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By Dave
20/08/2009

Contracting out homelessness reviews like the town hall catering contract

The Court of Appeal’s judgment in Heald and others v LB Brent [2009] EWCA Civ 930 is just out concerning the outsourcing of s 202 Housing Act 1996 reviews by Brent to Minos Perdios’ company Housing Reviews Ltd.  There have been a number of County Court judgments on this issue which have not necessarily been ad idem (see eg our post on Augustin v Barnet).  The argument against contracting out has been twofold: first, councils have no power to contract out their reviews function under Part VII (and, by extension although not relevant in this case, Part VI) because it is not a “function” of the local authority within s 70, Deregulation and Contracting Out Act and the Contracting Out Regs made under it (Local Authorities (Contracting out of Allocation of Housing and Homelessness Functions) Order 1996, SI 1996/3205); second, there is the appearance of bias on the part of Minos Perdios which gives rise to an Article 6 infringement.

The Court of Appeal dismissed both arguments.  The main judgment by Stanley Burnton LJ was given in robust terms and without regret (at [61]).  Sir Simon Tuckey simply agreed.   Sedley LJ agreed but gave a wonderful lament for the impoverishment of administrative justice  (and which I make no apologies for quoting in full below).

On the first argument, though, Stanley Burnton LJ seems to have treated the matter as pretty obvious (at [44]).  He is able to do so through citing the well-known definition of functions given by Lord Templeman in Hazell v Hammersmith and Fulham LBC [1992] 2 AC 1, 29:  a function “… embraces all the duties and powers of a local authority; the sum total of the activities Parliament has entrusted to it. Those activities are its functions.”  This definition is always trotted out as if it’s generic, but Lord Templeman was dealing with its use in a specific context, viz the legality of swap transactions in relation to (if I remember rightly) s 110, LGA 1972.  It’s now taken as gospel, but really must be sorted out.  Anyway, once you accept that definition applies, the argument pretty much folds.  It must follow that a review is a function for the purposes of s 70 capable of being contracted out, and it is significant that the review function is not expressly excluded by the SI (as other functions are).

How to deal with Runa Begum though?  In Runa Begum v Tower Hamlets [2003] 2 AC 430, Lords Bingham and Millett had made pretty scathing comments on the lawfulness of contracting out the review function – Lord Bingham (at [10]) had “very considerable doubts” whether it was a function; and Lord Millett agreeing pointed out that the SI was “concerned in very general terms with deregulation and the subcontracting of ordinary local authority functions” and was not apt to confer that power.  Lord Hoffmann doubted its efficacy and practicality, as opposed to the lawfulness.  Although not pointed out in Heald, it is notable that Hazell was not cited in Runa Begum.  Stanley Burnton LJ brushed the Runa Begum comments aside (at [50]) on the basis that the SI “… is indeed clear and permits contracting out of reviews”.

On the second argument, Stanley Burnton LJ started from the Runa Begum position that the a local authority employee does not infringe Article 6 when conducting a review  and

“I do not see that a third party should necessarily be any less impartial than an employee.  Whether he can be regarded as less independent may depend on the particular facts, and in particular the terms of the contract between the authority and the third party. It is possible to build into a contract a high degree of independence on the part of the third party, for example by prescribing a long contractual term that is terminable only for serious breach. To do so would, however, bring into play another of the Appellants’ objections to contracting out, namely that the third party is not democratically accountable.” (at 52])

Given that the decision on review, although made by Minos Perdios, was accepted by the council as its own (as indeed it would have to – see s 72, 1994 Act), the democratic accountability argument wasn’t a runner.   That conclusion about contracting out was fortified ( at [54]) by reg 2 of the Allocation of Housing and Homelessness (Review Procedures) Regulations 1999, SI 1999/71, which appears to accept that an external person may make a review decision.

There then follows an examination of the Minos Perdios contract with Brent together with his website.  As opposed to the “high degree of independence” considered in [52], it was noted that the contract has no real security of tenure.  But that didn’t matter because (a) the fact that he acts for a significant number of local authorities “confers a certain independence in relation to each of them”; and (b) local authorities do not necessarily have security of tenure if their “work is not to the liking of [their] superiors or political masters” (at [56]).

Drawing on the test of apparent bias in Porter v Magill [2002] 2 AC 357 (one of my all-time favourites, I’ve got to admit), he found that the Minos Perdios website did not convey that real danger of bias to an objective and well-informed observer (at [57]).  Equally, the sheer number of reviews done by Minos Perdios does not suggest that he doesn’t consider each one.  It was misleading that he signed his review letters on Brent notepaper as “Minos Perdios Reviews Manager” but that false impression was immaterial.

Ms Heald was successful on one point about which we have commented before on this site – the HHJ who heard her appeal simply said that he preferred the arguments for Brent without reasons.  That was clearly insufficient (but does seem to happen nevertheless) but immaterial as the CA had reviewed all the evidence before him (at [60]).

