Dudley Metropolitan Borough Council, R (on the application of) v Secretary of State for Communities and Local Government

MR JUSTICE SINGH: On the question of remedies I am going to quash the decision of 19 April 2011. The defendant accepts that the normal principle is that in a judicial review case, where the court has found that there was a breach of the duty to act fairly, for example, by not consulting as required by law at a formative stage, the court would normally quash the resulting decision. This is because as a constitutional matter it is not for the court to pre-empt or predict what the outcome of a lawful and fair procedure would be. That is a matter entrusted by the law to the Secretary of State.

The defendant also accepts that the test which the court should apply in exercising its discretion, exceptionally, to refuse to make a quashing order is to ask itself whether it is inevitable that that decision would be the same even if a lawful and fair procedure were adopted. I am not prepared to reach the conclusion that that would be inevitable in this case.

The defendant has submitted that one of the reasons why it is inevitable is that, as I have already found in the context of this claim for judicial review, particularly at paragraph 85 of the judgment, the Secretary of State was prepared to listen after the decision had been taken and to consider making an exception in the claimant's case. However, it seems to me that public law takes different attitudes to these two questions. The mere fact that a public authority has not acted unlawfully after a decision was taken by applying a rigid and inflexible policy without being prepared to even listen or consider an exception does not seem to me to coincide exactly with the requirements of public law in relation to what should happen before the decision. As I have found in my judgment there was a breach in the present case of one of the well-known Gunning principles, namely that the Secretary of State did not consult the claimant about the proposed decision before it was taken and in particular did not do so at a formative stage, in other words, when he still had an open mind.

The second submission that has been made on behalf of the defendant is that the court can be satisfied as to the inevitably of the outcome on any reconsideration because of the attitude which the defendant has taken in these proceedings. However, without in any way questioning the good faith of the defendant, it seems to me again that public law takes a somewhat different attitude as between these two situations. For perfectly understandable reasons a defendant -- even if it's a public authority, and I accept acting responsibly -- will have a certain attitude of mind when it's engaged in adversarial court litigation. It may be that having had the opportunity to consider the court's judgment and any representations which the claimant may wish to make in the light of that judgment, and acting in accordance with law, in other words with an open mind, that the Secretary of State may come to a different decision or he may not; that will be a matter for him.

The third thing which I should mention is that it was clear to me from the parties' own submissions, in particular the defendant's written note which was filed after the oral hearing before me, that on one view at least the defendant's own position is that the state of the evidence before the court is not necessarily complete. This relates to the dispute between the parties as to the financial consequences of the defendant's decision, something which I referred to at paragraphs 28 to 38 of my judgment. It may well be that if the defendant is right that the state of evidence as to the financial position in this case was incomplete before the court that the claimant will wish to complete the state of the evidence.

Furthermore, it seems to me from everything I have heard and read in this case that it may be, and it is not for me to say this definitively, that the differences between the parties on financial matters are not necessarily disputes about primary fact, they may be differences of interpretation. For example, whether different ways of paying over different times taken with the interest implications of those sorts of matters lead to the equivalent having been paid to a person or not, difficulties which are more the province of economists rather than lawyers, such as what constitutes the net present value of money, may well be the subject of vigorous debate between the parties. As I say, it is not for the court to anticipate what the outcome of those debates may be, but it does seem to me that there is at least potentially a very real debate to be had between the claimant and the defendant in the light of the court's decision in this case. For all those reasons I am not prepared to make the finding that it is inevitable that the defendant's decision would be the same if, as I propose to order, I quash the decision of 19 April 2011 and he has to reconsider in accordance with law.

