We've been a little busy, so apologies that our first update of 2025 has been a little delayed! As usual, we offer a straight forward and concise overview of six public law and regulation cases from the first quarter of 2025 which highlight important points of principle and procedure.

Our team of public law and regulation specialists examine the following cases and identify the key points which can be taken from them. This edition contains some interesting cases on consultation, rationality, revisiting decisions following changes in the law and bias:

The importance of stating the actual reasons for a consultation proposal

In R (Ellen Clifford) v Secretary of State for Work and Pensions, the claimant, a disability rights activist, challenged the legality of the defendant's consultation on changes to the Work Capability Assessment (WCA) which determines entitlement to certain benefits and what conditions must be met to receive them.

The claimant argued that the consultation did not meet the second requirement in R v Brent London Borough Council, Ex p Gunning that the reasons for proposals must be explained clearly so as to permit intelligent consideration. She stated that the defendant failed to explain the effect of the proposals or disclose the real rationale behind them.

She also argued that the third Gunning requirement was not met as the eight week time window for responses did not provide adequate time for consideration.

The consultation stated that the proposals aimed to encourage and support people into work, and to provide a safety net for those that needed it most. However, communications disclosed by the Secretary of State showed that the true motivation was that the Secretary of State was under pressure to identify savings ahead of the Autumn 2023 budget. This financial motivation was not disclosed in the consultation.

The documents also revealed that Ministers and civil servants were aware the consultation was rushed, there was little evidence that the changes would actually increase employment among those affected, and some assessment descriptors were specifically targeted because they would produce the highest savings.

It was clear that a number of stakeholders were concerned that the timetable for the consultation, and a lack of analysis on the impact of the proposals, could be unlawful. Despite this, the Secretary of State proceeded with an eight week consultation period and failed to present an evidence-based justification for many of the proposed changes.

The consultation did not explain that, if adopted, the proposals could significantly affect the amount of benefits paid to some people and compel additional people to look for work or take part in work related activity where this had previously been voluntary.

In its judgment, the High Court described elements of the consultation as misleading. It pointed out that whilst an expert stakeholder might understand the consequences of the proposals, many people would not.

It held that the Secretary of State had failed to both adequately explain the proposals themselves, and the real rationale behind them.

In response to a suggestion by the defendant that there was no evidence from consultation responses that people had misunderstood the effect of the proposals, the judge noted that where people had thought that the proposals would not have a significant adverse impact on them they may have felt it unnecessary to respond.

It was also found that the Secretary of State failed to provide sufficient time for responses. There was no genuine need for an eight week consultation in September 2023 as the proposals would not take effect until 2025/26, and the reason for the rush was due to the unstated intention to make savings in time for the 2023 Autumn Statement.

The importance of taking consultation responses into account

The claimant in R (SARCP) v Stoke-on-Trent City Council is a trade organisation representing care home providers.

The Council's contract with providers included a clause which mandated annual fee increases of no less than 1.4%. Despite this, in April 2024, the Council proposed a 0% increase for residential care, and later consulted on change of 1.4% after SARCP objected.

SARCP argued that the 1.4% rise was inadequate due to rising inflation and staffing costs, highlighting the 9.8% rise in the National Living Wage.

In defending the 1.4% rise, the Council highlighted their financial constraints and prioritisation of funding increases for nursing care – where they argued the market pressure was greater.

SARCP challenged the decision on several grounds including flawed consultation, breach of the Public Sector Equality Duty, failure to have regard to relevant factors, failure to follow statutory guidance and irrationality.

The Court rejected the Council's argument that its decision was governed by private rather than law as it was based in contract. The Court held that there was a sufficient public law element as the contract discharged statutory duties under the Care Act 2014 and the decision on fee uplifts involved the exercise of public powers and obligations, not merely private commercial terms.

With respect to its consultation, the Court held that the Council failed properly to engage with the detailed response submitted by the claimant. SARCP had raised a number of important points including the need to consider the actual costs of care rather than just the Council's budget, inflation and National Living Wage increases, the impact of squeezing costs on standards and comparable authorities adopting higher increases.

The Court noted that none of those points were addressed in the decision, and it had no statement from the decision-maker explaining how they were taken into account.

The decision also failed to mention guidance issued under the Care Act which required consideration of actual care costs and the sustainability of the market. It therefore failed to follow statutory guidance and, to the extent that some of the elements of the guidance were implicitly statutory factors to be taken into account under the Act, it also failed to take into account relevant considerations.

The Court held that the Public Sector Equality Duty had been breached as the Council failed to assess how the fee decision might disproportionately impact elderly, disabled residents, who were not even mentioned in the decision.

Finally, the decision was irrational as it did not give any reasons at all for selecting the increase of 1.4%, nor weigh the interests of the providers or care home residents.

Despite evidence that the majority of care providers had accepted the decision of a 1.4% uplift, the Court ruled that legality trumps convenience and ordered the decision quashed (although it did not order a fresh consultation). It recognised that this might disrupt care home contracts and invited parties to consider how best to implement a lawful decision without any unnecessary upheaval.

