Defeating substantive legitimate expectation claims

In the second in a two-part series on substantive legitimate expectations, David Sykes analyses the courts' approach to judicial review challenges and examines how such claims can be defeated.

Abstract

The purpose of this article is to examine the judicial approach when a substantive legitimate expectation challenge, whether arising from a personalised promise or one involved with introduction of a new policy or revision of established practice, is brought before it for judicial review. This will involve exploring the concepts of deference, and public interest, their nature and influence on substantive legitimate expectation claims. An additional purpose is to explore in practical terms, what local authorities can implement in their governance structures to maximise the impact of their administrative decisions being challenged on grounds of substantive legitimate expectations. This will involve the use of Standing Orders and the use and validity of exculpatory clauses in their published literature, as well as full recognition in any decision-making of the public interest.

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David's first article, Promises, promises, can be viewed here.

All cards on the table

This requirement arose in a tax case, R v IRC, Ex p. MFK [1], where Bingham L J emphasised the role notions of ‘fairness’ play in the doctrine of legitimate expectations. He stated:  

The doctrine of legitimate expectations is rooted in fairness, but fairness is not a one way street - it imports the notions of equitableness of fair and open dealing to which the authority is as much entitled as the citizen. [2]

In another tax case Moses LJ interpreted this requirement as an aspect of fair dealing between the parties [3] and in the recent case of R (Lahrie Mohamed) v HMRC it was stated important that the claimant ‘put all his cards on the table.' [4] Certainly the analogous equitable maxim of coming to court with clean hands comes to mind.

Standing Orders

A local authority’s Standing Orders can play an important part in reducing or at best mitigating an adverse judicial decision. The purpose of standing orders is to provide a structure for dealing with specific areas of governance, such as staff, contracts and procurement. If a policy or its revision therefore, has the potential to engage questions of a substantive legitimate expectation nature, it is of vital importance that standing orders set out how they are to be dealt with. Reports to committees must ensure that under the legal section such matters are specifically addressed and there is not over reliance on a ‘tick box’ mentality or resting on the fact that standard impact/feasibility reports have been undertaken. On any judicial review challenge cogent evidence that the local authority had foreseen potential problems and that its reaction was proportionate and fair will help to resist a legal challenge.

Exculpatory clauses

This section examines the potential use of exclusion clauses in literature issued by public bodies, such as local authorities. There has been a great deal of case law in England and Wales, involving literature issued by HM Inland Revenue on the use of ‘health warnings' [5] at the beginning of documents which negate the establishment of a legitimate expectation. The argument is based on the fact that the promise made is not therefore ‘devoid of qualification.' [6] There is no reason why lessons cannot be learned by judicial attitudes albeit in a different sphere. A useful illustrative case is R (on the application of Thompson) v Fletcher and the approach of Lawrence Collins J. That case involved relief from income tax under the Income and Corporation Taxes Act 1988 for individuals who subscribed for shares in Business Expansion Scheme companies. The judge dealt with the disclaimer in the tax payers’ booklet, which he considered made it absolutely clear that readers should not assume that the guidance is comprehensive or that it will provide a definitive answer in every case. [7] The booklet contained a declaration that ‘the notes are for guidance only-they are not binding and that in a particular case there may be special circumstances which will need to be taken into account.' [8] Hanover Company Services Ltd v Revenue and Customs Commissioners [2010] UKFTT 256 (TC) also contains helpful remarks, albeit obiter, concerning warnings in guidance notes. Tribunal Judge John Brooks states:

‘Even if Hanover had ,either directly or indirectly, relied on the guidance, given the health warning in the guidance that it was not comprehensive and did not provide a definitive answer in every case, the representation in the guidance was not capable of giving rise to a legitimate expectation as the representation was not devoid of relevant qualification.' [9]

It may be possible to argue that these tax cases are confined to their own special category of tax collection and not universally binding on other areas of activity, where financial issues are of lesser importance, than say questions of liberty and social welfare issues. However, this argument may not hold much water where the public body can refer to the many unsuccessful substantive legitimate expectation claims, in what are termed the ‘prisoner cases’. [10]

Rebecca Williams states:

‘Indeed as early as 1986 Kerry argued that public authorities would respond to the law of legitimate expectations by acting defensively to avoid the creation of those expectations in the first place.' [11]

