The Underwritten Warranty Company Ltd (t/a the Insurance Backed Guarantee Company) & Anor, R (on the application of) v Fensa Ltd & Ors

The first claimant, the Underwritten Warranty Company LTD (“UWC”) are insurance brokers specialising in the provision of insurance backed guarantees (“IBGs”) which are required for a regulatory scheme in relation to self-certification under the Building Regulations 2010 (“the 2010 Regulations”). The second claimant is its parent company. It offers consumer protection to customers of its members, including accreditation of those members, together with schemes of mediation and ombudsman services, as part of the aftercare following the installation of replacement windows, doors and other forms of glazing within existing dwellings.

The defendant, FENSA, is authorised by the third interested party, the Secretary of State for Communities and Local Government, to operate a Competent Persons Scheme (a “CPS”) under the 2010 Regulations. The CPS is also part and parcel of the scheme of regulation for self certification under the 2010 Regulations.

This regulatory scheme, in brief, is as follows. The power to make building regulations in relation to a range of issues including the design and construction of buildings, demolition of buildings and the services, fittings and equipment provided in or in connection with buildings is given to the third interested party by section 1 of the Buildings Act 1984. Paragraph 4A of Schedule 1 of the 1984 Act provides as follows:

Regulation 20 of the 2010 Regulations makes provisions in relation to self certification schemes in the following terms:

Schedule 3 of the 2010 Regulations contains details of self certification schemes identifying the type of work which is covered by the scheme and the identity of a person who is entitled to carry out that work and have the benefit of the self certification regime. In particular, as applies in the present case, schemes 10 and 11 are specified as follows:

It will be noted that the defendant is specifically identified in relation to schemes 10 and 11 as operators of a scheme, which is their CPS.

The third interested party has issued, in April 2016, Conditions of Authorisations in relation to competent person self-certification schemes under the Building Regulations. Under condition 1 of those Conditions of Authorisations the fourth interested party, the United Kingdom Accreditation Service (“UKAS”) is provided with the specific role of operating a scheme of accreditation which each CPS has to achieve. UKAS is charged with the initial assessment of any scheme submitted to it for endorsement as a CPS and thereafter required to reassess each scheme annually to ensure that the Conditions of Authorisations are being met. As the third interested party explained both in evidence and submissions, UKAS is responsible for monitoring compliance with the Conditions of Authorisations on behalf of the third interested party. Conditions 5 and 17 of the Conditions of Authorisations are relevant to the present proceedings and provide as follows:

In order to meet the requirements of condition 17 of the Conditions of Authorisations the defendant maintains a list of IBG providers. In or around July 2014 the defendant recognised the IBG issued by UWC and approved it for use by members of the defendant operating within their CPS. On 23^rd July 2014 the terms of the agreement between UWC and the defendant were set out in correspondence. Subsequently a further written notification of the terms of the agreement between UWC and the defendant for UWC’s appointment as an approved insurance provider pursuant to the defendant’s CPS was provided in a letter dated 27^th August 2015. The confirmation of the terms of the agreement was provided by UWC countersigning the letter of 27^th August 2015 on 5^th September 2015. Pertinent terms of that contract for the purposes of these proceedings are as follows:

It is important to appreciate, therefore, that as a consequence of the self certification regime and the existence of a CPS in relation to the classes of work identified under schemes 10 and 11 of Schedule 3 there are two routes to obtain building regulations approval. The first is by way of an application to the local authority seeking its approval. The second is by way of self certification on the basis of participation in a CPS.

UWC’s IBG was underwritten by Enterprise Insurance Company LTD (“EIC”) who were a company registered in Gibraltar. On 22^nd July 2016 the Gibraltar Financial Services Commission issued directions under the relevant Gibraltese legislation directing EIC to immediately cease effecting new contracts of insurance thereby effectively preventing them from issuing any new insurance policies and causing them to cease trading. EIC entered into provisional liquidation on 25^th July 2016 as a consequence of an order of the Gibraltar Supreme Court.

On 25^th July 2016 Jacqueline Crawford, on behalf of the defendant, emailed David Bond on behalf of UWC indicating that it had been drawn to the defendant’s attention that UWC’s insurance provider had been instructed not to write any more new insurance contracts as it was insolvent. She sought advice as to how UWC intended to continue with an alternative supplier. Mr Bond responded shortly afterwards on the same day stating that a contingency plan had been put in place. The contingency plan was that UWC’s IBG was to be underwritten by an alternative insurer Safe World Insurance Group (“SWIG”). In his evidence to the court Mr Bond explains that within six hours of having been notified that EIC had been prevented from providing further cover, arrangements for policies to be underwritten by SWIG had been put in place. On the afternoon of 25^th July in response to his email Ms Crawford sought copies of the revised policies and it was indicated to her that they would be provided later the same week.