Whilst Stanley Burnton LJ dismissed the appeal without regret, Sedley LJ, in a short reflective judgment, offered the following analysis on the first issue:

64 Local government has long since been divested of most of its adjudicative powers. The modern forum for the exercise of such powers is an independent tribunal. But by virtue of primary legislation important decisions which can make the difference between a home and the street for thousands of people every year have been consciously placed and kept within the administrative framework of local government, with recourse to the courts on process only and not on merits.

65 It is into this framework that the power to contract out has been introduced. Certain functions are exempted from the power, but the review of homelessness decisions is not one of them. One understands very well why members of the Appellate Committee [in Runa Begum] were dubious, even so, about the contracting out of an adjudicative function as if it were the town hall catering contract. But the fact is that it is difficult to envisage a process less compatible with Article 6 than the in-house review by one official of another official’s decision on an issue on which the local authority, through both of them, sits as judge in its own cause. Starting from such a low base, delegation of the review function to a competent outsider on the kind of terms we have seen in this case, whatever its weaknesses, probably offers more in the way of independence and impartiality than the in-house system.

This lament for local authority adjudications as if they are the town hall catering contract will live with me for a good while.

8 Comments

  1. tim scott

    Dare I say I told you so (see my contribution to Augustin above), and you chaps all gloating over Minos’ demise are now found, probably not for the first time, to have ejaculated somewhat prematurely…

    I, like the CoA, cannot see the difference between a LA-employee or and LA-employee-gone-private undertaking reviews. And if you think his success indicates an underlying bias, then this judgement suggests it is your fairmindedness that is in question, not his.

    Reply
    • NL

      Tim – I checked back and saw no gloating. I, for instance, have never seen a Perdios review, don’t know him and have no axe to grind over the quality or otherwise of the reviews.

      What I was and remain worried about is the contracting out and specifically the risk of the effect of a piece work or short-term contract on the independence of the reviewer. This was a point I made in reply to you on Augustin and to which you didn’t respond. And in fact, the Court of Appeal agree on the risks – look at para 52. In this case, on the specific facts, the Court of Appeal found that the risk was mitigated by the large number of authorities Perdios did reviews for – so lessening the need to please one individual master. Personally, I don’t agree with them on that point, but they clearly don’t simply ‘not see the difference’, as you suggest, they see a potential danger.

      On ‘underlying bias’ – the issue was apparent bias, i.e. the appearance of the danger of bias. Not the same thing. But granted the CoA didn’t see the same problem with the website that the HHJ did in Augustin.

      Reply
      • JS

        As Lords Millett, Bingham and Hoffmann appeared to see the danger I think those of expressing concern about the contracting out of reviews are in good company .

        I wonder whether they will apply to the Supreme Court especially with Runa Begum being reconsidered in Ali post Tsfayo.

        Reply
  2. Ros Tyrrell (Ms)

    I carry out s 202 reviews as an independent consultant for local authorities, primarily in Wales, but I have also done some work for a large English authority. Despite original objections from Shelter my approach has been accepted, probably because I have shown myself to be objective and unbiased. Contracting out performs a useful service because it CAN ensure true independence and better quality decisions, as well as advice to the authority.So please don’t think there is only one person doing this and that he reflects the general approach in this area.

    Reply
    • NL

      Ros, as I hoped I’d made clear above, my concerns are not at this point about whether or not particular individuals or companies carry out out-sourced reviews, but with the nature of out-sourcing, specifically the contractual and economic pressures involved. As noted in both this judgment and previously in the House of Lords, out-sourcing does not necessarily ensure independence and quite possibly the reverse.

      Reply
  3. Ros Tyrrell (Ms)

    This is true if you compare outsourcing review work to the town hall catering contract, but I don’t think it’s the right comparison and I agree it should not sink to that level. The expenditure encountered for review work should fall far short of most LA tendering requirements. Outsourcing this work should be compared with any need to engage a particular expertise or resource that is not present within the authority e.g. legal expertise, training in a particular field. Any local authority that seeks to go out to tender for this work has missed the point in my view.

    Reply
  4. Sean

    The 1996 order (contracting out) should have been challenged by way of judicial review; instead u/s 204 of the Housing Act, as it is a breach of principle of natural justice.

    TSFAYO v. THE UNITED KINGDOM, where the Housing Benefit Review Board (comprised of elected councillors) decision was quashed on holding Review Board is not “independent and impartial” and a length of discussion on Article 6.
    Review Companies can’t be independent and impartial as they need their contract to be renewed with the local authorities.

    Hence public law duty (section 202 of the Housing Act 1996) shouldn’t be discharged by these registered companies as they are not public bodies or bodies governed by public law.

    Reply
    • Ros Tyrrell (Ms)

      I am not a registered company. The process is arguably no less impartial that a senior officer working for the authority see the view of LJ Sedley in the article above. I personally do not boast about percentages of decisions upheld because I have recommended the the authorities I work for to overturn quite a few! The decision at the end of the day is the local authority’s – I carry out the process and it is endorsed or not endorsed accordingly. I wouldn’t be too concerned about the extent of this as there are only about 3 individuals doing this in the UK.

      Reply

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