Recognition of the ability of local authorities to qualify an assurance in their literature was made by Stuart-Smith J in Alansi, when he stated:

‘The Defendant could have included a statement that the promise was qualified by the reservation of a right to withdraw it in the event the Defendant wished to change its housing allocation policy in the future; but, it did not do so.' [12]

My view is that as the concept of legitimate expectations is based on notions of fairness in public law, it seems, adopting the opinion of Freedman and Vella unacceptable that public bodies, whether local authorities can disown their promises on the basis of a general exculpatory caveat, where there has been a clear abuse of power. [13] The difficult question in the context of substantive ‘promises’ made and then reneged upon by local authorities is the judicial meaning to be attributed to notions of fairness. Sir Kenneth Parker J has said:

‘Evaluating the fairness of the conduct of a public authority is not an exercise in semantics: it is necessary to ascertain, against the relevant legal and factual matrix, what the representation fairly and reasonably meant to those to whom it was made.' [14]

Case law constantly refers to terms such as ‘abuse of power’. Laws L J stated:

‘Abuse of power is a name for any act of a public body that is not legally justifies. It is a useful name, for it catches the moral impetus of the rule of law.' [15]

The rationale for the legitimate expectation doctrine may indeed be to curb public abuse of power or alternatively, as Laws L J preferred in Nadarajah, principles of good administration. I add a third foundational principle that of good stewardship, maintaining elsewhere that the relationship between local authorities and there service users is fiduciary like in nature, based on stewardship principles and an ethic of care for the local citizenry. [16]

The nature of local government decision making

Local authority decisions can be broadly divided into those of a bi-polar nature and those involving a wider spectrum of interests, termed polycentric. It is correct to identify that polycentric involvement causes judicial adjudication problems in the field of substantive legitimate expectation challenges. This is because they often involve macro-economic or macro-political issues. In my first article mention was made of the necessity of a local authority having to have good reasons to resile from a promise made. The recent Privy Council case of United Policyholders Group v Attorney General of Trinidad and Tobago [17] is useful since it restates the substantive legitimate expectation doctrine: a public body, unequivocal statement, reasonably relied upon and good reasons to depart. Lord Neuberger stated:

‘it was unlawful to resile unless it can show good reasons, judged by the court to be proportionate, taking into account any conflict with wider policy issues, particularly of a ‘macro-economic’ or ‘macro-political’ kind' [18]

The nature of decision-making -bi-polar and polycentric

A great number of administrative decisions in local government will be those involving a single issue such as refusal or grant of a market licence or planning permission, extension of a commercial shop lease or refusal of housing benefit. The likelihood is that only a few people will be affected, often only the applicant or their immediate family network. This type of issue is termed ‘bipolar’, because they have very little impact beyond this limited range. Some decisions, however, may affect a greater range of parties and encompass a wider range of issues, some involving unpredictable societal problems. For example, the sale of part of a school playing field and use of the net sale proceeds for a sheltered housing project will affect many people and groups in different ways.

Polycentric issues

Decisions that involve such ‘polycentric’ issues are, by definition, much harder to make than narrower bipolar decisions. In the context of local authorities they lack a single principal, but instead have multiple agency relationships, involving moral, legal or political obligations. This section examines the concept of polycentricism, and its relevance in their role as decision maker between local authorities and their service users. In any area of life - be it business, political or social - individuals and communities interact, creating potential both for co-operation and for conflict. Striking a balance is complex, and the existence of multiple interests makes contextualising the relationship between local authorities and their service users extremely difficult. Issues of polycentrism and the problems it creates in administrative English public law must be considered.

For the purposes of discussion, Kevin T Jackson’s [19] definition of the nature of a polycentric issue is adopted:

that polycentric issues involve a number of distinct centres each of which define rights and obligations of a multiplicity of affected parties and resolving matters around one centre typically creates unpredictable repercussions around one or more of the other centres

Lon Fuller [20], M Polyani [21] and Jeff King are prominent in discussions on polycentric issues and polycentrism. According to Fuller, a polycentric problem arises where there are a number of interlocking relationships that impact on each other. Fuller used the graphic metaphor of a spider’s web to illustrate interacting centres of diverse interests and, as noted by King, the spider’s web can be used to convey the idea of tensions between various parties, each pulling in different directions according to their own interests such that ‘pulling on one strand would distribute new and complicated tensions throughout all of the other strands of the web.' [22]

Enid Campbell and Mathew Groves [23] state that ‘bipolar’ and ‘polycentric’ disputes do not form a dichotomy, but rather ends of a continuum. The degree or level of polycentric elements will, in some measure, depend on the person making the decision, as different decision-makers may be prepared to recognise a greater or lesser range of interests.

