In the May 2023 edition of our case update, we offer a straightforward and concise overview of six public law and regulation cases from the first quarter of 2023 which highlight important points of principle and procedure.
Gowling WLG's team of public law and regulation specialists examine the following cases and identify the key points which can be taken from them.
The timing of proportionality assessments in human rights claims
In response to the outbreak of the COVID-19 pandemic, the Secretary of State introduced the Social Security (Coronavirus) (Further Measures) Regulations 2020 (the 2020 Regulations) which raised universal credit payments by £20 per week for a year starting from 30 March 2020. This was then extended by six months to 5 October 2021 by the Universal Credit (Extension of Coronavirus Measures) Regulations 2021 (the 2021 Regulations). In neither 2020 nor 2021 was there a corresponding uplift made to legacy benefits that universal credit was brought in to replace.
In T & Ors v Secretary of State for Work & Pensions, the appellants challenged the decision not to increase legacy benefits in 2021. They argued that by the time the 2021 Regulations were adopted, the exceptional circumstances that justified the 2020 Regulations no longer applied, meaning that the difference in treatment between those collecting universal credit and those receiving legacy benefits (when the uplift was extended) constituted unlawful discrimination under article 14, when read with article 8 and article 1 protocol 1 of the European Convention on Human Rights (the ECHR).
At first instance, it was held there was indirect discrimination because the measure had a disproportionate effect on disabled people. However, the difference in treatment was justified because of the exceptional circumstances and the need to further the legitimate objective of supporting those out of work and making claims for the first time due to the pandemic.
Swift J accepted the Secretary of State's submissions that increasing the legacy benefits would not further this objective and would require a longer and more complex process. Thus, it was proportionate to make this temporary change only to universal credit. Swift J found that the reasoning for uplifting only universal credit in 2021 was materially the same as the reasoning in 2020.
Permission to appeal was granted solely to assess whether Swift J had erred in his assessment of proportionality by focusing on the decision-making in 2020, and not the current facts.
The Court of Appeal dismissed the appeal holding that the Human Rights Act 1998 requires the court to exercise a different role in human rights cases than when considering other public law grounds. As per Lord Nicholls in Wilson v Secretary of State for Trade and Industry, the correct approach when dealing with ECHR cases is to assess questions of justification and proportionality as matters stand at the time when legislation is applied to a person, not when it was originally enacted.
The court will take into account where there is a material change in circumstances such that a measure is no longer rationally connected to a legitimate objective, or that its impact was significantly different at the time of the challenge than it was when the measure was adopted.
However, neither applied in this case, nor had Swift J erred in his proportionality assessment. He addressed both regulations and found that many of the factors that informed the 2020 decision had inevitably also informed the 2021 decision. It was implicit in his judgment that he rejected the appellants' argument that the exceptional circumstances no longer applied at the time of the 2021 Regulations.
A litany of public law wrongs in clawing back benefit overpayments
R (K) v Secretary of State for Work & Pensions concerns a claimant who was overpaid universal credit, due to the Secretary of State mistakenly treating their disabled son as being in full-time, non-advanced education. The claimant had taken all reasonable steps to clarify her entitlement, but the payments were repeatedly miscalculated. Despite this, the Secretary of State refused to waive recovery of the overpayment applying the policy set out in his 'Benefit Overpayment Recovery Guide' (BORG).
The claimant challenged the decision on a number of grounds including that –
- failure to publish the 'Decision Makers Guide to Waiver' (DMGW), a supporting policy to the BORG, was unlawful,
- the decision failed to take into account relevant considerations and was therefore irrational,
- it breached her legitimate expectation, and
- the Secretary of State had breached the public sector equality duty in section 149 of the Equality Act 2010 (the PSED).
In relation to the first ground, the claimant argued that the DMGW and the BORG were inconsistent, with the criteria for waiver in the former being less onerous than the latter.
