Two recent High Court cases illustrate the difficulties in determining when a party contracting with a public authority can pursue public law remedies.  The cases both involved challenges by providers of residential care homes to decisions taken by local councils relating to the provision of care.  Although both claims were ultimately unsuccessful, the court adopted different approaches and reached different conclusions on the question of whether the claimants, as parties to a contract with the respective councils, were able to seek public law remedies at all.

Key points

  • Judicial review is a process for reviewing the lawfulness of decisions, actions or failures to act "in relation to the exercise of a public function".  Where a public body delegates a statutory duty to a "private" organisation operating on a commercial basis, this can raise difficult issues about the dividing line between public and private law.  The complexity of the issue is well illustrated by the apparently conflicting decisions of the High Court discussed below.

Broadway Care

The Broadway Care case involved a challenge by the owner and operator of a single care home to a decision of the council to terminate its contract, without notice, on the basis of alleged breaches of its terms.  The council had delegated to the claimant its duty to provide care pursuant to the National Assistance Act 1948.  As a preliminary matter, the court considered whether the council's decision to terminate the contract was amenable to judicial review or whether, as the council contended, the decision involved the exercise of a private law power and was not a public function at all.

In support of its position, the claimant relied principally on s. 145 Health and Social Care Act 2008 (the 2008 Act) which provides that a provider of care in the claimant's position is deemed to be exercising a "function of a public nature" for the purpose of s. 6 Human Rights Act 1998 (HRA).  Section 6 HRA requires those exercising public functions to act compatibly with the European Convention on Human Rights (ECHR).  The claimant argued that this demonstrated that in fulfilling the council's "contracted out" statutory duty to provide care, the care home was performing a public function so that its contractual arrangements with the council engaged public law principles.  This argument was rejected by the Court, which noted that the purpose and effect of the relevant provision in the 2008 Act was to ensure the accountability of care homes to residents by making it clear that they must comply with Convention rights.  The provision did not mean that all arrangements between a care home provider and the local authority were to be treated as being of a "public nature".  The High Court therefore concluded that the claimant did not have a right to pursue proceedings in public law against the council. 

The court then considered whether, putting aside s.145 of the 2008 Act, the claimant had standing to bring judicial review proceedings to, among other things, protect the article 8 ECHR rights of the care home residents.  The council conceded that a decision of a public authority in a contractual context may be amenable to judicial review where it involved fraud, corruption or bad faith (which were not alleged in this case) or there was a sufficient nexus between the contractual action and the unlawful exercise of a public function.  In determining whether such a nexus existed, the court considered that any public law duties were owed by the council to residents rather than the care home.  This was also not a case where if the care home did not have standing to enforce these public law duties, no one would - the residents themselves would clearly have standing to bring proceedings.  Furthermore, the care home was precluded from bringing a human rights claim because under s. 7(1) of the Human Rights Act 1998 only "victims" can bring such claims.  

Neath Port Talbot

In Neath Port Talbot, the claimants sought to challenge the rate to be paid to them by the defendant council in respect of their provision of residential accommodation.  They argued that its decision was procedurally unfair; failed to take proper account of relevant "Commissioning Guidance", and was irrational.

Once again, as a preliminary matter the court considered whether the decision was amenable to judicial review, with the defendant arguing that setting a fee under the relevant contracts was a private law function.  The court referred to R (Weaver) v London and Quadrant Housing Trust [2010] 1 WLR 363, (concerning s. 6 HRA) which it said was of analogical assistance.  According to Elias LJ in Weaver, the starting point was "to focus on the nature of the act in the context of the body's activities as a whole. " In the present case, the act was the fee-setting by the council in the context of its public function of providing for the care of those in need.  The statutory and regulatory framework for doing so showed that a council does not have the same bargaining freedom that a private individual would have.  The mere fact that the decision concerned a private contract did not mean that it was a private act.  Elias LJ in Weaver also distinguished between acts necessarily involved in the regulation of what is a public function and those which are purely incidental or supplementary to it.  In the present case, the fee-setting could not be characterised as purely incidental or supplementary to the public function for making arrangements for care.  On this basis the High Court concluded that the council's decision to set the rate to be paid to care home providers was amenable to judicial review.

Interestingly (particularly in light of the court's reasoning in Broadway Care) the court rejected an argument that any public law duties owed by the council were owed to residents and not to care providers, saying that if the council's decision to set fees was amenable to judicial review by residents, the question then became one of standing.  The care homes would "clearly" have a sufficient interest to bring a claim because the decision affected their existing rights and their ability to meet their statutory duties.  In response to a submission from the defendants that the scope of review in a contractual context was normally restricted to fraud, corruption or abuse of power, the court held that "abuse of power" in a public law context extends to all conventional public law grounds.  The only qualifications were that the court would be cautious in intervening where the council was engaged in contractual negotiations with providers, who might seek public law remedies to enhance their position; and that special considerations would apply in the context of competitive tendering for contracts with public authorities.  

Discussion

As these cases highlight, the question of whether or not acts of a public authority in a contractual context are amenable to judicial review is far from straightforward.  Underlying the difficulty in answering this question is the tension between two policy considerations.  On the one hand, the Administrative Court is reluctant to intervene in what are, in substance, private law disputes subject to private law claims and remedies.  On the other hand, the mere fact that a public authority acts in a contractual context does not mean that it should be completely free from the need to act in accordance with public law principles of good administration.  Given the lack of clarity in this area of the law, public authorities and those contracting with them should remain alive to the possibility of public law challenges within a contractual context.  

R (Broadway Care Centre Limited) v Caerphilly County Borough Council [2012] EWHC 37 (Admin) and R (Bevan & Clarke LLP) v Neath Port Talbot County Borough Council [2012] EWCH 236 (Admin)