Fuller did not consider a polycentric issue susceptible to solution by adjudication; although the subject of polycentricism was prominent in much of his thought, he never directly defined the term. In addition to his spider’s web metaphor, Fuller also gave an additional example of a testamentary bequest of an art collection to be divided equally between two beneficiaries, and the problems that could arise if one legatee did not want a picture by a particular artist, because they already had some of that artist’s work. In this scenario the Personal Representative of the deceased would have to face making a decision involving not only the legatee who made the particular request, but would also need to consider how honouring such a request would affect the other legatee.

Other scholars have defined polycentrism in a variety of ways, Professor Jeffrey Jowell, for example, states it is, [24] ‘a complex network of relationships, with interacting points of influence. Each decision communicates itself to other centres of the decision, changing the conditions s that a new basis must be found for the next decision.’ Professor Paul Craig employs an easily identifiable sporting metaphor: the decision of a team captain to switch his centre-back to half-back may necessitate alterations to the whole team. [25] The consequences are more sweeping than the initial decision (of moving player A to a different field position) might have first suggested: not only would the team formation be affected, but no doubt tactics to accommodate the new line up would need to be formulated.

No matter what definition of polycentricism we prefer, it may be that - on a pluralist view - local politics is like a market place; in that market, a proliferation of competing interests push, pull, grapple and horse trade their way to influence the local authority decision making process. Significantly, Seth Davis observes that:

with the pluralists, fiduciary theorists describe contemporary life as characterised by the tug and pull of competing interest groups. But, unlike the pluralists, fiduciary theorists aspire to public governance that transcends normal politics and see an ambitious role for the courts to hold politicians and bureaucrats, no less than partners or agents, to something more than market morality [26]

The tug and pull of competing interests across a wide spectrum is no better illustrated than by the case of Alansi v London Borough of Newham [27] This was a housing allocation case and involved a claim that the council’s statements triggered a legitimate expectation that she would retain Priority Homeseeker status and that resiling from such subsequent assurances amounted to an unlawful abuse of power. The Council’s decision to remove her from the category of Priority Homeseekers with a right to bid for permanent accommodation involved resiling from the assurances. The judge referred to the provision of housing as a key concern of local authorities and referred to Lord Bingham’ statement in Huang v SSHD [28], where the influence of competing interests in central governments formulation of housing policy was made.

It appears that ‘no single body can hope to represent the full range of interests in a neighbourhood, so you can’t devolve to one single group. We need other forms of representation for powerless groups’. [29]

A countervailing public interest

A substantive legitimate expectation even when made out to the courts’ satisfaction does not always entitle the expectant claimant to relief as public interest considerations may dislodge it applying.

Lord Denning stated:

The underlying principle is that the Crown cannot be estopped from exercising its powers…when it is doing so in the proper exercise of its duty to act for the public good, even though this may work some injustice or unfairness to the private individual…it can however be estopped when it is not properly exercising its powers, but in misusing them; and it does misuse them if it exercises them in circumstances which work injustice or unfairness to the individual without any countervailing benefit for the public [30]

Lord Denning’s quote emphasises not only the balancing role of the court, but also the tension between protecting individual rights and the protection of the public interest. This tension is also identified by Stuart-Smith J in Alansi and usefully refers to the role and obligation of the public authority in formulating and implementing policy and as such, as an agent of change. [31] He appreciates the position of local authorities and states:

‘for local authorities in general and the Defendant in particular limited supply, heavy demand, and central government pressure makes the allocation of housing a core political area. The defendant’s aims of providing suitable housing for as many people as possible and prioritising the allocation of housing to those that really need it provided a clear rationale for wishing to adjust its policy to those, like the Claimant, who are suitably housed already’

