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England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Nash, R (on the application of) v Capita Plc & Ors  EWHC 1067 (Admin) (29 April 2013)
Cite as:  PTSR D31,  EWHC 1067 (Admin)
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| THE QUEEN ON THE APPLICATION OF MARIA STELLA NASH
|- and -
|BARNET LONDON BOROUGH COUNCIL
|CAPITA PLC, EC HARRIS LLP, CAPITA SYMONDS
Ms Monica Carss-Frisk QC and Mr Iain Steele (instructed by Trowers & Hamlins LLP) for the Defendant
Hearing dates: 19, 20 & 21 March 2013
Crown Copyright ©
Lord Justice Underhill :
(1) a decision made by the Council's Cabinet on 6 December 2012 to award a contract to Capita Plc, the First Interested Party, to provide a "New Support and Customer Service Organisation" ("the NSCSO contract"); and
(2) a decision which would, but for these proceedings, have been taken by the Cabinet on 31 January 2013 to award a contract to either Capita Symonds Ltd or EC Harris LLP, the Second and Third Interested Parties, to provide development and regulatory services ("the DRS contract").
No step has been taken to implement the first decision pending the outcome of these proceedings. Although the Council has deferred the second decision I will in the interests of simplicity refer to it as an actual decision.
(1) Consultation: It is said that the Council did not comply with statutory and other consultation obligations relating to the decisions.
(2) Public Sector Equality Duty: The Council is said to have failed in reaching the decisions to have due regard to the considerations specified in section 149 of the Equality Act 2010.
(3) Fiduciary Duty: It is said that if the Council enters into the proposed contracts it will be in breach of its "fiduciary duty" to council tax payers.
(A fourth ground, based on an alleged breach of the Public Contracts Regulations 2006, is not now pursued.)
(1) Two witness statements were originally lodged in support of the claim, from the Claimant and from Mr Gerald Shamash of her solicitors, Steel & Shamash. The Claimant is seriously disabled. Her statement describes the extent of her dependence on Council services and her fears about the adverse impact of the proposed outsourcing. She describes herself as a local activist and says that neither she nor any of the various organisations of which she is a member or with whom she has contact has been consulted about the proposals. Mr Shamash deals with matters of law and background outside the scope of the Claimant's statement.
(2) The Council lodged with its Acknowledgment of Service two witness statements from its Commercial Director, Mr Craig Cooper. One sets out at considerable length the history leading to the taking of the impugned decisions, exhibiting the relevant documentation which occupies six lever-arch files, and addressing some of the criticisms made by the Claimant and Mr Shamash. I am bound to say that I did not find this statement very helpfully structured or written. The other summarises the effect of the proposed contracts and exhibits the most recent drafts. By agreement this second statement and the exhibits have been subject to a "confidentiality ring"; and it has not in the end been necessary to refer to them for the purpose of my decision.
(3) The Council also lodged a witness statement from Ms Helen Randall, a partner of Trowers & Hamlins LLP, who has been advising it in connection with the proposed contracts and who represents it in these proceedings. She has substantial experience in the outsourcing of local authority functions and services, and her statement is essentially directed at explaining the national policy background, the outsourcing models commonly used and the role of consultation.
(4) The Claimant has lodged a further round of witness statements in response. These include second witness statements from herself and Mr Shamash, and a third from Mr Shamash dealing specifically with the confidential material in Mr Cooper's second witness statement. There are also witness statements from two other local activists, Mr John Dix and Ms Barbara Jacobson, dealing with aspects of the consultation issue.
(5) The Council has in turn lodged a second witness statement from Ms Randall and a third from Mr Cooper, responding to the Claimant's second round of evidence.
Although this evidence has been helpful in giving me a background to the issues, much of it has turned out in the end to be irrelevant to the comparatively narrow issues which I have to decide.
THE DECISION-TAKING PROCESS
"that the Chief Executive be authorised to lead a review of the organisational form of the Council and to report back to Cabinet with options for change by December 2008".
This became known as the "Future Shape" programme.
"In order [to] maximise the value to citizens of Barnet's public services, the Council should focus its energy on the activities where it alone can add value. It should therefore enable other organisations to do those things that they can do as well or better than the Council. Fundamentally, the Council should conduct those activities that only the Council can. This implies a number of principles on which to base the future shape of the organisation:
2. The future Council should be strategic rather than operational, focused on convening and working with its partners to prioritise and commission the public services that should be provided in the borough, rather than delivering services itself.
3.- 6. ..."
(The emphases are in the original.)
The Cabinet resolved:
"that the proposal for officers to develop a detailed assessment of the overall model for public service commissioning, design and delivery be agreed."
The process of developing that assessment came to be referred to as "phase II" of Future Shape.
"The background paper to this report sets out a high-level options analysis for how we might achieve the development of a customer services organisation. There are three options:
- Council remains the main delivery vehicle;
- Co-ownership model (Employees, Customers, Members are the major shareholders);
- Joint Venture/Outsourcing.
Work on deciding which option to pursue will be undertaken as part of the Future Shape implementation process."
The Cabinet accepted the recommendation to proceed with that process.
"... bring together the following functions into an environmental management, regulatory and design function, and seek a partnership with the private sector:
Planning, Housing and Regeneration
- Building Control and Structures (including Street Naming & numbering)
- Planning (Development Management)
- Strategic Planning
- Land Charges
- Environmental Health (Residential and Commercial sectors)
- Cemetery & Crematorium.
