B e f o r e :
THE MASTER OF THE ROLLS
LORD JUSTICE SULLIVAN
LORD JUSTICE UNDERHILL
|| (1) TRUST SPECIAL ADMINISTRATOR
APPOINTED TO SOUTH LONDON HEALTHCARE NHS TRUST
(2) SECRETARY OF STATE FOR HEALTH
||- and -
||(1) LONDON BOROUGH OF LEWISHAM
(2) SAVE LEWISHAM HOSPITAL CAMPAIGN
(Transcript of the Handed Down Judgment of
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Rory Phillips QC and Ivan Hare (instructed by the Treasury Solicitor) for the Appellants
Elisabeth Laing QC (instructed by Lewisham Legal Services) for the First Respondent
David Lock QC and Jeremy Hyam (instructed by Leigh Day Solicitors) for the Second Respondent
HTML VERSION OF JUDGMENT
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Lord Justice Sullivan:
This is the judgment of the Court:
- On the 29th October we dismissed the appeal by the Trust Special Administrator Appointed to the South London NHS Healthcare Trust ("the TSA") and the Secretary of State for Health ("the Secretary of State") against the Order dated 31st July 2013 of Silber J quashing the report of the TSA published on the 8th January 2013 ("the Report") and the decision of the Secretary of State dated 31st January 2013 ("the Decision") insofar as the Report made recommendations about, or which affected, the services provided by Lewisham Healthcare NHS Trust ("LHT") at Lewisham University Hospital ("LH"), and insofar as the Decision accepted those recommendations with modifications.
- We said that we would give the reasons for our decision as soon as possible. These are our reasons for dismissing the appeal.
- There is no dispute as to the factual background, which is set out in some detail in the judgment of Silber J  EWHC 2329 (Admin).
- The TSA was appointed by the Secretary of State under Chapter 5A of the National Health Service Act 2006 ("the 2006 Act"), which was inserted into the 2006 Act by the Health Act 2009, to exercise the functions of the chairman and directors of the South London Healthcare Trust ("SLHT"), an NHS Trust. The key stages of the Chapter 5A regime are set out in paragraph 4 of Silber J's judgment. For ease of reference, we have set out the relevant provisions of the Chapter 5A regime in force at the time of the Decision in the Appendix to this judgment.
- The appeal turns on a short point of construction: what is meant by the words "action …in relation to the trust" in sections 65F(1), 65I(1) and 65K(1) of the 2006 Act. It is common ground that "the trust" referred to in those sections is the SLHT, to which the TSA had been appointed. When the TSA recommended in his draft and final report to the Secretary of State that there should be a reconfiguration of the services provided by LHT at LH, and when the Secretary of State decided to accept that recommendation with modifications, were they recommending/deciding that action should be taken "in relation to" SLHT?
- The judge started with the proposition, which is not in dispute, that each NHS Trust is a separate legal entity: see section 25 of and schedule 4 to the 2006 Act. It followed that the words "the trust" in sections 65F(1), 65I(1) and 65K(1) meant the trust over which the TSA had been appointed – SLHT – and no other trust (paragraph 76 judgment). In paragraphs 78-94 of his judgment Silber J gave eight reasons for concluding that the power to recommend, or to decide to take action in relation to SLHT did not include a power to recommend, or decide on, service changes at any other Trust, including LHT.
- On behalf of the Appellants, Mr. Phillips QC submitted that the judge had adopted too narrow an interpretation of the power conferred by sections 65F(1), 65I(1) and 65K(1). In support of that submission he relied upon:
(a) the use of the phrase "in relation to";
(b) the factual context in which Chapter 5A operates and its purpose;
(c) the nature of the powers in Chapter 5A; and
(d) the consequences of adopting the narrow approach.
- Taking these four factors in turn, he submitted that the phrase "in relation to" had a naturally broad meaning, and that had Parliament intended to constrain the TSA's power to make recommendations it would have chosen a different form of words, eg recommendations "confined to the trust".
