IN THE HIGH COURT OF JUSTICE					    CO/3652/99
QUEEN’S BENCH DIVISION				
CROWN OFFICE  LIST
Maidstone Crown Court
Friday 12 May 2000
Before:
The Hon. Mr. Justice Moses
B E T W E E N:
THE QUEEN
-v-

SERVITE HOUSES
First Respondent
-and-

THE LONDON BOROUGH OF WANDSWORTH COUNCIL
Second Respondent
Ex parte

LOUISA  LAURA GOLDSMITH
By her daughter and litigation friend Linda Goldsmith
First Applicant
-and-

FLORENCE NELLIE CHATTING
By her niece and litigation friend Marlene Turner
Second Applicant
__________________________________
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040,  Fax No:  0171 831 8838
Official Shorthand Writers to the Court)
__________________________________
MR. RICHARD GORDON Q.C. and MISS JENNI RICHARDS (instructed by Messrs Thorpe) appeared on behalf of the Applicants.
MR. ROBERT JAY  Q.C.and MR. CRAIG BARLOW (instructed by Maclays) appeared on behalf of the First Respondent.
MISS ELISABETH LAING (instructed by Wandsworth Council Legal Services) appeared on behalf of the Second Respondent.
__________________________________
Judgment
As Approved by the Court

Crown Copyright ©

INTRODUCTION

Both Applicants are elderly residents at Mary Court.  Mary Court is owned and managed by the first Respondent, Servite Houses (“Servite”), a charitable housing association.  The second Respondent, the London Borough of Wandsworth (“Wandsworth”) had assessed both Applicants as being in need of residential accommodation.  It arranged with Servite that the Applicants should be placed at Mary Court.

Both Applicants and their relatives expected that Mary Court would be their home for the remainder of their lives unless their health required greater nursing care than was available at Mary Court.  Both Applicants allege that Servite promised that that would be so before they agreed to go there.  Servite decided in 1999 to close Mary Court as a residential home.  Wandsworth proposes to make arrangements that they be provided with a residential home elsewhere.  The Applicants contend that the decision to terminate the provision of residential accommodation at Mary Court constitutes a breach of the public law obligations of both Servite and Wandsworth.

This case raises a significant issue as to the scope of this court’s jurisdiction.  Can the court impose public law standards upon a private body providing community care services in accordance with arrangements made with a local authority?  The case has been argued on the assumption that the Applicants have no private law cause of action against Servite.  Accordingly, unless the Applicants can invoke the jurisdiction of this court against Servite, they are, for reasons which will become apparent, likely to be without remedy, even if they can establish the promises which they assert were made by Servite.

In form, this is an application for permission to apply for judicial review.  But it has been agreed between the parties that, in the interests of expedition, I should, if I consider that permission should be granted, consider the application.  For reasons which will become apparent in this judgment, I grant permission to apply (I deal with delay at the close of this judgment).  Accordingly, I have considered issues relating to:-

		1)	the nature of any promise made by Servite to the Applicants;
                        2)	the amenability of Servite to Judicial Review in providing residential accommodation in accordance with arrangements made between Servite and Wandsworth pursuant to the National Assistance Act 1948;

                         3)	whether Wandsworth itself was in breach of its public law obligations to the Applicants.

This case affords an opportunity for the courts to consider the reviewability of the functions of a private provider of community care services in an age when private bodies play an increasing part in the provision of such services.  The role and response of this court to issues raised by such “privatisation” lie at the heart of these proceedings.

FACTS

THE FIRST AND SECOND APPLICANTS

The first applicant, Lisa Goldsmith, is 91 having been born on 13 January 1909.  She has a history of anxiety, depression and dementia; she suffers from significant cognitive impairment.  Her condition is described more fully by her devoted daughter, Linda Goldsmith who is her litigation friend. (See in particular paragraphs 6-8 of her first Affidavit).  In particular, she suffers from a number of phobias which lead her to see danger in everything; they frequently rob her life of any pleasure.  Linda Goldsmith, who had worked for many years in social care, spoke to a former colleague who is manager for services for older people in the Council’s Social Services Directorate.  According to Linda Goldsmith, the colleague recommended Mary Court as a residential care home.  Linda Goldsmith was anxious to find a permanent home for the rest of her mother’s life.  I shall deal subsequently with the specific issue as to the nature of any promises given to Linda Goldsmith as to the permanence of that home.  Linda Goldsmith, with her mother and other members of the family, first visited the home in June of 1996 and met the Senior Care Worker there, Colleen Bullen.

A Community Care Assessment, pursuant to Section 47 of the National Health Service and Community Care Act 1990 was performed on 16 July 1996 but at that stage stated that the first Applicant did not need residential care.  In the light of further medical evidence, this assessment was changed and Wandsworth accepted that she did require residential accommodation as opposed to sheltered housing on 21st November 1996.  The first Applicant moved into Mary Court in December 1996.  There she has remained, although from time to time she has, unfortunately, been taken seriously ill, been treated in hospital and then returned to Mary Court.