On 2^nd August 2016 Ms Crawford chased Mr Bond for the revised policies which had yet to be provided to the defendant. She indicated that the defendant needed to undertake a desktop review of those documents and if she did not receive them by the following day she would have no option but to suspend the second claimant as an approved supplier. On 3^rd August Mr Bond emailed Ms Crawford and others at the defendant attaching copies of the IBGs which they were issuing and explaining that they were underwritten by SWIG. The email continued as follows:

On 4^th August Ms Crawford wrote to Liam Gilsenan and Jon Vanstone of the defendant indicating that having reviewed the supplied policies and undertaken due diligence she “found no problems or discrepancies so am proposing to acknowledge approval of the arrangement”. She enclosed information in relation to SWIG and the protected cell model which it operated. SWIG was a venture of Price Bailey Insurance PCC Limited in Guernsey. She sought Mr Gilsenan and Mr Vanstone’s agreement on behalf of the defendant in relation to the arrangements. She also stated as follows:

Notwithstanding this email, later that day Ms Crawford emailed Mr Bond asking for more information as to how the protected cell worked and in particular what the solvency requirements of the cell were “so that it can be demonstrated that the homeowner would be covered should Safe World Insurance become insolvent or cease to trade”. Later that day Mr Gilsenan provided thoughts on the issues. He stated as follows:

In response to the request for further information on 5^th August Mr Bond emailed the following information:

On 9^th August 2016, having considered this further information, Ms Crawford advised Mr Vanstone that she considered that the proposal was acceptable. She stated that she thought the risk of exposure to the defendant was low and enquired of Mr Vanstone whether he was prepared in Mr Gilsenan’s absence on holiday to authorise her to confirm acceptance. In the event it appears that Mr Vanstone was not prepared to make a decision without Mr Gilsenan and Ms Crawford advised Mr Bond that a decision would have to await the return of one of the defendant’s decision-makers from holiday. A meeting was held between Ms Crawford, Mr Gilsenan and Mr Vanstone on 16^th August 2016. In his witness statement Mr Vanstone describes the agreement which he and Mr Gilsenan reached in the following terms:

Following this meeting on 19^th August 2016 Ms Crawford telephoned Mr Bond to tell him that the defendant had taken a decision no longer to accept protected cell companies on their list of approved insurance providers and that therefore the UWC IBG would no longer be recognised by them. Mr Bond protested, complaining that other companies such as Network Veka also operated protected cell companies and yet were still approved by the defendant. Ms Crawford indicated to him that Network Veka were also to be removed from the approved list and she would be advising Mr Ogilvie at that company that this was the case. Around this time Mr Bond also advised Ms Crawford that Insurance Window Guarantee (“IWG”) had an underwriter called Isle of Man Assurance Limited (“IMA”) which he also believed was a protected cell company. Ms Crawford indicated to him that the defendant had been advised that IMA were FSCS protected but this would be investigated. These issues are explored further below when considering the merits of the claimants’ grounds.

Following the telephone conversation an email was sent by Ms Crawford to Mr Bond in the following terms:

In his evidence to the court Mr Vanstone explains that he was unaware that this decision was to be taken in relation to Network Veka until he received the email to them set out above. He states that this was not a decision which had been discussed with him. After he received the email he sent what he describes in his evidence as a conciliatory email to Mr Ogilvie in the following terms later on the same day:

In addition, on 19^th August 2016 solicitors instructed on behalf of the claimants wrote to the defendant threatening a claim for injunctive relief. No response was received to that correspondence and the matter was chased by the solicitors on 22^nd August 2016. The claimant’s solicitor (identified below as “RY”) then had a conversation with Mr Vanstone which is recorded in a telephone note in the following terms:

On the afternoon of 23^rd August it appears from Mr Vanstone’s evidence before the court that a meeting occurred and a decision was taken that interim cover until 30^th August 2016 could not be continued and UWC had to be suspended immediately. A letter was written on 24^th August 2016 by Mr Gilsenan on behalf of the defendant to Mr Pilkington in the following terms:

In fact, on the same day, Ms Crawford raised the application of Clause 4.9 of the conditions of the contract between the claimants and the defendant and raised the question as to whether or not this recognised the use of cell models and on the (mistaken) assumption that Guernsey was within the EEA the defendant might be in breach of contract. On the following day the second claimant announced its new partnership with the Assure CPS to replace its relationship with the defendant. Complaints were made about the defendant’s decision, which proved ultimately unsuccessful, to both UKAS and also the third interested party. Enquiries were made by Ian Drummond on behalf of the third interested party of the defendant seeking responses to the complaints which had been made by the claimants. In an email dated 31^st August 2016 Mr Vanstone responded to his queries as follows:

Ultimately, judicial review proceedings were threatened on behalf of the claimants against both the defendant and the third interested party. The defendant’s response to the claimant’s pre action protocol letter contained the following explanation as to why the decision had been reached to remove UWC from the list of recognised IBGs:

In their evidence it is explained by the claimants that as a consequence of the defendant’s decision the second claimant has lost a significant number of its members and sustained a significant loss in membership income and registration fees. It anticipates that those losses will continue and that membership numbers will decrease further. Significant resources have been deployed by the claimants to secure the transfer of business to the new partnership with Assure. Notwithstanding all of these efforts to mitigate their losses the claimants remain concerned as to the impact of the defendant’s decision on their business.

Within their evidence the claimants identify that the defendant’s CPS controls around 82% of the market. The claimants also draw attention to the fact that the defendant is a wholly owned subsidiary of the Glass and Glazing Federation (“GGF”). Another wholly owned subsidiary of the GGF is GGFi Limited (“GGFi”). GGFi specialises in the procurement of IBGs for the double glazing sector. It is therefore a direct competitor of UWC. The effect of this corporate structure is therefore that the defendant is part of a group of companies which include a direct competitor of UWC. Furthermore, the claimants point out that Mr Vanstone was at the time of reaching the decision which is in question in this case the managing directing of GGFi, UWC’s direct competitor. As a consequence of these and other contentions the claim, as originally formulated, included a suggestion that the defendant had acted for an improper purpose in taking the decision under challenge. It was contended that the decision was taken so as to promote the commercial advantage of GGFi. In the claimant’s skeleton argument at the hearing they made clear that this contention was no longer pursued and that they reserved their position in relation to what may have been the true motivation of the defendant in reaching the decision which they did.