Steyn J determined that the DMGW and the BORG could be read consistently. However, the DMGW should have been published and the claim succeeded on this ground. The DMGW was central to the decision-making process and, had the claimant known of it, she would have been able to frame her representations in line with its criteria.
We note that in this regard, the case is an interesting counter-point to the decision in R (MQ) v Secretary of State for the Home Department in which the Government was found not to be operating an unpublished policy.
In relation to the irrationality, the Court held that the claimant's good faith, her reasonable steps to clarify her entitlement, her reliance to her detriment and the fact that the overpayment occurred due to 'a profound lapse in service' had not adequately been taken into account. As these were relevant considerations, of sufficient importance, disregarding them robbed the decision of logic, thereby making it irrational.
In relation to legitimate expectation, Steyn J held that, in the face of repeated attempts to clarify his entitlement, the Secretary of State had made a clear and unambiguous representation to the claimant that her son was entitled to the relevant payments until he completed his course. The fact that this statement was based on a mistaken view of her entitlement in law did not preclude it from giving rise to a legitimate expectation. As the Secretary of State had a power, not a duty, to recover overpayment, waiver to give effect to that expectation would not breach any statutory duty, and in this case fairness required him to meet the expectation by waiving recovery (although it did not require continued overpayments going forward).
Finally, there was evidence to show that the waiver policy might have an adverse impact on disabled people so as to give rise to a duty to make reasonable enquiry, which the Secretary of State had not discharged. He had therefore breached the PSED.
A cautionary tale in considering consultation responses and PSED obligations
R (CDE) v Bournemouth, Christchurch and Poole Council is a High Court decision concerning the defendant council's policy with regard to sexual entertainment venues (SEVs) (the Policy).
The Policy included two key features –
- A policy to impose no cap on the number of SEV licences that may be granted to establishments in the locality (the No Cap Policy), and
- A presumption in favour of annual renewal for those SEVs already licensed to operate in the locality (the Acquired Rights Policy).
The Council conducted two consultations on draft versions of the Policy. Many responses raised 'sex equality-based concerns' (SEB concerns), including that SEVs contribute to negative attitudes towards, and treatment of, women and girls, ranging from objectification to violence. In one consultation, 76% of respondents disagreed with the No Cap Policy and 53% of respondents disagreed with the Acquired Rights Policy.
The Council considered that the majority of responses were 'moralistic' in nature, such as calls for a nil limit on SEVs, and that these should be disregarded as being outside of the licensing framework. Some councillors also strongly objected to the Policy. Despite this, the Council approved it.
The claimant was a local resident and a domestic and sexual abuse survivor. She was deeply concerned that the Policy, and the likely increase in SEVs, threatened women's welfare and safety, and sex equality generally.
The claimant challenged the Policy on three grounds –
- the Council failed to have regard to, and conscientiously engage with, SEB concerns,
- in doing so, the Council failed to comply with the public sector equality duty (PSED), and
- the Acquired Rights Policy unlawfully fettered the Council's discretion.
The challenge succeeded on the first two grounds, but failed on the third.
Firstly, Choudhury J held that the Council's understanding of 'moralistic' was too broad. While a council was entitled to give less weight to responses objecting to SEVs on the grounds that they should not exist, the Council discounted objections which should have been considered, namely the SEB concerns, which were not just unconditional objections to SEVs. Whilst the Council acknowledged SEB concerns in its deliberations, it did not conscientiously consider them.
Secondly, given that SEB concerns were not properly considered, Choudhury J considered that the evidence did not show that the Council rigorously considered the PSED with a 'proper and conscientious focus' on the statutory criteria in section 149 of the Equality Act 2010.
Choudhury J praised the Council for undertaking an otherwise diligent and extensive consultation, but this case serves as a cautionary tale to decision-makers. In particular –
- in summarising consultation responses, decision-makers should avoid incorrectly characterising comments, or applying a broad-brush label, to avoid inadvertently excluding valid and diverse comment, and
- documentary evidence should demonstrate that section 149 criteria was properly and conscientiously considered by decision-makers, by dealing with each criterion and its consideration in turn.