Some valuable remarks on rationality and heightened review

R (KP) v Secretary of State for Foreign, Commonwealth and Development Affairs and Anr concerned a Sri Lankan Tamil with serious mental health issues. He fled persecution and torture in Sri Lanka and is currently in prison in Diego Garcia where he has a number of previous convictions and has attempted suicide on numerous occasions.

The Secretary of State for the Home Department (the second defendant) refused to grant KP leave to enter the UK outside the Immigration Rules (LOTR) and alongside the first defendant also refused to make arrangements for his transfer and relocation to the UK.

KP sought to challenge those decisions on the basis that they were irrational.

The interest in the case come from the remarks made by the High Court on the applicable standard of review:

  1. The court's approach to assessing rationality varies depending on the gravity of its potential consequences. It is not necessary to identify a 'right' impacted by the decision to trigger a more rigorous examination. In many of the situations where the heightened standard of review applies, the claimant will have no prior right to the benefit which the decision denies.
  2. The heightened standard of review has implications for the way the court evaluates complaints of both process and outcome irrationality. In the former case, the court will subject the decision to more rigorous examination, to ensure that it is in no way flawed and will expect the reasoning of the decision to show that every factor in the claimant's favour has been properly taken into account. In relation to outcome irrationality, more will be required by way of justification and the importance of the interests affected may narrow the range of rational decisions, potentially to just one.
  3. The importance of the claimant's interests is not the only factor relevant to the court's approach to a complaint of outcome irrationality. The nature and importance of the public interests may also be important. In some cases, the court will recognise that a democratically accountable decision-maker is better placed to evaluate the impact that a particular decision may have on the public interest, or the weight to be accorded to that impact. Equally, constitutional considerations may dictate that the court should pay particular respect to the views of a democratically accountable decision-maker about how to balance the public and private interests, even where a decision will have grave consequences for the individual.

Applying these principles, the Court held that the decision-maker had not understated the risk to KP of remaining in Diego Garcia and that it was rational for the two Secretaries of State to conclude that there was a realistic prospect that a third country would take him. In particular, the Court noted the FCDO's institutional expertise in this area.

The Court further noted that while there were risks to KP in Diego Garcia, these had been rationally balanced against the risks to the public and to public confidence should KP be admitted to the UK.

Is it irrational to commission an expert review and then disagree with its findings?

R (The All-Party Parliamentary Group on Fair Banking) v Financial Conduct Authority concerned the redress scheme for mis-sold Interest Rate Hedging Products (IRHPs).

Following widespread complaints from small and medium enterprises about mis-sold IRHPs , the FCA's predecessor – the Financial Services Authority (the FSA) – negotiated a voluntary redress scheme with major banks in 2012. The scheme focused on those customers who were deemed to be more vulnerable to mis-selling and sought, through a 'sophistication test', to exclude larger or more knowledgeable companies who might be better able to look after themselves.

An independent review by Jonathan Swift KC was commissioned by the FSA's successor, the FCA, in 2021. The report following the review was critical of the FSA's approach, and concluded that it was wrong to confine the scheme to those customers deemed to be non-sophisticated and that all private a retail customers should have been included.

Following the review, the FCA considered whether it should reopen the decisions of the FSA taken many years previously with respect to the inclusion of sophisticated customers in the scheme. 

It decided not to, including because it disagreed with the review's conclusions in this regard. It considered that the sophistication test used in the scheme was an appropriate response at the time.

The claimant APPG challenged the FCA's decision, including on the basis that it was irrational.

It argued that where the FCA had commissioned a review by an acknowledged expert it needed to have a cogent reason to depart from his recommendations, rather than simply a reasonable disagreement with his conclusions. However, the Court held that there is no presumption that the FCA needed a cogent reason to depart from the recommendations.

Rather, the test is simply whether it was unreasonable to do so in ordinary public law terms. That includes whether there was an error in reasoning robbing the decision of logic. The FCA must also exercise objective judgement on the relevant material available to it and must act in good faith with no ulterior motive.

The FCA did not need to argue that the conclusions of the Review were unreasonable, simply that it had a reasonable basis for disagreeing with them. 

The FCA considered that the sophistication test was a blunt tool, but given the urgency at the time, there was no opportunity for the FSA to formulate a better alternative. It also considered that it was better to prioritise some customers in order to get a voluntary agreement over the line in circumstances where there were barriers to using its statutory powers to force through a solution.

The Court held that these views (and others) formed a reasonable basis on which to disagree with the review. It noted the wide measure of subjective discretion which is afforded to the FCA in seeking to provide an appropriate degree of protection to consumers and meeting its statutory objectives. That includes discretion as to how it deploys its resources. The FCA was entitled to take into account the differing degrees of experience of customers and that they should take responsibility for their purchasing decisions.