That leaves one other matter which has been raised before me in the defendant's submissions. The defendant has submitted that the logical implication of a quashing order would be that the decision has to be taken logically as a whole and the whole of it must be quashed. By that, the defendant means that the court should order the claimant to repay the £9.2 million together with interest which the defendant had paid having changed the basis on which he would make payments to the claimant from the declining balance basis to the annuity basis. It seems to me that this is not the right stage for the court to be making any such order. The consequence of the court's order will be that there has to be reconsideration in accordance with law. One possible outcome of that reconsideration is that the defendant comes to exactly the same decision as before, in which case no practical purpose would have been served by ordering transfers of money between different accounts in the meantime. Another possibility is that the defendant will agree with the claimant but will persuade the claimant that the logic of its own position is that it cannot retain the £9.2 million.

On that basis there may not be any need for transfers of money between accounts. It may simply be that the parties can agree the arithmetical consequences of what has been decided and the doctrine of set-off will apply. Or it may be, and the court has no way of knowing at this stage, that there will be some intermediate decision, or some variation of these things. At the end of the day, if the parties cannot resolve the arithmetical differences, if there are any, amicably, then everyone including the Secretary of State has open to it the possibility of recourse to the courts, for example, by way of a restitutionary claim or something of that sort. It's not, as I say, for this court, at this stage, to anticipate which of these possibilities may turn out to occur in the future. It is all too contingent and unnecessary in the interests of justice to predict those possible outcomes at this stage. For those reasons, I refuse that application by the defendant.

What else is there for me to deal with?

MR OLDHAM: I am grateful for your Lordship's judgment and order. We apply for our costs, my Lord. I apprehend that my learned friend will say that -- I am not quite sure what he will say, he will certainly say that we shouldn't pay all our costs. Shall we listen to him first?

MR NICHOLLS: We say that this is a case where the costs order ought to reflect the issues in the case. Where the claimant has won on one ground, it has lost on four grounds. Arguably following an issues based approach, the Secretary of State can seek to recover his costs in relation to those four grounds. I do say that the reason this was a two-day hearing with, I've forgotten how many files of documents we had to produce of the core bundle because there were so many, was because of all those other grounds on which the claimant fed on. Had this hearing solely dealt with the issue upon which they succeeded it would would've been a very short hearing with very limited evidence. Ultimately it actually turned on the interpretation of the letter sent in January. We do say that the Secretary of State is entitled to a proportion of his costs to reflect his success in relation to four-fifths of the claim. We say that leads to the Secretary of State recovering his costs. An alternative, one that would be in my submission quite generous to Dudley, would be to say no order as to costs to reflect the fact that the Secretary of State on most of the grounds, Dudley won one of them, and the lead matters lying where they stand to avoid the further time and expense of assessment of costs.

MR JUSTICE SINGH: The problem with the first of those approaches is that generally speaking the courts are discouraged from trying to order issue-by-issue cost orders. The general approach tends to be, certainly in my experience, that you try to do justice between the parties by, if necessary, reducing the amount of costs that have to be paid. That leads on to the second point which is related to your suggestion that there can be no order as to costs. The difficulty with that is that the claimant has come to court and succeeded in getting a quashing order. They had to come to court and they've got something. It may be partial victory, but generally speaking the courts tend to take the view that that needs to be reflected in the costs order because otherwise it's like saying, well, there was no need to and there was no point in coming to court. At the moment I would certainly be sympathetic to a submission that there should be some kind of discount. What that should be can be debated, but I am not at the moment persuaded that this is a case either for ordering the Secretary of State to receive some costs or for there to be no order as to costs.

MR NICHOLLS: The difficulty with leaving it just as a deduction is a point really recognised following the introduction of the CPR, it is an attempt to discourage litigants from throwing every single point into the pot in the hope that one of them comes up with a successful judgment. If we go away today, even on the footing that Dudley doesn't cover all of its costs but recovers a portion, nonetheless, the Secretary of State has incurred very substantial costs in defeating a large number of claims. I hadn't sought to dispute the proposition that Dudley can say it won on one ground and should for that reason, other things being equal, have a claim to recover some of its costs. But my submission is that other things aren't equal and that if one ignores and does not reflect in an appropriate costs order the Secretary of State's success on his other four grounds, one's not actually doing justice in relation to the costs. That's why I suggest there's a possibility, no order for costs. This protects Dudley in the sense that in doesn't make any point in relation to the Secretary of State's costs, notwithstanding he succeeded on 80 per cent of the grounds. I accept that means they don't recover any of their costs, but it's a way, a rough and ready way, of simply seeking to reflect the balance of judgment as between the parties.

