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||Neutral Citation Number:  EWHC 1460 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
||Royal Courts of Justice
London WC2A 2LL
||17 May 2012
B e f o r e :
MR JUSTICE MITTING
Computer-Aided Transcript of the Stenograph Notes of
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Mr A Sharland (instructed by Essex County Council) appeared on behalf of the Claimant
Mr A Swift QC and MS H STAUT (instructed by Treasury Solicitors) appeared on behalf of the Defendant
HTML VERSION OF JUDGMENT
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- MR JUSTICE MITTING: On 30 November 2007, the Department for Children, Schools and Families (as it was then known) announced, in a letter addressed to all local authorities with responsibility for education and for children, their allocation of capital grants for the 3 years from 1 April 2008 to 31 March 2011. The purpose was stated to be:
"i) To improve the quality of the learning environment in early years settings to support delivery of the Early Years Foundation Stage ("EYFS"), with a particular emphasis on improving play and physical activities and ICT resources;
ii) To ensure all children, including disabled children, are able to access provision.
iii) To enable private, voluntary and independent ("PVI") providers to deliver the extension to the free offer for 3 and 4 year olds and to do so flexibly."
- The grant to Essex County Council (who I shall refer to as Essex) was to be £5,573,670 in each of the 3 years.
- On 14 February 2008, the Department notified local authorities that they would be able to carry forward unspent capital grant for the years 2007-08 into 2008-09 and from 2008-09 and 2009-10 into each of the following years, subject to submitting an audited financial statement for the year in question. On 20 February 2009, the Department confirmed those arrangements but notified local authorities that they would be expected to use all their capital grant by 2010-11 and that there would be no carry forward beyond that year. On 19 February 2010, the Department again confirmed the arrangements, with the same warning.
- The jargon used by central and local government officers to describe this process is "End Year Flexibility" and the acronym is EYF. EYF applied to three types of capital project, with the first two of which, Children's Centres and Child Care Quality and Access ("CCQ&A") (small projects) (IT facilities and the like), I am not concerned with. This case is about CCQ&A (large projects) or, in ordinary language, nursery school building projects.
- On 22 June 2010, the Chancellor of the Exchequer announced an emergency budget to the House of Commons. It required substantial cuts in public expenditure in 2010-11, as well as in future years. On 15 July 2010, the Secretary of State for Education (as he was now called) announced to Parliament his intention to make savings of about £1 billion in EYF for 2010-11. Officials were asked to make savings of about £150 million in EYF in the three categories of capital expenditure which I have identified.
- Frances Carter, head of the Grants Management Team for the Children, Young People and Families Directorate in the Department, in her first witness statement, explained the alternatives considered: a proportionate cut, which would have affected local authorities with capital expenditure projects which were well advanced and was regarded as disproportionate; savings resulting from underspending; and savings which could be achieved by reducing EYF carried into 2010-11 from earlier years. She and her colleagues finally settled on a proposal to reduce EYF but to save the Children's Centre programme (which was mentioned in the coalition agreement and was near completion) and to target savings in two of the three remaining categories of capital expenditure only: CCQ&A (small and large projects).
- The initial proposal discussed was that only those projects which had been started, in the case of large projects, by a building contractor commencing work on site, should be funded. But on 2 July, shortly before the Minister's announcement, officials were persuaded, by architectural consultants retained by the Department, that the cut-off point should be when a building contract had been signed. Thereafter, they treated that as the stage at which funding was to be treated as "committed".
- Ms Carter says, and I accept, that it did not occur to anyone at that stage that any local authority had entered into contracts for large projects which were not building contracts. There is evidence from Lisa Wilson of Essex that the particular financial arrangements made by Essex were disclosed to departmental officials and to their architectural consultants, NPS, on earlier occasions. I have no reason to doubt that that is so but, equally, I have no reason to doubt what Ms Carter says that at the stage at which they were making these important decisions, none of the officials, or those with whom they discussed the issue, had Essex's particular financial arrangements in mind. They treated as a standard state of affairs circumstances in which local authorities either had or had not signed, for themselves, a building contract.
- On 6 July 2010, Miss Carter wrote to all local authorities telling them of the need to "manage down" capital expenditure by identifying possible savings and underspends. In the third paragraph of a two page email she identified their target:
"We intend to identify areas where savings can be made and where underspends are expected, by discussing the position with LA [Local Authorities] over the next couple of weeks. We will discuss your situation with you and I ask you to consider very carefully any areas were funding is not already committed and where you may be able to make savings. We also need to know where there are any potential underspends on the allocation that you currently have."
- The Department had subcontracted liaison with local authorities and supevision of projects to architectural consultants. In the case of Essex and other counties, they were the NPS Group.
- On 7 July 2010, Jon Chaney of NPS emailed the head of Early Years and Children at Essex, Harriet Hill, spelling out what he and NPS understood that the Department intended. The language is a little strained and has given rise to some of the issues in this case:
Essex are required to deliver 26 Children's Centres, these will be unaffected and will be delivered, subject to previously stated time restraints.
Any other projects over and above this figure, for which funding has been allocated from the Children's Centre funding stream, but which are uncommitted contractually (ie no contract signed or order placed) are to be frozen as at today's date.
Do not proceed with these projects any further.
This funding will be regarded by the DfE as unallocated for the purposes of this exercise...
CCQ&A (large projects/grants)
Similar criteria as the Children's Centres are to be applied to the CCQ&A funding stream. Where an allocation has been made to a setting, but payment has not been made, the funding is to be regarded as committed only if an order has been placed or a contract been entered into and signed. If this cannot be demonstrated then this amount will be regarded as unallocated, even if the allocation has been approved by a working group/committee and the setting received notification. The key element is the entering into a legal agreement, either contract or order. Please note that documentation may be required to substantiate this.
Please advise which projects DO NOT have a signed contract. If projects are subject to a letter of intent or allocated to a contractor under a partnering agreement, please advise this also.
Contingency to be regarded as unallocated and to remain frozen as at today's date.
