JUDGE LANGAN:
Introduction
1. This
case has to do with the concept of legitimate expectation in public law.
2. At
the material time the Learning and Skills Council (‘the LSC’) was responsible
for securing the provision of further education (other than higher education)
in England. The defendant is the statutory successor to the LSC,
but it will be convenient to use the acronym LSC to refer indifferently to the
defendant and the LSC itself. As part of the carrying out of its functions,
the LSC made grants to colleges in order to fund capital expenditure.
3. The
Grimsby Institute of Further and Higher Education (‘the Institute’) applied to
the LSC for a grant towards the erection of a new building. The system
operated by the LSC for dealing with applications in respect of schemes which
had, as the Institute’s project had, a capital value of more than £10 million
involved two distinct stages. These were known as Approval in Principle
(‘AiP’) and Approval in Detail (‘AiD’). The Institute obtained AiP for its
application. It failed thereafter to obtain AiD, not because of any lack of
merit in the scheme presented, but because the LSC ran out of funds. It
transpired that the LSC had given AiP to so many applications, without regard
to the fact that it had insufficient money to fund them all, that only a small number
of the schemes could be given AiD. The Institute was not one of that number.
4. The
Institute had spent a substantial amount of money in working up its application
to the point at which it applied for AiD. Some of this expenditure was
reimbursed by the LSC: the greater part, a sum put by the Institute at
£3,728,452, was not.
5. It
is not part of the Institute’s case that it should have been granted AiD for
its scheme. The case advanced is that the Institute had a twofold legitimate
expectation. First, that once AiP had been granted, the application would be
dealt with in accordance with the usual and known procedures of the LSC.
Second, that the LSC would be funded and organised in a manner which enabled it
to meet commitments given at AiP stage. It is now clear that AiD will never be
given to the Institute’s scheme. The Institute seeks compensation for the
non-fulfilment of the expectation in the form of reimbursement of the
expenditure which it incurred.
6. The
answer of the LSC to this claim is, put very shortly, that the Institute falls
a long way short of what is required to make good a public law case founded on
legitimate expectation.
7. This
has been, as judicial review claims go, a heavy case. There is a massive
amount of documentary material before the court. Witnesses were cross-examined
on their statements. The submissions of counsel, both written and oral, were
lengthy. The hearing lasted some six days. It should be possible in this
judgment, particularly in the light of the way in which the case was presented
on behalf of the Institute in closing submissions, to deal more shortly with
the facts than at one time I anticipated. This will, however, be possible,
only if I begin by rehearsing at some length, first, the statutory provisions
relating to the LSC and its functions, and, secondly, the structure of the LSC
and the procedures which it followed. The facts will then appear in what will,
I hope, be a comprehensible statutory and administrative context.
8. I
am grateful to all the counsel engaged in the case for their considerable
assistance.
The
LSC: statutory provisions
9. The
LSC was established by section 1 of the Learning and Skills Act 2000 (‘the
Act’) as a body of between 12 and 16 members, with functions expressly limited
to England (a separate council for Wales was established by section 30 of the
Act).
10. The main duties of the
LSC were set out in section 2(1) of the Act. The LSC
must secure
the provision of proper facilities for –
(a) the
provision of further education and training (other than higher education)
suitable to the requirements of persons who are above compulsory school age but
have not attained the age of 19,
(b) training
suitable to the requirements of such persons,
(c)
organised leisure-time occupation connected with such education, and
(d)
organised leisure-time occupation connected with such training.
11. Section 3(1) of the
Act provided that the LSC must secure the provision of reasonable facilities
(which is a concept which differs from that of proper facilities)
for the same descriptions of education, training and organised leisure-time for
persons who have attained the age of 19.
12. By section 5(1)(a) of
the Act the LSC was empowered to secure the provision of financial resources to
“persons providing or proposing to provide post-16 education or training.”
Section 6 of the Act empowered the LSC to impose conditions on the provision of
financial resources.
13. Section 19(1) of the
Act required the LSC to “establish a committee (to be called a local learning
and skills council) for each area of England specified by the Secretary of
State.” Each local council was to perform in relation to its area such of the
duties of the LSC as the LSC specified, and might exercise in relation to its area
such of the powers of the LSC as the LSC specified.
14. Finally, section 27
dealt with grants to the LSC, and, so far as is material to this case, made
these provisions.
(1)
The Secretary of State may make
grants to the Council of such amounts and subject to such conditions as he
thinks fit…
(2)
The conditions may set the
Council’s budget for any of its financial years.
The LSC:
structure and procedures
The structure
of the LSC
15. At national level the
LSC was headed by the Council itself. Among the committees of the LSC there
was a National Capital Committee, the function of which was to consider
large-scale capital projects and make recommendations on them to the Council.
16. Prior to 2008 the LSC
had 9 Regional Boards and 47 Local Councils, to which regional and local
functions were delegated. The Local Councils were dissolved on 21 February 2008. The Regional Boards were replaced by Regional Councils on 1 September 2008. It was the role of a Regional Council, assisted by a Regional Capital
Advisory Group, to identify, develop and recommend major capital projects. The
Institute lay within the LSC’s Yorkshire and Humber Region, which was itself
divided into 4 areas. The Institute was within the Humber Area.
The
financing of the LSC
17. At the period with
which I am concerned government expenditure was managed by way of triennial
Comprehensive Spending Reviews. Each year, in or around the month of December,
the LSC received a grant letter from the Secretary of State. This informed the
LSC of the amount which it would receive from government for the year starting
on the following 6 April. At the start of a Comprehensive Spending Review
period, the letter would provide a firm figure for the grant for the first year
of the triennium and indicative figures for the second and third years. One of
the LSC’s witnesses, Mr Philip Head, said that, in accordance with this
practice, in December 2004 the LSC had been given a firm figure for 2005-06 and
indicative figures for 2006-07 and 2007-08.
Grant
applications: the Capital Handbook
18. The procedure for
applying for grants was set out in the LSC’s Capital Handbook. I have the
second edition, which was published in November 2006. I do not have the
edition which was extant at the beginning of the story with which I am
concerned. That does not matter. It is common ground that the Institute was
aware from October 2006 of the imminent publication of the second edition, and
also that the basic division of the application process into having to obtain AiP
before seeking AiD was carried over from the first edition.
19. As will appear later
in this judgment, the contents of the Capital Handbook form an important plank
in the Institute’s case and it is accordingly necessary to look at three parts
of the Handbook in some detail. First, there is some general, introductory
material, through which I was taken when the case was opened. Secondly, and
relied upon in the closing submissions for the Institute, there are passages in
the body of the Handbook which deal with applications for AiP and AiD and with
project fee support. Thirdly, and similarly relied upon in closing
submissions, there is Annex A to the Handbook, which is entitled “Capital
Projects Criteria.”
The Handbook:
introductory material
20. The Handbook begins by
stating its purpose which is to update
the arrangements for the administration, assessment
and determination of applications to the Learning and Skills Council (LSC) for
consent and capital support. It consolidates all general capital guidance
provided by the LSC for further education (FE) sector providers (paragraph
1.1).
21. The Handbook then
proceeds, in a “Capital Overview”, to refer to the FE White Paper, Raising
Skills, Improving Life Chances, “which sets out the Government’s
expectation that the LSC’s capital resources will be directed to implement the
FE component of the 14-19 vision in each locality.”
In this context, the LSC is seeking to both challenge
and support the FE sector to develop world-class buildings for world-class
teaching and learning… (paragraph 2.1)
Based on the additional capital funding for 2008-10
announced in the 2005 budget, if this level of funding continues and if most of
it continues to be directed to the FE sector, the LSC estimates that the
renewal and modernisation of the FE estate could be substantially completed by
2013-2014… (paragraph 2.2)
22. There are then
sections dealing with national and regional capital strategies (paragraph 3)
and with provider property strategies (paragraph 4). As regards the latter
The LSC expects all FE colleges to produce a college
property strategy on a three-year basis. In particular all colleges submitting
a capital project application will need to have an agreed property strategy in
place in order for the application to be approved… (paragraph 4.4)
The
Handbook: AiP, AiD, and fee support
23. Applications for AiP
and AiD are dealt with in paragraph 7 of the Handbook.