MR JUSTICE SINGH: I understand. Yes.

MR OLDHAM: Can I take your Lordship to CPR 44 on page 1296 of the Rules, please. These will of course be very familiar to your Lordship but it's perhaps always worthwhile just reminding oneself.

MR JUSTICE SINGH: 1296?

MR OLDHAM: 1296, which is Rule 44.3.

MR JUSTICE SINGH: Yes.

MR OLDHAM: Sub-Rule 1, "The court has discretion as to costs in those terms". Then 44.3, Sub-rule 2, "If the court decides to make an order about costs the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party", so that is still the starting point unless there is a different order, referred to in (b) that we will get our costs.

That is subject to the other orders the court may make and there's explanation of those other orders at Sub-Rule 6.

MR JUSTICE SINGH: There is also 4(b) you may want to comment on.

MR OLDHAM: Yes, indeed. Your Lordship will have regard to that fact, your Lordship's absolutely right to bring that to my attention. I wouldn't dream of suggesting otherwise. Your Lordship touched on the issue of issue-based orders and proportional orders. Your Lordship will recall that by virtue of Sub-Rule 6 and 7 your Lordship should only make an order as to issues if it's not practical to make an order as to proportion of costs, I'll just let your Lordship look at those.

MR JUSTICE SINGH: Yes.

MR OLDHAM: In our respectful submission, the question is whether there is proper reason to depart from the general rule and if so, if your Lordship were minded not to agree with us that since we have won, since we were the successful party, we should get all our costs, what proportion of costs shouldn't be paid by the Secretary of State. As to that, my learned friend -- and here I look at the facts of our case, your Lordship will be well aware of these so I will be very brief -- as to the production of evidence we say, contrary to what my learned friend submitted, virtually all of the evidence was relevant to the point on which we won. Both parties were explaining through the evidence what the history had been, all relevant to consultation, and it was necessary because of the dispute which your Lordship has already referred to between the parties as to whether consultation, if there wasn't consultation, would have made any difference, it was necessary for the parties to engage in this issue of whether we had lost out financially and quite a lot of the evidence related to that. We say there was no or very little excess evidence that wouldn't have been in the bundle had we only pleaded the consultation claim. That is subject to the section 149 point where there was a separate statement, but of course there was no evidence from the Secretary of State on the section 149 point. What my learned friend can say and we say really only say is that some time was spent by my learned friend's clients on written and oral arguments. On the other points we say the mistake of fact and rigidity points took up minimal time, they were accretions on the existing material and existing arguments. Some time was spent, we accept, on the substantive judicial delay(?) expectation point and the 149 point, but not very much. We say that it certainly can't be said that the hearing would not have gone into an extra day, there was a lot to get through. For all those reasons, we say that if your Lordship was minded to have a proportional discount we say the proportion should be relatively small, we say a maximum 20 per cent. Unless I can help your Lordship further, those are my submissions.

MR JUSTICE SINGH: I see force in Mr Nicholls's submission that they have won. They have come to court, they have been forced to come to court, they have defeated you on a number of issues and that although the court doesn't normally do it on an issue by issue basis, that there ought to be a greater discount than the 20 per cent you are suggesting. What would you say to 50 per cent discount, for example?

MR OLDHAM: I would say that was too much by 30 per cent. I would say that would be very significant. We are saying that half the bundle wouldn't have been in.

MR JUSTICE SINGH: It's not simply a question of weighing up the body of evidence. It's trying to do justice, albeit in a rough and ready way, to reflect the fact they've won. They've won in knocking back quite a lot of your case.

