In this February 2024 edition of our quarterly case update, we offer a straightforward and concise overview of six public law and regulation cases from the last quarter of 2023 – all of 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 that can be taken from them. In particular, this quarter featured a number of interesting cases on policies, which can be found at the beginning of our list:
When can a defendant convince the court that an order is impossible to comply with?
In R (Imam) v London Borough of Croydon, the Supreme Court considered the issue of requiring compliance with a mandatory order that the defendant argues is impossible. The case concerned the defendant council's non-compliance with the statutory duty to provide suitable accommodation following an eligible application for homelessness assistance.
There was no dispute that Ms Imam was eligible and entitled to accommodation. In fact, temporary accommodation was provided by the council in response to her application. However, following a review requested by Ms Imam, the accommodation was deemed unsuitable by the council. No alternative was provided and Ms Imam applied for judicial review.
By the time the case reached the Supreme Court, the single question was whether a mandatory order should be made to compel the council to secure suitable accommodation.
The council contended that, while it accepted it was in breach of its duty, mandatory relief should not be granted as it was experiencing severe budgetary pressures which rendered compliance impossible.
However, the Court noted that the statutory duty is not qualified by the availability of resources. For a Court to modify or moderate the substance of the duty on such grounds would undermine Parliament's legislative authority.
It acknowledged that remedies are discretionary and certain mandatory orders may be impossible to comply with, but the relevant question is what constitutes impossibility.
The Supreme Court reaffirmed the Court of Appeal's finding that the onus is on the defendant to explain why a mandatory order should not be made, and to provide a detailed explanation of its current situation and why this makes it impossible to comply. It also agreed that the defendant must show it has taken all reasonable steps to perform its duty, while noting that this is an objective assessment.
Ms Imam had additionally argued that a mandatory order should be made regardless of whether the council had a suitable property available, thus requiring it to buy or adapt an existing property or divert other resources towards compliance.
However, the Court observed that this could undermine the balance of roles between a court and local authority. A court is unaware of all the council's statutory functions and cannot decide on resource allocation between them. A mandatory diversion of funding could unduly disrupt the council's ability to meet other duties.
The Court outlined the following factors relevant to the exercise of a court's discretion in determining whether a mandatory order should be made –
- Whether the defendant has a contingency fund to deal with unexpected costs.
- How quickly the defendant reacted to notice of a problem relating to non-performance of a duty.
- The impact on the individual to whom the duty is owed.
- Whether the defendant is now moving to rectify the situation.
- Whether the mandatory order would give a defendant undue priority over others.
Ultimately, the council had not provided sufficient explanation as to why it could not comply with the mandatory order. The case was remitted to the High Court for further consideration in accordance with the above factors.
Must a discretion always be subject to policy guidance?
In R (Northumbrian Water Limited) v Water Services Regulation Authority (Ofwat), the High Court rejected a challenge against Ofwat's decision not to grant a full exemption from underperformance penalties resulting from water supply interruptions during Storm Arwen.
Ofwat is responsible for the economic regulation of water and sewerage companies in England and Wales.
On an annual basis, Ofwat may decide whether the prices that companies charge customers should be adjusted to reflect company performance against certain performance indicators.
Broadly, good performance entitles a company to outperformance payments, recovered through higher annual charges in the following year. Poor performance exposes the company to underperformance penalties, resulting in reductions to customers' annual charges.
One metric of performance is the number and duration of interruptions to the supply of potable water to customers (e.g. by storms). Generally, companies bear the risk of supply interruptions when it comes to performance assessment. However, a company may apply for an exception to relieve it of any penalty where interruptions are caused by a 'civil emergency' (the CE Exception).
In this case, NWL challenged Ofwat's decision not to grant its application for a CE Exception in full in respect of supply interruptions arising from Storm Arwen in 2019. Ofwat initially decided not to grant an exception at all but, following consultation with water companies, ultimately agreed to exclude 50% of the amount that would otherwise be payable for underperformance. This was, from Ofwat's perspective, a fair exercise of a discretionary power.