7.1 The LSC will continue to operate two levels of
capital project approval for FE and 16-19 capital funding: approval in
principle (AiP) and detailed approval. Prior to preparing and submitting an
application, all providers should consult with the LSC local partnership team,
LSC regional provider financial management team and LSC RPA [regional property
advisor] to discuss the key education, finance and property aspects of the
project.
7.2 All colleges and other qualifying providers with
proposals that have a total capital cost of more than £10 million will normally
be required to make an AiP application. Once the AiP application has been
determined by the LSC, a detailed application will be worked up and submitted.
All proposals with estimated costs of more than £10 million will normally be
considered by the LSC at these two stages. All applications that have a total
capital cost of less than £10 million will normally be considered once by the
LSC as a detailed application.
7.3 The LSC will only accept applications when the
college or other qualifying provider has reached a certain stage in the project
design and preparation process. In the case of AiP applications, the proposal
must be developed approximately to the Royal Institute of British Architects
(RIBA) design stage C. In summary, the proposal should include the following:
• A project brief
• Floor plans and proposed elevations
• An estimate of construction and other
relevant costs
• A clear indication of town
planning issues including the identification of any onerous section 106
agreements.
7.4 In the case of detailed
applications, the proposal must be developed in the design stage to beyond RIBA
stage D. This means that the proposal should include the following:
• A fully completed project brief
• A detailed proposal showing spatial
arrangements, material and appearance, as well as a cost estimate
• Evidence of full planning permission
• A breakdown of tendered and other relevant
costs.
7.5 All capital applications should use the
appropriate forms, contained within Annex E…
24. Paragraph 8 of the
Handbook deals with feasibility and project fee support. Feasibility fee
support is available towards the costs of preparing feasibility studies for projects
with estimated capital costs of more than £5 million. Costs are supported to a
maximum of £200,000 on a matched funding basis: this means that the LSC will
pay up to £100,000 so long as a similar sum is paid by the applicant. The
paragraph goes on to deal with project fee support.
AiP-project fee support
8.3 In addition to the feasibility fee
support outlined above, the LSC has now introduced project fee support
arrangements where colleges can apply to the LSC for grant support towards the
fee costs associated with developing and preparing capital project
applications, both to the AiP stage and then to the detailed stage, and on a
basis suitable for LSC determination. The purpose of these arrangements is to
encourage colleges to bring forward more accurate and better founded
applications by accessing grant funding for capital projects from the LSC at an
earlier stage in the capital process, and to help reduce the financial burden
on colleges of preparing capital projects.
8.4 In order to develop a project
proposal to an AiP stage, colleges are likely to expend circa 15 per cent of
the consultants’ total projected fees (usually up to 10 per cent of total
project costs). Colleges can apply for project fee support on a matched
funding basis towards maximum costs of £500,000 to take an application up to
the AiP stage. This is not additional funding as such but is really an advance
of support that would have been payable later with the aim of improving cash
flow and incentivising better applications…
Detailed-project fee support
8.5 In order
to develop a detailed project application, colleges are likely to have expended
circa 45 per cent of the consultants’ total projected fees. Colleges that have
approved AiP applications can apply for project fee support to enable them to
develop the project to a stage where it can be considered as a detailed
application. The amount of project fee support is determined by the rate of
the indicative level of grant support the LSC will have agreed for the AiP
application. The maximum allowable fee cost is up to £1 million. For
example, this means that if a college spends £600,000 on fees between the
AiP and detailed stage and the AiP was agreed at an indicative rate of 40 per
cent, the college would be entitled to claim a grant of up to £240,000. As
with the AiP project fee support, this is not additional funding but an
advance of support to ease college cash flow…
The
Handbook: Capital Projects Criteria
25. Annex A to the
Handbook is divided into four sections: “Stage 1: Validation Criteria”; “Stage
2: Application to the Learning and Skills Council”; “Stage 3: Selection of
Proposals by the Learning and Skills Council”; “Stage 4: Moderation
Arrangements.”
26. Stage 1: Validation
Criteria. Before applying to the LSC for support, a provider is expected
to apply specified validation criteria to its own proposals (paragraphs 1-3).
It is also expected to be in a position to provide some of the funding of its
project.
4 Given the scarcity of capital funds, a provider
will be expected to contribute as much as it reasonably can
to the costs of its projects.
5 The LSC’s maximum contribution towards the costs of
a project will usually be no more than the sum the LSC considers necessary for
the provider to be able to undertake the project. A provider will need to
demonstrate the need for a particular level of grant support in confirming the
affordability of the project.
6 An appropriate figure should be provisionally
agreed with the LSC’s regional PFM [provider finance manager] director before
proposals are finalised. Under the stage 3 criteria (see below), preference
may be given to providers applying for less than the maximum available LSC
support should there be competition for funds…
Providers are
“required to demonstrate that they have diligently examined whether better
value for money might be obtained by private sector investment” or through a
public/private partnership (paragraph 9)
27. Stage 2:
Application to the LSC. This section of Annex A lists the factors which
applicants are advised to consider in developing a capital project. They are:
the delivery plan; quality issues; property indicators; the economic appraisal;
borrowing criteria; financial heath criteria; and race relations issues.
28. Stage 3: Selection
of Proposals by the LSC. This section begins with paragraph 23:
The LSC will consider all proposals that
pass the first two stages of the process against the seven selection criteria
described at paragraphs 24-31.
The selection
criteria are: the contributions which the project would make to the provision
of proper and reasonable facilities for FE and work-based training in the area;
quality assessments of the existing provision; economy (on a cost per square
metre comparison with similar constructions in the same area); value for money;
efficient space utilisation; projects required to meet legal requirements, such
as health and safety legislation (which will be given preference); and
financing (preference is to be given to public-private financed projects and
loan-financed projects, in that order).
29. Stage 4: Moderation
Arrangements. This section starts with paragraph 32:
Local LSCs will determine the priority of competing
capital applications according to the extent that they will contribute to
meeting the LSC’s local and national targets and objectives. In the event of
applications for capital grant exceeding the funds available, the LSC will put
in place national moderation arrangements to determine the relative priority to
be given to competing applications.
Narrative
30. I now turn to the
history of this case.
The
background
31. The Institute was
founded in 1944. Like other colleges in the FE sector, it was from its
inception part of the educational provision made by the relevant local
authority. In April 1993, pursuant to the Higher and Further Education Act
1992, such colleges became independent corporate bodies, operating on a
not-for-profit basis. Council land and buildings occupied by the colleges were
taken over by the new corporations from the local authorities. In 2007-08 there
were 366 FE colleges in England: there are somewhat fewer now, because of
mergers.
32. In 1993 much of the
infrastructure of the colleges was in poor condition. In the 2005 budget, the
government announced “a step change in capital investment in the FE sector.”
Existing plans would enable government support for investment in the FE estate
to rise to £250 million in 2007-08, while “Budget 2005 announces that an
additional £350m of capital investment will be made over 2008-09 to 2009-10 to
support the longer-term transformation of the further education sector.”
33. By 2005 the Institute
had around 20,000 students, the majority of whom were studying on part-time
courses. The main campus was at Nuns Corner in Grimsby. As was the case with
so many FE colleges, the Institute’s buildings left a good deal to be desired,
both in their general condition and as regards what is considered appropriate
in a modern learning environment. In discussions with local officers of the
LSC, it was acknowledged by the LSC that the Institute had not over the years
done particularly well in the allocation of capital grants from the LSC. At
the same time, it was made clear to the Institute that, in order to obtain
large-scale funding, a college must come up with a detailed ‘masterplan’ –
that is, an estates strategy for a period of 5 years or so, which would
demonstrate that any physical development would cohere with the college’s
educational plans and vision.