Lisa, please can you update the attached spreadsheet with actual dates where the forecast date has passed...
Any projects that are to have Tender documents issued before the end of July may proceed using your own judgement. The DfE have advised us that this is in an exercise and the outcome will hopefully be known within the next 2 to 3 weeks."
- On 15 July 2010, Gail Waters of NPS followed up Mr Chaney's email to remind Essex that it required information from it, including the total costs of "Childcare quality and access projects contractually committed (ie contract signed, order placed, SLA signed, funds transferred)".
- On 16 July, Essex provided a summary of their calculations to NPS, which prompted a response from NPS which queried £7,656,063 worth of funding for 13 projects on which tenders had not been returned, which they suggested should be shown as allocated but uncommitted "if contracts for these projects have not been entered into". This brought to the surface a difference of understanding between Essex and NPS, and ultimately the Department, about which projects should be treated as committed. The understanding of NPS was that that was a reference to building contracts. The understanding of Essex was that that was a reference to contracts with PVI providers, or, in ordinary language, primary schools and nurseries. This difference of understanding gives rise to the underlying challenges in this case.
- On 19 July 2010, Joanne Morris, for Essex, sent NPS a schedule of projects which she said all had contracts. NPS submitted the schedule to the Department and attended a meeting to discuss Essex's projects on 28 July 2010. Ms Carter emailed Harriet Hill on 29 July to state that funding for those projects which had not yet reached the stage when a commitment to construct had been made would be treated as unallocated, or, in the language that had been used up to then, uncommitted. On the same date, the Department's officials submitted a proposal to Ministers to exclude from EYF uncommitted expenditure in respect of projects identified by local authorities.
- On 5 August 2010, the Department wrote to Essex to ask for confirmation that £13,895,447 worth of projects would be treated at "committed" and £15,509,431 would be treated as "contractually uncommitted". On 9 August 2010, NPS emailed Essex to tell them that NPS had told the Department that Essex had "signed documentation with the providers", and spelt out clearly the criterion that was adopted by the Department:
"The presence of a signed contract with a building contractor, to carry out the construction of the project, as at 7 July 2010".
This prompted a return email 20 minutes later:
"The DFE need to be made aware that their definition of 'being under contract' is too narrow and recognise the complexity and liability of the LA and this may need to be done at Ministerial level by our senior management or the Leader of ECC.
See Derek Beer's response."
There then follows a comment by the legal adviser to Essex:
"In response to the question posed by Harriet's email of 9:56, the legal position this places ECC in should the funding be withdrawn is that ECC will nevertheless continue to be contractually bound to various parties.
This would run counter to the government's normal approach in the current cost-cutting exercise, which is to acknowledge contractual commitments."
- On 10 August, in an email sent direct to the Department, Harriet Hill set out Essex's contracts in greater detail:
"You mention that the purpose of the final stage is to make sure that the information held by DfE is correct and so I write to point out that there appears to have been an error in the classification of certain projects of Essex County Council as 'non-committed'.
The projects in question are set out in the attachment to this email and total £12,874,400.
It appears that the projects have been classified as non-committed on the basis that the county council's partners have not yet concluded contractual arrangements with third parties. However, the county council is contractually bound (and, indeed, some of the partners may have, subsequent to our reply to your original message which referred to projects under contract, have completed contractual arrangements with third parties).
The contracts between the county council and the entity procuring the service provide by virtue of Cls. 5 and 6 and Schedule 2 that ECC agrees to make the project payments if the entity proceeds in accordance with the project plan. There are no further sign-offs by the council or opportunities for the council to withdraw funding.
The specific contractual detail is as follows:
'Cl. 5.1 THE COUNCIL shall make payments of Capital Funds to THE PROVIDER for the Project Period in accordance with Clause 6.
Cl. 5.2 THE COUNCIL shall make payments to THE PROVIDER in a timely manner in accordance with the Project Plan.'
Cl. 6 is a link to the billing provisions of Schedule 2. Neither Clause 6 nor Schedule 2 requires anything further approvals from the county council. Subject to the Provider proceeding in accordance with the agreed Project Plan, ECC is bound to make the payments set out in the plan.
The net effect therefore is that the county council is now contractually bound to make these payments and if the DfE funding is withdrawn ECC will have no money to meet these contractual obligations, which would run counter to the government's normal approach in the current cost-cutting exercise, which is to acknowledge contractual commitments."
- In fact, that email did not fully set out the relevant terms of the two types of contract which Essex had entered into with primary schools and nurseries. In one type of contract there was the provision there set out for payment by Essex of a specified sum, sometimes by reference to particular stages or on specific dates. Those contracts, on their face, appeared to impose a contractual obligation on Essex to make payment, but other contracts imposed no such express obligation. Each type of contract contained provisions, one of which undoubtedly, and the other of which arguably, permitted Essex to withdraw at no, or no significant, cost. Clause 9 in both types of contract provided:
"This contract may be terminated only by the council on giving reasonable written notice to the school..."
And clause 14 in both contained a force majeure clause:
"For so long as such circumstances prevail, no party shall be liable for any failure or delay in the performance of its obligations and/or duties under this contract to the extent that such failure or delay is caused by circumstances beyond that party's reasonable control."
- The existence of both of those clauses became clear later on in discussions between Essex and the Department.
- A schedule was attached to Ms Hill's email which identified the dates on which Essex had entered into contracts with primary schools and nurseries, all but one of them before 7 July 2010, and shows that in most cases five figure sums had been paid by Essex to them, it seems for professional fees and such like.
- On 25 August 2010, Essex wrote to the providers:
"Since allocating you the grant, we have been informed by the DfE that all awards for which there is not a signed contract with the builder they consider unallocated and, therefore, subject to clawback by central government.
We are vigorously contesting this interpretation on the grounds that we have always expected those awarded the grant to procure the contractor, and that our contract is with the organisation awarded the grant. However, we are still awaiting the DfE response to our argument.