The second Applicant, Florence Chatting is 79, having been born on 14 October 1920.  She is paralysed on her left side, suffers epilepsy and has learning difficulties.  She had lived all her life in Battersea.  After her brother died in August 1994, she was assessed by Wandsworth in September 1994 as being in need of residential care. Again she has the advantage of a devoted member of her family, Marlene Turner, a niece, who is her litigation friend in this application.  Marlene Turner visited Mary Court with other members of her family in 1994 and the second Applicant moved there in February 1995.
	
It is important to record, at this stage, that neither applicant has been re-assessed in the light of the subsequent decision to close Mary Court.  In both cases, Mary Court has been their home for over four years.

MARY COURT

Mary Court is a purpose-built residential care home.  It was opened in November 1991 to provide residential care facilities for Wandsworth.  It was designed with separate flat units to provide a greater degree of independence to residents than most residential care homes and for up to 39 elderly, physically frail or disabled people.  Its function is to provide a secure homely environment which, as the chief executive of Servite houses says:-
“will seek to retain each individual’s independence, privacy, dignity and freedom of choice”.  (See paragraph 10, Kate Davis Witness Statement).      It is part of a larger complex including a sheltered housing scheme, registered nursing home and day centre.

Servite Houses owns Mary Court.  It is a charitable housing association which owns a number of  properties designed to provide housing for families, elderly people and others in need of care within the community.  It is registered as a social landlord with the housing corporation under the Housing Associations Act 1995, and is also a charity.  Nothing, in this case, turns upon its status as a charity.

It is managed by a board of thirteen members providing their services on a voluntary basis.  Its day to day management rests with senior staff which includes Kate Davis as Chief Executive and Martin Palmer, who has made a witness statement in these proceedings, as Deputy Chief Executive.  It is registered as a residential care home under Part I of the Registered Homes Act 1984.

ARRANGEMENTS WITH WANDSWORTH  
The two Applicants resided at Mary Court pursuant to written placement agreements made between Servite and Wandsworth. The statutory source of Wandsworth’s power to make those placement agreements is contained within Section 26 of the National Assistance Act 1948. I shall deal subsequently with the statutory regime.  The Applicants were unaware of the terms of those agreements.  The placement agreement in relation to Louisa Goldsmith was stated at paragraph 1 to be for a period from 3 December 1996 but no date was inserted to denote the end of that period.  The placement agreement referred to Servite as “the agency” (see paragraph 1).  It set out the weekly fee to be met by the Council (see paragraph 6).  By paragraph 22:-
“The agency undertakes to maintain the standard of care as required under The Registered Homes Act 1984 and The Registered Homes (Amendments) Act 1991.

23.The agency undertakes to provide services in compliance with the code of practice for residential care homes and nursing homes as agreed between the council and the agency which is attached at Annex 3”.

The Code of Practice states:
“This Code of Practice must be read in conjunction with the Placement agreement.”

By Clause 2 (Accommodation):
“(c)	Before applying for admission the resident…should be given in writing a clear statement of the terms under which the accommodation is offered.  This may be included in the introductory brochure if the home so wishes.  This statement should include:
…..

- the circumstances in which residents might be asked to leave;”

The Code of Practice also required each resident to have an individual care plan providing for consultation, review, liaison and case conferences.

The second Applicant’s placement agreement was in identical terms, save that the period referred to in Clause 1 was stated to be from 25 February 1995 until “permanent”.

There is one other important feature of both placement agreements.  By Clause 17:-

“The parties hereto may terminate this agreement with one month’s notice in writing to the other.  The Council requires two months notice in the event of closure of the Home or change of ownership.”

THE DECISION TO CLOSE
Servite decided to close Mary Court as a residential care home at a Board meeting on 27 May 1999.  This decision followed an investigation by the Board which started in August 1998 and revealed that there was a continuing financial deficit arising from the provision of care facilities where the level of funding received from local authority placements was insufficient to meet the actual costs of providing this care. (See paragraphs 4-5 of Palmer’s Witness Statement).  The Board decided to re-structure its homes to ensure that running costs were met.  Mary Court had consistently suffered the greatest deficit of all Servite’s care homes, particularly, according to Mr. Palmer (paragraph 6) because of its layout, the inability of local authorities to meet the actual cost of replacements, and the need to meet the requirements of registration as a residential care home.  According to an information sheet promulgated in June 1999 there had been substantial deficits in all the years from 1996 to 1999.  In 1996-1997 they were £233,780; they were less in the subsequent two years but Mary Court was budgeted to lose £154,000 in the year 1999-2000; the losses were expected to be greater than those which were budgeted.

