Vijayatunga, R (on the application of) v The Legal Services Commission

MR JUSTICE SULLIVAN: This is a renewed application for permission to apply for judicial review of a decision by the Legal Services Commission Contract Review Board on 8th July 2003 to uphold the decision of the London Regional Director to terminate the claimant's firm of solicitors' General Civil Contract and Specialist Quality Mark. The London Regional Director had concluded that the firm had failed a pre-contract management audit.

In their letter dated 8th July 2003, the Contract Review Body ("CRB") found that the critical quality concerns were correctly raised by the auditor, and that the Regional Director's decision to issue a notice of termination was reasonable and properly carried out. The letter dealt with whether or not it was proper to audit closed files, and also considered arguments that had been raised by the claimant as to the proportionality of terminating her firm's contract.

The letter said:

In due course, on 8th October 2003, the decision of 4th July was challenged by way of judicial review, but that was after the claimant had given a notice of intention to enter into arbitration. The letter said that this was without prejudice to any right she had to take judicial review proceedings. The notice of intention to enter into arbitration contained in the letter of 21st July 2003 arises in this way. The contract between the Legal Services Commission and the claimant's firm contains an arbitration clause. Under the heading: "Where this is Subject to Arbitration?", paragraph 23 says this:

There had been a certain amount of discussion about whether or not the Commission would agree to mediation. It declined to do so, but during the course of those discussions the Commission made it clear that it was prepared to discuss an extension of time for the matter to be referred to arbitration.

When the matter came before Pitchford J on the papers, he said that the grounds were in essence an attack on the merits of the decision.

He then went on to say that the grounds did not demonstrate procedural unfairness, and that the claim had not been brought promptly and no explanation had been given for the delay.

The Commission resists the proceedings on a number of grounds. First of all, it contends that the decision in question is not amenable to judicial review. It is a dispute about a commercial contract between the parties. Secondly, it says that clause 23.23 of the contract means what it says: any dispute shall be referred to arbitration. It is submitted that this is an arbitration within the meaning of section 61 of the Arbitration Act and therefore, since none of the defined exceptions apply, this court has simply no option but to stay the proceedings.

The Commission also says that the proceedings were not commenced promptly, and further says that in any event, arbitration was available as an appropriate alternative remedy, and Pitchford J was correct in observing that judicial review was a last resort.

I propose to assume in the claimant's favour, and I underline that it is an assumption, that the court would have jurisdiction to judicially review a decision of this kind. Thus in principle the decision is amenable to judicial review. I also propose to assume that the claim was made promptly, even though it was made at the very end of the three-month period. I further propose to assume that I am not required by the Arbitration Act to grant a stay, but that I do have a discretion in the matter.

The question, therefore, is: upon the basis of all those assumptions in the claimant's favour, is it right that she should be allowed to commence judicial review proceedings in the face of an alternative remedy by way of arbitration, moreover an alternative remedy which she herself commenced, albeit without prejudice to any other right that she may have had?

I have no doubt that Pitchford J was right to refuse permission on the ground that judicial review is a remedy of last resort. I can see no possible basis for the contention that the various complaints advanced by the claimant could not have been perfectly satisfactorily dealt with by the arbitrator.

On the claimant's behalf, Mr Engelman seeks to persuade me that there are matters which he says are public law matters which could not properly be dealt with by the arbitrator. The first of those is the question of proportionality. It is said that terminating the contract was a disproportionate response to such faults as were found in the files.

It is plain that the CRB itself considered the issue of proportionality. I have read out the relevant passage from its letter of 8th July 2003. I can see no reason whatsoever why an arbitrator would not also be able to consider that issue. Although "proportionality" is a word that is used in a public law context, in effect, what is being said in this case is that the penalty is simply too severe a response to such faults as may have been found. The Commission is taking a sledgehammer to crack a nut. That is an argument that can be advanced perfectly well before an arbitrator.

Then there are the various allegations of unfairness. It is said that certain matters should not have been considered: for example, the audit of the closed files that was addressed in the board's letter; that there was a failure to provide the substance of certain interviews; that there was too strict a time limit on addressing the CRB; and that the CRB is under an overarching duty to provide training and guidance rather than close firms down.

It seems to me that those are all arguments which could perfectly and properly be advanced in front of an arbitrator. Whilst it is perfectly true that the arbitrator would not be directly concerned with whether or not the CRB had allowed 10 or 15 minutes to make submissions, the matter proceeds de novo by way of a rehearing so that if the claimant persuaded the arbitrator that she had not had sufficient time to develop a particular point, then the arbitrator would be able to consider the matter at greater length. If the claimant persuaded the arbitrator that she should be provided with the substance of certain interviews, and if it is wrong to proceed without her being provided with them, then the arbitrator could require them to be provided to her.

All these, it seems to me, are precisely the kind of detailed matters that can properly be raised in an arbitration when both parties have a full opportunity to represent their cases.

This is very definitely not a case where there is a sharp-edged point of law and where it would be desirable for the Administrative Court to step in and resolve that point of law so that both parties know where they stand before proceedings go any further. The various complaints, to the extent that they are not simply an attack upon the merits of the decision, are so closely bound up with the merits of the decision that they are much better dealt with by way of arbitration than by way of judicial review.