The questions, therefore, which remain for determination in this case are firstly, whether or not the defendant’s decision of 19^th August 2016 and 24^th August 2016 was a public law decision against which an action for judicial review lies. Secondly, on the basis that judicial review is available to the claimants, the claimants submit that there were a number of public law errors in the defendant’s decisions. Firstly, it is contended that the defendant were under a duty to make reasonable enquiries in relation to the arrangements which had been put in place by the claimants following the collapse of EIC. No proper enquiries were undertaken by the defendant before reaching their decision and this was an error of law. Secondly, the claimants contend that there was procedural unfairness in the way in which the decision was reached. None of the concerns which were relied upon by the defendant were properly put back to the claimants so as to enable them to deal with them and have an opportunity to satisfy the defendant that there was no substance in their concerns. Thirdly, the claimants contend that the decision which was reached was irrational. In particular, they point to suggested inconsistencies and incoherence in the reasons which were offered by the defendant for the decision; they point to other instances where protected cell arrangements or arrangements without access to the FSCS or FOS schemes were endorsed by the defendant; they submit that in substance the Guernsey based scheme for insolvency which is available pursuant to the arrangements with SWIG amounts to the equivalent of that provided by the FOS. Finally, it is submitted that the reasons provided by the defendant for their decision were incoherent and inconsistent and thus there was a failure to give adequate reasons for the decision.

The defendant contends that the claimants are not entitled to bring this action as the decision which it reached is not one which was susceptible to judicial review. It is important before embarking upon a detailed examination of the issues which this point raises to be clear about the nature of the decision which is under challenge. The decision which the defendant took and which is complained about was to remove the claimants from their approved list of suppliers of IBGs for the purposes of their CPS.

In R v Panel on Takeovers and Mergers Ex Parte Datafin PLC [1987] 1 QB 815 Lloyd LJ stated as follows at page 846E-847D:

In the subsequent case of R v Chief Rabbi of the United Hebrew Congregations of Great Britain and The Commonwealth Ex Parte Wachmann [1992] 1 WLR 1036 Simon Brown J (as he then was) had to consider whether the declaration of the Chief Rabbi in a disciplinary inquiry in relation to the claimant was amenable to judicial review. He concluded that it was not. His conclusions were reasoned as follows at page 1041C – 1042A:

As was pointed out during the course of argument, the fact that the relationship between the claimants and the defendant is purely contractual does not exclude that there may be a remedy by way of judicial review in respect of certain decisions. In R v Bristol City Council Ex Parte DL Barrett and Sons unreported (CO/4181/1999) Jackson J (as he then was) had to address a judicial review in relation to the removal of the claimants from the defendant’s tendering list of contractors for construction work. It was said by the defendant that its decision was not susceptible to judicial review. Jackson J set out the relevant law and his conclusions in the following terms:

This line of authority was followed by Lloyd-Jones J (as he then was) in R (on the application of A) v B Council [2007] EWHC 1529 (Admin). The claim in that case concerned the removal by an education authority of a sub-contractor driver from its education transport contracts. The removal arose as a consequence of CRB checks on the claimant disclosing that she had a criminal past. In operating the contracts, section 17 of the Local Government Act 1988 (as set out above) was relevant. Lloyd-Jones J cited the decisions in ex parte Unwin referred to above and ex parte Barrett and concluded that ex parte Unwin was binding upon him and that both of the authorities were directly in point. He formed the following further conclusion:

By contrast to this, Mr Jamie Burton, who appeared on behalf of the defendant, drew attention to the case of R v Servite Houses & Wandsworth LBC Ex Parte Goldsmith and Chatting [2001] 33 HLR 35. In brief, the facts of that case were that two older people were assessed as being in need of residential accommodation and pursuant to sections 21 and 26 of the National Assistance Act 1948. Arrangements were made by their local authority for them to be accommodated in a purpose built registered care home owned by Servite Houses, a registered social landlord. They were promised that, provided they did become so ill as to require nursing care, they could remain in that care home for the rest of their lives. The contract between the local authority and Servite provided that either party could terminate the agreement under which the claimants were accommodated by giving notice. Servite then decided to close the care home as a consequence of financial problems and indicated that they would assist the local authority in finding alternative accommodation for its residents. The claimants brought an action for judicial review and argued that although Servite was a private body it was susceptible to judicial review because in providing accommodation under section 26 of the 1948 Act it was exercising a function of a public body.

Having reviewed the authorities Moses J concluded at paragraphs 76 and 77 as follows:

Mr Burton also drew attention to the case of R v The Lord Chancellor Ex Parte Hibbitt and Saunders The Times Law Reports 12^th March 1993 in which there was a challenge by way of judicial review to the award of a contract following a tender process by unsuccessful tenderers in relation to the provision of transcription services at certain courts. The conclusions of Rose LJ were as follows:

To like effect was a judgment given on an application for permission to apply for judicial review in the case of R v Great Western Trains Company Limited Ex Parte Frederick (unreported CO/1325/1997).