MR OLDHAM: With respect, my Lord, I'm not sure that that's the correct approach. In our submission it is a more mechanistic approach, namely to say that, yes, we have won, but how much of the time and cost of the litigation was unnecessary --

MR JUSTICE SINGH: Hold on.

MR OLDHAM: -- in the light of the fact that we --

MR JUSTICE SINGH: If I decided against you on all five grounds rather than on four grounds you would have had to pay their costs.

MR OLDHAM: Then we would have been been "the unsuccessful party". One has to remember that the whole thing is anchored in the initial rule. I simply say 50 per cent, in all the circumstances, would be too great a discount.

MR JUSTICE SINGH: I see.

MR OLDHAM: Unless I can help your Lordship further.

MR JUSTICE SINGH: Thank you very much. Mr Nicholls, do you want to say anything else?

MR NICHOLLS: Simply that Mr Oldham's analysis of the case fails accurately to reflect the relative points. I agree with him that one tries to translate it into proportions. I would submit that 50 per cent is the minimum discount. It is a very large part of a difficult argument and most of the evidence went to the substantive legitimate expectation point, that's why I wanted to go into the detail of the operation of the system and the papers because they were saying they had a right, a continued right, to decline inbalance(?). They lost on that, so I submit a deduction of 70 per cent would be more appropriate and 50 per cent, I suggest, is the minimum.

MR JUSTICE SINGH: Thank you very much.

On costs, what I am going to do in the exercise of the court's discretion, is to order that the defendant to pay the claimant's costs to the extent of 50 per cent of those costs. I have in mind the provisions of Rule 44 of the Civil Procedure Rules, in particular those which have been brought to my attention today.

It seems to me that particular factors to bear in mind in the exercise of the court's discretion are the following. First of all, the fact that the claimant has succeeded, it was compelled to come to court and has secured a partial victory, and that needs to be reflected in the overall decision of the court on costs. I would not be prepared to accept the defendant's submission that the just order would be no order as to costs. That is something that the court is specifically required to have regard to as well as all the other circumstances by Rule 44.3, paragraph 4(b).

Another factor that I need to bear in mind is that the defendant has to some extent succeeded in resisting some of the grounds of challenge. The court is not usually inclined to award costs on an issue by issue basis, but rather to reflect the overall justice of the case by discounting the amount of costs which the successful party should recover in a case of this kind.

In that context I also bear in mind that many of the other issues on which I have decided against the claimant were relatively short and did not in my view add a huge amount to the hearing time. I accept the claimant's submission that the only ground on which it succeeded in this case by itself would have necessitated a large and substantial amount of evidence as well as argument and I accept the claimant's submission that it would have needed the hearing to go into a second day even if it wouldn't have taken quite as long as it otherwise did.

I also take the view that although for legal analytical purposes one can dissect the procedural fairness ground from the substantive legitimate expectation ground, nevertheless, I have certainly found it useful in deciding this case to have the overall context explained to me by both parties and to have the full evidence and submissions on the legitimate expectation point placed before the court. For all those reasons, I exercise the court's discretion to make the order that I have already indicated.

MR OLDHAM: My Lord I am grateful. There is one final matter and I am very conscious of the time in your Lordship's list. I wonder whether I could address your Lordship briefly on an issue for an application for permission to appeal in respect of two points: first of all the substantive legitimate expectation point and the section 149 point. I am conscious that we have won, but if we have won on either of those points, the order that your Lordship would have made would have been different so it is a competent appeal we are appealing against the appeal.

MR JUSTICE SINGH: I am quashing the decision.

MR OLDHAM: Yes, but --

MR JUSTICE SINGH: It is well established that what a party appeals against is orders, not judgments, not reasons. You have won --

MR OLDHAM: We have won.

MR JUSTICE SINGH: -- in the sense that you have an order from the court quashing the decision of 19 April. If they appealed against that order, which is adverse to them, it is not adverse to you --

MR OLDHAM: No it is not adverse.