So for those reasons, making, as I say, every assumption in favour of the claimant that could possibly be made, there is no doubt that arbitration was the more appropriate remedy in the present case, particularly since it was actually initiated by this claimant. Judicial review is not to be used as a means of shortcutting agreements to use alternative remedies, in particular arbitration.

For these reasons, this renewed application for permission to apply for judicial review must be refused.

Thank you.

MR HERBERG: My Lord, I am grateful. My Lord, the Commission seeks its costs of this matter, the costs of the acknowledgment of service and the costs of this hearing. My Lord, as I understand it, the usual practice now, following a recent decision, is to grant the costs of acknowledgment of service but not necessarily for the hearing itself. It may be appropriate for me to say just briefly why I seek the latter costs as well.

MR JUSTICE SULLIVAN: You will have to persuade me of the latter costs since the Court of Appeal's decision. It is a slightly odd position: it would be for Mr Engelman to persuade me that you should not have the costs of your acknowledgment of service, and for you to persuade me that you should have your costs of turning up today.

MR HERBERG: My Lord, yes. I had anticipated that. My Lord, in essence, very shortly, we say that the matter was clearly raised at an early stage as to the alternative remedy point, simply on the ground which your Lordship has decided to dispose of the matter today. The alternative remedy point was raised early by the Board. It was clearly in the claimant's mind because, as your Lordship has noted, there was effectively first an intention to pursue that which was then put aside.

My Lord, the matter was raised again when the case of Barrett(?) was drawn to the attention of the claimants. Your Lordship I think has received a copy of that. That was not featured in argument. This was the permission decision of Henriques J on precisely the same point, in which he refused permission on a number of grounds which I have raised today, but including the alternative remedy point, and the claimant was invited to discontinue at that stage on the basis that the self-same point about the disposal was not arguable by another judge. Nevertheless, the claimant persisted.

My Lord, in these circumstances, we say it was a clear point. The remedy was clearly there, and the matter had been adjudicated by another judge, and in those circumstances there is a good case to award costs not only of the acknowledgment of the service but also of the necessity of the Board to attend and argue today, to attend and assist your Lordship.

MR JUSTICE SULLIVAN: It was a very full summary of grounds for actually resisting the claim, I think, was it not?

MR HERBERG: My Lord, it was. Part of the reason that I held off the skeleton to the last moment, I received a skeleton argument from my learned friend on Friday afternoon and I thought it appropriate then to put something in writing to slightly expand these grounds. That is why I took that course at that stage. My Lord, in view of the way the matter was quite properly put, we submit it was appropriate to attend and to set out our position.

MR JUSTICE SULLIVAN: Yes. Mr Engelman, I am not persuaded that the circumstances are so exceptional to justify giving the Commission its costs for attending today. The Court of Appeal has made it plain that it has to be a pretty exceptional case to justify that. It is now for you to persuade me why they should not be entitled to the costs of their acknowledgment of service.

MR ENGELMAN: My Lord, forgive me, I am slightly hard of hearing. I do not wish to persuade your Lordship as to why they should not have their costs for the acknowledgment of service, but do I not need to make submissions as to the matter of attending today? I am much obliged.

MR JUSTICE SULLIVAN: Thank you very much. Mr Herberg, you can have the costs of preparing the summary grounds of resisting the claim, but I am afraid not your attendance today. It has been very helpful, but we are under direction from the Court of Appeal.

MR HERBERG: My Lord, I do have a summary of costs which has been served to my learned friend. If I may hand that up. My learned friend is looking as if he has not received it. I understand that it was served on his solicitor.

MR JUSTICE SULLIVAN: Does this split up the --

MR HERBERG: I have taken instructions on the split, my Lord, and I can quickly take your Lordship through it. It really does not make a huge amount of difference, because pretty much all the additional work was my work, which can be taken out. My Lord, I am instructed that to split it up, there should be a reduction. The second figure, the 0.163(?), is related to the hearing, so that should be struck out. That is simply £16.30. The other 0.9 of an hour should be divided, 0.7 to 0.2 in favour of the acknowledgment. My Lord, where I have put "documents", that is all acknowledgment, that is the £720. "Attendance of the hearing" obviously is the hearing myself. My Lord, that means that then there is a reduction, altogether we calculate ... then over the page, my Lord, the "fee for advice conference documents" is all relating to the acknowledgment of service, and the "fee for hearing" is obviously the hearing.

MR JUSTICE SULLIVAN: So what is the end figure? What is the bottom line that you are asking me to order?

MR HERBERG: Having said that, I have not worked it out.

MR JUSTICE SULLIVAN: I think the best way of dealing with it, since Mr Engelman has only just received the document, is for me to say that if you are able to agree it: well and good. Otherwise, I would be minded to say it goes for assessment. If you want to go back and argue about it once you have had a talk, by all means do. It is clearly desirable that a relatively modest matter such as this should be dealt with summarily, if at all possible. At the moment, I plainly cannot take it on board.

MR ENGELMAN: My Lord, of course not. I am much obliged.

MR JUSTICE SULLIVAN: I will dismiss the application. Unless I hear anything further from the parties, either that they have agreed a figure or that they want to argue about a figure, I will order that the claimant pay the defendant's costs of the acknowledgment of the summary grounds and acknowledgment of service: such costs to go for detailed assessment.

Thank you all.