The Administrative Court has reiterated its reluctance to become involved in what it considers to be merits-based challenges to expert economic decisions made by those to whom Parliament has entrusted the difficult decision-making role. In R (on the application of Centro) v Secretary of State for Transport  EWHC 2729 (Admin), Beatson J refused permission for judicial review on the basis that it was unarguable that the Secretary of State had acted irrationally.
The claimant, which was a passenger transport executive responsible for operating concessionary fare schemes, wished to challenge the Secretary of State's decision to modify its proposed arrangements for the reimbursement of bus operators in respect of losses incurred by them due to the application of concessionary fares.
The interested parties, bus operators West Midlands Travel and Go West Midlands Limited, considered that the reimbursement arrangements did not properly reflect their losses, their reimbursement rate having steadily fallen under the economic model used by the claimant. The relevant statutory framework included an objective, but not a duty, on the claimant to ensure that operators were "no better and no worse off" as a result of the concessionary travel arrangements and the interested parties considered that this was not being met under the claimant's reimbursement arrangements. They therefore applied to the Secretary of State under the statutory framework (Transport Acts 1985 and 2000 and regulations made under them) to have the proposed arrangements modified. The claimant and the interested parties all submitted substantial documentation to the Secretary of State but there was no oral hearing despite the claimant having requested one.
The Secretary of State accepted the interested parties' position that the claimant's model was not producing accurate and full reimbursement. He decided to modify the reimbursement rates, with the result that substantially greater sums became payable to the operators. In reaching this decision he received and took into account professional economic advice.
The Secretary of State had published guidance including a 'toolkit' which could be used to calculate reimbursement revenues. However, in reaching his decision in this case he did not use the toolkit as a basis of calculation.
The claimant submitted that the decision was irrational (Wednesbury unreasonable) due to the Secretary of State's disregard of relevant factors, including his own guidance. It was also argued that there was a lack of adequate reasons for the decision and there had been procedural unfairness because the decisions had been made without an oral hearing.
The approach to irrationality-based challenges in economic cases
As a preliminary point, Beatson J noted that irrationality in the sense of Wednesbury unreasonableness (ie that no reasonable decision-maker could have made the decision in question) was distinct from unreasonableness arising from a disregard of relevant factors or taking irrelevant factors into account.
Beatson J emphasised that if the challenge was put on the basis of irrationality, the threshold was a high one, and difficult to apply when dealing with complex economic concepts such as the elasticities applied to price increases to calculate reimbursement rates. He noted that in such cases the court was particularly cautious and reluctant to intervene. Beatson J referred to the approach previously adopted by the court in cases such as R (on the application of London & Continental Stations & Property Ltd) v The Rail Regulator (2003) EWHC 2607 (Admin) in which regulators were dealing with issues of economic policy. It was also relevant that the Secretary of State, himself an expert and experienced decision-maker, had received further expert advice on the matter.
Beatson J then considered the position if the challenge was analysed in terms of the relevancy principle. He held that even where regard had to be had to particular factors as a matter of statutory or regulatory interpretation, meaning that the threshold for intervention was lower, issues of the relative competence of the court and the decision maker to make technical decisions might still lead to judicial restraint, based on R v Monopolies and Mergers Commission ex parte South Yorkshire Transport Ltd (1993) 1 WLR 23.
Applying these principles to the facts in the case, Beatson J first considered the challenge formulated as a disregard of relevant factors. He found that the Secretary of State's guidance made it clear that it was not mandatory to use the toolkit and that it was not arguable that he had not had regard to the guidance or any of the other matters referred to by the claimant.
Finding also that the challenge based on irrationality was "unarguable", he observed that the claimant had in fact been seeking to re-argue the merits of the case and emphasised that:
"That is not the function of a reviewing court, particularly in a case of this kind, involving as it does complex economic issues on which there is legitimate scope for disagreement and on which Parliament has enacted that it is the defendant who is to be the decision maker".
Other aspects of the decision
In relation to the giving of reasons, reasons had been given for the central, important and controversial issue of the adequacy of the elasticities applied. It was not necessary that reasons be given referring to every material consideration, following the decision of South Buckinghamshire DC v Porter (No 2) (2004) UKHL 33.
There was also no requirement for an oral hearing, in circumstances where the parties had been given a fair opportunity to comment on all the evidence and where the Secretary of State believed he had al the material needed to reach a well informed decision, and that a hearing would simply further delay the decision and would not represent good value for money and time
Although this was an application for permission rather than a substantive judicial review claim, it is nonetheless the latest in a growing line of recent cases from the Administrative Court indicating a reluctance to interfere in technical or economic regulatory cases, particularly where expert advice has been received. The court appears to characterise such claims as being thinly veiled merits-based challenges, which it looks unfavourably upon. Potential claimants should therefore consider very carefully whether there are grounds other than irrationality that can be used as the basis for any judicial review challenge, as those are likely to have a greater chance of success.
The approach of the Administrative Court applying judicial review principles is in marked contrast to the approach of those tribunals that have a merits-based appeals function. Most notably in the area of economic regulation the Competition Appeal Tribunal has shown itself to be much more willing to consider the detailed merits of a decision. Therefore someone aggrieved at the substance of a detailed regulatory decision is in a stronger position if the governing legislation provides that the particular decision can be the subject of a merits-based appeal rather than the lighter touch of judicial review.