- Turning to the factual context in which Chapter 5A operates and its purpose, Mr. Phillips submitted that, although NHS Trusts are distinct legal entities, they do not exist in isolation from each other. Since they provide "a complex matrix of inter-dependent services" it is highly likely that action taken in respect of one Trust will have knock-on effects on other Trusts. That likelihood is increased in the context of Chapter 5A which is designed to deal with those exceptional cases where an NHS Trust has become unsustainable and may have to be dissolved. The Secretary of State has overall responsibility for the NHS (see section 1 of the 2006 Act) and appoints a TSA only if "he considers it appropriate in the interests of the health service".
- Since Chapter 5A powers are designed for exceptional situations requiring imaginative solutions, Mr. Phillips submitted that Parliament must have intended to confer a broad remit upon the expert TSA. He drew our attention to particular features of the Chapter 5A regime: the independence of the TSA in relation to the advice contained in his report; the need for both the TSA and the Secretary of State to comply with strict time limits; the need to inform Parliament of the reasons for appointing a TSA, of the contents of the TSA's report, and of the reasons for the Secretary of State's decision; and the express disapplication of the normal, and very elaborate, consultation requirements that are contained in Part 12 of the 2006 Act.
- Against this background, Mr. Phillips submitted that a TSA's job had two distinct parts. First, he was appointed to exercise the functions of the chairman and directors of the failing NHS trust. The TSA's powers of day-to-day management were necessarily limited to the Trust to which he was appointed. Secondly, the TSA was under a duty to carry out inquiries into the problems of the Trust and to make recommendations to the Secretary of State as to what action should be taken to remedy them. Those powers were not confined to the "functions of the chairman and directors", but were of a broader character, subject only to the fact that they must be "in relation to" the Trust.
- Mr. Phillips submitted that in enacting Chapter 5A Parliament must have intended to supplement the powers that were already available to the Secretary of State under the 2006 Act. Those powers included the power to give directions under section 8 of the Act, the power to make intervention orders and default orders under sections 66 and 68 of the Act, and the power to dissolve Trusts and distribute their property to other NHS bodies under paragraphs 28 and 29 of Schedule 4 to the Act. In enacting Chapter 5A it was Parliament's intention to make comprehensive provision for an expedited process which was designed to find solutions for the most difficult problems.
- In the Appellants' Skeleton Argument it was submitted that the consequence of upholding Silber J's "narrow interpretation" would be that Chapter 5A would be "likely to prove to be a dead letter." If a TSA discovered that the Trust to which he was appointed could not be placed on a secure footing by means of internal reforms only, it was said that he would be obliged to "down tools" and inform the Secretary of State that he could go no further, or he would have to produce a report that recommended only a partial, and therefore unsatisfactory, solution to the problems he had identified. In the present case the TSA had made a number of recommendations in Chapter 4 of the Report -"Assessment of and recommendations relating to South London Healthcare NHS Trust". In Chapter 5 of the Report - "Commissioning Context and recommendations relating to the south east London health economy" - the TSA had said that his recommendations in Chapter 4 would "enable a significant improvement to the financial position at [SLHT]" but he had concluded that this was only a partial solution:
"However, implementing them neither bridges the financial gap entirely nor fully responds to the need to deliver the quality improvements in healthcare, recommended following a recent review of emergency and maternity care in London. The TSA was therefore required to look more broadly at the financial and clinical state of the whole health economy in south east London."
- It is common ground that the words "in relation to" are capable of having a broader or a narrower meaning, depending upon the context in which they are used: see the Svenska Petroleum case cited by Silber J in paragraph 72 of his judgment. In the context of a statutory framework in which each NHS Trust is a separate legal entity, and in which a TSA is appointed to step into the shoes of the chairman and directors of a particular, unsustainable, Trust, the ordinary and natural meaning of the words "in relation to the trust" is the narrower meaning. The ordinary and natural meaning of action in "relation to Trust A" is action which affects or concerns or impacts on Trust A and it cannot be extended to include (as the Appellants contend) action which affects or concerns or impacts on Trust B which is considered to be necessary for and consequential on action taken in relation to Trust A. Such an extended meaning is strained and unnatural. The words "in relation to the trust" make it clear that the TSA, who has no authority in respect of any Trust other than the one to which he has been appointed, may recommend action in relation to that Trust, but not in relation to any other Trust.