I have set out above the statutory regime with which this case is concerned. In support of the contention that the defendant’s decision is amenable to judicial review Mr Tim Ward QC, who appeared on behalf of the claimants, submits that both the contract with the claimants and also the removal of the claimants from the approved list of providers of IBGs were the exercise of a public function. He draws attention to the fact that the defendant is specifically identified in the schedules to the 2010 Regulations as being authorised to set up a CPS. The purpose of that authorisation is to supervise building activities pursuant to the 1984 Act, and to ensure in the public interest that installations are undertaken in accordance with appropriate standards and supported by appropriate financial provision in relation to, for instance, insurance in the event of failure of the installation and the insolvency of the installer. In effect the functions of the 1984 Act are being discharged through these arrangements and the defendant is part of a regulatory system.

Mr Ward relies upon the case of ex parte Wachmann and contends that there is a clear governmental interest in compliance with the Building Regulations, and if providers of CPS’s did not exist then the Government would have to step in. As a complimentary submission he draws attention to the fact that installers cannot choose whether to comply with the regime of Building Regulations overall: they either have to submit to inspection by the local authority or a competent, independent, private contractor undertaking a building inspection, or, alternatively, engage with the self-certification regime of which the defendant is part. Mr Ward submits that the cases of Ex Parte Hibbett and Saunders and Ex Parte Frederick were clearly concerned with commercial contracts and the Servite case is also of limited assistance since this again was simply a contract with a private body to discharge a public power vested in the local authority. That is a situation which is not analagous to the present case. He submitted that the line of authority culminating in R (on the application of A) v B Council was closer to the present case and illustrated that public law duties would arise where contracts were entered into which had an overlay of a public law character.

Mr Burton in his submissions emphasised that the defendant was a private body, and the source of its power was essentially an agreement with the third interested party enabling it to set up a CPS. Looking at the nature of the power, whilst he accepted that it was enmeshed within a regime of building regulation control, he drew attention to a number of features which supported his submission that the decision in question was not amenable to judicial review. Firstly, he drew attention to the facts that the defendant did not receive any public money for performing the function which it did, and that it could not be compelled to run a CPS. He submitted that in so far as the CPS was an alternative means of satisfying building control, and not a substitute for it or a delegation of it, that too favoured the conclusion that the decision was not a public law decision, and also supported the contention that if the defendant did not perform this function the Government would not step in to perform it for them. That was not in the nature of the scheme. The scheme firstly, contemplated a number of providers of CPS’s and secondly, existed alongside the regime supervised by local authorities or privately instructed building inspectors. He drew attention to the fact that installers were not obliged to join a CPS or indeed be any part of one: they could choose to use the local authority regime and, furthermore, they had a choice of which CPS they might use. He further drew attention to the fact that all of the arrangements concerned in the case were contractual and were arranged accordingly.

Finally, he drew attention to the breadth of the discretion afforded to the defendant as the operator of a CPS by condition 17. The breadth of this discretion is described in the evidence provided by Ian Drummond on behalf of the third interested party in which at paragraphs 26-28 he stated as follows:

Against this background it was submitted by Mr Burton that given the breadth of the discretion under condition 17, which is not challenged by the claimants, there is a clear freedom of choice as to how the defendant chooses to construct and administer its CPS which again supports the contention that the arrangements are purely contractual and do not engage any public law issue.

As was observed by the divisional court in R (on the application of Holmecroft Properties Limited) v KPMG LLP and Others [2016] EWHC 323 (Admin) at paragraph 23:

The question of whether or not the decision made by the defendant to remove the claimants from their list of approved IBGs in the present case has not been easy to resolve but, ultimately, I am satisfied that the decision is not one which is susceptible to judicial review and rather that it was a decision governed solely by the private law in relation to the contract which the first claimant had entered into with the defendant.

The starting point for the consideration of this issue must be the statutory scheme within which the defendant operates. I accept, as is obvious, that self-certification schemes under Regulation 20 of the 2010 Regulations exist as part and parcel of the statutory scheme for building control, and that within the Regulations themselves the defendant has been identified as authorised to conduct a CPS. However, the system of self-certification was clearly brought into existence as an alternative to regulation by local authorities or other independent building inspectors and as a form of opted-out self-regulation for the construction industry, and in particular in this case those who carry out the types of instalment within paragraphs 10 and 11 of Schedule 3 of the 2010 Regulations.

Under this system of self-regulation it is clear from the breadth of the conditions provided that the operators of CPS’s are afforded considerable latitude in how they choose to construct their CPS. The Conditions of Authorisations provide key objectives for the CPS, but the operators of the CPS are left to their own devices as to how those objectives are met by their particular arrangements. Taking condition 17 as an example, it is clear from Mr Drummond’s evidence that the operation of the condition leaves to the operator of the CPS a very wide scope as to how it chooses to meet the requirements of the condition. For instance, it may choose to require of those who use its scheme requirements which are not specified or necessarily required to meet condition 17, but which rather gold-plate its requirements. As the third interested party’s evidence from Mr Drummond records, neither the 1984 Act nor the 2010 Regulations set out any criteria for the operation of a CPS.