In the light of this, I must tell you that you should not, until this is resolved, sign any contracts following tenders. This is because, if the DfE maintains its position, EEC will not be able to claim grant and will be unable to pay you the grant awarded by the panel."
- The Department did not agree with Essex's stance. It regarded expenditure as committed only when a construction contract had been entered into, not when funds had been passed or promised to third parties, such as primary schools and nurseries, for them to spend, a practice known as passporting in the Department (see Ms Carter's internal email of 22 September 2010).
- On 24 September 2010, a two and a half hour meeting took place at the Department between officials of the Department, including Ms Carter, and Essex, including Ms Wilson and officers of NPS. Essex identified 20 projects which they believed should be treated as "committed" and said why: Essex was committed by contract and would face legal action if they broke their contract. Ms Carter confirmed the Department's definition of "committed". Each of the 20 projects was then discussed, it seems in some detail. There is no agreed minute of the meeting but I have the Department's note of the meeting which, subject to one matter, seems to me to record all that was discussed. The one matter concerns the raising or not of equality duties, to which I will refer later.
- On 3 November 2010, officials submitted a briefing note to the Secretary of State. It noted that all but two authorities, one of which was Essex, had accepted the Department's decisions about grants for capital projects, and went on to analyse the position of Essex in some detail. It began by considering whether, impliedly, an exception should be made for Essex, but the conclusion recommended was that the same criteria should be applied to Essex as was applied to other local authorities and that the Department was confident that the process was fair and equitable and could be demonstrated to be so. Individual projects affected by the Department's decision were then identified. It is unnecessary for me to set out any of the detail contained in the briefing note, only the conclusion that officials recommended - that Essex's carry forward of its EYF should be reduced by a total of £12.9 million.
- Paragraph 28 of the note contained a description of the likely impact on Essex. It contains what may be a material inaccuracy:
"For Essex the impact is likely to be greater. LAO [the Department's legal adviser] has advised that the contracts entered into by Essex with providers prior to the grant of planning consents and tenders are binding, and that breaking them will likely lead to penalties. However, whilst the reduction we are recommending is significant, so is the remaining allocation. We are protecting a sizeable 2010-11 base allocation and still granting some carry-forward. Essex would be left with a revised 2010-11 allocation of £20.3 m and offered support to re-prioritise their capital programme accordingly."
- Part of the legal advice given by the Department's legal adviser has been disclosed without waving privilege on the remainder. The advice reads:
"I have considered the form of contract which Essex have purportedly entered into with a number of providers. Once executed these would be binding on Essex in the usual way (even if they were entered into in breach of planning procedures and/or the proper tender process - at least until a Court orders otherwise). The statement on the front page that the contract becomes void if not returned after 30 workings days would not alter the position - this is probably intended to mean that the contract terms can be withdrawn if they are not signed up to in that time, but they would become binding whenever both parties sign. The termination clause does appear to allow Essex to withdraw from the contract without penalty however, so that they can mitigate any losses incurred if they do not receive the funding to enable them to proceed. In addition, clause 14 provides that neither party will be liable for any failure or delay in the performance of its obligations under the Contract to the extent that such failure or delay is caused by circumstances beyond that party's reasonable control - which arguably a withdrawal of the department's funding would be."
- For what it is worth, I agree with the legal adviser's advice: the cautious second proposition that clause 14 might permit Essex to escape liability in the event that funding was refused and the more confident advice that clause 9 permitted Essex to withdraw from the contracts on reasonable notice without penalty. In any event, that is what the officials of the Department understood the position to be: that Essex could withdraw from the contracts with providers where they, the providers, had not become contractually bound to contractors, without penalty, or at least significant penalty, or adverse financial consequences.
- One notable omission from the briefing note was any reference to equality duties. The Secretary of State approved the recommendation. On 22 November 2010, the Department notified Essex of the Secretary of State's decision:
"Together with our architectural advisers (NPS) we have now considered your representation and have been able to partially accept your changes. Where we considered that funds were committed according to the criteria we issued we have been able to accept the changes (totalling £2.2m). However, where we have found there was no evidence of commitment to construct at the date of our original request we have been unable to accept the amendment (£12.9m). On that basis I can confirm that your revised allocation for 2010-11 is £20,320,905."
There then follows a breakdown of how that sum was made up. Included within it is a carry forward allowance from 2009-10 of £11,386,998:
"I understand that some local authorities will have incurred some abortive fees. Usually such costs are met from revenue funding rather than capital. However in this case if you are in this position, up until the date of this letter, you can choose whether to count costs already incurred against your revenue allocation or your revised capital allocation. After the date of this letter, you will need to account for abortive costs in the usual manner."
- In an exchange of emails between 23 and 25 November, the Department identified the five projects in respect of which EYF had not been withdrawn and gave, in response to a request for a "quick explanation", the answer that it had accepted a case put forward by NPS based on "how far these projects had actually reached".
- Ms Wilson, the Early Years and Childcare Funding Manager for Essex, in two witness statements, has explained that despite the Secretary of State's decision, Essex completed substantially all of the projects in respect of which, or by reference to which, the Secretary of State had withdrawn EYF. Mr Sharland, for Essex, tells me, and I accept, that roughly £5 million was spent in 2010-11 and approximately the same sum in 2011-12. Essex claims that but for the Secretary of State's decision and the time taken to make it, projects which were completed after the year end would have been completed during 2010-11 and so would have qualified for EYF had the Secretary of State's decision not been made. I lack the information necessary to determine whether or not that submission is wholly or partly correct. On any view, the Secretary of State's decision caused Essex not to receive a significant sum by way of a central government grant and for the purposes of this case it does not matter precisely what that sum was.