- While the TSA's role has two elements: to exercise the functions of the chairman and directors of the unsustainable Trust to which he has been appointed (section 65B(1)), and to make recommendations to the Secretary of State as to what actions should be taken "in relation to" that Trust (section 65F(1)), we do not accept the Appellant's submission that the two elements of the TSA's role are to be treated as wholly distinct functions, and that the different forms of words used in relation to the management power are an indication that the TSA's reporting power is much broader. The fact that the person who is making the recommendations under section 65F(1) is the person who has been appointed to exercise the functions of the chairman and directors of a particular Trust is highly relevant when one is deciding whether the words "in relation to the trust" can bear the extended meaning for which the Appellants contend.
- Although it is a self-contained regime, Chapter 5A must be construed in the context of the 2006 Act as a whole. It is a striking feature of the 2006 Act that it makes provision for an elaborate and lengthy process of public involvement and consultation in respect of proposals to reconfigure hospital services: see section 242 of the Act. If the Secretary of State invokes the Chapter 5A regime those arrangements are excluded, and Chapter 5A itself makes provision for a more limited process of consultation. As Silber J pointed out (see paragraphs 83-86 of the judgment) a TSA is under no obligation to consult any other Trust when preparing his draft report (section 65F(2)), or when seeking responses to his draft report (section 65H).
- Mr. Phillips submitted that Chapter 5A set out the minimum requirements for consultation, it was always open to a TSA to consult more widely, and the TSA had done so in the present case. In our judgment, the fact that a TSA might choose to consult more widely, and that the TSA in this case did so, is of no assistance in determining the meaning of "in relation to the trust" in sections 65F(1) and 65I(1) (the Appellants do not suggest that the words have a different meaning in section 65K(1)). The absence of any requirement to consult any other Trust that might be affected by the recommendations is, in our view, a powerful indication that Parliament gave a TSA power to recommend action which would affect or concern or have an impact on the Trust to which he had been appointed and no other Trust. In a statutory scheme that sets great store by consultation, even in the context of the expedited Chapter 5A procedure (see eg the requirement in section 65H(4) to consult the staff of the Trust to which the TSA has been appointed), it is most unlikely that Parliament would have conferred a power on a TSA to recommend, eg the closure of an A and E department or a maternity unit in a hospital within another Trust for which he has no responsibility without requiring the TSA to consult that other Trust. Whether one looks at the words "in relation to" in the context of the 2006 Act as a whole, or in the context of Chapter 5A in isolation, their natural meaning is that adopted by Silber J.
- We are not persuaded that the factual context in which Chapter 5A operates and its purpose – to address the problems posed by unsustainable NHS Trusts when other powers of intervention have proved inadequate – are such as to justify giving the words "in relation to the trust" what would be a strained and, in their statutory context (see paragraphs 14-17 above), an unnatural meaning. In his oral submissions (unlike his Skeleton Argument) Mr. Phillips did not go so far as to submit that the likely consequence of adopting Silber J's interpretation would be that Chapter 5A would prove to be a "dead letter". Indeed, in his reply he sought to justify the lack of any express obligation to consult those other Trusts which might be affected by a TSA's recommendations for action in relation to their services by saying that in the "vast majority" of cases there might be no need for the TSA's recommendations to go beyond the Trust to which he had been appointed. Thus, Chapter 5A, as interpreted by Silber J, does supplement the powers that were already available to the Secretary of State under the 2006 Act by conferring upon him an additional power that is of some practical value.