The Conditions of Authorisations are issued by the third interested party and are used by the fourth interested party, UKAS, to monitor compliance. The effect therefore of Regulation 20 is in my view to establish a self-regulation regime as an alternative but not a substitute for that operated by the local authority. The source of the power to provide for self-certification under a CPS is not simply the identification of the defendant within paragraphs 10 and 11 of Schedule 3 of the 2010 Regulations, but their acceptance of the Conditions of Authorisations and their operation of a CPS which, having been devised by the defendant, meets the requirements of the Conditions of Authorisations. How those requirements are to be met is left to the defendant. Compliance with those Conditions of Authorisations is thus the source of the power to self-certify. In addition to this feature, it is important to note that (in the light of Simon Brown J in the case of ex parte Wachmann at page 1041F) if no party chose to operate a CPS, Parliament would not intervene: the system of local authority Building Regulation control would continue but without the alternative and complimentary opportunity for self regulation.

In the light of these conclusions I am satisfied that the arrangements made by the defendant in order to meet the requirements of the Conditions of Authorisations, and thus the decision to remove the claimant’s IBG from their list of approved suppliers, was a private law matter and not a decision which engaged public law giving rise to the availability of judicial review. The arrangements which the defendant chose to put in place in order to comply with the Conditions of Authorisations were themselves purely contractual, in so far as they related to their relationship with their members and installers, and related to their agreement to abide by the Conditions of Authorisations which were published by the third interested party.

I am not dissuaded from that view by the line of cases which culminate in R (on the application of A) v B Council. Those cases, as set out above, concerned the placing of contracts which was itself the subject of statutory provisions under the 1988 Act, in circumstances where the relevant provisions of the 1988 Act contemplated proceedings for judicial review if they were not complied with. That statutory framework provided the decision as to how those contracts were to be placed with what Lloyd-Jones J described as “a pronounced public law element”. In my view that is quite different from the defendant’s construction of its own contractual arrangements with, amongst others, the claimants so as to operate a CPS which abides by Conditions of Authorisations. How those arrangements are constructed are, in my view, purely a private law issue. The arrangements do not have to be constructed and entered into in accordance with any public law duty or obligation such as to do so “without reference to matters which are non commercial matters” as was the duty under section 17 of the 1988 Act.

I can see force in Mr Ward’s submission that the Servite case is not on all fours with the present case. That was, as Moses J described, a case of privatisation. As I have set out above the statutory scheme and the arrangements pursuant to it are different in the present case. However, for the reasons which I have given I am satisfied that the arrangements which a person who is authorised to operate a CPS puts into place to meet the Conditions of Authorisations are private law contractual arrangements. They are private law contractual arrangements entered into with, for instance, installers who take advantage of the defendant’s CPS or the providers of IBGs who support the defendant’s operation of their CPS and assist them in meeting requirements of condition 17.

Further features of the arrangements which support the view that the defendant in operating them is not subject to the supervisory jurisdiction of the court by way of judicial review are that, as Mr Burton pointed out, installers are not obliged to join a CPS or be any part of one: as set out above the local authority administered scheme of building control is always available. Moreover, they have a choice of a number of CPS’s that they can join if they wish to. In reality there is a market operating between those authorised to conduct a CPS and the operators compete for the self certification business of installers. These matters contribute to the ingredients in the present case which persuade me that the arrangement in question in this case engages private law rather than public law.

Notwithstanding this conclusion I propose to examine and provide conclusions on the substantive Grounds of challenge in case I am wrong about whether or not this dispute is properly amenable to judicial review. To assist in the analysis of the Grounds I have not addressed them in the same order as they were set out in the course of argument and as they have been set out above for reasons that are explained below.

I have decided to commence the consideration of the merits of the defendant’s decision with this aspect of the claimant’s case since it raises further factual issues which it is sensible to set out before dealing with the other aspects of their claim. In respect of the allegation that the defendant’s decision was irrational the argument advanced by Mr Ward commences from observing that condition 17 of the Conditions of Authorisations does not require that any financial protection which is provided should have access to the FSCS or FOS. As such it is submitted by Mr Ward that the revocation of the approval of the IBG provided by the defendant was unreasonable in the Wednesbury sense since it appears from the defendant’s decision that they have placed a blanket ban on the consideration of the protected cell arrangement without properly assessing the degree of protection afforded by the level of regulation provided in the Channel Islands. He submits that it was irrational to require FOS protection as part of any financial protection package which was provided by IBGs. Furthermore, he submits that it was irrational to require the claimants to have FSCS approval not only on the basis that it was not a requirement of condition 17 but also, and in particular, because there was evidence that the defendant had endorsed the use of other IBGs which were not covered by the FSCS and were provided by Network VEKA and IWG. Mr Ward submits that it is, as Lord Hoffmann observed in Matadeen v Pointeu [1999] 1 AC 98 at 109C-D, an axiom of rational behaviour that like cases will be treated alike. On the basis that the defendant was prepared to approve the use of Network Veka’s IBG which was based on a protected cell arrangement and not covered by the FSCS, and also endorsed the use of IWG’s IBG without FSCS protection, it was perverse for them to decide that the absence of FSCS protection was a reason for removing the claimants from the approved list of IBG providers.