- Registration of Births, Marriages and Deaths
Environment and Operations
- Trading Standards & Licensing
- Highways Network Management
- Highways Traffic & Development
- Highways Strategy
- Transport & Regeneration."
The Cabinet resolved:
"That the Commercial Director be authorised to commence the procurement process to identify a strategic partner for the delivery of the Development and Regulatory Services project."
This decision constitutes the formal beginning of the process leading to the DRS decision which is under challenge in these proceedings.
"1.1 That the Director of Commercial Services be authorised to produce a business case for the following:
a. The procurement of a private sector partner(s) to deliver the following services - Customer Services, Estates, Finance, Human Resources, Information Services, Procurement, Revenues and Benefits.
1.2 That the details of business case 1.1(a) be referred to and considered by a future meeting of Cabinet Resources Committee.
1.3 That the Director of Commercial Services be authorised to initiate the procurement of a private sector partner(s) to deliver the following services:
- Customer Services, Estates, Finance, Human Resources, Information Services, Procurement, Revenues and Benefits
1.4 That this procurement process will only proceed into the dialogue phase once the business case identified in 1.1(a) above be approved by Cabinet Resources Committee."
The recommendation was accepted. This decision constitutes the formal beginning of the process leading to the NSCSO decision which is under challenge in these proceedings.
"New Support and Customer Services Organisation Business
For the reasons set out in the Cabinet Member's report, and having given due regard to the statutory Public Sector Equality Duty and the outcomes of equality impact assessments referred to within the report, the Committee
(1) That the committee approves the New Support and Customer Services Business Case in order that the council can begin the competitive dialogue process, following the previously approved placing of the OJEU notice.
(2) That the authority to award contract remains with the Cabinet Resources Committee.
(3) That the committee give due regard to the statutory equality duties under the Equality Act 2010 and the outcomes of the equality impact assessments referred to in this report."
"1 That Cabinet note the outcome of the evaluation stage of the New Support and Customer Service Organisation (NSCSO) Project and accept Capita's Final Tender as the preferred bid, with reference to the Full Business Case . ,
Equalities Impact Assessments ..., List of Principal Legislation ., and Evaluation Scores ... .
2 That Cabinet approve the appointment of the recommended reserve bidder.
3 That Cabinet delegate contract completion and signature (and ancillary documentation) finalisation and execution to the [Chief Financial Officer] ...
(a) the new customer services organisation, which will represent the interface between it and its citizens and other users of its services;
(b) the following back-office functions - estates; finance; human resources; information services; procurement; project management; and revenue and benefits; and
(c) a number of environment management, regulatory and design functions, itemised in para. 11 above, including but limited to: planning; building control; environmental health; trading standards; and highways.
The minimum duration of the two contracts is ten years.
(2) Public Sector Equality Duty
(1) She contends that to perform EIAs at so late a stage cannot constitute compliance with the public sector equality duty. The Council was obliged to have due regard to the matters specified in section 149 at the formative stage of its outsourcing policy, or in any event at the stage when it was developing the specifications to be published to tenderers.
(2) She contends in any event, by way of alternative, that the EIA which was eventually submitted in relation to the NSCSO contract demonstrates that the Council had in fact very little information with which to evaluate the impact of the proposed outsourcing on protected groups, and she submits that in those circumstances it could and should have sought to obtain such information by consulting with the representatives of such groups.
(3) Breach of fiduciary duty
IS THE CLAIM IN TIME ?
"Where the High Court considers that there has been undue delay in making an application for judicial review, the court may refuse to grant—
(a) leave for the making of the application; or
(b) any relief sought on the application,
if it considers that the granting of the relief sought would be likely to cause substantial hardship to, or substantially prejudice the rights of, any person or would be detrimental to good administration."
(1) TIME: THE CLAIM OF FAILURE TO CONSULT
"a ... principle, whose nature is not dependent upon an appeal to the rules relating to delay . that a judicial review applicant must move against the substantive act or decision which is the real basis of his complaint. If, after that act has been done, he takes no steps but merely waits until something consequential and dependent upon it takes place and then challenges that, he runs the risk of being put out of court for being too late."
However, the House of Lords allowed Mrs Burkett's appeal on the basis that even if the challenge to the resolution was out of time she would be in time to challenge the subsequent unconditional grant of planning permission.
(1) He defines the critical issue as being "the interpretation and application of the words 'from the date when grounds for the application first arose'" (para. 37). He makes the point, to which he returns later, that CPR 54.5 applies to applications for judicial review generally and not only to challenges to planning decisions, and that "an interpretation is to be preferred which is capable of applying to the generality of cases" (p. 1605 F-G).
(2) He acknowledges at para. 38 that it is well-established that in appropriate cases judicial review proceedings can be brought to challenge decisions which are "preliminary" and do not in themselves affect legal rights, but are part of a process which may lead to a final decision that does so. Thus he accepts that Mrs Burkett could have challenged the September 1999 resolution if she had done so in time.
(3) However, he says that it does not follow from the fact that Mrs Burkett could have challenged the earlier, preliminary, decision that her time for challenging the subsequent actual grant of planning permission ran from the earlier date (para. 38, at p. 1606 A-B). As a matter of language you could say that distinct "grounds" arose in relation to each decision. And the context suggested that that was the right approach, because "until the actual grant of planning permission the resolution has no legal effect" (para. 39, p. 1606 C-D): he develops that point by pointing out that the September resolution might never have become a final decision for a variety of reasons, including failure to agree the terms of a section 106 agreement or a simple change of mind on the part of the authority (para. 39 - and see also para. 34).