This is all the more so for particularly sensitive or controversial decisions, such as the one here.
Can a statutory direction override a statutory duty?
In R (VIP Communications) (In Liquidation) v Secretary of State for the Home Department, the Supreme Court considered whether the Secretary of State could issue a direction under one statute (the Communications Act 2003, the CA 2003) to prevent the telecoms regulator, Ofcom, from complying with a statutory obligation under a different statute (Wireless Telegraphy Act 2006, the WTA 2006).
Where Ofcom is satisfied that certain conditions are met, the WTA 2006 requires it to make regulations exempting the installation and use of particular equipment from the requirement for a licence. Under the CA 2003, Ofcom is under a separate duty to carry out its functions in accordance with directions given by the Secretary of State. Such directions may be issued on limited grounds, including in the interests of national security and public safety.
The respondent, VIP Communications (VIP), specialises in commercial multi-user gateways, which enable phone calls and text messages from landlines to be routed directly onto mobile networks. Ofcom issued a direction stating its intention to make regulations exempting such gateways from licensing requirements.
In response, the Secretary of State directed that they should not be exempted given the national security and public safety concerns as the gateways can conceal the identity and location of the caller. VIP argued that the Secretary of State had acted beyond his powers in giving the direction, the effect of which would preclude compliance with a statutory duty.
The High Court and Court of Appeal held that there was a principle of statutory interpretation under which a statutory power to give a direction does not extend to a direction not to comply with a statutory duty arising under that or another statute, in the absence of clear words to that effect.
The Supreme Court disagreed and, as always, context was everything.
It observed that, although the provisions dealing with the regulation of wireless telegraphy were contained within more than one statute, these formed a single system of regulation and should be read together as though they were contained in a single piece of legislation.
The Court noted that prior to the CA 2003, the government had sole responsibility for wireless telegraphy. It was beyond argument that Parliament had intended the government to continue being responsible for national security (and the other matters in relation to which a direction could be issued).
By contrast, Ofcom was neither equipped nor empowered to deal with such issues. Instead, its remit in relation to wireless telegraphy pertained to technical and other matters which could properly be decided by a regulator.
The Supreme Court held that there was no principle of statutory interpretation of the type identified by the Court of Appeal, and that a direction could indeed require non-compliance with a statutory duty. There were cases in which a direction would not be permitted to contravene fundamental rights or the rule of law, but that was not the case here.
Given the careful division of responsibility between the government and the regulator, it would be very surprising if the former's power of direction in relation to national interests could not prevent Ofcom making a regulation that could prejudice those interests. The appeal was therefore successful.
Procedural fairness and the right to comment on a critical report by a regulator
In R (Hexpress Healthcare Ltd) v The Care Quality Commission the Court of Appeal considered a challenge to a Care Quality Commission (the CQC) report giving the appellant's healthcare services an overall rating of 'requires improvement' and a safety rating of 'inadequate'.
The appellant was provided with a draft of the report and given 10 working days to comment on any factual inaccuracies. In line with the CQC's Factual Accuracy Check (FAC), the lead inspector considered the comments and made amendments to the draft, which were checked by another inspector independent of the investigation.
This was an appeal against the refusal of permission for judicial review on two grounds of challenge –
- that the CQC failed to independently review the response to the appellant's comments, which was procedurally unfair, and
- that the final report contained errors of fact or was unreasonable as it gave undue weight to irrelevant factors, including that the CQC should have taken into consideration additional evidence provided and remedial steps taken by the appellant since its inspection.