In my view some of the preliminary submissions which are made by Mr Ward are persuasive. It is clear from the contractual arrangements that there is no ban on protected cell structures (see clause 4.9 of the contract) provided that such cell structures are protected by the FSCS. If they are regulated within the EEA as a consequence of passporting arrangements, then they would have the benefit of FSCS protection. I do not, however, consider that it was irrational of the defendant in principle to require as a clause of their contractual arrangements with IBG providers that the financial protection of FSCS cover was provided to consumers. Whilst it is not an explicit requirement of condition 17 of the Conditions of Authorisations, equally there is nothing in condition 17 which precludes it being a requirement. On the basis that the defendant are one of a number of CPS’s from which installers can choose, offering the certainty of FSCS protection to consumers is in my view an entirely reasonable approach to providing a form of quality assurance to the defendant’s scheme of financial protection. Similar considerations arise in relation to access to the FOS. In my view, in this Ground the real question is whether or not the claimant has established that the defendant has treated like cases differently, and if it has whether or not that amounts to irrationality. In order to answer that question it is necessary to examine in a little more detail the evidence in relation to Network Veka and IWG to see whether in substance they were parties in a similar position to the claimants.

Starting with the evidence in relation to Network Veka, that organisation operates the Assure CPS which is authorised by the third interested party. In evidence provided by Mr Ogilvie, on behalf of Network Veka, he describes their IBG and the relationship between Network Veka and the defendant in the following terms:

It appears that during 2015 there were discussions between the defendant and Network Veka in relation to the circumstances of their IBG, and whether or not it should be recognised by the defendant. On 13^th October 2015 Mr Ogilvie wrote to a representative of the defendant in the following terms:

It is clear from the email that recognition of the Network Veka IBG was to enable members of the Assure CPS to have a dual membership with the defendant. In the light of this correspondence Ms Crawford was commissioned to examine Network Veka’s IBG. A review was carried out by Ms Crawford and she reached the following conclusions on 17^th November 2015:

Enquiries were raised following the completion of this audit in respect of what might happen in the event of Mannequin, the protected cell company providing financial protection to the IBG, becoming insolvent. The response which was received was in the following terms:

Having addressed the audit that occurred Mr Vanstone explains in his evidence the relationship between the defendant and Network Veka, and correspondence from Ms Crawford in which she purported to remove Network Veka (see above) as a registered provider of IBG’s, although in fact they were never listed, as follows:

Having examined this evidence I am not at all satisfied that the claimants were in the same position as Network Veka, and that therefore the decision which was reached by the defendant was one in which like cases were not treated alike. There are a number of features of the evidence which in my view lead to this conclusion. Firstly, Network Veka and the Mannequin IBG never featured on the list of approved providers unlike the claimants. The reason for that, which is clear from the evidence, is that the relationship between the defendant and Network Veka was, as Mr Vanstone describes, a bespoke arrangement that was a one-off enabling installers to register with both the defendant and the Assure CPS. Secondly, unlike the claimants, there was no contract and therefore no contractual specification between the defendant and Network Veka. Thirdly, as Mr Vanstone points out (and is illustrated in the second witness statement of Mr Vanstone in these proceedings which exhibits to it financial statements in relation to Network Veka and first claimant) there is a clear and substantial contrast between the financial positions of the claimant and Network Veka. As Mr Vanstone observes, Network Veka was clearly a multimillion pound business with a substantial amount of financial stability providing collateral to the financial protection which it offers.

Whilst the claimants contend that there have been installations which have been registered with FENSA whilst protected by the Mannequin IBG provided by Network Veka, it is unclear from the evidence that this related to a significant number of installations at the time when the defendant reached its decision. Correspondence prior to the resumed hearing suggested that there were 200-300 installations registered with FENSA using the mannequin IBG before Assure was set up in November 2010. Even taking that at face value it does not add materially to the claimants’ case, since the examination of the rationality of the defendant’s decision must be gauged against the circumstances which pertained at the time. At the time of the decision in question I am satisfied that given the bespoke nature of the arrangement with Network Veka (who were operating their own CPS and with whom it was mutually advantageous to enable installers to have a foot both in the Assure camp and the defendant’s camp), coupled with the substantial financial status of Network Veka there was ample justification for a differential treatment in any event. This coupled with the fact that there was no contract, and therefore contract specification with Network Veka, unlike the claimants, and that the Network Veka IBG has never featured on the approved list of providers there was in my view clear justification for the defendant’s approach.

The second comparator relied upon by the claimants is IWG. They are one of the 11 insurance providers on the defendant’s approved list. Mr Bond in his evidence on behalf of the claimant, gives as his understanding that the IWG IBG is underwritten by IMA. In his evidence Mr Bond points out that IMA do not have access to the FSCS. In response to this Mr Vanstone points out that if this is true then IWG would be in breach of the conditions of approval which it had agreed with the defendant, and that its description of its IBG was inaccurate and potentially misleading. Because of these concerns and in the light of the fact that Mr Vanstone indicated that the defendant would act swiftly to protect consumers if it were true that they were in breach of the requirement to provide access to the FSCS, the defendant commissioned an insurance expert to provide a report in relation to this issue. At the hearing the court was provided with the expert’s report which states as follows:

In response to this report the claimants contend that the expert’s report does not answer the question of whether or not access to the FSCS is provided. The report does not, therefore, resolve their concerns about differential treatment between the claimants and IWG.

I am not persuaded taking the evidence as a whole in relation to IWG that there has been differential treatment between the claimants and IWG. It is only fair to point out that on the face of the IWG documentation the following is observed:

The third issue raised in relation to differential treatment was a concern in respect of the defendant’s deposit insurance scheme. In my view the question of deposit insurance schemes is of no relevance to the decision which the defendant reached in this case which was quite specifically related to the financial protection to be offered in respect of an installation so as to cover the risk if the installation failed and the insurance if the installer was insolvent.