- There are three grounds of challenge:
1. Lack of consultation.
2. Irrationality in the choice of criteria.
3. Failure to fulfil statutory duties under the equalities legislation.
- I deal first with consultation. This issue overlaps with irrationality but I will deal with it discreetly first. It is first of all necessary to identify what aspects of the decision-making is not challenged on this ground. Mr Sharland does not suggest that the Secretary of State should have consulted before deciding to make a drastic reduction in education expenditure for the year 2010-11 in July 2010. Secondly, he does not submit that Essex, or local authorities generally, should have been consulted about the decision to achieve part of that reduction by reducing EYF. Thirdly, he does not submit that, having determined the criteria by which reductions were to be made, the Secretary of State failed in any duty of consultation about the detailed application of the criteria. He accepts that such a duty, if it existed, was fulfilled by the meeting on 24 September 2010. His case is specifically and precisely targeted. He submits that the Secretary of State was under a duty to consult about the criteria to determine what was and what was not committed expenditure.
- This issue arose in a challenge which also was made to a different aspect of the Secretary of State's decision to cut local authority funding in R(Luton & other councils) v Secretary of State for Education  EWHC 217 (Admin). In it, Holman J cited the, by now accepted, test for the existence of a duty to consult, that set out by Laws LJ in R(Bhatt Murphy) v The Independent Assessor  EWCA Civ 755. Laws LJ considered the two types of legitimate expectation which could arise in respect of a public law decision. The first, with which I am not concerned, a substantive legitimate expectation, and, secondly, a procedural legitimate expectation. At paragraph 49, he observed:
"Accordingly for this secondary case of procedural expectation to run, the impact of the authority's past conduct on potentially affected persons must, again, be pressing and focussed. One would expect at least to find an individual or group who in reason have substantial grounds to expect that the substance of the relevant policy will continue to enure for their particular benefit: not necessarily for ever, but at least for a reasonable period, to provide a cushion against the change. In such a case the change cannot lawfully be made, certainly not made abruptly, unless the authority notify and consult."
- Those comments might have been deployed in relation to a challenge to make the cut in EYF in July 2010. They are more difficult to deploy in relation to the specific challenge to lack of consultation about the criteria.
- In support of his assertion that the Secretary of State had become under a duty to consult with Essex about the choice of criteria, Mr Sharland relies on two things. First, the importance for the inhabitants of Essex of the decision and, secondly, the fact that Essex officials had, during the course of the CCQ&A project, had regular talks with the Department's agents NPS about specific projects. Mr Sharland submits that there is a close analogy with the situation which arose in the Luton case, in which an outline business case for a school building had been accepted by the Department between January and July 2010. Holman J concluded that, principally for that reason and because there was continuing dialogue between the Department officials and local authorities about those plans, a duty to consult arose before they were abruptly cancelled.
- Mr Sharland's first premise that the importance of the topic should have given rise to an obligation to consult about the criteria I find difficult to follow. I accept that the topic was important for the inhabitants of Essex but I do not accept that that fact by itself imposed on the Secretary of State an obligation to consult about the precise criteria which he would select to reduce EYF for capital projects. Secondly, the discussions that had taken place been Essex and NPS were discussions about individual projects, they were not discussions about what might happen if financial stringency required some of the projects to be cancelled. They were simply discussions of a kind that one would expect to occur between architectural consultants retained by the ultimate paymaster and the local authority responsible for establishing the projects and bringing them to fulfilment.
- Nothing in the Department's conduct in either respect could be described as giving rise to a procedural expectation which was "pressing and focused". There was no expectation on the part of Essex that this particular category of funding would enure indefinitely or even that it could not be withdrawn in one financial year when it had been promised in another. Every public authority knows, or is to be taken to know, that public funds are voted by Parliament annually and that no Minister can make a promise in respect of future years, not secured by an ordinary commercial contract, to make payments which are to be voted in future by Parliament. That is precisely what this scheme was, an allowance by the executive to local authorities to carry forward capital expenditure which they had not incurred in a previous year. If it is not open to the local authority to contend, as it is not, that the Secretary of State should have consulted them about the wider picture, I see nothing in the facts and nothing in principle to suggest that he should have consulted them about the precise terms upon which he proposed to take his decision.
- The rationality challenge is similarly unarguable. The Secretary of State was entitled to choose to achieve cuts in funding by making those cuts which imposed the least burden on the public purse, including on the purse of local authorities. Essex have laid heavy emphasis upon the apparent reliance upon the existence of binding contracts of whatever nature and submit that the Secretary of State's reliance only on construction contracts is irrational. With respect to Mr Sharland, the argument overlooks the underlying motive for the decision and the underlying nature of the decision. It is explained by Ms Carter, in her third witness statement, in terms which I accept:
"The 'in principle' decision taken at the beginning of August 2010 [perhaps at the end of July, given the history which I have recited] was not as detailed as that. Essentially, we adopted a single criterion of whether or not funding was 'contractually committed' and for that purpose we assumed (based on the advice we had received from the architectural advisers) that it would be 'contractually committed' if a contract with a builder had been entered into or an order for the purchase of a capital asset made - ie what had been explained to Essex in Mr Chaney's email of 29 July 2010. Where authorities had particular situations for which they considered those criteria to be inappropriate, however, we considered their cases individually, as we did for Essex."
- Once Essex produced copies of its contracts with primary schools and nurseries and the Department had obtained proper legal advice about the effect of these contracts, it was apparent to officials, and through them to the Secretary of State, that cancellation of the projects before the primary schools and nurseries had become contractually committed to builders could be achieved at no, or no great, cost. Given the nature of the exercise that the Secretary of State was undertaking, the urgent saving of public funds where possible, a criterion identified to achieve that purpose cannot be described as irrational. I am satisfied that the criteria adopted by the Secretary of State, which I have described at some length, was rationally connected to the object to be achieved and itself a reasonable choice from amongst those available.
- I turn to the third challenge. The decision was taken before the Equality Act 2010 came into force, accordingly section 71(1) of the Race Relations Act 1976 and section 49A(1) of the Disability Discrimination Act 1995 applied. Section 71(1) provided:
"(1)Every body or other person specified in Schedule 1A (which includes a Minister)...shall, in carrying out its functions, have due regard to the need—
(a)to eliminate unlawful racial discrimination and victimisation; and
(b)to promote equality of opportunity and good relations between persons of different racial groups."