In relation to the first ground, the appellant placed reliance on R (SSP Health Ltd) v Care Quality Commission and the subsequent decision in R (Ideal Care Homes Ltd) v Care Quality Commission, which it argued required that a provider see the lead inspector's proposed response to the FAC comments with a subsequent opportunity to request an independent review. Mere checking of amendments by an independent inspector was insufficient.
The Court of Appeal disagreed with the appellant, and took the opportunity to deal with conflicting authorities on the point. The circumstances in SSP Health had required comments on proposed revisions as in that case the inspector had refused to amend facts that were clearly incorrect with reference to the objective evidence, and at this time an inspector's work was not independently reviewed as standard. The CQC had put the FAC procedure in place following that decision, it was a fair process and had been followed in this case.
The Court pointed out that a single opportunity to comment on adverse comments in a report is what is provided under the Inquiries Rules 2006 and it was not clear why fairness would require something more in relation to CQC reports. Permission was therefore refused for the first ground.
Permission was also refused for the second ground as the Court of Appeal held it was rational for the CQC to base its rating on its findings at the time of its inspection, not events after. This would help ensure consistency and prevent delays in publishing reports. The CQC's procedure in that regard was therefore reasonable.
The appellant had also applied for an injunction to prevent publication of the CQC's report while proceedings were ongoing. The High Court's decision on that illustrates the difficulty of obtaining an injunction to prevent publication of a regulator's report.
Fairness in the special administration process for Bulb Energy
R (British Gas Trading Ltd & Ors) v Secretary of State for Energy Security and Net Zero concerned a challenge to approvals in relation to the transfer of customers from failed energy company, Bulb Energy (Bulb), to Octopus Energy (Octopus).
Joint energy administrators (JEAs) were appointed under the legislative special administration scheme and set about trying to find a taker for Bulb's customers. The claimants were part of early negotiations for the sale. British Gas Trading dropped out having stipulated that it was only interested in taking on some, but not all, of Bulb's customers due to the associated costs and financial risk. ScottishPower also dropped out. The sale was ultimately concluded on terms which included significant financial support from the government in return for Octopus taking on the entire customer book.
The claimants argued that they would have continued to engage with the process and submitted bids had they received the same information as Octopus as to the level of support available. They brought a challenge on a number of grounds including in relation to procedural fairness, failure to consult, taking into account irrelevant considerations and failure to take account of relevant considerations.
Although the claim was brought around one month after the first of the Secretary of State's approvals, the Divisional Court found that, in the circumstances, it had not been brought promptly and permission was refused on that basis. It noted that the claimants had sufficient (if not full) information to frame their claims at the date of the decisions, the pre-action protocol can be dispensed with or abridged in urgent cases, and any delay would clearly prejudice the interests of third parties.
However, as full argument had been heard at a rolled up hearing, the Court went on to consider the merits of the grounds. It adopted a light touch approach, citing the fact that the process which the claimants sought to challenge was carried out by JEAs who were required by the legislation to be qualified insolvency practitioners and were subject to oversight by (and could be challenged through) the Commercial Court.
As the process had been conducted by the JEAs, the Court stated that the question was whether the Secretary of State was reasonably entitled to accept their advice that the process had been fair. The Court found that he was. The claimants relied on the decision in ex parte Camelot, in which the Lottery Commission had announced that both bidders for the National Lottery had failed to meet the statutory criteria but then allowed one bidder, but not the other, to correct deficiencies in its bid. However, the Divisional Court distinguished Camelot on the basis that the Commission itself had undertaken the process, acting under statutory powers, and was under an implied duty of fairness when exercising those powers. Here the JEAs and not the Secretary of State had conducted the process.
Likewise, the legislation required consultation with Ofgem as part of the process, but not with anyone else and no legitimate expectation of consultation had been established. The Court also found that the Secretary of State had had regard to the relevant considerations set out in statute, and had not had regard to any irrelevant considerations.
On this basis, had it not been for the delay, the Court would have refused permission for the public law grounds in any case as it found that they were not reasonably arguable.
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