(4) He says that he does not accept that the fact that the same factor - i.e. the inadequacy of the environmental statement - was relied on as vitiating the September resolution and the final grant of approval means that grounds for challenging the latter decision existed at the time of the former (para. 42). He repeats that the resolution was not, unlike the final grant, "a juristic act giving rise to rights and obligations" (p. 1607 C-D). He says, at p. 1607F:
"For my part the substantive position is straightforward. The court has jurisdiction to entertain an application by a citizen for judicial review in respect of a resolution before or after its adoption. But it is a jump in legal logic to say that he must apply for such relief in respect of the resolution on pain of losing his right to judicial review of the actual grant of planning permission which does affect his rights."
(5) He observes (para. 42, p. 1607 F-G) that if the position were that a person in Mrs Burkett's position was obliged to challenge a preliminary resolution rather than await the final grant of planning permission that "... would also be in tension with the established principle that judicial review is a remedy of last resort". He develops that point in para. 43 as follows:
"If a decision-maker indicates that, subject to hearing further representations, he is provisionally minded to make a decision adverse to a citizen, is it to be said that time runs against the citizen from the moment of the provisional expression of view?
That would plainly not be sensible and would involve waste of time and money. Let me give a more concrete example. A licensing authority expresses a provisional view that a licence should be cancelled but indicates a willingness to hear further argument. The citizen contends that the proposed decision would be unlawful. Surely, a court might as a matter of discretion take the view that it would be premature to apply for judicial review as soon as the provisional decision is announced. And it would certainly be contrary to principle to require the citizen to take such premature legal action. In my view the time limit under the rules of court would not run from the date of such preliminary decisions in respect of a challenge of the actual decision. If that is so, one is entitled to ask: what is the qualitative difference in town planning ?"
(6) At paras. 43-50 he considers which approach is preferable as a matter of policy. He acknowledges the "need for public bodies to have certainty as to the legal validity of their actions" (para. 44, at p. 1603C), and he refers to the weight given to that factor by the Court of Appeal and by Laws J in Greenpeace. But he believed that there were countervailing policy considerations. In summary:
(a) Since the effect of CPR 54.5 is potentially to deprive a citizen of the right to challenge an abuse of power, it is important to have "a clear and straightforward interpretation which will yield a readily ascertainable starting date" (para. 45, at p. 1608 F-G).
(b) If, as Laws J had decided in Greenpeace, time was treated as running from the date of the act or decision "which is the real basis of his complaint" - or, as it is put elsewhere, "when the complaint could first reasonably have been made" - that would conduce to complexity and uncertainty (paras. 45-49). It would often be highly debatable when the "real" basis of a complaint had arisen or when it could first reasonably have been made.
(c) It would be unreasonably burdensome to require applicants to incur the very considerable costs of preparing an application for judicial review of a resolution of the kind in question "when the resolution may never take effect" (para. 50).
(7) The relevant part of the speech concludes, at para. 51 (p. 1610):
"For all these reasons I am satisfied that the words 'from the date when the grounds for the application first arose' refer to the date when the planning permission was granted. In the case before the House time did not run therefore from the resolution of 15 September 1999 but only from the grant of planning permission on 12 May 2000."
"In my opinion, for the reasons given by Lord Steyn, where there is a challenge to the grant itself, time runs from the date of the grant and not from the date of the resolution. It seems to me clear that because someone fails to challenge in time a resolution conditionally authorising the grant of planning permission, that failure does not prevent a challenge to the grant itself if brought in time, i.e. from the date when the planning permission is granted. I realise that this may cause some difficulties in practice, both for local authorities and for developers, but for the grant not to be capable of challenge, because the resolution has not been challenged in time, seems to me wrongly to restrict the right of the citizen to protect his interests. The relevant legislative provisions do not compel such a result nor do principles of administrative law prevent a challenge to the grant even if the grounds relied on are broadly the same as those which if brought in time would have been relied on to challenge the resolution."
"43. The references to the Burkett and Risk Management cases were clearly helpful in identifying the principles but they cannot be dispositive in themselves. ... [M]uch may turn on the individual facts of the particular case. To what extent is it right on the evidence before me to regard the decisions as final?
44. I do not think it appropriate to take too legalistic a view on finality. As I have pointed out already, if the Defendants chose not to go ahead at some point, after signing the "instruction to proceed" documents, there would be financial consequences. Because they could be released from their commitment on payment of the appropriate sum, does that mean that the decisions taken at that stage had only been conditional ? I think not. It seems to me that those binding agreements, en route to the final agreements then contemplated, cannot be equated to conditional agreements. They reflect contractual obligations.
45. Final decisions had already been taken in September, ... which might in theory have been reversed, but there was no indication that this would happen. The 29 September minute referred to contract discussions on how (not whether) to take matters forward. If an agreement is truly conditional, one can envisage at least two possibilities occurring. There will come, as it were, a fork in the road at some point. Either the condition(s) will be fulfilled or not. There is an inherent degree of uncertainty. Here, the decisions were "final", although there were arrangements to be worked out. There could be a change of heart. One or more of the Defendants could have extracted themselves from the commitment - perhaps on making the appropriate contractual payments. But that seems to me to be qualitatively different from a resolution to go ahead only on the fulfilment of certain conditions."
