was, when given, untrue or inaccurate in a material respect.” Para 67(1) makes clear that the Relevant Body may serve such a notice at any time after it comes to its attention that the information was untrue or inaccurate. The same applies with respect to each of paras 69 to 72.

Even if para 67 were mere surplusage, that fact would not be a strong pointer. As Lord Hoffmann said in Walker v Centaur Clothes Group Ltd [2000] 1 WLR 799, 805D: “I seldom think that an argument from redundancy carries much weight, even in a Finance Act. It is not unusual for Parliament to say expressly what the courts would have inferred anyway”.

Thirdly, there are further indications in the language of the PDS Regulations which suggest that para 67 is not intended to provide a substantive free-standing right to terminate. I have set out para 73 at [13] above. Mr Supperstone draws attention to the fact that para 73(2) does not include any reference to termination pursuant to para 67. He submits that this shows that it was not considered that para 67 gives a substantive free-standing right to terminate. Miss Demetriou responds that para 73(2) does not refer to termination under para 67 because termination under that provision does not necessarily entail any misconduct on the part of the contractor. That is true. However, although on Miss Demetriou’s interpretation, para 67 does not necessarily entail misconduct, it can entail such misconduct provided that it does not cover the same ground as paras 68 to 72. There is no good reason why, assuming that para 67 gives a free-standing right to terminate, the Relevant Body should be deprived of the discretion to impose agreement sanctions before considering a termination where it wishes to terminate under para 67 for misconduct which does not fall within the scope of paras 68 to 72.

Another indication is to be found in para 75 which I have set out at [14] above. Mr Supperstone submits that the fact that this paragraph applies the NHS dispute resolution procedure only to termination by the Relevant Body under paras 68,69,70,71(4), 71(6) or 72 implies that these are the only paragraphs which confer on the Relevant Body a substantive right to terminate the agreement. Miss Demetriou responds that para 67 requires the notice period to be agreed in advance and set out in the agreement itself. Para 75(1) by contrast concerns termination under paragraphs which require the notice period to be set out in the notice of termination. This is not a convincing response. The essential point is that the Relevant Body cannot terminate the agreement under any provision without serving notice in writing. So much is common ground. If Miss Demetriou’s submissions about the meaning of para 67 are correct, then termination under para 67 is effected by serving a written notice giving the period of notice specified in the agreement. Para 75 is a detailed and carefully drafted provision which, with certain exceptions, has the important effect of suspending the termination process pending the outcome of an NHS dispute resolution procedure. On Miss Demetriou’s interpretation, these provisions have no application where the Relevant Body terminates the agreement under para 67. No reason has been suggested to explain why a contractor should not have the benefit of the suspensive provisions of para 75 in relation to all notices of termination. It is true that, on Miss Demetriou’s interpretation, a contractor who wishes to dispute a purported para 67 termination can refer the dispute pursuant to Part 7 of Schedule 3 to the PDS Regulations. But that would not have the effect of suspending the operation of the termination pending the outcome of the dispute resolution.

Fourthly, by conceding that the para 67 right for which she contends is subject to the implied limitation that it cannot be exercised so as to circumvent the detailed provisions of paras 68 to 72, Miss Demetriou takes the sting out of the point made by the judge at [51] that, if the Relevant Body had the right to terminate without cause, it could avoid going through the necessary hoops provided by paras 68 to 72 so that “the protection built in by the need to establish the grounds would be removed.”

But however attractive the concession may at first sight appear to be, it is not without its difficulties. Let us suppose that the Relevant Body invokes para 67 without citing any cause at all. It would in practice be difficult for the contractor to say that para 67 could not be invoked on the grounds that in truth it had breached the agreement and, therefore, the Relevant Body was obliged to go through the “hoops” of para 71. But even if the contractor had breached the agreement, why should the Relevant Body be compelled to rely on the breach if it has a free-standing right to terminate under para 67? No doubt Miss Demetriou would respond that the Relevant Body could not invoke para 67 in bad faith. But it may be acting in good faith and genuinely believe that it cannot terminate under paras 68 to 72. Let us suppose that the Relevant Body serves a notice to terminate citing a para 68 to 72 cause, and the NHS dispute resolution procedure is invoked resulting in a determination that the Relevant Body was not entitled to terminate for cause. On Miss Demetriou’s argument, the Relevant Body could then start again and proceed to terminate without citing any cause by giving written notice under para 67. It seems unlikely that such a situation was envisaged as a possibility by Parliament when making these regulations. These problems suggest that, if Miss Demtriou’s interpretation were correct, there would be real difficulties in determining the true relationship between the right to terminate under para 67 on the one hand and the rights to terminate under paras 68 to 72 on the other.