However, NWL argued that the CE Exemption represented an automatic entitlement which applied once certain pre-conditions were met to relieve NWL of the consequences of interruptions that were not its fault. It contained no element of discretion.
Alternatively, even if Ofwat had some discretion, it was required, but had failed, to publish prescriptive policy guidance on how that discretion should be exercised. The absence of such guidance would cause water companies to invest inefficiently to protect themselves from the financial impact of a civil emergency to the disadvantage of customers and was significant given the lack of appeal or redetermination mechanism in relation to Ofwat's decision.
HH Judge Klein rejected NWL's challenge on all grounds.
Firstly, the CE Exception was discretionary. This discretion was consistent with the purpose of the wider statutory framework and price control regime.
Secondly, the purpose of a published policy is 'to secure appropriate consistency, to protect against arbitrariness, to allow informed representations and to facilitate informed challenge'. Those purposes were met without a published policy in this case. This is not a case where discretion was completely unbounded. Ofwat was acting within the confines of statutory duties which themselves provided a platform for consistent decision-making.
In addition, this was not a case where guidance was required to ensure consistency between decisions made by multiple caseworkers on numerous individual applications addressing similar circumstances. Rather, there were a small number of water companies, applications for the CE Exception would be rare and highly individual, and decisions would be made by very senior officials. Both those officials and the applicant companies would be aware of previous decisions.
Our Public Law & Regulation team represented Ofwat in these proceedings.
When both sides think the other has promised something
In 2021 a substantial rise in energy wholesale prices forced a number of energy suppliers out of business. In such cases, the energy regulator – the Gas and Electricity Markets Authority (Ofgem) – can direct another supplier to act as a Supplier of Last Resort (SoLR) to customers of the failed suppliers. E.ON was appointed as an SoLR, replacing three failed suppliers.
Some of the costs related to being an SoLR can be recovered through a Last Resort Supply Payment (LRSP), which takes the form of a levy on other suppliers requiring approval by Ofgem. Before accepting the appointment, E.ON asked whether it could use the LRSP to recover certain costs and claimed that Ofgem had provided a letter of comfort stating that it could. On the basis of that supposed assurance, in its bid to become an SoLR, E.ON had stated that it would absorb £15 million in costs in taking on that role, so long as Ofgem treated it fairly.
Ofgem later disallowed part of the LRSP relating to the relevant costs. In consequence, E.ON stated that it would not now be absorbing the £15 million costs of taking on the SoLR role. Ofgem responded by deducting that amount from what E.ON could recover under the LRSP.
In R (E.ON Next Energy Ltd) v Gas and Electricity Markets Authority E.ON challenged the refusal of the full LRSP including on the basis that it breached the legitimate expectation created by the letter of comfort. It also claimed that the reduction of the LRSP by £15 million was an error of law and irrational.
To create a legitimate expectation in public law, a statement must be clear, unambiguous and devoid of any relevant qualification. The Court held that the comfort letter did not meet that threshold; it stated simply that any claim for an LRSP would be subject to the normal review process under Standard Licence Condition 9.
That condition provided Ofgem with discretion as to whether to approve an LRSP. The interpretation put on the letter by E.ON would have fettered that discretion. Indeed, in later correspondence, Ofgem referred to the criteria by which it would assess an LRSP claim and stated that E.ON would need to meet those criteria.
However, the Court agreed that Ofgem should not have made the £15 million deduction from the LRSP. E.ON had committed to absorb the £15 million at its own discretion, if it believed that the LRSP claim was dealt with fairly. The claimant had complete discretion as to whether or not it considered Ofgem to have behaved fairly, and E.ON did not have to apply a public law standard of fairness in forming its opinion.
As such, E.ON had not committed to absorb the costs and the £15 million deduction was indeed wrong in law 'and/or' irrational. It was therefore successful on this point.