From
masterplan to AiP
34. On 6 July 2005 the Institute applied to the LSC for feasibility fee support “to employ
consultants to undertake a 10 year masterplan/vision for estates
rationalisation.” Fee costs of the consultants were to come to £47,829 and
support was requested at 50 per cent of this figure. On 28 October 2005 the LSC approved the application. The consultants engaged by the Institute for the
purpose of preparing the masterplan were Dyers.
35. By May 2006, North
East Lincolnshire Council and Franklin Sixth Form College were on the scene,
the former as the education authority which was responsible for Hereford School
in Grimsby. The idea which was being pursued was the comprehensive
redevelopment of all three establishments on a single site so as to form a
“learning village” or “learning corridor.” There were various meetings at
which representatives of the Institute, the local authority, the Sixth Form
College and the LSC were present and exchanged ideas about the scheme.
36. For the most part, it
is not necessary for me to examine these meetings. There were, however, three
meetings in 2006 on which particular reliance was placed in submissions made on
behalf of the Institute. These took place on 18 August, 15 September and 13 October 2006. As I intend to deal only with uncontroversial matters in this part of
the judgment, I shall at this stage do no more than refer to the place of each
meeting and the persons who were present.
37. The meeting of 18 August 2006 took place at the Institute. There were 14 persons present. Among them
were: Professor Daniel Khan, who was then the Principal of the Institute; Mr
Adrian Clarke, the Associate Principal (Strategic Services & Resourcing); Mr
Michael Green FRICS, the regional property advisor for the Yorkshire and Humber
Region of the LSC; and representatives of Franklin College, the local authority,
and the Institute’s professional advisors. Someone who was not at this meeting
was Mr Ray Ellis, the Deputy Principal, who had the lead role within the
project team at the Institute.
38. On 22 August 2006 the Institute placed an advertisement in the Official Journal of the
European Union regarding the obtaining of professional services for the
project.
39. The next important
meeting took place on 15 September 2006 at the Institute. There were 12 people
(together with a thirteenth person recorded as being “in attendance”) at the
meeting. They included, from the Institute, Professor Khan and Mr Ellis; from
the LSC, Mr Bob Flockton, who held the post of Partnership Director;
representatives of Franklin College and the local authority, and professional
advisors.
40. Around this time Dyers
produced their “Property Strategy and Ten Year Masterplan.” As might be
anticipated, this is a lengthy document. It presented the Institute with four
options, with Option 4 being recommended as the preferred option. Option 1 was
“Do nothing.” Option 2 was “Do minimum”, that is, simply the outstanding
planned maintenance. Option 3, which was called “Combined new build HE and FE
facility”, in fact comprised four sub-options, 3A, 3B, etc. What these had in
common was that each included some elements of refurbishment and some elements
of new building on the Nuns Corner site. Option 4 was “Complete new build with
contribution to HE and Learning Corridor objectives” and was just that: 46,680
square metres of purpose built accommodation, including provision of a nursery
and a linked University Centre facility.
41. By this stage, North
East Lincolnshire Council and Hereford School appear to have left the stage,
and they do not appear again in the story.
42. Following the
production of the masterplan, there were further meetings involving
representatives of the Institute and Franklin College and of the LSC. Ms Jane
Lyon, the Area Director for the Humber Area of the LSC, then wrote to Mr Philip
Jenkinson, the chair of the governors of the Institute. The letter is undated,
but it must have been written after the masterplan had been seen by Ms Lyon and
prior to the meeting of 26 September 2006 to which I will come shortly,
because the letter was referred to at that meeting.
43. Ms Lyon set out the
main elements of Dyers’ Option 4, noting that it embodied “a significant change
to the original proposals but one which still supports the concept of a
learning corridor.” She continued:
After a further meeting with Peter [Newcome, the
Principal of Franklin College] to share his views, the LSC felt it was
important at this early stage to inform you of our support, in principle, and
its further exploration.
As with any project of this magnitude, there will be
many aspects to resolve. However, the potential benefits for learners in North
East Lincolnshire are seen as considerable.
From the LSC funding perspective, there is an
opportunity for FE colleges to obtain substantial support that is unlikely to
be available again for some considerable time. Inevitably, both colleges will
need to consider the financial implications but the LSC are hopeful that the
Governing Bodies will recognise the benefits.
We do not want this to be a distraction from moving
the overall scheme forward but we felt we need to determine, at an early stage,
whether this radical plan is worthy of further investigation. If it is, then
we need to move speedily into the next stage and prepare a feasibility study as
soon as possible.
We appreciate this will require a degree of trust and
mutual understanding requiring the best endeavours of both Corporations to make
it happen. If you need any further information from the LSC then do let us
know, we are more than happy to give any presentations to the governing body if
that is appropriate.
44. On 26 September 2006 there was a meeting of the Corporation, or governing body, of the
Institute. Mr Ellis is recorded in the draft minutes (I have not seen an
approved version) as saying that “the LSC have embedded themselves in the
process.” The minutes say that “[t]here was general support for the preferred
option in terms of a joint campus with Franklin College.” Then
The Corporation APPROVED the 10 year estates
master plan and the submission of the detailed business case for the preferred
option.
Lawrence Hart [of AA Projects, one of the professional
advisors] advised that the next stage was to have discussions with the national
LSC, so that the Institute could understand from an early state whether they
supported the numbers. He advised that the meeting should take place within
4-6 weeks.
45. The third of the
meetings as to which there is controversy was of a very different kind from
the other two. It took place on 13 October 2006 at the Cedar Court Hotel in Bradford
and was organised by the Yorkshire and the Humber Region of the LSC for an
invited audience of college principals and chairs of governors or their
representatives. The agenda was headed “Building for the Future: Yorkshire and
the Humber Regional Capital Strategy Event.” The speakers included Mr Alastair
Grindlay, the LSC’s Capital Programme Manager. Mr Green was among the many LSC
officers who were present. The Institute was represented by Mr Ellis and Mr
Clarke.
46. It is now possible to
speed up the narrative somewhat.
47. After the meeting of 13 October 2006, the Institute started the process of selecting architects, main
contractors, and the various professionals (quantity surveyors and
environmental consultants) who would be required for the early stages of the
project.
48. On 3 November 2006 the Institute lodged with the LSC an application for fee support up to
application in principle stage. On the application form, the estimated project
cost was shown as £113,134,340; the total fee cost up to AiP as £2 million; and
the LSC contribution requested as £500,000.
49. Around the end of 2006
and the beginning of 2007 the Institute appointed Tribal Property Limited as
project manager for the development.
50. At some stage Franklin
College decided to pursue its own application separately from that of the
Institute.
51. On 9 February 2007 the LSC informed the Institute that fee support of £250,000 had been
approved.
52. Formal appointments of
professionals were then made.
53. On 17 July 2007 the Institute submitted its application for AiP. The original application
was revised in October 2007 (the precise date is uncertain) and in the revised
form, the project cost was shown as £118,699,000 before inflation and
£133,656,525 after inflation. The contribution requested from the LSC was
£96,003,221 or 81 per cent of the pre-inflation cost. This percentage is
referred to as the “intervention rate.” The balance was to be provided by a
contribution from the Institute (£16,666,000) and other public sector grants
(£6,000,000).
54. There was then a
process of discussion between the LSC’s regional finance officers and
representatives of the Institute, and the application wound its way through the
various stages required in order to obtain AiP. The application was considered
by the LSC’s Humber Capital Committee on 12 November 2007; by the Regional Capital Committee on 27 November 2007; and by the National Capital Committee
on 13 December 2007. At each stage the project was recommended for approval to
the next tier in the hierarchy, but with an intervention rate of 80 per cent.
55. The National Council
of the LSC considered the application at a meeting on 23 January 2008. There were 9 proposals in all before the meeting but, as the papers for the meeting
had not been circulated in sufficient time for consideration by the members, no
firm decisions were reached. Instead, the chair and chief executive were given
delegated authority to determine the applications, subject to comments which
they might receive from members.
