AC-2024-LON-0001595 - [2025] EWHC 2182 (Admin)

The issue under this part is not whether the SoS’s decisions are amenable to judicial review – it is agreed that they are – but as to scope of such review and in particular whether, as the Claimant contends, the full range of judicial review grounds are available, or, as the Defendant contends, only those arising out of allegations of fraud, corruption or bad faith.

The more limited scope of judicial review as set out in Mercury was considered more recently by the Privy Council in State of Mauritius v CT Power Ltd [2019] UKPC 27, a case concerning the negotiation of a commercial contract between the State and a private company for the construction of a new electricity generating plant. At [63] ff, Lord Sales considered the breadth of the State’s discretion in undertaking negotiations:

“63.

The power of the Minister of Energy to undertake negotiations with CT Power as part of the conduct of the business of the Government is a wide one, conferring on the Minister a very wide discretion as to how best to proceed. The implication is that the Minister is permitted to participate in the commercial market in the usual way, ie through the exercise of the full bargaining power available to the Government in order to secure the best commercial deal possible and thereby promote the public interest. With that end in view, a court should be astute to ensure that application of public law standards in relation to the Minister does not cut down or undermine that bargaining power. Nor should public law standards be applied in such a way as to give a potential contracting counterparty a negotiating advantage which has not been bargained for.

64.

In negotiating a commercial contract on behalf of the Government, the Minister, as a public authority, is not entirely free from constraints arising under public law. He is obliged to comply with basic public law standards which ensure that he properly seeks to promote the public interest. Accordingly, his decision-making as to how to conduct negotiations before a contract is entered into might be brought into question if, by way of purely hypothetical example, he acted out of personal spite or because he had been bribed. As a result, the potential counterparty is not exposed to what, if they were negotiating with another private party, might be the pure capriciousness of that private party in deciding whether to enter into the contract and on what terms.

65.

However, when conducting negotiations, the Minister is entitled to have regard to a wide range of considerations, including political considerations, which would not typically play a role in negotiations between two private commercial parties. In the present case, for example, entering into the Implementation Agreement would involve a commitment potentially requiring substantial payments of public money. There is inevitably a possible political dimension to such questions which it would be legitimate to take into account. In the present case it appears that the incoming government after the general election in December 2014 may have been less convinced than the former government that the project was a good idea and that the commitment to be given in the Implementation Agreement was justified.

66.

For these reasons, in the present context the Board takes the opportunity to reaffirm the guidance given by it in the Mercury Energy case, at [1994] 1 WLR 521, 529A-B:

“It does not seem likely that a decision by a state enterprise to enter into or determine a commercial contract to supply goods or services will ever be the subject of judicial review in the absence of fraud, corruption or bad faith.”

The limited scope for a judicial review challenge as indicated in this passage reflects the width of the relevant discretion enjoyed by a state enterprise (or, in the present case, the Minister of Energy) when exercising its powers to negotiate a commercial contract or how to use its rights under such a contract.” (Emphasis added)

It is clear from this that the contractual context need not be purely commercial for the limited scope of judicial review to apply, as political and other considerations may be at play and rightly taken into account by the authority. In Hampshire County Council v Supportways Community Services Ltd [2006] EWCA Civ 1035, the council had entered into a service agreement with Supportways for the provision of housing related support services pursuant to a scheme established by the Local Government Act 2000. The council exercised a contractual right to review the services and concluded that the cost was too high and that the agreement should be determined. Rejecting Supportways’ claim for judicial review and an order quashing the result of the review, Neuberger LJ (as he then was) said as follows:

“35 In my judgment, the basis of the Company's case was not in public law, but only in private law. The Company's complaint was that the Council had failed to comply with the Agreement, and the Company accordingly was seeking to enforce the Council's compliance. Subject to being contradicted by a closer analysis of the principles or by binding authority, such a complaint and such enforcement would appear to me respectively to involve a private law claim and a private law remedy, both of which are contractually based, albeit with common law and equitable aspects.

36 In answer to this, Mr Knafler first relied on the fact that the Council's obligations under clause 11.3 were, in reality, public law duties in that they can be traced directly to section 93 and to paragraph 71 of the 2003 Guidance. The fact that a contractual obligation is framed by reference to a statutory duty does not, in my view, render that obligation a public law duty. Of course, where the statutory duty is owed to a contracting party independently of the contractual obligation, he can normally expect to be able to seek a public law remedy by reference to the duty, as well as, or instead of, a private law remedy by reference to the obligation. However, in the present case, the Council's public law duty, namely that arising under section 93, was owed to the Secretary of State in relation to the provision of grants. There was, as it seems to me, no question of that duty being owed to providers such as the Company.