Fifthly, the fact remains that paras 68 to 72 contain detailed and balanced provisions which are so comprehensive in their scope that at first sight at any rate they appear to be intended to be exhaustive. They cover a wide range of circumstances. For example, para 71 embraces all breaches of the agreement other than those for which express provision is made in paras 68 to 70. It includes protections for the contractor. Thus where the breach is remediable, the Relevant Body must serve a remedial notice and if the contractor remedies the breach, there is no right to terminate. Even where the breach is repeated or the breach is not capable of remedy, para 71(7) imposes restrictions on the Relevant Body’s right to terminate.

In the context of such a comprehensive scheme, it is inherently unlikely that it was intended to grant a residual right to terminate without affording any express protections to the contractor, confining the contractor to the uncertain protection afforded by the law that the Relevant Body may not act unfairly or unreasonably and (possibly) disproportionately.

Sixthly, I do not consider that para 100 of the PMS Regulations (see [30 above]) bears the weight that Miss Demetriou seeks to place on it. Para 100(1) must be read in conjunction with para 100(2). Para 100(2) provides that “where notice is served pursuant to sub-paragraph (1), the agreement shall terminate on the date provided for under the agreement.” These words are identical to the words in para 67(2) of the PDS Regulations. Paras 102 to 107 set out the specific grounds on which the Relevant Body may terminate the agreement in terms which correspond with paras 68 to 72 of the PDS Regulations. In my judgment, the fact that the rights of the parties to terminate are stated in the same paragraph in the PMS Regulations and are separated out in the PDS Regulations sheds no light on the meaning of the provisions. If the words in para 100(2) would otherwise mean that the agreement shall terminate on the date provided for under a notice served in accordance with paras 102 to 107, then I do not consider that this meaning is excluded by the fact that para 100(2) applies to a notice served by the contractor as well as to a notice served by the Relevant Body.

Seventhly, I turn to examine the purposes for which it is said on behalf of the Secretary of State that a residual free-standing right to terminate is necessary or desirable.

The first purpose is said to be to enable the Relevant Body to transfer part of its budget from contractor A to contractor B for reasons which have nothing to do with the contractor A’s performance. As is pointed out by Mr Supperstone, there are provisions in the PDS Regulations which go some way to enabling the Relevant Body to satisfy this objective. Para 61 of Schedule 3 provides that, where the contractor or the Relevant Body is of the opinion that there needs to be a variation to the number of units of dental or orthodontic activity to be provided under the agreement, the parties must use their best endeavours to determine what (if any) variation should be made to the number of units. Any dispute about this can be the subject of a reference under Part 7 of Schedule 3. It is common ground, however, that this provision cannot be invoked in effect to terminate an agreement by the back door.

If the reason for the Relevant Body’s wish to transfer part of its budget from contractor A to contractor B is that there is insufficient NHS demand for the services of contractor A, then there is a question as to whether the matter would be governed by the review process provided for in para 58 of Schedule 3. This provides for a mid-year review of activity under the agreement. Where the Relevant Body determines on 31 October of each year the number of units performed by the contractor between 1 April and 30 September of that financial year, and determines that in that period the contractor has provided less than 30% of the total number of units he is required to provide, it may require the contractor to participate in the mid-year review of its performance in relation to the agreement. If, having taken into account any evidence or reasons put forward by the contractor at the review, the Relevant Body has serious concerns that the contractor is unlikely by the end of the year to provide the number of units required, it may require the contractor to comply with a written plan drawn up by it to ensure that the required outstanding units are performed by the end of the financial year or withhold monies calculated in accordance with para 59(3).

On the other hand, if there is demand for the contractor’s services and he is performing the required number of units and does not agree to vary his units downwards, but the Relevant Body wishes to reduce the number of units provided by the contractor notwithstanding patients’ wishes to avail themselves of his services, it is common ground that, if para 67 cannot be invoked, the PDS Regulations do not permit the Relevant Body to force such a reduction by unilaterally varying the agreement.