56. Thereafter, the
decision made was to grant AiP to the Institute’s application, but at a
slightly lower intervention rate of 79 per cent. The news was communicated in
a letter of 31 January 2008 from Mr Philip Head, Director of Infrastructure and
Property Services, to Professor Khan. I should set out two paragraphs in full:
4 I confirm that in order to assist in marketing to,
and negotiating with potential developers and partners, without prejudice to
the determination of a detailed application in due course, that the Council has
agreed that the project proposal would meet the Council’s projects criteria.
The Council has also agreed that budgetary provision equivalent to 79% of the
estimated total project cost (£93,749,000) should also be made for the project
proposal for a period of up to twelve months pending receipt of a detailed
application.
5 I must inform you, however, that the Council’s in
principle support for these project proposals is subject to the condition that
the project should be implemented in phases, broadly equal in terms in floor
space and costs for which individual detailed applications should be made. To
clarify this point, the assumption is that the college should have successfully
completed phase 1 before implementing phase 2 and any further phases. The
grant support intervention rate will be calculated for each phase of the
proposal as and when they come forward to the Council for determination.
From AiP to
detailed application
57. Most of the year 2008
was taken up with moving the application from AiP to a state in which it could
be submitted for AiP. By May 2008, Davis Langdon LLP had replaced Tribal
Property Limited as project manager (although the individual responsible, Mr
Robert Hardy, moved from Tribal Property to Davis Langdon, thus providing
continuity); BAM Construction Limited was appointed as main contractor; and
work by the Institute and its advisors towards preparation of the detailed
application was well under way.
58. In June 2008 a serious
problem raised its head. It will be recalled that AiP had been given on the
footing that the project would proceed in two distinct, and roughly equal,
phases. It became apparent to the Institute and those advising the Institute
that this two phase implementation would have serious disadvantages. The
principal disadvantages were: an escalation in cost to a figure well in excess
of that for which AiP had been given (the main contractor put the cost of a two
phase construction at £160 million); disruption during the second phase
(because the first phase would, in effect, amount to the construction of one
half of a single building); the risk that AiD might not be obtained for the
second phase; and the risk that contractors would have the Institute “over a
barrel” on pricing for the second phase because of the need for continuity.
59. This matter was
considered at a meeting at the LSC’s offices in Coventry on 29 July 2008. The meeting was, contrary to the case originally advanced by the Institute,
convened at the request of the Institute, not at that of the LSC. The persons
present included Mr Ellis and Mr Clarke from the Institute, and Mr Green and Mr
Grindlay of the LSC. All of these apart from Mr Grindlay, who is seriously
ill, gave oral evidence. The account of the meeting which I find to be reliable
is that which was given by Mr Green.
60. The upshot of the
meeting was that the Institute was to revise its plans so as to submit a single
phase project for AiD. Mr Green said during cross-examination:
They had a good case, but they would have to come up
with figures. We would support the proposal for a single AiD, if there was a
real prospect of getting AiD. Mr Grindlay said that, if a sufficient case was
put up, he would support it. He did say that we, as officers, would have a
difficult time at the National Capital Committee. I told Mr Hardy [this must
have been after the meeting, as Mr Hardy was not there] that the departure from
AiP was a concern.
61. It is, I think, a fair
reading of the evidence as a whole that proceeding with a single phase application
for AiD was something which had the support, but the cautious and qualified
(particularly as to cost) support, of the responsible officers at LSC. On the
Institute’s side, there was a recognition that AiD could not be taken for
granted and that the situation after the change to a single phase bid was less
certain than it had been previously. Thus, in the risk register which was
compiled on a monthly basis by Davis Langdon, one finds as at 30 June 2008 that
the risk that the LSC do not continue with a positive approach to the project
is put at 50 per cent; but by 30 October 2008, that risk factor has increased
to 0.8 (the equivalent of 80 per cent).
62. In the meantime quite
significant enabling works were being undertaken on site. These included the conversion
of the Institute’s Business Solutions Centre to workshops; the construction of
a new brick workshop; and the provision of a temporary car park. The approval
of these works, together with the incurring of professional fees, was said by
Mr Ellis in an e-mail of 10 September 2008 to “have tested the risk appetite of
our Governing Body.”
63. The detailed
application on the single phase basis was submitted to the LSC on 27 October 2008. The project cost was £154,068,000 before inflation and £161,772,260 after
inflation. The contribution sought from the LSC was £135,080,000, which
represented an intervention rate of 85 per cent.
64. From the point of view
of the LSC, the figures in this application were, as Mr Green said in
evidence, “seriously too high.” They were high in a double sense: they
exceeded both the level of grant which was anticipated by the LSC and they were
much greater than the amounts on the basis of which AiP had been given. This
view was made clear to the Institute, which set about revising the detailed
application, which was then re-submitted on 27 or 28 November 2008. The figures had come down: project cost, £140,028,661 before inflation and £146,754,863
after inflation; contribution sought, £115,936,000; intervention rate, 79 per
cent.
65. The Institute had been
working towards having the detailed application considered at a meeting of the
National Council of the LSC on 17 December 2008. The application would first
have to pass through a meeting of the Regional Capital Committee earlier in the
month. As was made clear by Mr Green in an e-mail of 3 December 2008 to Professor Khan, the late submission of the revised application had made this
timescale one which could not be met. It was then hoped to have the papers
ready for the meeting of the Regional Capital Committee fixed for January 2009.
66. The papers were not, I
think, ready in time: but it would have made no difference to the outcome if
they had been. The balloon was about to go up.
The
collapse of funding
67. The National Council
of the LSC met on 17 December 2008 as planned. The papers prepared for the
meeting and the minutes are documents of considerable length. Put very
shortly, the LSC found that it was running out of money. It did not have
sufficient funds to grant AiP or AiD to applications which, on their merits,
might have been successful. There had, as matters were later described in a
draft Report of the Committee on Public Accounts,
been “a catastrophic mismanagement of the LSC capital budget during 2008 and
neglect of oversight by those in senior positions in the LSC.”
68. The following
decisions were taken at the meeting of 17 December 2008. Decisions on all
applications listed for AiP or AiD at the meeting of 17 December were deferred
to the meeting of 4 March 2009. There would be a general deferral of the
determination of all capital applications pending a review of the capital
programme. The outcome of this review would be considered at the meeting of 4 March 2009. The Capital Committee meetings for January and February 2009 were
cancelled, and there was to be no consideration of projects by Regional Capital
Committees. At the meeting of 4 March 2009 the Council would confirm the
timescales and the terms on which pending applications might be considered.
Communications about all this “needed to be urgently and sensitively handled.”
69. On 9 January 2009 there was a meeting in Bradford between representatives of the LSC and of
the Institute. It is sufficient to say that the funding difficulties of the
LSC and the concerns of the Institute over any delay in the funding of the
project were the main subjects for discussion.
70. Work continued,
probably in hope rather than in expectation, on a further revision to the
detailed application with a view to reducing costs. The application in its final
form was submitted around 25 February 2009. The cost of the project before
inflation had come down to £138,948,385; after inflation, the cost was
£139,950,000; the contribution sought from the LSC was £106,000,000; the
intervention rate was in the region of 76 per cent.
71. At the meeting of the
National Council on 4 March 2009, it became apparent that the situation faced
by the LSC was even more serious than had been anticipated. 79 projects had
received AiP, with £2.7bn required from the LSC: the extent by which the grants
of AiP exceeded funds which could be made available at AiD stage is apparent
from the fact that, as will be seen, a few months later, AiD could be given to
only 13 of these schemes. The meeting was told that Sir Andrew Foster had been
asked by the Secretary of State to carry out a review, and in the meantime the LSC
was working on a consultation exercise to identify a strategy for prioritising
all future projects.
72. On 16 March 2009 Ms Lyon wrote to Professor Khan to inform him of the current situation, and
told him that, pending the completion of the consultation exercise, “as
previously advised, your college should continue to avoid incurring any further
costs in developing its project.”