Section 49A(1) provided:
"(1) Every public authority shall in carrying out its functions have due regard to—
(a) the need to eliminate unlawful discrimination and victimisation...
(c) the need to promote equality of opportunity between disabled persons and other persons;
(d) the need to take steps to take account of disabled persons' disabilities, even where that involves treating disabled persons more favourably than other persons."
- The importance of fulfilment of those duties has been emphasised in an unbroken series of cases. What is known as the "Brown" principles govern the approach which decision-makers should take. That is a reference to R(Brown) v Secretary of State for Work and Pensions  EWHC 3158 and the reserved judgment given by Aikens LJ. Again, I am grateful to the summary of the Brown principles set out by Holman J in the Luton case at paragraph 104:
"i) The decision maker who has to take decisions that do or might affect disabled people (or persons of different race or sex) must be made aware of his duty to have 'due regard' to the identified goals.
Ii) The due regard must be fulfilled before and at the time that a particular decision is being considered. Attempts to justify a decision as being consistent with the exercise of the duty when it was not, in fact, considered before the decision, are not enough to discharge the duty.
Iii) The duty must be exercised in substance, with rigour and with an open mind. The duty has to be integrated within the discharge of the public functions. It is not a question of 'ticking boxes'. However the fact that the duty has not been specifically mentioned (although it is good practice to do so) is not determinative of whether it has been performed.
Iv) The duty is non delegable.
V) The duty is a continuing one.
Vi) It is good practice to keep an adequate record showing that the equality duties had been actually considered and pondered. That disciplines decision makers to undertake their equality duties conscientiously."
- I make one qualification to that otherwise uncontroversial summary. The statement that "the duty is not delegable" requires qualification. It is based on a longer statement of the court in Brown at paragraph 94:
"Fourthly, the duty imposed on public authorities that are subject to the section 49A(1) duty is a non–delegable duty. The duty will always remain on the public authority charged with it. In practice another body may actually carry out practical steps to fulfil a policy stated by a public authority that is charged with the section 49A(1) duty. In those circumstances the duty to have 'due regard' to the needs identified will only be fulfilled by the relevant public authority if (1) it appoints a third party that is capable of fulfilling the 'due regard' duty and is willing to do so; and (2) the public authority maintains a proper supervision over the third party to ensure it carries out its 'due regard' duty."
- In my judgment, Aikens LJ was not purporting to override or in any way qualify the long-established principle that central government acts not personally by a Secretary of State but by a Secretary of State advised by numerous officials. There is no need for me to cite the well-known passage at  2 All ER 563 A - C in the judgment of Lord Greene MR in Carltona v Commissioners of Works. I make that qualification because of a concession that seems to have been made to Holman J in the Luton case by Mr Goudie QC, on behalf of the Secretary of State for Education, noted at paragraph 105:
"He submits that the Secretary of State personally (the duty being non delegable) was well aware of his duties under the relevant statutory provisions and did have the required due regard."
- In that case, as in this, it was the Secretary of State who personally made the final decision but I would not have regarded it as unlawful for the Secretary of State to have relied on consideration given by officials to the equality duties who then reported to him in a briefing note that, having given that proper consideration, they were satisfied that the duty to eliminate unlawful discrimination or promote equality of opportunity had been fulfilled. I do not regard the decision in Brown as meaning that the Secretary of State could not within his own department delegate the task of discharging some of his functions to officials. What is prohibited, subject to the qualifications identified by Aikens LJ, is the delegation of that responsibility to outsiders, whether they be another department of state or public authority or private concern.
- Were the duties to have regard to those considerations discharged? Mr Swift QC, for the Secretary of State, urges upon me that although there is no express reference in any of the contemporaneous documents, including the briefing note to the Secretary of State, I could nonetheless be satisfied that the duty was discharged. He relies on four propositions. First, that the officials charged with making recommendations to the Secretary of State were well aware of their duties. They had received training and regular communications about their fulfilment. Secondly, because the Secretary of State's decision was bound to impact on disadvantaged groups in respect of whom the duty arose, so inevitably it must have been considered. Thirdly, that by cutting off uncommitted funds the best method was achieved of safeguarding the interests of the groups in question. Fourthly, that because it was the local authority who actually spent the money and because the Secretary of State did not purport to direct them upon what or how it should be spent, they were better placed to discharge the duty than the Department.
- I deal with those four submissions in turn. Susanna Todd, the Deputy Director of the Directorate Support Division for the Children, Young People and Families Directorate within the Department says, in her witness statement, that consideration was given to the statutory duties, and describes the training that she personally has received, as well as some of the communications also received while this exercise was under way and before it. She and her fellow official, Ann Gross, says, and I accept, that they did not consider it necessary to carry out a formal equality impact assessment either in relation to the EYF exercise overall or specifically in relation to Essex. I accept, therefore, the factual premise of Mr Swift's first submission.
- The second is self-evident. It was obvious that withdrawal of funding for capital projects for primary schools and nurseries would have an impact on the disabled and might well have a disproportionate impact upon children and parents from ethnic minorities. However, the extent of the impact on the latter category could not, in any of the documents that I have seen, have been discerned.
- As to Mr Swift's third proposition, I do not accept its rationality. The impact of not building a school or schoolroom for 3- to 4-year-olds would be the same on them whether the local authority was contractually committed to building or not. What would matter in relation to them was the impact which it would have, either on them in their immediate area or on children and their parents in Essex generally, or in local authorities generally.
- There is more in the fourth reason. Local authorities obviously would have greater knowledge of the impact which cuts would have upon families in their areas and it would be reasonable for the Secretary of State to assume that any such detailed assessment would be carried out by the local authorities; certainly the Department was not in a position to do so. But on the overall impact of cuts in EYF funding in Essex or in local authorities generally, the Department, perhaps informed by information provided by Essex and other local authorities, could have put itself in a position in which it was able to evaluate the impact of the measures upon the relevant groups.