The analysis is not expressed in precisely the terms that I have used, but it seems to me to be essentially the same: the earlier decision, i.e. the substantive decision to proceed taken in September, was a decision in its own right ("final" in Eady J's terminology) and could not be treated as merely a conditional or preliminary foreshadowing of the eventual decision to award the contract. And that was so notwithstanding the possibility that no contract might in the end eventuate. Eady J evidently - and I would respectfully say rightly - did not regard Burkett as laying down a universal rule that in the case of a staged decision-making process time for a challenge will always start to run afresh when the final decision in the process is made.
(1) In R v Avon County Council, ex p. Terry Adams Ltd  Env LR 442 a disappointed tenderer under a statutory process sought to challenge a decision to award the contract to a rival. It did so within three months of that decision but the challenge was held to be out of time. The Court of Appeal held that time started to run when the competition was advertised. Ralph Gibson LJ observed, at p. 478:
"There is much importance in the principle that, if objection is to be made by an objector to the conduct by a public authority of a continuing administrative process, in which costs will be incurred by the authority and by other intended parties, application should be made promptly."
(2) In R v Cardiff County Council, ex p. Gooding Investments Ltd  Env LR 288 a disappointed tenderer again waited until the award of the contract before bringing proceedings. Owen J held that he was out of time to do so. He said, at page 300-1:
"What is the relevant decision which the applicant seeks to challenge? The application refers to the respondent's decision on January 11, 1995. However, it is conceded that if the applicant' s argument is correct there are two aspects of alleged illegality:
1. the respondent's proposal indicated at the start of the new tendering process when on August 8, 1994 the contract notice was placed in the Official Journal, to make arrangements with a joint venture company contrary to the provisions of section 51; and
2. the decision of the full council on January 11, 1995 to award the contract to a company which was not a tenderer.
The respondent argues that although as a matter of fact the appellant complains of the latter in law the former complaint is the true complaint and that complaint could have been made in August 1994. ... In my judgment the decision of which the applicant in reality complains was the decision to require a successful tenderer to acquire shares in waste disposal contractors which had not been a part of the tendering process.
Clearly application could have been made very shortly after the publication in the European Journal.
The applicant did not seek leave to apply for judicial review until February 9 by which time all the tenderers, including GEG had, as GEG must have known would be the case, expended considerable sums on the second tender. I accept the respondent's contention. The complaint could and should have been made promptly after August 8, 1994."
(3) In Jobsin Co UK plc v Department of Health  1 CMLR 244 (decided prior to Burkett) the department published inadequate criteria for a procurement process. The relevant regulations incorporated limitation provisions in equivalent terms to CPR 54.5. The Court of Appeal held that time ran from the date of the publication of the criteria rather than from the conclusion of the process. Dyson LJ said, at para. 28 (p. 1270):
"It would be strange if a complaint could not be brought until the process has been completed. It may be too late to challenge the process by then. A contract may have been concluded with the successful bidder. Even if that has not occurred, the longer the delay, the greater the cost of re-running the process and the greater the overall cost. There is every good reason why Parliament should have intended that challenges to the lawfulness of the process should be made as soon as possible. They can be made as soon as there has occurred a breach which may cause one of the bidders to suffer loss. There was no good reason for postponing the earliest date when proceedings can begin beyond that date."
(4) In Allan Rutherford LLP v Legal Services Commission  EWHC 3068 (Admin) a firm of solicitors tendering for a legal aid contract challenged the rejection of its bid on the basis that one of the published criteria was unlawful. Burnett J held (para. 10) that time ran from the date of publication of the criteria. He relied on Jobsin; Burkett was not referred to. That reasoning was followed in two subsequent cases on similar facts - Hereward & Foster LLP v Legal Services Commission  EWHC 3370 (Admin) (again, Burnett J) and Parker Rhodes Hickmott v Legal Services Commission  EWHC 1323 (Admin) (McCombe J).
I was also referred to De Whalley v Norfolk County Council  EWHC 3739 (Admin); but the issue there was rather different, and I do not believe that it is of assistance for present purposes.
"The claimant should challenge the decision which brings about the legal situation of which complaint is made. There are occasions when a claimant does not challenge that decision but waits until some consequential or ancillary decision is taken and then challenges that later decision on the ground that the earlier decision is unlawful. If the substance of the dispute relates to the lawfulness of that earlier decision and if it is that earlier decision which is, in reality, determinative of the legal position and the later decision does not, in fact, produce any change in the legal position, then the courts may rule that the time-limit runs from that earlier decision."
The footnote to that passage cites Terry Adams and Gooding and observes that they "still appear to be compatible with the principles laid down by the House of Lords in [Burkett]". What is said to have been disapproved in Burkett is the proposition derived from Greenpeace that time can start to run "before the decision that is constitutive of legal effects comes into being". That appears broadly consistent with my analysis.
(a) that this was a case of continuing breach;
(b) that the matter is one of considerable public importance and that the interests of vulnerable persons are at stake;
(c) that the Council created confusion by the way in which it responded to demands for consultation;
(d) that the Council only had itself to blame for the situation in which it found itself; and
(e) that the only relief sought was a requirement that the Council should consult in accordance with its statutory obligations and that, if following the consultation it remained of the view that the proposal should proceed, all that would have been lost was time.
(1) At a resident's forum on 2 September 2009 he was told:
"It is not our intention to consult the public on the principles of the Future Shape programme. As we have stated elsewhere the programme is a response to known concerns, such as declining satisfaction and significantly lower grant settlements and the Council is showing clear leadership in addressing these issues directly.