Revisiting previous decisions when understanding of the law changes

In R (Chong and others) v Financial Services Compensation Scheme Limited, the claimants had transferred their occupational pension funds into a high risk Self-Invested Personal Pension.

In April 2021, the Court of Appeal's decision in Adams v Options UK Personal Pensions LLP changed the understanding of the basis on which compensation should be paid after those investments failed.

Following Adams, the claimants lodged appeals with FSCS in April 2021, seeking reassessment of their compensation.

Having reviewed its approach in light of Adams, the FSCS concluded that:

  1. new or pending claims as of 1 April 2021 would be reassessed,
  2. claims that had been fully settled claims at that date would remain closed, and
  3. appeals lodged after 1 April 2021 in respect of fully determined claims would not be considered further.

In June and July 2023, FSCS issued decisions to the claimants refusing to decide their appeals.

The claimants sought judicial review of those decisions. They argued that it was irrational, or procedurally unfair, to refuse to decide the appeals after having originally accepted them as valid and after two years of silence. They also argued that they had a legitimate expectation that their appeals would be decided in line with Adams.

The Court noted that previous caselaw relating to compensation schemes affected by a change in the understanding of the law established that a decision maker may adopt a lawful policy for the reconsideration of previous decisions. That could include a bright-line rule as to cut off dates.

The nature of such a rule is that there will be winners and losers, but this does not make a policy unlawful as long as it is rational. Here it was rational not to reopen cases decided before 1 April 2021.

The challenge was to the individual decisions in relation to the claimants, not the policy itself. However, the Court did express reservations about the policy in respect of appeals. This was because some individuals only received decision letters in March 2021 and it was arbitrary to curtail their appeal rights in circumstances where they would not have had time to consider an appeal before the cut-off date of 1 April 2021.

However, the policy was not the target of the claim. As the decision letters sent to them simply confirmed that policy, the Court should not allow these to be used to mount a collateral challenge to the policy where this would be out of time.

Nevertheless, the Court considered the legitimate expectation claim. It noted that while formulating its policy for dealing with its previous decisions in light of Adams, the FSCS sent holding letters that neither promised any particular outcome nor rejected appeals that had been lodged. The promise made was that these matters would be considered. Once formulated, the FSCS then applied its policy to the claimants' appeals. As such, no legitimate expectation had been created.

Following policies on bias and conflict of interest

The claimant in R (Cygnet Health Care Limited) v Care and Quality Commission operates several mental health and learning disability hospitals.

A former patient, 'AA', had been detained in two of Cygnet's facilities under the Mental Health Act 1983. AA later lodged serious complaints about his treatment at those facilities. Upon his recovery, AA became an inspector for the defendant, the CQC, which is the statutory regulator for health and social care in England.

The CQC later assigned AA to inspect a number of Cygnet hospitals. AA's involvement led to seven adverse reports and four enforcement actions across different Cygnet sites, including placing one facility into special measures.

The CQC's policy specified that the decision to allocate Cygnet's inspection to AA, a former service user, should have been escalated to the Deputy Chief Inspector or Chief Inspector. However, this was not done.

Cygnet applied for a judicial review, challenging a number of inspection reports and enforcement actions on the basis of apparent bias on the part of AA.

The test for apparent bias is whether a fair-minded and informed observer, having considered all of the relevant facts, would consider that there is a real possibility of bias. Over the years many attributes have been accreted to the fair-minded observer including that they seek to understand all sides of the argument and all relevant material, are not unduly suspicious or overly complacent, and do not adopt the complainant's assumptions unless they are objectively justified.

The courts have also held that there may be a real possibility of bias if there is any particular animosity between the decision-maker and a person involved in the case, or if there are real grounds for doubting the ability of the decision-maker to ignore prejudices and predilections and bring objective judgment to bear.

The High Court agreed that there was apparent bias in this case. It noted that, despite the fact that the inspection reports in question were well-supported by evidence, AA's past complaints against Cygnet created a serious risk of conflict of interest.

That conflict of interest could have been managed by full disclosure, including disclosure to Cygnet, and through the application of the Conflicts Policy, which the CQC failed to do. That was a serious failure – particularly for a regulator focussed on compliance.

In this case, there was insufficient enquiry into AA's recollections of his experiences and his concluded views to be able to understand the potential for unduly favourable or adverse approaches to his inspection work. In the absence of that understanding, there was no proper opportunity to deal with the result and mitigate appropriately.

Although it found apparent bias, the Court did not quash all of the inspection reports or enforcement decisions. It held, under section 31(2A) of the Senior Courts Act 1981 that even absent AA's involvement, the CQC's findings were highly likely to be the same.

It did, however, quash one decision in relation to a particular hospital, requiring it to be reconsidered, as this was a serious case involving real risks of fatality and the particular mix of procedures involved meant that the Court was unable to conclude that the decision would be highly likely to be the same.

For more information and guidance, or to discuss any of these cases, contact our Public Law & Regulation team.