MR JUSTICE SINGH: -- then they might well, I am not inviting them to do this, but if they did, in the context of those proceedings you might well put in a respondent's notice and/or cross appeal.

MR OLDHAM: The reason why we say we can appeal is that the form of declaration would be different and so actually would the subsequent orders.

MR JUSTICE SINGH: Nobody's asking to make a declaration at this stage.

MR OLDHAM: Well a quashing order -- I haven't come to your Lordship with the form of order and perhaps I should have done -- but what I would envisage is putting before your Lordship an order with a declaration and a quashing order. But in any event even if there was no declaration, the form of order would be different, certainly as regards to substantive legitimate expectation.

MR JUSTICE SINGH: I didn't say anything in the order about that, you see, that's my point. The first paragraph of the court's order will simply say, "the defendant's decision of 19 April 2011 is hereby quashed". If anyone wants to know why it has been quashed, they have to read my judgment.

MR OLDHAM: Indeed.

MR JUSTICE SINGH: Lake v Lake establishes that what an litigant appeals against is orders of the court, not its reasons.

MR OLDHAM: I entirely accept that which is why I alerted your Lordship upfront. If we were to have won on the substantive legitimate expectation point, the order would have required the Secretary of State to pay us or to revert to the declining balance basis which of course isn't the form of order your Lordship will make. The reason why we say that we should be given permanent to appeal on that point is as follows. First of all the law on substantive legitimate expectation is in something of a state of development.

MR JUSTICE SINGH: Yes.

MR OLDHAM: Secondly, your Lordship's judgment said that we hadn't received anything "equivalent to a promissory note". We say that in the light of the policy document from the treasury, which we put before your Lordship affirming that government funding wouldn't be cut so as to endanger PFI funding, that was as close to a promissory note as you will get this side of the public law/private law divide. We recognise the force of the point that governments change but there must be some situations where, though governments change, the new government is bound by previous governments' promises. Indeed, your Lordship might think that that's an interesting area, an important area, for their Lordships in the Court of Appeal to consider in determining the effect of a change of government on substantive legitimate expectation. For all those reasons, we ask for permission to appeal on that basis. If we were to be given permission on that basis then it seems to me the section 149 point would also be properly part of the appeal. We accept that we can't appeal alone on the basis of that --

MR JUSTICE SINGH: I see what you mean now.

MR OLDHAM: -- issue in your Lordship weren't to make a declaration in respect of 149, but to simply make a quashing order. Unless I can help your Lordship further, those are my submissions. On the 149 point, the important point there being, when does the duty kick in?

MR JUSTICE SINGH: Yes.

MR OLDHAM: Which hasn't really been explored, certainly in my submission, thoroughly, by the Court of Appeal.

MR NICHOLLS: For the reasons your Lordship gives, the appeal is against an order. They have won. It's quite difficult to see how they can appeal. But in any event I invite your Lordship to say that in the light of your Lordship's judgment there is no arguing the case. In paragraph 82, you said, "I find it impossible to spell out a substantive legitimate expectation" and in relation to section 149 you were applying the well-established authorities.

MR JUSTICE SINGH: Even if the claimant in principle can appeal against the order of this court, I refuse permission to appeal. I take the view that there are no real prospects of success or other compelling reasons to allow the appeal to go before the Court of Appeal. Rightly or wrongly I have rejected the claimant's arguments in firm terms, I believe, both in relation to the substantive legitimate expectation point and the section 149 point. If I am wrong about those matters then that would be a matter for the Court of Appeal.

MR OLDHAM: I am very grateful.

MR JUSTICE SINGH: Was there anything else?

MR OLDHAM: Nothing, my Lord.

MR JUSTICE SINGH: Thank you and your legal representatives in this case. What I would be grateful for is if you could agree the form of a draft order and e-mail that to my clerk as soon as possible, subject to any revisions you may want to make, I will endorse that.

MR OLDHAM: Most grateful.