Mair Bain v Secretary of State for Transport
[2024] EWHC 2216 (Admin)
Birmingham City Council, R (on the application of) v Secretary of State for Transport
17 June 2024
[2024] EWHC 1487 (Admin)
High Court
The city council wanted the government to keep paying for road repairs as promised. The government changed its mind late in the game without giving the council a chance to respond. The court ruled that was unfair and cancelled the government's decision.
Key Facts
- •Birmingham City Council (BCC) challenged the Secretary of State for Transport's (DfT) decision to not support a revised Highways Maintenance Private Finance Initiative (PFI) arrangement.
- •The DfT's decision was based on the revised deal's inability to be recorded "off balance sheet" due to insufficient capital work and risk transfer to the private sector, resulting in a significant upfront cost.
- •BCC argued that the DfT breached a legitimate expectation, established through a 2010 letter and a 2009-10 guide, that PFI credits would only be terminated in exceptional circumstances.
- •The case involved a lengthy history of negotiations and business case submissions between BCC and DfT following a settlement with Amey, the original PFI contractor.
- •A key issue was the change in EU accounting standards (ESA 2010) that impacted the balance sheet treatment of the revised PFI arrangement.
Legal Principles
Substantive Legitimate Expectation
Various case laws including Re Finucane’s application [2019] 3 All ER 191, R v Board of Inland Revenue ex parte MFK Underwriting Agencies Ltd [1990] 1 All ER 91, R v North and East Devon Health Authority ex parte Coughlan [2001] QB 213
Procedural Legitimate Expectation/Fairness
R (Bhatt Murphy) v Independent Assessor [2008] EWCA Civ 755, R (Luton BC and others v Secretary of State for Education [2011] EWHC 217 (Admin), R (Dudley MBC v Secretary of State for Communities and Local Government [2012] EWHC 1729 (Admin)
Legal basis for government grant funding for PFI projects
Section 31 of the Local Government Act 2003
Outcomes
Grounds 1-3 (Substantive Legitimate Expectation) were rejected.
The court found that the 2010 letter and the Guide did not create a clear and unambiguous promise that PFI credits would only be withdrawn in exceptional circumstances. The government's policy allowed for reassessment of support following major variations.
Ground 4 (Procedural Legitimate Expectation/Fairness) succeeded.
The court found that the DfT acted unfairly by not giving BCC a further opportunity to respond to new, determinative factors (balance sheet treatment, risk transfer, and affordability) that emerged in September 2023, after BCC had submitted its final business case. The court deemed this unfair considering the extensive prior engagement between the parties.
Grounds 5 and 6 were rejected.
Ground 5 (Failure to have regard to relevant considerations and irrationality) was deemed not reasonably arguable. Ground 6 (Reasons) was rejected because the reasons given in the DfT's decision were found to be adequate and intelligible.
The Decision was quashed on Ground 4 only.
The court found that the unfair procedure likely affected the outcome of the decision.
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