The judge did not consider that the case involved ‘macro-politics’ to the same extent as central government decisions, although it was within the sphere of political policy’ affecting a significant numbers of people (and, for example, many more than were affected by the impugned decision in Coughlan). [32] It is sufficient here to state that the judicial role is not to engage in policy reviews whether of a political or economic nature: to do so would offend separation of powers principles. It was however, legitimate for the judge to comment on the function of local authorities ‘who are required to take into account both local and national interests and considerations when deciding where to strike the balance of fairness for all those who look to the local authority to provide them with suitable housing.' [33]

A fundamental principle of public law is that the public interest be protected in the realm of discretionary decision making by public bodies. Decision makers must pay heed to the public interest. Local authorities, unlike private parties are entitled to weigh up the public interest against that of the individual. This leads Sales and Steyn to conclude that:

there is no scope for the simple transposition of private law estoppel rules into the public law field [34]

If a public body can successfully plead the public interest then it will trump any legitimate expectation claim whether procedural or substantive. This effectively limits the roving commission of equity, for even where a legitimate expectation arises, it can always be defeated by the public interest. There are however limitations placed on the use of justification of the public interest in not keeping promises made by a public body. In Niazi/Bhatt Murphy [35] Laws LJ delivered the leading opinion in the Court’s judgment and stated that whilst a court will recognise and respect the right of a public body (thus including a local authority) to override whichever type of legitimate expectation may exist in the public interest, nevertheless in exercising that prerogative a public body must respect the requirement of proportionality. By ‘proportionality’, Laws L J meant that a public body had to give ‘a proportionate response (of which the court is the judge, or the last judge) having regard to a legitimate aim pursued by the public body in the public interest’. [36]

The concept of ‘public interest’ at general law is an amorphous concept, wide ranging and expansive. Its overriding effect is graphically illustrated by its operation in legitimate expectation claims, where it has the power to defeat even a legitimate expectation. The administration acts in the public interest and the law must recognise its purposes. As Robert Thomas states quoting Maxime Letourneur, a former member of the Conseil d’Etat, 'administrative law is by its very nature, an unequal law; for the general interest must be accorded supremacy over private rights.' [37] The underlying purpose of judicial control of the administration is to recognise the different needs of the state and the individual, and to balance them accordingly. [38] As Robert Thomas states: [39]

In general, the public interest represented by respect for legality prevails; the only exception is where the administrative decision so interferes with private interests that the public interest cannot justify the incursion. The purpose of the balancing exercise is therefore to ensure that in the exercise of its powers a local authority does not act arbitrarily towards individuals

The use of the notion of the public interest concept evokes several important and challenging questions that are not easy to answer definitively.

i. What do we mean by the public interest?

ii. What guidance can the courts give to administrative decision makers, such as local authorities and the citizen on how the public interest factor will be assessed?

The following can be said with certainty:

• Categories of what come within the term ‘public interest’ are not closed. [40] This approach allows flexibility and is intentional on the part of the judges, because it recognises that legislatures and policy makers have to deal with changes over time and according to the circumstances in each situation- society’s perception of what is in the public interest changes.
• The term does not mean that which gratifies curiosity or merely provided information or amusement. [41] Similarly, it is necessary to distinguish between ‘what is in the public interest and what is of interest to know.' [42] ‘The public interest is a term embracing matters, among others, of standards of human conduct and of the functioning of government and government instrumentalities tacitly accepted and acknowledged to be for the good order of society and for the wellbeing of its members.’
• The Privy Council held in Paponnette [43] that once a legitimate expectation has been established by a claimant then the burden of proving that the expectation should be defeated by reference to the overriding public interest shifts to the defendant. The court will examine the public interest argument, which must be presented succinctly and accurately. In the absence of any cogent reasons it is unlikely that the public body’s position will prevail.

According to Advocate-General Lagrange it forms ‘one of the fundamental concepts of administrative law, and is …without doubt the chief justification for the very existence of administrative courts' [44] The courts have made it clear that a public authority can resile from what has been a procedural or substantive legitimate expectation (It would seem harder to resile from a procedural legitimate expectation than a substantive one), but there must be ‘a sufficient overriding interest’ that ‘outweighs’ the representation relied upon or which justifies a new or reversal of established policy, Sedley L.J. stated ‘relevant and overriding policy imperatives' [45] and his lordship again in Niazi [46] ‘sufficiently powerful supervening factors.’