73. On 1 April 2009 Sir Andrew Foster’s Review of the Capital Programme in Further Education
was presented to the House of Commons by the Secretary of State. This
contained a damning indictment of financial management at the LSC. The
implementation of the laudable policy to transform the FE estate “did not
include a robust financial strategy or a regional or national approach to
prioritisation.” Overcommitment to projects should have been detected sooner
and, on the basis of “plenty of experience in the public sector”, might have
been anticipated so that “the surge [in take-up] could have been mitigated and
managed.” There was a “champagne moment culture” in which AiP was celebrated
“as the point of no return.” It seemed to be normal practice for projects not
to be rejected at detailed stage, provided that costs stayed in line with those
which had received AiP.
74. On 21 April 2009 Professor Khan wrote to the chief executive of the LSC. He set out the
“severe consequences” for the project of the “current suspension of capital
projects and the lack of clear timescales going forward.” He said that the
Institute “need[ed] to recoup from the LSC the development costs of the
project.” He enclosed a breakdown, which showed costs of £4,768,452, incurred
under eight headings: architects; project managers; quantity surveyors;
building contractor; mechanical and electrical consultants; structural and
civil consultants; enabling works; and “other (including planning).” From the
total, Professor Khan deducted grants of £790,000 and £250,000 received from the
LSC, leaving a balance (for which he enclosed an invoice) of £3,728,452. I
should say that I have been unable to trace documents relating to the larger of
the two grants, but the receipt of that sum by the Institute is not a matter of
controversy.
75. On 24 April 2009 the chief executive wrote to Professor Khan. The letter does not appear to
be a direct reply to Professor Khan’s letter of 21 April, but rather a standard
letter designed to be sent to all FE college heads. As regards projects
awaiting approval, PricewaterhouseCoopers had been appointed to assist in the
preparation of new criteria for prioritisation. As regards costs, once the LSC
had “a full analysis of the costs and their nature” it would “be able to
identify those cases where a contribution to such costs from the LSC may be
justified.”
76. On 27 May 2009 the Institute sent the pre-action protocol letter to the LSC.
77. On 19 June 2009 the LSC replied. There are three points of particular significance in the
letter. First, the Institute’s application for AiD would be considered in
accordance with the LSC’s new prioritisation process. Second, the Institute
had been responsible for delay in submitting the detailed application, by
reason of the change in the scheme and the costs being in excess of those for
which AiP had been given. It was “not until February 2009 that the cost of the
scheme had reached a reasonable level.” Third, the failure to reimburse costs
over and above the payments already made was not unreasonable.
78. The LSC, with the
assistance of PricewaterhouseCoopers, then proceeded to the assessment of
applications so as to select those which should be supported with additional
capital funding which had been provided by HM Treasury. The details of the
assessment exercise have not been examined in the course of the hearing. The
competitors were those applications which were “shovel-ready”, that is to say,
where work could begin within three months. They were then awarded points
under various criteria, and the 13 colleges with the highest overall scores
were allocated funds. The Institute missed, but only by a narrow margin,
coming into the top 13. The Institute was informed of the fact that it had
been unsuccessful by a letter of 26 June 2009.
79. As a result, the
project for the redevelopment of the Nuns Corner site is, for all practical
purposes, dead.
80. There remained the
question of the Institute’s wasted expenditure. The LSC sent out a
questionnaire about costs incurred by applicants for grants whose cases would
not be going any further. 209 colleges returned the questionnaire duly
completed. In round figures: the total amount spent by colleges on costs
relating to capital projects which did not obtain AiP or AiD was £340 million;
£94 million was due to the colleges under the established arrangements for fee
support; the gap between the two figures was £246 million. The latter sum was
simply something which the LSC could not afford.
81. The decision
eventually taken by the LSC was to reimburse those colleges who would face
possible insolvency if there were not reimbursed. There were 41 such colleges
and between them these received payments which came to £44 million.
82. I was told that the
Institute is the only college which has challenged the decision not to
reimburse it in full.
The
Law
Preliminary
83. Mr Randall put before
the court nine propositions of law, which provided him with headings for what
I found an impressive and comprehensive review of the subject of legitimate
expectation in public law. In this section of the judgment, it will be
convenient to set out those propositions, together with Mr Knox’s response and,
where this seems to be required, some observations of my own.
First
proposition
84. “Save in an
exceptional case, a legitimate expectation founded on a representation requires
that representation to be clear and unambiguous.” The authorities relied upon
are R v Inland Revenue Commissioner, Ex parte M.F.K. Underwriting Agents Ltd
and R (Association of British Internees: Far East Region)
v Secretary of State for Defence (hereafter
‘ABCIFER’).
85. Mr Knox accepted this
proposition, subject to the qualification that a statement must always be read
in context. One has to consider, as was said in the judgment of the Court of
Appeal in ABCIFER how “on a fair reading” a statement “would reasonably
have been understood by those to whom it was directed.”
86. There is no real
difference between counsel on this point.
Second
proposition
87. “A legitimate
expectation founded on a past practice requires there to have been a
specific undertaking to an individual or group whereby its continuance is
assured.” The authority relied upon is R (on the application of Bhatt
Murphy (a firm)) v The Independent Assessor.
88. Mr Knox did not
question the proposition but, rather, turned it to the advantage of the
Institute by relying on the following passage from the judgment of Laws LJ in
the Bhatt Murphy case.
43 Authority shows that where a substantive
expectation is to run the promise or practice which is its genesis is not
merely a reflection of the ordinary fact (as I have put it) that a policy with
no terminal date or terminating event will continue in effect until rational
grounds for its cessation arise. Rather, it must constitute a specific
undertaking directed at a particular individual or group by which the relevant
policy’s continuance is assured…
44 I will give two concrete examples from the
cases. In Ex p Khan [1985] 1 All ER 40 the Home Office promulgated
specific criteria for the admission of children into this country for the
purpose of adoption here. The appellant sought entry for his prospective
adoptive child. He relied in terms on the published criteria which he
fulfilled. But he found his application blocked by a further, unannounced
criterion which he did not satisfy. This court allowed his appeal.
“This”, Mr Knox
said, “is my case.”
Third
proposition
89. “Although an abuse of
power through acting with conspicuous unfairness can arise without any
legitimate expectation being infringed, such cases are highly exceptional.” Although
this proposition, which was accompanied by a lengthy review of the authorities,
was accepted by Mr Knox as being “what the authorities say”, I would myself put
it slightly differently. It seems to me that abuse of power cases are properly
characterised as legitimate expectation cases. The expectation is, however,
not based on a specific representation, but is of a more general kind, namely,
that a public authority will not act so unfairly that its conduct amounts to an
abuse of power.
But, perhaps more importantly, it is common ground that cases of legitimate
expectation not founded on a representation are highly exceptional.
Fourth
proposition
90. “The
requirements for legitimate expectation in public law are now sufficiently
developed to stand separately from private law doctrines such as estoppel, and
should do so, being more sensitive, and tailored to, the particular context of
public law.” The authorities relied upon are R (Reprotech (Pebsham) Ltd) v East Sussex County Council,
and the Bhatt Murphy case which was previously cited.
91. Mr Knox accepts this
proposition, but reminds the court that the moral values of estoppel have been
absorbed into public law. Further, while the remedies in private and public
law cases are quite different, the approach of the court to the interpretation
of statements is the same.
Fifth
proposition
92. “Legitimate
expectation not being the same as estoppel, detrimental reliance is not
essential to making it out, though it remains highly relevant.” There was
extensive citation of authority in support of this proposition,
which was accepted as correct by Mr Knox.
Sixth
proposition
93. “When allotting an
alleged legitimate expectation as between the three Coughlan categories,
the correct approach is that of the Court of Appeal in Bibi.”