37 Mr Knafler next relied on the fact that the nature of the Agreement, involving as it did the Council performing public administrative functions, was such that a claim brought under it would be a public law claim. That cannot, I think, be right. Virtually any contract entered into by a local authority, almost by definition, will involve it acting in such a way, as otherwise it would be acting ultra vires. Yet, it is clear that, as Mr Knafler rightly accepts, in the case of alleged breaches of many such contracts, a private law claim is the only type of claim which can be brought.

38 Thus, the mere fact that the party alleged to be in breach of contract is a public body plainly cannot, on its own, transform what would otherwise be a private law claim into a public law claim.There are, of course, circumstances where, in a contractual context, a public body is susceptible to public law remedies. However, where the claim is fundamentally contractual in nature, and involves no allegation of fraud or improper motive or the like against the public body, it would, at least in the absence of very unusual circumstances, be right, as a matter of principle, to limit a claimant to private law remedies.” (Emphasis added)

In the same judgment, at [55] to [56], Mummery LJ held that:

“55…a public authority could, in principle, both be subject to claims in private law for breach of contract and to judicial review for breach of public law duties or abuse of public law powers in connection with a contract made by it.

56.

[However], in order to attract public law remedies, it would be necessary for the applicant for judicial review to establish, at the very least, a relevant and sufficient nexus between the aspect of the contractual situation of which complaint is made and an alleged unlawful exercise of relevant public law powers.” (Emphasis added)

What the Hampshire CC case makes clear is that the mere fact that a contracting party is a public body or that the contractual obligation in question is “framed by reference to a statutory duty” is not sufficient to render that obligation a public law duty. More would be required in the form of “at the very least, a relevant and sufficient nexus” between the contractual obligation in question and a relevant public law power. I was also referred to the judgments of Holgate J (as he then was) in R (Annington Property Ltd) v Secretary of State for Defence [2024] 1 WLR 365 at [465] and the Court of Appeal in R (Dudley Muslim Association) v Dudley MBC [2015] EWCA Civ 1123 at [22] to [26], both of which make similar points.

In the present case, the impugned decisions are ones that were taken pursuant to the terms of the Contract and the SRTs. The context is therefore contractual. Moreover, the SRTs (including the terms in question) were ones that were agreed after a process of negotiation between the SoS and the construction industry (or at least those members of that industry who chose to take part). The fact that the SoS’s underlying objectives in that negotiation went beyond the purely commercial and included the desire to achieve an appropriately funded and effective scheme of self-remediation in respect of necessary works in the interests of public safety does not of itself diminish or render insignificant that contractual context. As held in the Mauritius case, such objectives are part and parcel of what a public authority may take into account in conducting such negotiations both as to the terms of a contract and as to how those will be applied.

Mr Litton’s submission as to the statutory architecture behind the Scheme does not, in my view, advance his argument as to the scope of judicial review very far. The existence of that architecture or statutory context is very far from determinative of the question whether the full range of judicial review grounds is available even taking account of the fact that the Contract is specifically referenced in reg. 21 of the RAS Regulations. That reference does no more than confirm the statutory background to the terms; it does not render public the contractual obligations arising out of those terms.

It is significant in this case that none of the impugned decisions are said to have been made in the exercise of any statutory or prerogative power, the implication being that it is accepted that these were made in the exercise of contractual powers. What then are the factors, apart from the statutory context, which the Claimant says points to the full range of public law standards being applicable to the exercise of such powers? The Claimant relies on three factors: the first is that the Contract plays a key part of the regulatory mechanism to achieve the statutory purposes of the BSA 2022. However, in the absence of the terms being dictated by statute (which they are not) it is difficult to see how the exercise of a broad statutory power to establish the Scheme can be said to impose public law obligations in respect of contractual provisions giving effect to that scheme. The enabling provisions of the BSA 2022 and the prescribed requirements under the RSA Regulations are in broad terms and do not descend to the level of stipulating what particular terms should be contained in the Contract or the SRTs. The Claimant suggests in its Skeleton Argument (at [77]) that “The source of the Decisions is ss. 126 – 129 BSA 2022 and the RAS Regs under which the Scheme was established”. However, there is nothing in those provisions which can be said to contain any statutory power pursuant to which the impugned decisions were made. Those decisions were made pursuant to contractual provisions which are not directly reflective of any particular statutory provisions. There was therefore no “nexus” between the contractual provisions pursuant to which these decisions were made and any statutory power so as to attract public law remedies: see Hampshire CC at [57] per Mummery LJ. The position here is to be contrasted with that in R (Elliot Associates) v London Metal Exchange [2024] EWCA Civ 1168 at [79] (on which the Claimant places some reliance), as in that case, the decision was made in the exercise of a regulatory rule that had been expressly incorporated into the relevant contract by reference. That passage in Males LJ’s judgment in Elliot was obiter in any event and does not assist the Claimant.