This begs the question of what is meant by the 'public interest'? Is it easily definable or can it have different meanings within a different factual context? The term ‘public interest’ is an amorphous concept and its inability to resist tight definition gives it an intentional flexibility. Legislators, policy makers and judges have all recognised that the conception of what is in the public interest will change over time and according to the circumstances of each situation. In the same way, the law does not try to define categorically what is ‘reasonable’. Jonathan Moffett [47] states ‘Plainly by importing concepts such as ‘overriding’ and ‘outweighing’, the court abrogates to itself at least an element of the decision-making function that is normally the preserve of the public authority’. This theme also impregnates the views of J. A G. Griffith who states, ‘judges differ in their view of where the public interest lies.' [48]

Tamberlin J [49] in the Australian case McKinnon v Secretary, Department of Treasury in the author’s view succinctly summarises the judicial process when public interest concerns are raised. He states:

‘This ultimate evaluation of the public interest will involve a determination of what are the relevant facets of the public interest that are competing and the comparative importance that ought to be given to them so that ‘the public interest’ can be ascertained and served. In some circumstances, one or more considerations will be of such overriding significance that they will prevail over all others. In other circumstances, the competing considerations will be more finely balanced so that the outcome is not so clearly predictable. For example, in some contexts, interests such as public health, national security, risks of serious sexual or elderly persons’ abuse, anti-terrorism or international obligations may be of overriding significance when compared with other considerations’

My conclusion is that the more a local authority can show that it has acted carefully in weighing up its decision to override the expectation by considering the substance of the issue and considerations of fairness, and it satisfies the test of proportionality the more likely that the court will uphold the local authority’s decision to override the legitimate expectation.

R (Cheshire East Borough and others) v Secretary of State for the Environment, Food and Rural Affairs (2001) EWHC 1975 (Admin) [50] provides a recent example where the public authority succeeded in frustrating the legitimate expectation on grounds of overriding public interest. The claimant local authority lost its judicial review application against the defendant Secretary of State that Private Finance Initiative (PFI) funding would be provided for their waste diversion project. The Executive Board of the Waste Infrastructure Delivery Programme were broadly sympathetic to proposals and set aside £30m PFI credits, but later changed its methodology and did not make the grant available. During negotiations it had been stated by the Department for the Environment, Food and Rural Affairs (DEFRA) who were also involved that the issue of the PFI credits were not guaranteed, and remained subject to approval of a final business plan. The challenge was on the basis of breach of both procedural and substantive legitimate expectation. Each ground failed. Langstaff J held that there was an overriding public interest that would have frustrated any legitimate expectation. He considered that a broad approach to selecting projects to secure the savings was permissible. His comments are very important for local authorities and their service users in a period of economic restraint and what has been said about the nature of a fiduciary obligation to council tax payers, Langstaff J stated:

The Government decided on a macro-political and macro-economic basis that spending had to be cut significantly and quickly. A plan for deficit reduction was to be set out in an emergency budget within 50 days. The Spending Review itself recorded that the Government saw it as an urgent priority to secure economic stability. Choices were required, as a result of which departmental budgets were to be cut by ‘an average of 19% over four years’. In that context, I accept that a decision maker in an individual department of State must be accorded a very wide margin of appreciation, and a court must be reluctant to interfere with technical expert judgments such as are in issue here: as Lord Millett said in Southwark LBC v Mills (2001) 1 A.C. 1 at 26, priority in the allocation of resources must be resolved by the democratic process, national and local, and the Courts are ill-equipped to resolve such issues

A major difference between public law adjudication and that of equity is that English courts have recognised that ‘public administration extends not to a single case but the management of a continuing regime.' [51] As Robert Thomas states ‘they have not adequately considered whether their own task extends merely to the single case or to the management of a continuing regime.' [52] Thomas rightly concludes ‘how can the courts effectively protect expectations if they maintain the distinction between adjudication and administration.' [53]