94. This proposition
requires some exegesis from me. In R v North and East Devon
Health Authority, Ex parte Coughlan,
there is in the judgment of the Court of Appeal a somewhat involved discussion
of the role of the court in legitimate expectation cases. The starting-point
is to determine what was the legitimate expectation of a member of the public
as to how he would be treated by a public authority. There are at least three
possible outcomes of the enquiry. (1) The court might decide that the authority
was only required to bear in mind its previous policy or representations giving
them the weight it thought right, but no more, before deciding whether to
change course. (2) The court might decide that the promise or practice induced
a legitimate expectation of being consulted before a particular decision is
taken. (3) The court might decide that a lawful promise or practice has
induced a legitimate expectation of a benefit which is substantive.
95. Once it has been
decided into which category a legitimate expectation falls, the role the role
of the court differs according to the category. In category (1), the court is
limited to reviewing the decision on conventional Wednesbury grounds.
In category (2), the court has to determine whether the decision was
procedurally fair, and will require the opportunity for consultation to be
given unless there is an overriding reason to depart from it. In category (3),
the court will have to decide whether to frustrate the expectation is so unfair
as to amount to an abuse of power and, when necessary, to decide whether there
is a sufficient overriding interest to depart from what has been promised.
96. Coughlan was
decided in 1999. R (Bibi) v Newham London Borough Council
came before the Court of Appeal two years later. As I read the latter
decision, it is dealing not so much (as is suggested by the sixth proposition)
with the allocation of cases between the Coughlan categories, but rather
with rhe resolution of cases which fall within category (3), where the relevant
legitimate expectation is that of a substantive, and not merely a procedural,
benefit. Bibi qualifies Coughlan in two respects. First, doubt
is expressly cast on the approach which suggests that the question for the
court in a category (3) case is whether the authority by reneging on its
promise was acting so unfairly as to be an abuse of power. This question
provides an uncertain guide, because a major part of the problem in legitimate
expectation cases “is that it is often not adequate to look at the situation of
the disappointed promisee” apart from the situations of the promisor and
(sometimes) of many other persons to whom promises have been made.
Secondly, doubt is cast by implication upon what was said in Coughlan about
the remedy in category (3) cases. The judgment of the court, which was handed
down by Schiemann LJ, contains the following passages:
40 The court has two functions – assessing the
legality of actions by administrators and if it finds unlawfulness on the
administrators’ part, deciding what relief it should give. It is in our
judgment a mistake to isolate from the rest of administrative law cases those
which turn on representations made by authorities. The same constitutional
principles apply to the exercise by the court of each of these two functions.
41 The court, even where it finds that the applicant
has a legitimate expectation of some benefit, will not order the authority to
honour its promise where to do so would be to assume the powers of the
executive. Once the court has established such an abuse it may ask the
decision taker to take the legitimate expectation properly into account in the
decision making process…
43 While in some cases there can only be one lawful
ultimate answer to the question whether the authority should honour its
promise, at any rate in cases involving a legitimate expectation of a
substantive benefit, this will not invariably be the case.
97. Mr Knox was prepared
to accept in general terms that the judgment in Bibi provided the road
along which the court now has to go: but he emphasised that Bibi should
not be considered in isolation from other cases on legitimate expectation, and
he drew my attention to two other passages in the judgment in Bibi:
39 But, on any view, if an authority, without even
considering the fact that it is in breach of a promise which has given rise to
a legitimate expectation that it will be honoured, makes a decision to adopt a
course of action at variance with that promise then the authority is abusing
its powers…
59 But when the authority looks at the matter again it
must take into account the legitimate expectations. Unless there are reasons
for not giving effect to those legitimate expectations then effect should be
given to them.
Seventh
proposition
98. “(1) It is clear that
in non-ECHR/EU cases, the test of proportionality has not been substituted for
the Wednesbury principle.
(2) That being so, many of the comments about balancing the public and private
interests in Coughlan
have to be read with caution.” I have divided this proposition into two
parts in order to take account of Mr Knox’s response.
99. Mr Knox accepted
sub-proposition (1) as correct. Several authorities were cited by Mr Randall:
the point was perhaps most clearly articulated in 1991 in the decision of the
House of Lords in R v Secretary of State for the Home Department, Ex parte
Brind.
Mr Knox, however, rejected sub-proposition (2), on the basis that Coughlan had
been approved in, and survived, Bibi.
I have already referred to the Coughlan categories. The controversy
here is focused on category (3), where a promise resulting in a substantive
legitimate expectation has been broken. It was common ground in Coughlan that
the public authority could break its promise (to permit the claimant to remain
in a particular care home for the rest of her life) if, and only if, an
overriding public interest required this. The court said:
Both [counsel] adopted the position that, while the
initial judgment on this question has to be reached by the health authority, it
can be impugned if improperly reached. We consider that it is for the court to
decide in an arguable case whether such a judgment, albeit properly arrived at,
strikes a proper balance between the public and the private interest.
100.
I think that, so far as the application of the law to the facts of the
present case is concerned, this debate may well be an academic one. I will
therefore deal with it briefly. I have already commented on the relationship
between the decisions in Coughlan and Bibi. I agree with Mr
Randall, but only to this limited extent: while a striking of the balance
between the public and the private interest may be required in some cases, Bibi
provides a reminder that the court should not concentrate on the understandable
disappointment of the claimant to the exclusion of wider considerations.
Eighth
proposition
101.
“The fact that maladministration has occurred is not a ground for
judicial review. The question is only – has the public body acted
unlawfully?”
102.
Mr Knox agreed with this proposition, subject to the qualification that,
while maladministration is not a ground for judicial review, “it is still
relevant in deciding whether it is fair to allow a public body to change its
practices.” I have to say that I do not really understand the qualification.
It seems to me, with respect, to come close to contradicting the main
proposition, at any rate in legitimate expectation cases. The question must
always be whether the act of the pubic body is unlawful.
Ninth
proposition
103.
“In deciding what, if any, relief should be granted, the court will take
into account (a) whether the decision challenged is in the macro-political field,
and/or (b) involves social or political value judgments as to priority of
expenditure, and/or (c) the nature and clarity of the promise or prior practice
in question.” There was, once again, extensive citation of authority.
104.
This ninth proposition is, I think, incontrovertible. Mr Knox limited
his response to saying (and I agree) that it is simply not realistic to characterise
the decisions in this case as having been made in the macro-political field.
Discussion
The claim as
pleaded
105.
Formally, the challenge made in these proceedings is to the decision, which
was conveyed to the Institute by the letter of 26 June 2009, that its application for funding was not going to proceed to AiD. As I have already stated, the
claim has effectively turned into one for wasted expenditure, so that the true
challenge is to the decision not to reimburse the Institute in full. The heart
of the Institute’s case is to be found in paragraph 28 of the Amended Grounds
of Claim:
By so encouraging the Institute, the LSC implicitly
represented to it that if and when it obtained AiP, (a) its application for AiD
would be dealt with and approved in the usual way (subject to satisfying the
LSC of relevant criteria) and (b) the LSC was and would continue to be properly
financed and organised, so that it could deal with (and approve) such application in the usual way.
Accordingly, the Institute had a legitimate expectation to this effect. Had it
not been for this encouragement, the Institute would not have undertaken a
project of this magnitude.
106.
This formulation was criticised by Mr Randall on the basis that one
could not derive from it any clear meaning, phrases like “the usual way”,
“properly financed” and “properly organised” being shot through with
ambiguity. In my judgment, the criticism is not a sound one. The meat of the
alleged representation – for it seems to me that one is looking at a single
representation expressed in alternative ways – is that the Institute’s
application for AiD would be dealt with on its merits and without regard, as Mr
Knox put the matter early in his closing submissions, to the financial state of
the LSC.
107.
Whether any such representation was implicit in things said or done on
behalf of the LSC is, of course, quite a different matter.
The alleged
representations
108.
In his closing submissions, Mr Knox set out the representations on which
the Institute was relying. They fell into two main groups, of which the second
was further sub-divided. (1) There were representations made in the Institute’s
Capital Handbook. Even if these stood alone the Institute would, on Mr Knox’s
submissions, be entitled to succeed. (2) There were representations made
otherwise than in the Handbook. These were: (i) representations made prior to 13
October 2006, namely (a) on 18 August 2006, (b) on 15 September 2006, and (c) in
the undated letter from Ms Lyon which was produced at the meeting of 26
September 2006; (ii) representations made on the 13 October 2006; (iii)
representations which were (a) implicit in the dealings of the LSC thereafter,
and (b) particularly in the AiP letter of 31 January 2008.