However there will be a process for engaging citizens in the 'commissioning' phase of the future shape programme to ensure that we understand how we can work with people to achieve better outcomes for the people of Barnet. Those areas will be discussed in the next future shape report. The timescales of this will vary depending on the issue but we would expect this process to start within the next 12 months and to involve large numbers of residents."
(2) At another forum on 15 June 2010 he was told:
"Over coming months the council intends to engage fully residents as to how services can develop in the difficult financial circumstances that the public sector faces. The scale of this involvement will relate to the challenge we face."
(3) The minutes of a meeting of the "Future Shape Overview & Sentencing Panel" on 11 August 2010 record that the Chairman told Mr Dix:
"The Council is planning to launch a wide-ranging consultation at the end of September 2010 to invite residents to comment on the future of services and public sector priorities in Barnet over the coming years given the current pressures on public finances and changing models of customer demands.
As well as public meetings (which have not attracted many attendees in the past) the council will explore new internet based models for involving residents in developing the priorities of the council. Individual services will be engaging with current and potential service users to explore new models of service provision over coming years. The exact nature of this latter engagement will vary from service to service, as is most appropriate for the users of each service. Details will be published as engagement programmes are launched.
The Council will promote engagement activity through Barnet First magazine, Council advertising sites and local newspapers.
The Future Shape Overview and Scrutiny Panel will monitor this consultation.
All the feedback from the consultation will be fed into the relevant project streams of the One Barnet programme."
(4) Finally, at a further meeting of the Panel on 23 February 2011 Mr Dix was told that an "engagement strategy" had been endorsed by the "One Barnet Partnership Board" on 20 January 2011, though this was qualified by a statement that the document in question was "less of a strategy and more of a collection of principles". I was not referred to the document itself.
What the Claimant says is that those statements created an expectation of consultation which never in fact materialised; and that the mismatch between promise and reality was confusing.
(a) He is no doubt right that if the Council failed to consult, as he says it should have done, before the 2010/11 decisions were taken it could in principle have retrieved the position by undertaking consultation subsequently at any time before the contracts were actually agreed. But I do not see how that supports his case for extending time.
(b) I can accept that the issue is important, but that consideration does not seem to me to outweigh the prejudice that would be done by allowing so belated a challenge. I am also prepared to accept that some vulnerable persons, including the Claimant herself, are genuinely fearful of the impact of the proposed outsourcing on the services that they receive. But it is by no means established that their fears are well-founded. This is not a case where the Council wishes to proceed with a measure which is acknowledged by it to disadvantage vulnerable groups.
(c) It may be right that the Council's promises of consultation or "engagement" in relation to the Future Shape programme, including in particular the question of outsourcing, were not met. Certainly the evidence of consultation on which the Council relied before me did not raise the question of outsourcing in the way that, for example, what Mr Dix was told in August 2010 might have led him to expect. But I do not see that this is a reason for extending time. If the Council did not live up to its promises of consultation before taking the 2010/2011 decisions, that will have been apparent at once to those who were pressing for consultation.
(d) I do not understand this point.
(e) I do not believe that this submission gives sufficient weight to the importance to be attached to the interests of certainty in decision taking.
(2) TIME: THE PUBLIC SECTOR EQUALITY DUTY CLAIM
(3) TIME: BREACH OF FIDUCIARY DUTY
SUMMARY ON THE TIME ISSUE
THE SUBSTANTIVE CLAIM
" The general duty
(1) A best value authority must make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.
(2) For the purpose of deciding how to fulfil the duty arising under subsection (1) an authority must consult—
(a) representatives of persons liable to pay any tax, precept or levy to or in respect of the authority,
(b) representatives of persons liable to pay non-domestic rates in respect of any area within which the authority carries out functions,
(c) representatives of persons who use or are likely to use services provided by the authority, and
(d) representatives of persons appearing to the authority to have an interest in any area within which the authority carries out functions.
(3) For the purposes of subsection (2) "representatives" in relation to a group of persons means persons who appear to the authority to be representative of that group.
(4) In deciding-
(a) how to fulfil the duty arising under subsection (1),
(b) who to consult under subsection (2), or
(c) the form, content and timing of consultations under that subsection, an authority must have regard to any guidance issued by the Secretary of State."
"6.5 To fulfil the duty of best value, authorities should seek to achieve a balance between potentially, but not necessarily, competing objectives in particular:
- responding to the needs of all sections of the community including those groups with complex or specialist needs
- seeking to address the whole-life costs of decisions, focusing on early intervention and achieving sustainable outcomes
- exploiting economies of scale
- achieving locally-responsive services.
6.6 Achieving the right balance will require - as set out in section 2 on the duty to involve - appropriate consultation and involvement (ideally led by elected members) with representatives of local people including potentially the local authority's own workforce, and - where there is an impact upon LAAs - also require consultation with the relevant partner authorities."
(The reference to a "duty to involve" is to a distinct duty introduced by the 2007 Act, which attracts its own guidance in chapter 2.) Fresh guidance, entitled Best Value Statutory Guidance, was issued in September 2011. The passage relating to consultation reads:
"To achieve the right balance - and before deciding how to fulfil their Best Value Duty - authorities are under a Duty to Consult representatives of a wide range of local persons; this is not optional. Authorities must consult representatives of council tax payers, those who use or are likely to use services provided by the authority, and those appearing to the authority to have an interest in any area within which the authority carries out functions. Authorities should include local voluntary and community organisations and small businesses in such consultation. This should apply at all stages of the commissioning cycle, including when considering the decommissioning of services."
In neither form does the guidance appear to advance matters much for the purpose of the issue before me.