For the reasons which I have set out above I am unable to accept that the decision by the defendant in this case was irrational. Ultimately, the issues in this case arose from the failure of an insurance company. That circumstance threw into sharp relief the financial risk to consumers if there was absence of access to the FSCS to provide them with some form of compensation in that eventuality. In these circumstances the prudence of the defendant requiring in its contract for those on the approved list to provide access to the FSCS was conspicuous and justified. The approach taken by the defendant did not involve them treating like cases differently for the reasons which I have set out above.

The claimants contend that the defendant’s decision was unlawful as it failed to provide legally adequate reasons for its decisions. It is conceded that, having decided to provide reasons, it was then incumbent upon the defendant to provide reasons that were legally adequate in support of its decision. Mr Ward submits that the defendant’s decision-making process was “murky” and that there had been vacillation in the reasons which the defendant suggested from time to time as being the basis of the decision, such that no adequate reasons had been provided for the basis upon which the defendant reached its decisions.

Mr Ward draws attention to the fact that in the email written by Ms Crawford on 19^th August 2016 it is suggested that the decision to remove the claimants was on the basis that the defendant had decided not to recognise the provision of financial support by the use of the “cell concept”. This was similar to the suggested basis for the decision discontinuing the arrangements with Network Veka. On 24^th August the decision reached was said to be based upon failure to fulfil section 4 of the terms and conditions of the contract between the first claimant and the defendant. In the email to Mr Drummond of 31^st August 2016 the defendant’s reasons had reverted to reliance upon the fact that the cell structure was the objection which led to the termination of the claimants from the list of IBG suppliers. By the time of the response to the pre-action protocol letter the reasons for the decision had reverted in paragraph 20 of that letter to reliance upon clause 4.7 of the contract and the failure to provide access to the FSCS and cover by the FOS. Thus Mr Ward submits the reasons waxed and waned over the course of time and did not present any coherent explanation as to why the decision had been reached.

Furthermore, Mr Ward relied upon the case of Nash v Chelsea College of Art and Design [2001] EWHC 538 (Admin) in which Stanley Burnton J drew attention at paragraph 29 of his judgment to the decision of the Court of Appeal in R v Westminster City Council ex parte Ermakov [1996] 2 All ER 302 in which the court observed that great caution should be exercised in allowing evidence which had the function of elucidating or correcting reasons for decisions. The court emphasised in ex parte Ermakov that the function of any evidence after the decision had been reached should be elucidation but not fundamental alteration. It should provide confirmation not contradiction. Stanley Burnton J went on to provide the following observations as to the approach to be taken by the court in assessing late reasons:

On behalf of the defendant, Mr Burton submits that the letter of 24^th August 2016 was perfectly clear and focused upon the failure of the SWIG related product to satisfy section 4 of the terms and conditions of the contract between the defendant and UWC. In substance there could be no argument about that proposition: the SWIG product did not satisfy section 4 of the contract since it did not provide access to the FSCS and was not covered by the FOS. He submitted that the references to the “cell concept” (for instance in the emails from Ms Crawford dated 19^th August 2016 and 31^st August 2016 from Mr Vanstone) were effectively the other side of the same coin as the failure to comply with section 4 of the contract and the absence of access to the FSCS and FOS required by the contract. The existence of the use of a cell in Guernsey had as a necessary consequence that there would not be access to these schemes. As a consequence therefore there was no fundamental difference or waxing and waning of the defendant’s reasoning as suggested by Mr Ward.

In my judgment, there was no defect or deficit in the reasons which were provided at that time, nor was there inconsistency or incoherence in the reasons bespeaking an unlawful decision-making process. I accept the submission made by Mr Burton that the letter of 24^th August 2016 provided clear and adequate reasons to explain to the claimants why the defendant was removing them from the approved list. Further, it is clear to me that the reference to the “cell concept” is clearly interlinked with the absence of FSCS access and ability to use the FOS. What is set out in paragraphs 20 and 23 of the defendant’s response to the Pre-Action Protocol letter is both valid and reflects the conclusions which it is clear that the defendant had reached, namely that the new arrangements involving a protected cell in a jurisdiction which did not have access as the contract required to the FSCS and the FOS could not be acceptable. Whilst Mr Ward has sought to stress that the reasons provided at the stage of the response to the Pre-Action Protocol letter and in Mr Vanstone’s witness statement are retrospective reasons I do not consider that that is an appropriate characterisation of what is set out in those documents. The contemporaneous documentation which I have set out above reflects the approach taken in relation to compliance with the contract and, in particular, that part of the contract relating to financial protection of consumers.

A subsidiary issue was raised by Mr Ward in relation to Mr Vanstone’s first witness statement. In that witness statement he stated as follows:

Mr Ward submits that the reference to a capital requirement of £100,000 plus is derived from Mr Bond’s reference to an absolute minimum capital requirement of £100,000 and the SWIG capital requirement being in excess of £100,000. I do not accept Mr Ward’s submission that the reference to this figure betrays either a failure of Mr Vanstone to understand the material being provided to the defendant by Mr Bond, or that the reasoning process for the decision was “murky” in that the true reasons for reaching the decision had not been disclosed. The key point is to read on in paragraph 10.11 to the final sentence. The concern that was being expressed by the defendant at all times was the need for security to be available in the event that the cell failed. I am also unpersuaded by Mr Ward’s submissions in relation to the absence of detail about the meeting leading to the decision of 24^th August 2016 in Mr Vanstone’s paragraph 10.16. For the reasons I have already explained, the basis of the decision is in my view clear from the decision of 24^th August 2016, and in those circumstances there is nothing either suspicious or inappropriate in the absence of minutes or other documentation of the meeting of 23^rd August 2016, or the absence of any further particularity in Mr Vanstone’s witness statement. For all for the reasons which I have set out above I do not consider that there is any error of law in the defendant’s decision based on the reasons provided for it.