Practical suggestions for local authorities

The legalistic nature and uncertain scope of the legitimate expectations doctrine, in its substantive form, makes this a difficult field in which it is difficult to give advice to clients with certainty. Further, faced with an increasingly diverse range of service provision and new forms of service delivery in a cost cutting environment and a number of involved players, it is of paramount important that local authorities give priority to aspects of governance, especially in the context of triggering legitimate expectations, whether procedural or substantive or both. What can local authorities do to alleviate the risk of successful judicial review claims? I have attempted to show that the substantive legitimate expectation doctrine is a difficult one to tame. Notwithstanding it is possible to draw out a number of salient points that judges centre upon. These involve local authorities having to establish that their response to resiling from a promise is proportional to the purpose to be achieved. This will involve having in place a detailed set of internal council procedures that will alert potential areas of risk. For example, if there is a major town regeneration scheme proposed, it is essential that standard practices of regularly conveying information to all interested parties and consultation mechanisms in place. The precise ‘beneficiary’ class affected, whether personal or commercial and if wide ranging issues involved the public interest: a tick box mentality will not suffice. In carrying out regular case reviews particular awareness should be directed to new policies and revision of existing policies and how the user class is affected, including those citizens who are in the transitional stage between policy changes, for it is precisely in this area that substantive legitimate expectation claims can be made.

It is correct that decisions may be regarded as fact-specific, as illustrated by the Westminster City case, which provides a salutary warning to local authorities about the importance of carefully expressing offers of provision, and encouragement to those who provision is withdrawn or changed in breach of an earlier commitment. From my experience as a lawyer in local government I sometimes found it disconcerting that the legal department was often locked out of matters and consulted at too late a stage only after a judicial challenge had been made. Liaison between departments is crucial. For example, proof reading by the legal section of guidance notes issued by the social services department or housing department may spot potential assurances of a definite actionable quality under grounds of breach of a substantive legitimate expectation, if withdrawn or revised. Further, if exculpatory clauses are to be used, their scope, purpose and ultimate validity must be reviewed by lawyers whether in-house or counsel, experienced in the area concerned: good governance dictates such an approach. The phenomenon of ‘soft law’ employed by local authorities is of growing importance where communications are treated like law, even though they are neither legislation nor subordinated legislation. [54]

Local authorities when making any decision are required to identify their client base: this may involve only a few people, for example where a street trader’s market licence comes up for renewal, or one where it is apparent that there are wider public interests to factor in. It is appreciated that identifying the public interest may in certain situations be complex, but this is no reason for it not to be on the agenda: there are many areas of national and community activities which may be the subject of the public interest - ‘the interest is therefore the interest of the public as distinct from the interest of an individual or individuals.' [55] A local authority has the task of assessing public interest considerations in each particular case: a public interest test must be on the agenda. This is essential if a local authority argues the public interest exemption.

The scrutiny committee and members should play a key role in local authority governance; be robust and must explore all options thoroughly and not be afraid to make difficult choices. [56] The scrutiny function cannot be emphasised enough in eliminating risk and challenges, for example concerning legitimate expectation challenges.

The Courts use fairness as a barometer, but context is important to. In closing it is vital that local authorities be fully aware of the impact of the doctrine of legitimate expectations, in both its manifestations of procedural and substantive. As Venice James states;

‘the doctrine will continue to evolve, encompassing as it does, issues of estoppel, contract, abuse of power, reasonableness and irrationality and above all the concept of fairness.' [57]

To this list I would add proportionality [58] and the need for local authorities to consider the impact of any of their decisions on the public interest: in addition asking itself the right questions and any applicable statutory obligations. Recent case law has identified this aspect of local authority decision-making as a problem area. [59]

The designation of local authorities as ‘statutory corporations’ does not do justice to the significant role they play in a local area, nor help us to identify the true nature of the relationship between local authorities and their service users. Its only function is to determine their statutory genesis and emphasise that local authorities can only act within the remit of their statutory authority, for to do so otherwise will be ‘ultra vires’ and unlawful. I consider their role to be better categorised as one of stewardship - a steward of local resources: stewardship of person, place, property and purpose, should be paramount. That study, however must wait for another time.

David Sykes is a former local government solicitor who is studying for a PhD at the University of Essex. He can be contacted This email address is being protected from spambots. You need JavaScript enabled to view it..