(1) The Council created on its website, and sought to publicise, an "online budget simulator", which set out the various areas of council income and expenditure and enabled residents to experiment with their interaction.
(2) The Council also made available on its website, and encouraged residents to complete, a detailed survey questionnaire. It had 59 boxes, most containing questions though some contained guidance or short summaries of Council policy by way of introduction to the questions. The questions cover a very wide range - including, for example, the amount by which respondents thought that council tax should increase or decrease, or whether proposals for savings in particular areas of expenditure were appropriate. There are no questions about outsourcing. Box 43, which introduces the set of questions relating to "Central and Corporate Services" says:
"A significant part of the savings identified would come from 'Future Shape' - the Council's transformation programme. These savings would come from bringing together all of the internal support services across the council - for instance from having a single central team responsible for managing the purchase of goods and services, or developing contracts with service providers."
The reference to "contracts with service providers" could be a reference to outsourcing, though it hardly leaps from the page, but none of the questions which follow asks about that as an issue. General questions were asked about "other areas where you think we could make savings".
(3) Those completing the survey could click though to drafts of the corporate plan and the MTFS and to the budget proposals. The Corporate Plan is a document of a very general character. Under the heading "Better Services with Less Money" there is a series of bullet-points, two of which refer to, respectively, "consolidation of back office functions" (i.e. what became the "CSO" element in the NSCSO proposal) and another to the establishment of "a new business entity for the delivery of regulatory services" (i.e. the germ of the DRS). But there is no explicit reference to outsourcing. I was not referred to anything more specific in the MTFS nor to the budget proposals.
(4) The Council conducted a series of face-to-face events which were said by Mr Cooper at para. 83.1 of his witness statement to "include":
".... the 'Leader Listens' event (which involved sending invitations to electors in selected polling districts to attend a questions and answer session) area forums and a 'Leader Listens Business Breakfast', which highlighted that the Council hoped to make savings through the implementation of the Future Shape programme."
I was not shown any documentation relevant to these events except for the Breakfast, for which I saw a summary of what was discussed. There was no reference to outsourcing.
(5) Mr Cooper says that "letters were sent out to all business rate payers". I was not shown them. It is reasonable to infer from the contents of the other materials identified above that they do not seek to initiate consultation specifically about outsourcing.
Response to the consultation was apparently poor. According to Mr Cooper, only 22 people responded to the survey. A report to Cabinet says that 53 residents used the online budget simulator.
(1) In the autumn of 2010 there was a first-stage consultation which included an "ideas website", where information was published on how money was spent by the Council and the budgetary pressures on it. This does not appear to have raised questions about outsourcing.
(2) On 7 October 2010 the Council organised a day workshop via the Barnet Civic Network, which is a group of voluntary organisations, with the title "A New Relationship with Citizens". Copies of the draft budget proposals were available to participants. I was shown the agenda, which raised five questions, namely:
- What are your views on what we can cut back on ?
- Should the council stop doing some services ?
- What could the council do better ?
- What could the council provide and charge for ?
- Are there activities that the council could facilitate rather than pay for ?"
One or two of those questions approached the margins of the issue of outsourcing, and the note of the meeting shows that the subject of "Alternative service delivery model" did come up, in connection with the estimate of the savings contained in the budget proposals. Some participants apparently raised "concerns ... about this meaning private sector involvement" and that there was "an 'agenda' behind the private sector". Others said, tellingly, that "they did not feel they had enough information to make an informed decision" (though of course the reference to a "decision" is inapt).
(3) There was again an online survey, with a link through to various documents. Those included the budget proposals, which, as noted above, contained a number of references to savings anticipated from the New Support Organisation or from an "alternative service delivery model", though no text explaining what that consisted of. I was not shown the text of the questions asked but it is not suggested that they included any directed to the question of outsourcing.
(4) Three public meetings were planned for late October/early November 2010, to cover what Mr Cooper described as "the context in which the budget setting is taking place, the level of savings required and the high level options". They were, however, cancelled because only a handful of people expressed an interest in attending the first: the relevant Cabinet member spoke personally on the telephone to those who did express an interest.
".... although there will be no compulsion to put services out to tender there should be no presumption that services should be delivered directly if other more efficient and effective means are available."
(1) The core subject-matter is "the way in which" the authority's functions are exercised. That is very general language. It could in a different context cover almost any choice about anything that the authority does. But in this context it seems to me clear that it connotes high-level choices about how, as a matter of principle and approach, an authority goes about performing its functions. I do not say that the choice of whether, or to what extent, to outsource is the only such choice; but in the light of the legislative background outlined above the "ways" in which functions can be performed must include whether they are performed directly by the authority itself or in partnership with others: indeed that would seem to be a paradigm of the kinds of choices with which section 3(1) is concerned.
(2) The duty is aimed at securing "improvements" in the way in which the authority's functions are exercised. That inevitably means change, where the authority judges that change would be for the better having regard to the specified criteria.
(3) The actual duty is not formulated as a duty to secure improvements simpliciter but as a duty to "make arrangements" to do so. I am not sure why this formula was adopted. I do not think that the draftsman was concerned with administrative "arrangements". It may have been thought that to impose a duty simply "to secure improvements" would expose authorities to legal challenges from those who contended that particular decisions were for the worse, or that authorities were wrong in failing to take particular steps which it was asserted would make things better: the reference to "making arrangements" would make it clear that the duty was concerned with intentions rather than outcome. It may also be that the draftsman wanted to emphasise the need to build the fulfilment of the best value duty into authorities' plans and procedures. Or perhaps it is just circumlocution. But, whatever the explanation, the important point for present purposes is what the arrangements are aimed at, namely securing improvements in the way in which authorities perform their functions.