109.
I will consider these groups of alleged representations in turn.
Group 1
representations: the Capital Handbook
110.
The parts of the Handbook which Mr Knox treated as central to his
submission are paragraphs 7.3 (the stage to which a project must be developed
before it can be considered for AiP), 8.5 (fee support leading to the
application for AiD) and, more particularly, Annex A. There is within Annex A,
at paragraph 6, reference to competition for funds; and, at paragraphs 23-31
the criteria for selection of projects. Finally, there is paragraph 32 of
Annex A, the reference to moderation arrangements to determine the relative
priority to be given to competing applications where insufficient funds are
available to meet all applications.
111.
The thrust of Mr Knox’s submissions was that Annex A was limited to the
stage at which AiP was being sought. A finding to this effect is vital to the
case resting on Group 1 representations because, if Annex A extends to the AiD
stage, paragraph 32 opens the door to the refusal of an application on the
footing that the LSC has insufficient funds to meet all applications which have
received AiP. There was, in Mr Knox’s submission, no suggestion in the
Handbook that, once AiP had been obtained, there was going to be any
competition for grants. Two of the selection criteria, those relating to
preference being given to projects which are put forward in order to meet legal
requirements and which are to be financed on a public-private basis or on loan,
supported the view that the Annex applied only up to AiP.
112.
Mr Randall disagreed. He pointed out that Guidance Note A which is part
of the Handbook required the same application form to be used for applications
for both AiP and AiD and that nearly all the requirements set out in the
Guidance Note applied indifferently to both types of application. As regards
criteria according to which applications would be selected, the only published
criteria were those set out in Annex A. If they applied only up to AiP, there
would be no criteria applicable at AiD stage, and that was something which must
be highly improbable. Even if one did not have the express provision as to
moderation arrangements, it would be unthinkable that a public body with
manifold calls on its funds was somehow debarred from exercising a choice when
the funds available turned out to be insufficient to meet all those calls.
113.
In my judgment, the submissions made by Mr Randall are to be preferred.
For the reasons advanced by him, I do not accept that Annex A is to be
restricted in the manner suggested by Mr Knox: and, as soon as one treats the
moderation arrangements as applicable at AiD stage, the implied representation
on which reliance is placed melts away. Representations, even implied
representations, have to be clear and unequivocal. Nothing in the Handbook seems
to me to come anywhere close to implying that, once AiP has been obtained, the
availability of funds to the LSC becomes irrelevant.
Group 2(i)
representations: representations prior to 13 October 2006
Representation
2(i)(a): meeting on 18 August 2006
114.
The relevant pleading is in paragraph 5B(1) of the Amended Grounds of
Claim.
At a meeting on 18 August 2006, Mr Green of the LSC
informed the representatives from the Institute (Professor Khan, Mr Adrian
Clarke and others), from Hereford School and Franklin Sixth Form College: (a)
that the LSC fully supported the masterplan; (b) that a “total new rebuild
should be considered as an option for all parties”; (c) that the LSC had an
additional £350 million over the next three financial years. (The LSC relies on
the Institute’s own minute of this meeting).
115.
The three points recorded in paragraph 5B(1) as having been made by Mr
Green come verbatim from the minute referred to. Mr Green in evidence accepted
the accuracy of the minute.
116.
I have real difficulty in grappling with this part of the Institute’s
case. (a) is a representation of the LSC’s attitude or collective state of
mind and is not said to be inaccurate. (b) is a suggestion, or recommendation,
as to how matters might or should proceed. (c) is a representation of fact and
is not said to be inaccurate. I am simply unable to derive from these
statements, individually or taken together, an implied representation to the
effect that, if an application for a capital grant were to be made by the
Institute, and if (at some undefined time in the future) AiP were to be
obtained, the availability of funds to the LSC would thereafter be irrelevant
in determining an application for AiD. The Institute has, as I see matters,
got to get as far as that to establish a case on implied representation and it
gets nowhere near doing so.
Representation
2(i)(b): meeting on 15 September 2006
117.
The pleading is in paragraph 5B(3) of the Amended Grounds of Claim:
At a meeting on 15 September 2006
to discuss option 4, attended by Professor Khan, Mr Ellis, and Mr Clarke for
the Institute, by Mr Bob Flockton for the LSC, and representatives from the
North East Lincolnshire Council and Dyers (who had drawn up the masterplan):
(a) There was discussion about the financial backing
for the project and the requirement for it to be considered within “two year
window of opportunity with the LSC”;
(b) Mr Bob Flockton confirmed that the LSC had agreed
the project in principle and to explore what level of funds would be available
to support the development costs.
118.
The statements are recorded in a minute taken for the Institute. The
witnesses from the Institute confirmed the accuracy of the minute. No one who
attended the meeting on behalf of the LSC gave evidence. Mr Green made the
observation that he would have thought that the phrase “two year window of
opportunity” would be more likely to have been used by a representative of the
Institute rather than by an officer of the LSC.
119.
My difficulty with this part of the case is the same as that which I had
with the previous representation. This meeting took place at an early stage. Discussions
were still exploratory in nature. The LSC was, as the witnesses from the
Institute stated (and as I accept), adopting a positive and encouraging
attitude to the project. That, however, is the beginning and end of the
matter. It is, in my judgment, once again simply impossible to translate these
statements into the kind of implied representation which is embodied in
paragraph 28 of the Amended Grounds of Claim.
Representation
2(i)(c): Ms Lyon’s undated letter
120.
I have precisely the same problem as with representations 2(1)(a) and
2(1)(b). The letter is expressly supportive of the Institute’s plans, albeit
cautiously so (“we need to determine… whether this radical plan is worthy of
further investigation”). But the letter, read as a whole, is tentative in
nature and, once again, falls far short of being able to bear the weight which
Mr Knox seeks to place upon it.
Group
2(ii) representations: meeting on 13 October 2006
121.
This was the large gathering at Bradford attended by representatives of
many FE colleges and of the LSC. It is said in paragraph 6 of the Amended
Grounds of Claim that “[t]he attendees were briefed on the process for
applications and then the LSC staff positively encouraged the Colleges to put
in binds for large capital developments as the LSC was said to have “significant
under spend” (italics in original).
122.
There has been controversy about what was said at the meeting but, on
reviewing my notes of the evidence, some of the points of difference between
the two sides seem to have disappeared. Thus Mr Ellis, for the Institute, was
unable to say firmly that phrases like “once in a lifetime opportunity” and
“significant under spend” were used at this (rather than at some other) meeting.
On the other hand, Mr Green, for the LSC, accepted that colleges were invited
to come back to the LSC with proposals, and he also agreed that the LSC was in
effect informing colleges that they had a once-in-lifetime opportunity to
obtain funding.
123.
Mr Green was an impressive witness, who gave his evidence in a measured
and transparently honest manner. Mr Ellis was argumentative and, on one other
significant part of the history, has been shown up as unreliable.
Mr Clarke’s recollection was exposed in cross-examination as being patchy and
uncertain. The only safe course (which I adopt without hesitation) is
therefore to accept what Mr Green said. I will set out the bulk of my notes of
the relevant part of his cross-examination:
I can’t recall ‘world class buildings’ being mentioned
at the meeting. We did not encourage [colleges] to come back with
mega-schemes.
Colleges were not asked for big buildings. They were
asked to go away, look at their estates and come back with proposals.
I can’t recall the LSC using the phrase ‘once in a
lifetime.’ I think ‘support’ rather than ‘encourage’ was the word used. It
was a positive message.
The extra £350m over 3 years was not mentioned, but
there was a slide showing the money available.