- Accordingly, I do not accept that the Secretary of State, either personally or by his officials, fully discharged the duty upon them of having regard to the duty to eliminate unlawful discrimination and to promote equality of opportunity provided for in the two Acts. The rigour of that requirement is established by the case law and summarised in the Brown criteria.
- I have not yet heard final submissions on what, if anything, should be done as a result of that conclusion. It would, therefore, be inappropriate for me at this stage to say any more about it, other than that I am satisfied that the decision was flawed but flawed in that respect and for that reason only.
- MR SHARLAND: Thank you very much, my Lord. My Lord, we would ask that the decision-making process is quashed in light of your judgment, my Lord, that is the appropriate remedy in this case and we would also ask for our costs, my Lord.
- MR SWIFT: My Lord, I think I should first deal with the points Mr Sharland made earlier to the effect that the Secretary of State should not be permitted to rely on the assessment that has recently been undertaken. My Lord, I appreciate that it was a document that was recently provided to the county council. It is under cover of a letter of 3 May and you will have seen, perhaps, the council's response of 8 May. Be that as it may, the county council has had a period of 2 weeks to consider the document and to at least commence formulating any response to it. So, my Lord, the first point I would make is this: that if the objection is advanced only on the basis that the county council has not yet had the opportunity fully to consider and respond to the document, the correct means of addressing that objection is not to prevent the Secretary of State from relying on the document but, if appropriate, to permit a further period of time in order to identify the submissions they wish to make in response to the Secretary of State's reliance on it. The next point that is made is it said that the document is inadmissible because it was made without prior consultation with the county council.
- MR JUSTICE MITTING: I think it is not inadmissible for that reason but flawed for that reason, is what is suggested. I think inadmissibility goes to the late stage in the production of it.
- MR SWIFT: It is certainty not inadmissible on the face of it, I say, but also not flawed either. There is no obligation to consult in order to have the due regard required by either the Disability Discrimination Act or Race Relations Act or, for that matter, the Equality Act. So, my Lord, firstly, it is not an objection to its admissibility nor, in our submission, is it any form of objection to the content of the document.
- Then it is said that the document does not address matters as at the time of the 2010 decision. Well, my Lord, it does. It addresses them both as at 2010 and as at the present date, or seeks to do so.
- Then it is said it does not address matters or does not refer to the provisions of the Equality Act. My Lord, again, it does. It refers both to those provisions and to the predecessor provisions of the Race Relations Act and the Disability Discrimination Act.
- Next it is said that it does not refer specifically to one part of the document from 2008. That is the childcare sufficiency assessment document. My Lord, I accept that it does not refer specifically to that point, and that is a proportion of people who do not use preschool childcare facilities who are from minority ethnic groups, but if you are permitted, or if you permit yourself, to consider the document as a whole, you will see that the document does squarely accept that the potential impact in the event that there is less grant funding available is that persons from disadvantaged groups will not, or may not, have access to preschool childcare facilities which they might otherwise have. So, to that extent, the particular bit of information may not have been referred to but I say that does not of itself establish any fundamental flaw with the document, as one needs to look at it in the round.
- So although those latter points are points that are said to be failings in the document, they are not, in my submission, matters that should prevent you from considering the document for the purpose of submissions on remedies.
- My Lord, further, we say there are important reasons why you should consider this document for the purposes of remedies. First, it would mean that, to the extent that the Secretary of State has been able to remedy the defect of the decision-making process that has been identified in your judgment, that is a matter on which that can be addressed now sooner rather than later and that must be a point that is important if it can be done. Secondly, it is ordinarily the case that if there is a substantial dispute on the question of remedies, the court will look at what the decision-maker has done after the event, to see whether that is material to the discretion the court has. It would be entirely artificial, in my submission, for the court to assume in this case that there was nothing attaching to its discretion to grant relief because the Secretary of State had done nothing after his decision, when, in fact, he has attempted to act responsibly and address matters and, in those circumstances, as I say, it would be inimicable to good decision-making in response to public authorities for a court simply to disregard the document and grant relief on the basis that the exercise had not been undertaken at all.
- So, my Lord, I say you should have regard to this document and I say, quite simply, that if you do not, you are not in a position properly to address the question of relief.
- MR SHARLAND: My Lord, I actually thought you had ruled on the admissibility of this document earlier.
- MR JUSTICE MITTING: No, that was for the purposes of the hearing on the substantive issue. We have now got to relief. I invited preliminary submissions to see if I could find my way round before we got to this stage but my decision, once I had heard your submissions on this aspect, was that I would defer it until after I had given my ruling and then deal with all questions relating to relief, including whether or not I should look at this document formally.
- MR SHARLAND: I am very grateful for that indication. My Lord, part of our point is taken on the lateness of this document and the unfairness to my client. I think the letter was sent on the 3rd, even though it may have been received on the 4th but there have been other things going on both in Essex -- it is a busy local authority and this case has taken some preparation, my Lord. So my learned friend has not given any explanation why this was not done in November. The BSF case, the equality impact assessment was done within months of the decision, indeed after the decision. We have got no explanation whatsoever why the Department just sat on their hands since November 2010 and why it was only in early May, just before the hearing, they were able to do this, my Lord. I would expect a witness statement explaining this because it is a discretion whether to admit it, my Lord, and there needs to be a good explanation why it has come so late. They have no right to put it in, my Lord, and it is whether the court should exercise its discretion. They have provided no explanation why you should exercise your discretion.
- Secondly, my Lord, it is important that both parties are treated in the same way. In relation to our irrationality ground, notwithstanding the Secretary of State had an opportunity, and did take that opportunity, to put in evidence in response, the council were excluded from advancing that argument on the grounds, I think, of fairness and, secondly, that it should have been raised earlier. Well, my Lord, both those points apply with greater force in relation to this issue and my client is entitled to be treated fairly. I did flag up this point but, my Lord, you were ahead of me anyway, you knew I would be but it would be fundamentally unfair to the council, my Lord. Further, it does not assist my Lord my learned friend saying that the decision will inevitably be the same, so there is no point quashing but, my Lord, I think you accepted when I suggested it that the council is going to be entitled to make submissions on all matters in this decision.