The claimant’s contentions under this heading are that such enquiries as were made by the defendant into the replacement product which the claimants had secured following the collapse of EIC were inadequate and a failure of the duty upon them to make reasonable and proper enquiries about the product which was on offer. It is pointed out by Mr Ward that the enquiries which were made by Ms Crawford led her to the conclusion that the product was one which was satisfactory and should be endorsed by the defendant. He submits that Mr Vanstone and Mr Gilsenan’s rejection of her recommendation, and thereafter rejection of the claimant’s alternative cover, followed from a failure to make any reasonable or appropriate enquiries in respect of those arrangements. In particular, Mr Ward relies upon the reference in Mr Vanstone’s evidence to the £100,000 plus as a failure to make proper enquiries into the product which was available and protection which was afforded by the Guernsey authorities.

The legal principles in relation to any duty to make further enquiry were set out by the Court of Appeal in R (Khatun) v Newham London Borough Council [2004] EWCA Civ 55; [2005] QB 37. Laws LJ in his judgment, with which the other members of the court agreed, observed at paragraph 35 as follows:

Applying these principles to the present case I do not consider that it is possible to accept that no reasonable person in the position of the defendant could have supposed that the enquiries that the defendant had made were sufficient. As will be clear from the chronology of events they had made enquiries of the claimants seeking to establish the nature of the new arrangement which they had entered into with SWIG. Those enquiries included requests for further information. As Mr Burton pointed out the difficulty, ultimately, with the claimant’s contention that dialogue should have continued is that they would not have been able to overcome the basic reason for their removal from the approved list, namely that SWIG’s product did not comply with section 4 of the contract in the light of the absence of access to the FSCS and the FOS which is a position which not only continued to persist at the time when the defendant reached its decision but also continued until the conclusion of the hearing. Thus, not only am I satisfied that the enquiries which were made were adequate and appropriate for the defendant to be satisfied that the terms of its contract with the claimants would be breached by endorsing the SWIG product, but also even if those enquiries had continued the defendant’s concerns would not have been overcome. I am therefore satisfied that there is nothing in the claimants’ case in this respect.

Under this heading Mr Ward submits that whilst there had been some engagement with the claimants prior to deciding to remove them as an approved provider of IBGs from the defendant’s lists the requirements of fairness were not adhered to. In particular Mr Ward contends that it was unlawful for the defendant to fail to put the concerns that led to the decision to delete them back to the claimants so as to enable them to comment upon them and provide a response to the matters which led to the defendant’s conclusion. The requirement to act fairly and provide the claimant with that opportunity to comment was particularly acute in circumstances where the claimants were having to act as a matter of extreme urgency as a consequence of the entirely unforeseeable collapse of EIC. Mr Ward submits that further discussion could have made a difference, for instance in relation to what he characterised as the misconception as to the supposed £100,000 plus capital requirement, a misconception which could have been dispelled if there had been further discussions between the claimants and the defendant. In short, it was unfair to suspend the claimants without providing any proper dialogue.

I am not satisfied that this submission has merit. The answer to it is similar to the answer in relation to the contention that the defendants were under a duty to carry out further enquiries. The reality is that Mr Bond on behalf of the claimants was fully aware of the potential difficulty with using SWIG in relation to the inability to access the FSCS and the FOS. In his email of 3^rd August 2016, having asserted that the policy conditions and limits were the same as the previous policy under EIC, he was careful to point out that the arrangements with SWIG did not include access to the FSCS, and only included access to the Channel Islands Financial Ombudsman. He went on in that email to explain his case in relation to why that alteration from the EIC arrangements should be sanctioned (on the basis that it was not a mandatory requirement of the third interested party and to indicate that SWIG were attempting to obtain consent to access the FSCS). Ms Crawford followed that email with a request seeking further information as to what the solvency arrangements of the cell were, and how a homeowner would be covered if SWIG became insolvent or ceased to trade. These concerns were clearly related to the absence of FSCS protection. That led to further correspondence on 5^th August 2016 from Mr Bond seeking, as set out above, to provide reassurance amongst other things on the basis that the authorities in Guernsey would not allow an insurer to fail “rather than providing a limited backup, such as the FSCS, in case one fails.” The reality was that these contentions did not satisfy the requirements of the contract or the concerns which the defendant had. I can see no unfairness in the procedure so as to render the defendant’s decision unlawful. The defendant raised concerns as to the arrangements if insolvency occurred with the claimants and the answer which was provided did not satisfy either their concerns or the specific requirements of the contact which they had with the claimants. In those circumstances in my view there is no merit in the suggestion that the defendant acted unfairly.

It follows from what I have concluded that, on balance, I am not satisfied that the decision which is the focus of these proceedings is one which was subject to public law and the supervision of this court by means of an application for judicial review. Even were I wrong about that, having scrutinised the detailed Grounds raised by the claimants I do not consider that any of them are made out. The claimants’ claim must therefore be dismissed.