It follows that one of the effects of the best value duty is to require local authorities to outsource - or, if you prefer, to make arrangements to outsource - the performance of particular functions where it considers, having regard to the specified criteria, that that would constitute an improvement.
"If consulted about the authority's Human Resources function in isolation, residents might say that it is important to them that it remains being carried out by employees of the authority itself. But if consulted about that function in conjunction with others, and against a backdrop where the authority has explained that its financial position is such that savings must be made by one route or another, residents might be considerably more amenable to outsourcing of the Human Resources function, in preference to cutting frontline services elsewhere."
"Where an authority has decided that the appropriate way to consult for the purpose of assisting it in deciding how to fulfil its duty to "make arrangements" is through consultation relating to the full range of its functions, the obvious means of carrying out that consultation is through the process of setting the authority's Budget, the Corporate Plan and the Medium Term Financial Plan. That is the stage at which the authority must itself make difficult decisions on how best to allocate its limited resources. It is of the essence of this stage that it is directed towards securing improvement in the way which the authority's functions are exercised. It is therefore the stage at which consultation will best assist the authority in deciding how to make arrangements to secure that improvement."
That is what, in essence, the Council did the present case: see paras. 64 and 65 above.
"Authorities have to use common sense. The Bill does not say "you must consult in this way on that aspect. ... We should credit local councils with a bit of common sense. That is why we are making the bill more flexible. Our proposals will not involve a consultation process that is over-prescriptive, over-bureaucratic or, quite honestly, useless."
She also referred to the section in the White Paper dealing with consultation. Paras 3.10 and 3.11 read as follows:
"3.10 Legislation could prescribe a framework for the form and timing of consultation. Consultation could be achieved, for example, through general publicity, through specific mailing of individuals and businesses, through regular feedback related to specific services, or in respect of the whole impact of the council's services on particular groups or communities. A combination of such methods, decided locally, might be feasible. The timing of the consultation process would ideally be related to the budget cycle, although this might be difficult to achieve across all services on an annual basis. The process of consultation might, therefore, need to have a longer term focus recognising that it could sometimes be difficult to adjust services instantaneously. Either way the local consultation process will be effective only insofar as it secures and sustains a positive response from local people. This will depend in part on local authorities' responsiveness, and the skill and transparency with which the issues are presented. But it will also depend on public perception of progress in restoring fiscal responsibility to councils and in involving local people in local decisions.
3.11 A formal requirement to consult in a particular way would not in itself guarantee a responsive and sensitive process, or guarantee a sense of interest and involvement by local people. There is probably no one mechanism that will be appropriate in all circumstances: individual local authorities and people will need to consider what suits their local circumstances best, building on the good practice that authorities have been developing through initiatives such as Local Agenda 21. The Government therefore favours a duty to consult cast only in general terms, leaving the process open to local discretion and the development and dissemination of best practice, including that learnt from the pilot schemes. It will take into account, however, responses to its proposals to involve local communities in shaping local services such as those described in the consultation paper on local democracy and community leadership."
It may be debatable whether at least the Minister's observations in committee are admissible as an aid to the construction of section 3; but for reasons which will appear I do not need to form a view about that.
(1) I fully accept that it cannot have been the statutory intention that every time that an authority makes a particular operational decision, by way of outsourcing or otherwise, it is required by section 3 to consult about that decision simply because that could be said to be part of "the way in which" it performs its functions. As I have said above, in this context that phrase connotes high-level issues concerning the approach to the performance of an authority's functions, and it is about those and not about particular implementation that consultation is required.
(2) Because here the Council never set out to consult about its outsourcing programme at all, the present case is not a good occasion to offer guidance on the form that such a consultation might have taken. The essential is simply that the representatives should have been given the opportunity to express views or concerns about outsourcing the functions or services in question that could inform the Council's decision-taking both on whether to proceed and on matters requiring attention in the arrangements eventually made. I repeat that that does not mean that it should have consulted on all the particular decisions, great or small, that fell to be taken by way of implementation: the Council initially believed, or affected to believe, that it was the Claimant's case that it was necessary to consult specifically on such matters as the criteria to be published for the purpose of the procurement exercise or the identity of the preferred bidder. Mr Giffin rightly disavowed any such case.
(3) I have no difficulty with Ms Carss-Frisk's submission that useful responses are most likely to be obtained if consultees are informed of the broad context in which outsourcing decisions have to be taken, or her suggestion (though in fact it appears to originate in the White Paper) that consultation is best timed as part of the annual budgetary process. Where I part company with her is the submission that consultees need not in fact be asked about outsourcing at all, as long as they are consulted generally about priorities and expenditure.
(4) The statute provides for consultation with "representatives" of the four classes specified. There was some discussion before me about whether an authority could satisfy its obligations by direct consultation with the individuals constituting the classes in question. On its face that would seem more onerous than consulting with representatives, and I think that the issue was only raised because of the reliance perforce placed by the Council on its online consultation procedures. Although the point does not fall for decision, I see no reason why the statute should not mean what it says. I was informed during the hearing of the wide range of bodies, mostly involved in the Barnet Civic Network to which reference is made above, with whom the Council deals on particular issues; and it would seem that its existing procedures could readily accommodate such consultation as might be required under section 3 (2).