I don’t think [LSC officers] said there was an under
spend. They did say that there were insufficient projects coming forward so
that Yorkshire and Humberside were not doing well compared to other
regions. Yorkshire and Humberside were missing out on the opportunity to
get [funds] from the national budget.
I don’t recall it being said that there would be
competition for AiD among projects which have AiP
124.
It is common ground that the information imparted by the LSC at the
meeting included an explanation of the procedure for obtaining capital grants
with express mention of the AiP and AiD stages. On the basis of Mr Green’s
evidence, the college representatives were told that funds were available and
that they should go away and think about applying for grants for capital
projects. But I find it impossible to derive from anything that was said, or
from the positive tone of the meeting, a representation of the kind relied upon.
It must not be forgotten the representation pleaded in paragraph 28 of the Amended
Grounds of Claim comes to this: that, in the event of AiP being granted, there
would be excluded from further consideration by the LSC both the totality of
funds available to the LSC and other calls upon those funds. Once again, I
find that there are light years between matters established as having been said
or done on the one hand and what the Institute seeks to infer from those
matters on the other hand.
Group 3
representations: representations after 13 October2006
Representation
3(i):“implicit in all other dealings”
125.
This is far too vague and unparticularised. It is true that the
officers of the LSC adopted a positive attitude towards the application for
AiD. It is clear from the evidence that they regarded it as part of their job
to assist an applicant (if necessary, by constructive criticism) to work up a
project to a state in which it was suitable for submission to the relevant
decision-making bodies at the LSC. Indeed, the officers appear to have been
unwilling to bring a project to committee unless it was such as they felt able
to recommend for approval. But none of this seems to me to be apt to convey to
the mind of the applicant, and in particular the Institute, the message that
consideration of a detailed application would be confined to the inherent
merits of the application.
Representation
3(ii): letter of 31 January 2008
126.
This letter was put forward by Mr Knox as coming close to an express
representation. He attached particular importance to the passage in which
Professor Khan was informed that budgetary provision for 79 per cent of the
cost of the project was being made for a period of up to 12 months pending
receipt of the detailed application. This was, Mr Knox submitted, tantamount
to saying “the money will be there if you satisfy the criteria.”
127.
This letter had not been pleaded as a representation in the Amended
Grounds of Claim and was not dealt with, or complained about, by any of the
witnesses for the Institute. It raised its head only in Mr Knox’s
cross-examination of one of the witnesses for the LSC towards the end of the
case. I appreciate the force of Mr Randall’s objection that “it is grossly
unfair to bounce the defendant into a legitimate expectation argument based on
this letter.”
128.
I do not think that Mr Randall needed to be too concerned. If the
information about budgetary provision stood alone, it would be arguable that it
could be read as conveying to the reader the message that funds had been
ring-fenced and that there was something close to a guarantee of availability.
But the passage has to be read in context. It follows immediately upon a
sentence which informs the Institute that AiP has been granted “without
prejudice to the determination of a detailed application in due course.” There
is, once again, a total absence of words from which one could fairly infer the
exclusion from consideration by the LSC of financial matters external to the
application.
129.
Mr Randall put his point succinctly:
The sentence does not support the paragraph 28
representation. It is a late thought to salvage a fatally flawed case.
I agree.
Conclusion on
representations
130.
The case for the Institute was put primarily on the basis of legitimate
expectation based upon implied representations. For the reasons set out in the
foregoing paragraphs, I do not think that the paragraph 28 representations can on
any objective basis be regarded as implicit in the words and actions relied
upon by the Institute. There was, in my judgment, nothing in the nature of a
clear and unambiguous statement of the kind required to found a legitimate
expectation (the first proposition of law discussed above).
131.
Mr Randall made several points which demonstrated to my mind that the
evidence given on behalf of the Institute was inconsistent with the case
presented on its behalf.
132.
First, none of the witnesses for the Institute said that he understood
the paragraph 28 representation to have been implicit in the words relied upon
as constituting that representation. The statements now relied upon never seem
to have registered contemporaneously with the Institute’s own officers.
133.
Second, although detrimental reliance is not essential to making out a
case of legitimate expectation, it is relevant (the fifth proposition of law), yet
reliance is not actually claimed by any of the witnesses for the Institute.
134.
Third, there was throughout the process of applying for AiD an
appreciation on the part of the officers of the Institute that they were
proceeding at risk of failure. It would be remarkable if, after the risk came
to fruition, a claim based on legitimate expectation of success were to be
established.
The claim
based on practice
135.
There was not, in my judgment, anything in the nature of a specific
undertaking to colleges that a practice (if it existed) of confining
consideration of an application for AiD to the merits of that application would
continue (see the second proposition). The real weakness of the Institute’s
case here lies in the impossibility of finding in the Capital Handbook or
elsewhere any assurance of the kind which would be required to found a
practice-based legitimate expectation.
The claim
based on conspicuous unfairness
136.
This is an alternative way of putting the case for the Institute. I
have dealt with the relevant legal principles earlier (the third proposition).
There can be no doubt as to three matters: a case of legitimate expectation not
founded on a representation must satisfy the test of conspicuous unfairness;
such cases are exceptional; and whether a case falls within this exceptional
category is entirely dependent on the facts.
137.
In his closing submissions Mr Knox put the conspicuous unfairness claim
in this way:
My clients were encouraged to apply for a very
substantial grant in circumstances in which it was known that they would incur
very substantial fees. The fees were bound to be far greater than the
subsidised amount [reference was made to the Capital Handbook]. They have not
been accused of extravagance. It is unfair to turn them down at the last
moment on the ‘no money’ basis… The fault lay with the LSC, not with us.
138.
It is, of course, understandable that the outcome of the application for
AiD was a considerable disappointment to the Institute. Further, the
Institute has been left with substantial unreimbursed expenditure. What
happened cannot be dismissed as “just one of those things.” But, in my
judgment, the facts of the case fall a long way short of what is required to
make out, as can only be done in a rare case, conspicuous unfairness on the
part of a public authority. There was no departure by the LSC from any
published practice or concession. The Institute acted throughout with what Mr
Randall aptly called “an active appreciation of risk.” The Institute was not
left entirely out-of-pocket, but received the maximum contribution to costs available
under the guidelines in the Capital Handbook. The Institute’s request for the
additional amount now claimed was not dismissed out of hand, but was considered
together with similar requests from many other colleges. The result for the
Institute is most unfortunate, but it cannot be characterised as the product of
an abuse of power by the LSC.
The true
analysis
139.
The debacle which gave rise to this litigation did not, in my judgment,
leave the Institute without any rights in public law. It must, I think, have
had a right to due consideration of its request for reimbursement along with
the requests made by other colleges who returned the questionnaire regarding
costs to the LSC. But that right has been satisfied: the request was
considered and the decision to apply such funds as were available to meeting
the expenses incurred by colleges which were facing insolvency cannot be
stigmatised as irrational.
Disposal
140.
It follows from what I have said that the claim for judicial review must
be dismissed.
Quantum
141.
In case the litigation goes to appeal and my decision is held to be
wrong, I should say a little about the relief which I would have granted if I
had held the case of the Institute to be sound in principle.
142.
The very short statement of expenditure put in evidence by the Institute
would not be an adequate foundation for an order for payment of the sum alleged
to be due. There are three matters which require attention. First, the claim
is unvouched. Secondly, it seems to me that expenditure incurred prior to AiP
should be quantified and excluded. Thirdly, it may be that the Institute has
derived value from some of the enabling works carried out after AiP and, if so,
that there should be some deduction in respect of betterment. I would
therefore have directed, in the absence of agreement between the parties, a
short hearing at which to determine any outstanding issues on quantum.
Envoi
143.
I do not pretend to have dealt with every point that was canvassed
either in evidence or in submissions. That is, in part, the result of a
determination on my part to avoid missing the wood from the trees. It is all
too easy to fall into that trap in a case like this, which did not merely
suffer from documentary overload but was not simplified (I put the matter
gently) from the making of quite substantial additions to the court papers as
the hearing progressed. I have tried, and I hope succeeded, not to omit
consideration of anything of real importance.