The second factor relied upon by the Claimant is that Rydon was compelled to enter into the Contract and the SRTs, and the Contract cannot be said to be a ‘normal’ commercial contract freely negotiated between the parties and freely entered into by Rydon. Particular emphasis is placed on the regulatory consequences – including being placed on the Prohibitions List – of failing to sign up to these terms.

It is right to say that the consequences of not signing up were severe: as set out above, they include being prevented from undertaking large developments (defined as those of more than 10 homes) and being subject to building control restrictions that would restrict current and future projects. Whilst there was no compulsion as such, in that Rydon could have opted not to sign up, the commercial reality was that any affected entity not willing to substantially downscale its business activity would have to sign up. The question is whether that commercial reality changed the character of the Contract such that it is appropriate to overlay contractual obligations with those arising under public law. I am not persuaded that it does. It is not unusual for a private entity to have to enter into a contract with a particular provider (e.g. with an insurer) as a condition of participating in a given market. Moreover, the terms of the Contract in this case were not imposed ‘from on high’ but were the subject of extensive negotiations with the HBF, the representative of the building industry. That Rydon chose not to participate (in the apparent belief that as a SME provider, the negotiations were not relevant to it) does not undermine the significance of such negotiation. The industry therefore had a substantial say in the terms, which, as a matter of commercial reality, its members would have to sign up to. Of course, one cannot ignore the fact that these negotiations may have been somewhat lop-sided given the Government’s stated intent that the building industry pay a fair share towards the necessary remediation work. However, that seems to me an aspect of the public interest which the SoS was entitled to take into account and to take steps towards securing. It is notable that it is no part of the present claim that there was anything unlawful about that process of negotiation or as to any of the terms of the Contract or the SRTs that were agreed.

The Claimant also prays in aid the fact that the Department was unwilling to enter into any further negotiation with Rydon or a side letter. It is said that this is further evidence of the absence of free negotiations. However, Rydon had the opportunity at an earlier stage to participate in the negotiations. It chose not to take that opportunity up. It cannot now complain, after the terms have been agreed with the bulk of the industry, that the Department was unwilling to reopen negotiations especially on its account.

The final factor relied upon is that the SoS, in exercising his discretion, was not operating in any sort of commercial market. This point is not understood. The context was no less commercial than that of many contracts between a government department and a private entity, save that in this case the Government, not being the owner of any of the affected buildings, was not a direct beneficiary of the agreed services. However, that does not detract from the fact that there is a contract the terms of which were agreed after a process of negotiation.

For these reasons, the Claimant’s arguments as to the scope of judicial review in this contractual context do not succeed. Decisions made pursuant to the Contract and the SRTs are amenable to judicial review only on the limited grounds of fraud, corruption or bad faith, none of which is alleged or is extant here. The Claimant has available alternative contractual remedies but complains that such remedies would not provide the relief sought by way of judicial review. However, even if that were so, that is not reason enough to permit public law remedies to be pursued. As held by Mummery LJ in the Hampshire CC case at [61]:

“…it cannot be right in principle for a party to a contract with a public authority to have recourse to public law remedies simply on the ground the private law remedies, such as specific performance, are not available after the relevant contractual obligations have expired, or because they are too vague and uncertain to be specifically enforceable by the court, or because alternative private law remedies, such as damages for breach of contract, are inadequate. The relevant remedies are those available in private law for breach of contract.”

That is sufficient to dispose of the claim for judicial review in its entirety. In the event that I am wrong about the scope of judicial review, and for completeness, I go on to consider each of the grounds of judicial review on their merits. In doing so, I bear in mind the need to consider each such ground in the particular contractual context in which it arises. As stated in the Mauritius case (at [63]), the Court should be astute not to allow the application of public law standards to cut across or undermine the SoS’s contractual position and confer on the contracting counterparty some advantage which goes beyond that which was agreed.