Expert decision-making at the intersection between public and private law
Nickel prices rose dramatically in March 2022. On 8 March, the London Metal Exchange, the main centre for trading industrial metals, and its clearing house counterparty (together, LME) decided to suspend nickel trading and subsequently cancel nickel trades concluded that day (the Cancellation).
LME considered the fluctuated price was disconnected from the value of underlying nickel, indicating a 'disorderly market', leaving LME members at significant risk. Trades reflecting a disorderly market were not 'meaningful' and LME considered the Cancellation the best option. The decision cancelled trades worth billions of dollars to traders.
In R (Elliott Associates LP & Anor) v The London Metal Exchange & Anor, an investment fund and an international trader challenged the Cancellation. They argued that LME did not have the power to cancel trades, the process was procedurally unfair because the claimants had no opportunity to make representations, and LME's approach was irrational as it had not sought to investigate the underlying causes of the price fluctuations.
The Divisional Court noted that the claimants were experienced traders and that by choosing to trade via LME, they had accepted the LME Rules. Although those rules operated in private rather than public law, they had to be read in the context of the relevant statutory framework which required the rules to ensure that the market met certain requirements.
Properly interpreted in that context, the Court held that the rules gave LME the power to cancel any trade in exceptional circumstances where it considered appropriate.
The Court also dismissed the procedural unfairness claim. Not only were any representations likely to repeat views that had already been expressed to LME, but the lack of contractual nexus would have made it impracticable for LME to even identify the claimants to consult them. Additionally, the LME Rules did not require prior consultation and the urgency of the situation justified LME's approach.
The Court noted that, while the LME Rules did not specify matters to be included or excluded from consideration, market 'orderliness' was certainly something to which LME should have had regard. The causes of the price fluctuation were complex and not completely obvious from contemporary materials. In a context where the Court considered there was no fixed meaning for market 'order', LME's approach was consistent with industry guidance and 'legally permissible'. As a specialist decision-maker in a complex technical area, significant latitude should be given to LME, particularly when considering the degree to which it sought to investigate causes before taking action to restore order. The Court also emphasised its supervisory role in judicial review proceedings and was unimpressed that some of the evidence was directed to criticising the merits of the Cancellation rather than its lawfulness.
The claimants also sought damages to compensate them for lost profits, claiming a breach of their rights to peaceful enjoyment of possessions under Article 1 of the First Protocol (A1P1) of the European Convention on Human Rights.
Only one claimant actually concluded nickel contracts, which were 'possessions' under A1P1. Nevertheless, their claim failed as the Cancellation was a lawful use of the LME's power to cancel trades, underpinned by legislation and consented to by LME traders.
Party leadership elections not justiciable – even when they choose the Prime Minister
Following the resignation of Boris Johnson in July 2022, the Conservative Party held a leadership election from which Liz Truss emerged the winner. As the leader of the largest party in the House of Commons, in accordance with convention, she was appointed as Prime Minister by the late Queen.
Tortoise Media (Tortoise) wrote to the Conservative Party, requesting information about the leadership election process and the electorate that took part in it. As the Freedom of Information Act 2000 does not apply to political parties, it argued that in line with previous caselaw, this was 'state-held information' to which the public had a right under Article 10 of the European Convention on Human Rights (freedom of expression). The Conservative Party denied the request on the basis that it was not a public body, or carrying out public functions, and therefore not subject to the Human Rights Act 1998 (the HRA).
Tortoise sought judicial review of that decision on the basis that, in electing a leader who would become Prime Minister, the Conservative Party was carrying out a public function. It was thus caught by the HRA – and therefore had to comply with Article 10 – and also amenable to judicial review under CPR 54.1(2)(a).
However, in R (Tortoise Media Ltd) v Conservative and Unionist Party permission for judicial review was refused.
Mr Justice Fordham noted that the relevant function being performed by the defendant was the mid-term election of a new party leader whilst the party had a majority in the House of Commons. Although that function had a consequence – the winner's appointment as Prime Minister – the two could not be conflated. The defendant chose its own leader and the Sovereign appointed the Prime Minister utilising prerogative powers. These were distinct functions.