- MR JUSTICE MITTING: I am not sure about that. That depends upon the relief that I grant. If I quash the decision, I can direct that it is taken in the light of any equalities impact assessment or such like that is undertaken and not by reference to any other factors.
- MR SHARLAND: Well, my Lord, you may well have that power but I would suggest that it is wholly inappropriate and it does not make for good public authority decision-making if the council are not allowed to make other points, my Lord.
- MR JUSTICE MITTING: Why not?
- MR SHARLAND: The norm would just be quashing, my Lord. In ex parte C, the Court of Appeal invoked the rule of law. The usual course should be quashing in these circumstances and not quashing at liberty, just quashing, my Lord.
- MR JUSTICE MITTING: There is no jurisdictional constraint upon a court quashing a decision on one ground and requiring it to be retaken in respect of that ground only and not in respect of any other ground.
- MR SHARLAND: I did not say that you did not have the power to do so, my Lord, I am saying you should not do so.
- MR JUSTICE MITTING: Why?
- MR SHARLAND: Because the council should have an opportunity to raise relevant matters. To limit a decision to only certain factors, my Lord, is not going to improve the quality of decision-making, it is going to make it worse.
- MR JUSTICE MITTING: On the contrary. There is a reasonable requirement for finality in decision-making and if a decision is right on three grounds and is wrong on one only and that ground can be dealt with discretely, I do not see why grounds 1 to 3 should be taken all over again.
- MR SHARLAND: Well, my Lord, it is not a question of grounds, it is a question of points of fact and submissions being made to the Secretary of State. If the Secretary of State does not think much of those submissions, it can no doubt say, "I do not think much of those submissions". If the council try to re-run a particular point saying we return to consultations, in light of your judgment, the Secretary of State may reasonably confidently say, "I am not very impressed with that point", my Lord.
- MR JUSTICE MITTING: What is the point of requiring a process to be gone through in respect of all points other than the equality issue, which will, by reason of my judgment, unquestionably achieve the same result?
- MR SHARLAND: Well, my Lord, what you are proposing, I am not suggesting that you do not have the power to do so, but I would say look at what happened in ex parte C. The decision there was quashed solely on this ground. It was not remitted back just to look at that particular ground, it was quashed. My Lord, we would say that is an appropriate response here. My Lord, the court is usually concerned with the legality of what has happened in the past, it is not generally to supervise what happens in the future. The Secretary of State, I assume, can be trusted to act lawfully in the future and reconsider his decision with an open mind, taking into account relevant factors and disregarding irrelevant factors. This is a relevant factor but it has to be considered in the round. So, my Lord, I do not accept you can take it out of the equation. The Secretary of State has to consider the decision again, considering all relevant factors and disregarding all irrelevant factors. By limiting his discretion by only limiting it to this, my Lord, I would suggest that you would be undermining the legality of his judgment, his discretion. My Lord, I suggest this is not a case to make new ground in relation to remedies, it is appropriate to follow the traditional course, my Lord, and to quash the decision. My Lord, I believe the editors have dismissed, in the context of discretion, recognised the court's discretion but say the normal approach should be to quash. Yes, they quote the House of Lords in Berkeley that the requirements of rule of law means that "the discretion of the court to do other than quash the relevant order or action where such excessive exercise of power is shown is very narrow".
- MR JUSTICE MITTING: Berkeley was a case involving and environmental impact assessment, or the lack of one, was it not?
- MR SHARLAND: It was my, Lord.
- MR JUSTICE MITTING: And that vitiated the decision fundamentally.
- MR SHARLAND: As does failure to have regard to equality duties. I would say that they are directly analogous. The courts have consistently emphasised the importance of this, my Lord. The environmental impact assessment is also important but the decision-maker may have got 95 per cent of his decision right but missed out the EIA but the courts do not say, "Well, you can keep your 95 per cent, you have just got to fit in the EIA". They quash it and say, "Look at it again, look at the relevant considerations and disregard the irrelevant considerations and act lawfully this time". I am very grateful, my Lord.
- MR JUSTICE MITTING: Very well, understood.
- MR SWIFT: Two points, if I may, my Lord, in reply. Firstly, the relief that you grant must reflect your judgment. You have concluded, firstly, that the Secretary of State was not under any obligation to consult the county council. You have also concluded that the Secretary of State adopted rational criteria. Where the Secretary of State fell down was that he needed to think further. I précis significantly your reasons. He needed to think further about his obligation to have due regard. So your relief must focus, in my submission, on that point. My Lord, the second point in relation to that -- and this is back to should you consider the assessment the Secretary of State has now caused to be undertaken? -- perhaps it might be helpful to look at it in these terms: assume that you do not consider it, what is the Secretary of State going to do next? Now, my Lord, clearly the Secretary of State will study the relevant part of your judgment. That is an important part of the exercise. But, nevertheless, the Secretary of State does believe that he has now faithfully addressed his due regard obligation through the current assessment and so, on that basis, subject to consideration of your reasons, the Secretary of State would be likely to reach a conclusion that, if he takes into account what is in the assessment, he is in a position lawfully to decide whether to affirm his decision or not. Now, given that is the likely sequence of events, in my submission, it would plainly be -- well, plainly it is permissible and, in my submission, plainly preferable for the court to look at matters now based on that assessment. It is all very well for Mr Sharland to say if we need to have round two or round three of litigation, let us lawyer up and spend the money, but that is not, with respect, the real-world approach, it certainly is not an approach that should lightly be taken by any public body or the Secretary of State or a county council and so I do say, and stick with the submission I made to you, that if you are to exercise your discretion in an effective way when it comes to relief, you should have regard to the content of this report.