- The fact that in some cases a TSA might think it necessary to go further and make recommendations for action in relation to other Trusts, as happened in the present case, might be a justification for conferring wider powers on TSAs and the Secretary of State, but whether or not that would be desirable is a matter for Parliament, not this Court. We were told that a new clause has been inserted into the Care Bill, which is presently before Parliament. The new clause provides that references in Chapter 5A to taking action in relation to an NHS trust include a reference to taking action "in relation to another NHS Trust". This is precisely the kind of provision that one would have expected to see in Chapter 5A if Parliament had intended it to have the meaning attributed to it by the Appellants.
- Far from assisting the Appellants' case, the nature of the powers conferred by Chapter 5A – a procedure that is an exception to the normal reconfiguration process that Parliament has prescribed in the 2006 Act, which must be completed within tight time limits and with limited consultation – tend to support a narrow, rather than a broad interpretation of the powers conferred upon the TSA. Parliament would have been astute to guard against conferring too broad a power which might be used as a "back door approach to reconfiguration." The Appellants' reliance upon the Secretary of State's overall responsibility for the NHS and the fact that he may appoint a TSA only when he considers it "appropriate in the interests of the health service" (section 65B(2)) is misplaced. A TSA will obviously consider what is appropriate in the interests of the health service when making his recommendations for action in relation to the Trust to which he has been appointed, but he is not given a general power to make recommendations as to what action the Secretary of State should take in the interests of the health service, or any part of it (other than in relation to the Trust to which he has been appointed).
- Undue weight should not be placed on the Chapter headings in the Report, but the respective titles of Chapters 4 and 5 in the Report (see paragraph 13 above) fairly reflect the reality: Chapter 4 did recommend what action the Secretary of State should take in relation to SLHT, whereas the recommendations in Chapter 5 related, not to the SLHT, but to the whole of the south east London health economy. The Appellants' submission that if the recommendations in Chapter 5 of the Report can be said to be "necessary and consequential" on the action recommended for the SLHT in Chapter 4, then they fall within the definition of recommendations "in relation to SLHT", attributes an unrealistically broad and ill-defined meaning to the words "in relation to". Mr. Phillips fairly accepted that on the Appellants' approach the TSA's recommendations could lawfully have extended to Trusts beyond South East London if the TSA had thought that those recommendations were necessary and consequential on the action that he was recommending for SLHT. The short answer to this submission is that if Parliament wishes a TSA appointed in respect of a particular Trust to make recommendations for action, not merely in relation to that Trust, but in relation to any Trust within all or part of the region in which the Trust is located, then it must expressly say so.
- Both the Report and the Decision were ultra vires to the extent that they made recommendations about, or affected, the services provided by LHT at LH. The appeal against the quashing orders must therefore be dismissed. In these circumstances it is unnecessary for us to consider the Appellants' second ground of appeal which would have been relevant only if their challenge to the judge's ruling on the vires issue had been successful.
Lord Justice Underhill:
- I agree.
The Master of the Rolls:
- I also agree.
(1) This Chapter applies to—
(a) an NHS trust all or most of whose hospitals, establishments and facilities are in England;
65B NHS trusts: appointment of trust special administrator
(1) The Secretary of State may make an order authorising the appointment of a trust special administrator to exercise the functions of the chairman and directors of an NHS trust to which this Chapter applies.
(2) An order may be made under subsection (1) only if the Secretary of State considers it appropriate in the interests of the health service.
. . .
(4) Before making the order the Secretary of State must consult—
(a) the trust,
(b) any Strategic Health Authority in whose area the trust has hospitals, establishments or facilities, and
(c) any other person to which the trust provides goods or services under this Act and which the Secretary of State considers it appropriate to consult.
(5) The Secretary of State must lay before Parliament (with the statutory instrument containing the order) a report stating the reasons for making the order.
65C Suspension of directors
(1) When the appointment of a trust special administrator takes effect, the trust's chairman and executive and non-executive directors are suspended from office.
65F Draft report
(1) Within the period of 45 working days beginning with the day on which a trust special administrator's appointment takes effect, the administrator must provide to the Secretary of State and publish a draft report stating the action which the administrator recommends the Secretary of State should take in relation to the trust.
(2) When preparing the draft report, the administrator must consult—
(za) the Board, and
(b) any other person to which the trust provides goods or services under this Act and which the Secretary of State directs the administrator to consult.