The other purpose identified by Miss Demetriou is that of terminating the agreement where the contractor is not providing services of adequate quality. As Mr Supperstone points out, serious cases of inadequacy putting the safety of patients at risk can be dealt with by terminating under para 70. Cases of inadequacy less serious than those putting patient safety at serious risk can be dealt with under para 71. In cases of inefficiency, the Relevant Body may take steps to investigate and if appropriate remove the contractor from its performers’ list under regulation 10(3) and (4)(a) of the National Health Service (Performers Lists) Regulations 2004 SI 2004 No 585. If the contractor is removed from the performers list, his PDS agreement may be terminated under para 69(2)(d) of Part 9 of Schedule 3 to the PDS Regulations.

There are yet further provisions that are potentially relevant here. Para 13 of Schedule 3 to the PDS Regulations requires the contractor to ensure that the premises used for the provision of services are suitable for the delivery of the services to be provided and that the contractor provides such other facilities and equipment as are necessary to enable it to properly perform the services. Paras 77 and 78 of Part 10 impose obligations on the contractor to comply with “clinical governance arrangements” and to establish and operate a “practice based quality assurance system”. Para 29 of Part 4 imposes on the contractor obligations to ensure that training arrangements are in place for dental practitioners or dental care professionals employed or engaged by it.

Thus the PDS Regulations contain a number of detailed provisions which are sufficient to ensure that the Relevant Body can terminate an agreement where the contractor is not providing services of adequate quality.

In my judgment, the only purpose that has been identified by Miss Demetriou, which cannot be satisfied if para 67 does not provide a residual right to terminate without cause, is the wish of a Relevant Body to terminate an agreement if it wants to transfer part of its NHS budget to contractor B in circumstances where there is a continuing demand for the services of contractor A. It seems to me, however, that it is unlikely that Parliament intended to give the Relevant Body the exorbitant right to terminate an agreement without cause solely to cater for such a situation. If Parliament had intended to give the Relevant Body the right to terminate in that situation, it could have included an express power to do so.

I return to the language of para 67(2). I would construe the words “on the date provided for in the agreement” as a reference to an agreement entered into by the parties which contains terms having the same effect as those specified in paras 68 to 72: see regulation 20(1). Thus, an agreement may only be terminated by notice given in accordance with paras 68 to 72. A notice specifying a notice period in accordance with those paragraphs gives a date for termination “provided for in the agreement”. In other words, para 67 emphasises the notice requirements which are to be found in the detail of paras 68 to 72. Beyond making it clear that a notice can be served at any time (subject to the provisions of paras 68 to 72), para 67 does not add anything that is not in those paragraphs. But that does not mean that para 67 serves no useful purpose. The fact that, on this interpretation, para 67 is surplusage, is not of itself necessarily a good reason for rejecting it: see [42] above. In my judgment, this interpretation makes good sense and avoids a result which I do not consider that Parliament can have intended.

I am fortified in this conclusion by the fact that it is consistent with clause 301 of the Model PDS Contract which was published by the Department of Health in 2006 which provides: “The PCT may only terminate the Agreement in accordance with this Part”. There then follow a number of clauses which reflect the provisions of paras 68 to 72. It is clear that this form of contract does not confer on the PCT a free-standing right to terminate without cause.

In the result, I would hold that clause 301A is consistent with para 67. It is to be construed (like para 67(1)) as meaning that the PCT may terminate (and may only terminate) the agreement in accordance with the succeeding clauses (302 to 338). Clause 301B is consequential upon clause 301A. It too is consistent with para 67, if it is construed as meaning that “the date specified in the notice served” is the date specified in the notice that is served in accordance with the termination clause relied on by the PCT. But there is no room for clause 301C. The rights to terminate given to the Relevant Body by Part 9 are exhaustive. Para 66 states that “the Relevant Body may only terminate the agreement in accordance with the provisions in this Part” (emphasis added). In this respect, the position of the Relevant Body differs from that of the contractor. This is because para 64(3) provides that the contractor’s rights under paras 64 and 65 are “without prejudice to any other rights to terminate the agreement that the contractor may have”.

The judge ordered that the defendant’s decision to offer the agreement to the claimant “be quashed in so far as it relates to 301A, B and C and the matter must be renegotiated or dealt with in accordance with this judgment in due course”. It follows from my judgment that I agree with the judge’s interpretation of para 67 (although my reasons differ from his to some extent). But in the light of [60] above, I do not agree that the defendant’s decision in relation to clauses 301A and B needs to be quashed. I would invite counsel to agree a form of order that gives effect to this judgment.

I agree.

I also agree.