- Now, if Mr Sharland is saying the county council has not had sufficient time to consider the report and so is not in a position to make submissions in respect of this, well, my Lord, in those circumstances, the appropriate action is to give the county council more time and to adjourn the submissions on the question of relief for a suitable period to allow the county council an opportunity to consider. But they have had this report for 2 weeks and this is not a matter where the county council starts, as it were, from a standing start. Significant thought has clearly been given to these equality issues in the context of bringing the proceedings and preparing for this hearing. So, to that extent, the county council ought to be in a position relatively quickly, if not now, to address any matters arising out of the assessment that the Secretary of State has undertaken.
- MR JUSTICE MITTING: I decline to make the assessment myself and to consider whether or not the Secretary of State would inevitably, in the light of the equality impact assessment that has now been made, determinate, and determine lawfully, that the outcome would be the same. I decline to do so for three reasons. First, the duty is upon him, not on me. Secondly, the duty is an important one, as the case law establishes. Thirdly, the law has changed and the facts may have changed since the original decision was made. The two Acts have now been replaced by the single Equality Act 2010, using slightly different language and it is that act which the Secretary of State now has to apply.
- For those reasons, I decline to refuse effective relief to the partly successful claimant. However, given that I have decided, for the reasons that I have explained, that the other challenges to this decision have failed and that in all other respects the decision was lawful, I see no good reason for putting the Secretary of State to the expense and trouble of re-deciding those issues in the light of whatever the claimant may wish to submit to him about them. I will quash the decision and I will order that it be retaken but only to give effect to the Secretary of State's obligation under, now, the 2010 Equality Act. I will state expressly in the order that he need not reopen or reconsider any other issue, save to the extent that consideration of his duties under the 2010 Act requires him to do so.
- MR SWIFT: My Lord, can I address you on costs?
- MR JUSTICE MITTING: Of course, but can I, first of all, ask the two of you to prepare a formal order that reflects what I have just said. Costs, you are going to say it is a curate's egg.
- MR SWIFT: I think that is right. My Lord, in my submission, this is a situation where the claimant should recover only a proportion of its costs. The claimant pursued three grounds, lost on two. The two it lost on were factually quite intensive reasons, and you have seen ping-pong witness statements, they pretty much all deal with questions going to rationality and, to a lesser extent, consultation.
- MR JUSTICE MITTING: Would I be wrong in my estimate that about 10 per cent of the paperwork and the background work has been devoted to the equality issue and 90 per cent to the rest?
- MR SWIFT: I think in terms of paperwork, that is right. I think that 10 per cent would include the Secretary of State's controversial recent assessment. But, my Lord, in terms of paperwork, that is right. In my submission, I accept the court will give due weight to the fact that, in part, the claimant succeeded and, to that extent, that is going to be reflected to the extent to which the costs are recoverable. But, my Lord, I say, taking a rough and ready approach, which is effectively what you are required to do by the CPR in such a case, by looking at it in terms of percentages, if possible, rather than issues, that it would be appropriate that the claimant recover no more than 40 per cent of their costs, to be assessed on the standard basis.
- MR SHARLAND: My Lord, somewhat unsurprisingly, we say it should be 100 per cent. The equality ground has been raised from the outset, my Lord, and it has been raised clearly. The Secretary of State's evidence on this was non-existent. This was a clear-cut case where the Secretary of State should have conceded this matter when we commenced action raising the equality issue. If they had acted reasonably at that time, tens of thousands of pounds of public expense would not have been wasted on this litigation. It was in the Secretary of State's hands to avoid that great expenditure, a matter that no doubt my learned friend's client is greatly concerned with. He chose not to. He chose to fight this case tooth and nail. The equality duty, there was no concession on it. Just before the hearing, they produced an equality impact assessment, although their pleadings said they were not able to do that. No apology. They could have got rid of this case very easily but they chose not to. They fought it hard all the way and then lost and my Lord quashed it. In those circumstances, 100 per cent of the costs is appropriate, particularly bearing in mind the importance of the matter, the anti-discrimination provisions, the consistent emphasis and the fact that they fell down a long way from what was required here.
- MR JUSTICE MITTING: I think you have to face the fact that you have not succeeded on a significant part of your case. You cannot get away from that by expressing yourself with eloquent forcefulness and highlighting the Secretary of State's shortcomings.
- MR SHARLAND: My Lord, I accept that we did not succeed but it is very common for a claimant to advance a number of grounds, succeed on one or two and get 100 per cent of their costs. That is very much the norm and, as I say, it was in the Secretary of State's court, they could have ended this and saved tens, if not hundreds, of thousands of pounds of public money but he chose not to, my Lord, and he knew that there was not a shred of any contemporaneous evidence of consideration, my Lord. It is really does not reflect well on central government's decision-making.
- Miss Todd, who gave her evidence, said, "I am well aware of this, I have looked at what was said", and we looked at the documentation that she said she had seen and considered and she just ignored it, my Lord. It was very clear what was expected of decision-makers. This was clear-cut case on equality duties, my Lord, and, in those circumstances, I would ask for 100 per cent of my client's costs.
- MR JUSTICE MITTING: The defendant must pay 50 per cent of the claimant's costs, to be the subject of a detailed assessment if not agreed. I reach that proportionate decision fundamentally for two reasons. First, the claimant has won on a significant ground, a ground which the Secretary of State could have conceded at the outset, but the claimant has lost on the grounds which have taken the great majority of effort, both in financial and legal terms, to advance. In those circumstances, a proportionate order is inevitable and 50 per cent is the best figure at which I can arrive.
- MR SHARLAND: I am very grateful, my Lord. There is just one final matter. I would ask for permission to appeal against the order. We say that in the circumstances of this case a quashing order is appropriate on its own and by limiting the Secretary of State to just that matter, it is arguably an error of law. My Lord, I perhaps anticipate what you are going to say in response to that but, as a matter of form, I feel I should flag it up.
- MR JUSTICE MITTING: You anticipate correctly. I do not believe that the order that I have made, in the light of my reasons and conclusions, is outwith my jurisdiction or not one that is reasonably open to me. Thank you both. They were very interesting submissions.
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