(3) After receiving the draft report, the Secretary of State must lay it before Parliament.
65G Consultation plan
(1) At the same time as publishing a draft report under section 65F, a trust special administrator must publish a statement setting out the means by which the administrator will seek responses to the draft report.
(2) The statement must specify a period of 30 working days within which the administrator seeks responses (the "consultation period").
(3) The first day of the consultation period must be within the period of 5 working days beginning with the day on which the draft report is published.
65H Consultation requirements
(1) The following duties apply during the consultation period.
(2) The trust special administrator must publish a notice stating that the administrator is seeking responses to the draft report and describing how people can give their responses.
(3) A notice under subsection (2) must include details of how responses can be given in writing.
(4) The trust special administrator must hold at least one meeting to seek responses from staff of the trust and from such persons as the trust special administrator may recognise as representing staff of the trust.
(5) The trust special administrator must hold at least one other meeting to seek responses from any person who wishes to attend, after publishing notice of the date, time and place of the meeting.
(6) Notices under subsections (2) and (5) must be published at least once in the first 5 working days of the consultation period.
(7) The trust special administrator must request a written response from—
(za) the Board,
(b) any other person to which the trust provides goods or services under this Act;
(c) any person within subsection (8), if required by directions given by the Secretary of State;
(d) any other person specified in a direction given by the Secretary of State.
(8) The persons within this subsection are—
(e) a person carrying on, in pursuance of arrangements made by any local authority under subsection (1) of section 221 of the Local Government and Public Involvement in Health Act 2007, activities specified in subsection (2) of that section (local involvement networks);
(f) the member of Parliament for any constituency.
(9) The trust special administrator must hold at least one meeting to seek responses from representatives of the Board and each of the persons from whom the administrator must request a written response under subsection (7)(b), (c) or (d).
(10) The Secretary of State may direct an administrator to—
(a) request a written response from any person;
(b) hold a meeting to seek a response from any person.
65I Final report
(1) Within the period of 15 working days beginning with the end of the consultation period, the trust special administrator must provide to the Secretary of State a final report stating the action which the administrator recommends that the Secretary of State should take in relation to the trust.
(2) The administrator must attach to the final report a summary of all responses to the draft report which were received by the administrator in the period beginning with the publication of the draft report and ending with the last day of the consultation period.
(3) After receiving the administrator's final report, the Secretary of State must publish it and lay it before Parliament.
65J Power to extend time
(1) This section applies to—
(a) the duty of a trust special administrator to provide a draft report within the period specified in section 65F(1);
(b) the duty of a trust special administrator to consult in the consultation period specified under section 65G(2);
(c) the duty of a trust special administrator to provide a final report within the period specified in section 65I(1).
(2) If the Secretary of State thinks it is not reasonable in the circumstances for the administrator to be required to carry out the duty within the specified period, the Secretary of State may by order extend the period.
65K Secretary of State's decision in case of NHS trust
(1) Within the period of 20 working days beginning with the day on which the Secretary of State receives a final report under section 65I relating to an NHS trust, the Secretary of State must decide what action to take in relation to the trust.
(2) The Secretary of State must as soon as reasonably practicable—
(a) publish a notice of the decision and of the reasons for it;
(b) lay a copy of the notice before Parliament.
65L Trusts coming out of administration
(1) This section applies if the Secretary of State decides under section 65K not to dissolve the trust.
65M Replacement of trust special administrator
(1) If a trust special administrator ceases to hold office for any reason before the Secretary of State has made either an order under section 65L(2) or an order dissolving the trust, the Secretary of State must—
(a) appoint another person as the trust special administrator, and
(b) publish the name of the person appointed.
70 Transfer of residual liabilities
(1) If . . . an NHS trust . . . ceases to exist, the Secretary of State must exercise his functions so as to secure that all of the body's liabilities (other than any criminal liabilities) are dealt with.
(2) A liability is dealt with by being transferred to an NHS body, the Secretary of State or the Welsh Ministers."