The Court was also unconvinced by the argument that 'real injustice' would result from any inability to review the defendant's decision. It held that the election of a leader by the governing party was not a function in relation to which it was necessary or appropriate for the rule of law and other constitutional principles to be given effect through judicial review.
Indeed, the function which Tortoise claimed should attract judicial scrutiny – the appointment of a leader – was not actually the subject of its challenge (which concerned the release of information). Therefore, there was no injustice in any inability to review the discharge of that function.
Finally, Fordham J dismissed Tortoise's arguments that following R (Miller) v Prime Minister, advice given to the Sovereign – in this case as to who should be Prime Minister – was justiciable. In Miller, the limits of the prerogative power had been exceeded because proroguing Parliament had left a vacuum in which that decision could not be held to account. However, in this case, accountability was preserved through the ability of the House of Commons to decide that the new Prime Minister did not command its support. Indeed, even if such advice to the Sovereign was amenable to judicial review, the challenge here was not to that advice, but rather to the defendant's action in choosing its leader.
No 'routine' redaction of names in evidence before the court
The judgment in R (IAB & Others) v Secretary of State for the Home Department concerned disclosure by the Secretary of State (SoS) in advance of a substantive hearing of the claimants' challenge to the SoS decision to make regulations excluding houses in multiple occupation (HMOs) used to provide accommodation to asylum claimants from regulation of HMOs under the Housing Act 2004. This decision aimed to increase the premises available for asylum claimants and reduce the reliance on hotels for accommodation.
Although yet to file detailed evidence, the SoS had disclosed redacted documents at various stages in the proceedings thus far. Redactions included the names of (a) contractors supplying accommodation to the Home Office and (b) 'junior civil servants' – which was understood to mean those outside of the Senior Civil Service, regardless of experience.
The SoS argued that the names could be redacted because they were irrelevant to the proceedings, acknowledging that this would not be the case where a civil servant's identity was relevant to the legality of a decision – where bias was alleged, for example.
The Court did not accept that argument, which would permit redaction of anything that did not somehow directly concern a ground of challenge. While the grounds in the case did not depend on the identity of those involved in the decision-making process, the Court considered that this approach was not sufficient to discharge the duty of candour.
The Court observed that in disclosing the documents, the SoS clearly accepted that they were necessary for the fair and just disposal of the issues in the case, or were at least significant to the challenged decision.
Redaction can cause practical difficulties. The Court noted that when documents relating to a decision-making process are disclosed, a court's understanding of the process and decision is assisted by knowing who has seen them.
Redactions make a court's consideration of the documents harder as they affect the document's 'intelligibility' and frustrate the purpose of disclosure in the first place.
The Court noted the importance of public confidence in legal scrutiny of documents in litigation. Routine redaction might risk the 'sense or significance' of a document being overlooked.
Civil servants exercise public functions and some of the so-called 'junior' civil servants had significant responsibilities, so there was no reasonable expectation of confidentiality.
The Court also disagreed that disclosing names could threaten open conversation within government and expose those involved to harassment. The Court acknowledged that instances of abuse were regrettable but uncommon, and therefore not a sufficient basis on which to calibrate principles of open justice.
Absent good reasons (e.g. confidentiality), redaction solely on grounds of relevance should be restricted to 'clear situations' in which the information redacted does not concern the challenged decision. Redaction should occur for 'good and sufficient reason', so names should not be routinely redacted.
In closing, the Court confirmed that a party wishing to disclose redacted documents in judicial review proceedings should concisely explain the justification for redaction at the point of disclosure. Single-word indicators like 'relevance' or 'privilege' were insufficient to enable the claimants to decide whether to apply for disclosure in the case.
Note - the Court of Appeal has now upheld this judgment, noting that the duty of candour is not fulfilled by 'routine' redaction of names and that it was for Parliament to enact any 'general right to anonymity'.
For more information and guidance, contact our Public Law & Regulation team.