(2) PUBLIC SECTOR EQUALITY DUTY
"(1) A public authority must, in the exercise of its functions, have due regard to the need to—
(a) eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under this Act;
(b) advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it;
(c) foster good relations between persons who share a relevant protected characteristic and persons who do not share it.
(7) The relevant protected characteristics are -
Pregnancy and maternity;
Religion or belief;
"Having considered these issues in detail, it is the Council's view that the overall impact on all groups with protected characteristics in the borough in terms of their access to and use of these services, the Council's ability to tackle discrimination and advance equality of opportunity, is likely to be positive. There is likely to be a neutral impact on good relations between those sharing and those not sharing protected characteristics. However these assessments will be kept under review throughout the mobilisation and contract period."
It continues, so far as customers are concerned:
"The reasons for the current positive and neutral assessments are as follows:
- No service reductions are proposed in Capita's Final Tender. In particular, face to face provision will be retained as is, in terms of location, staff numbers and opening hours.
- Capita has defined key over-arching design objectives for the NSCSO designed to ensure that Customer needs are met and groups with protected characteristics are protected including:
(a) Building Service Delivery Differently - Capita will enable multi-channelled delivery and the ability to bundle services in ways that relate to customer need and put that at the heart of service delivery. Capita will consult closely with all stakeholders and employ a co-design process with customer groups that represent the residents of Barnet so services fit into customer's lives and are easy to use.(b) Managing Service Delivery Differently - Capita will transform the way Customers interact with our services (and the Council) by transferring control to them and engaging them in service design. Insight will form the basis of the new service delivery model by investment in understanding the customer, understand need, understanding access to services and the requirements of the more vulnerable.
- Where there could be negative impacts, in terms of location, service structures and new technology, Capita has committed to a range of measures that will prevent changes from adversely impacting the quality of service provision on any customer, and introducing equalities training for staff and advocacy for vulnerable customers to make a positive contribution to equalities. Capita has also committed to conducting EIAs when any changes to services are being considered, prior to their approval and implementation.
- Capita has committed to adhering to equalities legislation and the Council's equalities policy, and producing an annual equalities report.
- Activities or measures currently undertaken by the services which promote the public sector equalities duty will be retained by Capita.
- Capita is introducing a number of service improvements that will enable better data about customers to be collected, analysed, and shared so that services can be better designed and targeted to customers needs, and committing to significant improvements to customer service outcomes such as first contact resolution and customer satisfaction.
- Capita will use the intelligence gathered through codesign and their on-going management of processes and operations to create dynamic and personalised service delivery for all customer groups. This rich understanding of customers drawn from behavioural analysis, and combined with their experience and Barnet specific Insight will enable them to identify and understand patterns of Customer behaviour and specific customer needs and tailor service accordingly."
I need not set out the equivalent passage as regards employees, since the Claimant's concern appears to be entirely about service users.
(3) BREACH OF FIDUCIARY DUTY
Note 1 I use the term “outsource” in this judgment as a convenient shorthand for any arrangement by which a public authority provides for parts of its functions to be performed by others. Such arrangements can of course take many different forms: in particular, they can involve other public or “third sector” organisations as well as the private sector, and they can take the form of a joint venture as well as the outright passing of the function to others. But these distinctions are not important to the issues which I have to decide. I will also follow the preferred usage of local authorities, though arguably it is not very apt, of describing the other party to an outsourcing arrangement as a “partner”. [Back] Note 2 The original intention to include registration of births marriages and deaths within the DRS contract was not pursued. [Back] Note 3 See R v North and East Devon Health Authority, ex p. Coughlan  QB 213, at para. 108 (p. 258). [Back] Note 4 It had initially appeared from Mr Cooper’s evidence that the Council intended to rely on miscellaneous residents’ forums and other such events where residents and others have the chance to raise questions with, or express views to, councillors. But they appeared to be of no real relevance to the issue of outsourcing and Ms Carss-Frisk in her oral submissions focused on these two consultation exercises. [Back] Note 5 I was not shown any earlier guidance that there may have been. [Back] Note 6 In fact, that kind of general consultation looks much more like the consultation which is the subject-matter of section 3A - “involvement of local representatives” - which was introduced by the 2007 Act. [Back]
Note 1 I use the term “outsource” in this judgment as a convenient shorthand for any arrangement by which a public authority provides for parts of its functions to be performed by others. Such arrangements can of course take many different forms: in particular, they can involve other public or “third sector” organisations as well as the private sector, and they can take the form of a joint venture as well as the outright passing of the function to others. But these distinctions are not important to the issues which I have to decide. I will also follow the preferred usage of local authorities, though arguably it is not very apt, of describing the other party to an outsourcing arrangement as a “partner”. [Back]
Note 2 The original intention to include registration of births marriages and deaths within the DRS contract was not pursued. [Back]
Note 3 See R v North and East Devon Health Authority, ex p. Coughlan  QB 213, at para. 108 (p. 258). [Back]
Note 4 It had initially appeared from Mr Cooper’s evidence that the Council intended to rely on miscellaneous residents’ forums and other such events where residents and others have the chance to raise questions with, or express views to, councillors. But they appeared to be of no real relevance to the issue of outsourcing and Ms Carss-Frisk in her oral submissions focused on these two consultation exercises. [Back]
Note 5 I was not shown any earlier guidance that there may have been. [Back]
Note 6 In fact, that kind of general consultation looks much more like the consultation which is the subject-matter of section 3A - “involvement of local representatives” - which was introduced by the 2007 Act. [Back]