At the Board Meeting on 27 May 1999, the Board decided that there was no alternative but to close Mary Court as a residential care home.  It was resolved to continue discussions with Wandsworth to devise an acceptable scheme for Mary Court, to give notice to residents, relatives and staff as soon as possible but to postpone actual closure until the end of March 2000.  It was hoped that Wandsworth would, after the announcement of the closure, undertake assessments for all residents pursuant to the National Health Service and Community Care Act 1990 and that those for whom sheltered housing was suitable, would remain at a “re-configured” Mary Court.

On 10 June 1999 Servite communicated its decision to close Mary Court on 31 March 2000 to residents and their relatives.  The circular to which I have referred, disclosing the losses, was issued.  It recorded the Board’s appreciation of the distress that the closure would cause to all residents and relatives.  It stated:

“The position in residential care is that local authority budgets generally are being squeezed tighter as each year passes and there is less and less money available for supporting people in residential care.”

It referred to Mary Court’s particular problem of expense and assured relatives and residents that the staff would work closely with them to identify suitable alternative accommodation.

Subsequently, discussions continued with Wandsworth as to proposals in which new sheltered housing with additional care would be provided at Mary Court.  It was hoped that after further assessments, many of the existing residents would be able to remain at Mary Court in sheltered accommodation with additional care.

These proceedings were started against Servite in September 1999.  I shall deal with the history of the proceedings in relation to the issue of delay later in this judgment.

I should observe that the hope that existing residents might remain in sheltered housing at Mary Court may prove optimistic and certainly is likely to do so in relation to the two applicants.  In its brochure Servite state:-
“Mary Court is designed to meet the needs of people who are unable to live in their own home or sheltered housing.”

The impact of closure upon these two applicants requires little imagination.  Both the applicants are frail old ladies.  The first Applicant’s medical condition has from time to time caused great concern (see in particular the Affidavit of Linda Goldsmith at paragraphs 25-27).  Any move is likely to have a deleterious effect on their health and will certainly adversely affect the quality of their life.

I should further observe, at this stage, that there is no suggestion of any consultation between Servite and Wandsworth as to measures which might be taken which would avoid closure of Mary Court as a residential care home.  Nor was there any consultation with residents or relatives prior to the decision to close.  All the consultation and discussion which has taken place thereafter has been on the basis that Servite was entitled to exercise its right to terminate placement agreements pursuant to Clause 17.

PROMISES OF A PERMANENT HOME
The trigger for these proceedings is the assertion by both Applicants that Servite promised them that Mary Court would be their permanent home for life unless their medical condition required care which the facilities of this residential care home could no longer provide.  It is asserted that they entered Mary Court as residents in reliance upon those promises.  There is a dispute between the parties as to whether any promise, as opposed to the expression of a  hope, was ever given.  Neither side has sought to cross-examine upon the affidavits.  Neither side has asserted that the sworn evidence is inherently improbable.  In those circumstances, as I hope has been made clear to these Applicants, my conclusions will be based upon those facts which appear to me to be revealed as common ground between the parties.

Linda Goldsmith explains the importance of seeing that her mother, the first Applicant, should have a permanent and secure home for the rest of her life.  She says that she discussed it with her colleague Jean Green, of Wandsworth Social Services Department on 3 May 1996 and that that need was expressly accepted by Jean Green (see paragraph 10).  In the middle of June 1996 when she first visited Mary Court, she says that she specifically asked the Senior Care Worker, Colleen Bullen, whether Mary Court could and would provide a permanent home for life for her mother and that Colleen Bullen replied that it was:-
“Mary Court’s stated philosophy to offer potential residents a permanent home for life at Mary Court”.  (paragraph 11).  

This was repeated on 21st July 1996. (See paragraph 13) and at a meeting with the Manager 
Caroline Franceschina, on 21 November 1996.  The only qualification stated by the Manager was:-
“If a particular resident’s care needs alter to the extent that the resident required specialist nursing care”.

The promise was  reiterated in September 1998 by the Manager after the first Applicant had been taken to hospital and before she returned to the home. (See paragraph 22).

Linda Goldsmith emphasises throughout her evidence the importance to her and her mother of the assurance that she would be able to remain at Mary Court for the rest of her life, subject to any requirement for specialist nursing care which could only be provided elsewhere.  She says:-
“It was of the utmost importance for me to ensure that without qualification, the first Applicant would have a home for life.  This is what was offered at Mary Court as conveyed to me by Colleen Bullen and Caroline Franceschina” (See paragraph 12 (XIII) Second Affidavit).

Linda Goldsmith did not see any brochure from Servite before her mother moved into Mary Court.

On the other hand, Marlene Turner, the second Applicant’s niece did see the brochure issued by Servite in accordance with the Code of Practice, which at the relevant period stated:-
“Servite Houses wish to provide a home for life whenever possible, but unfortunately cannot do so if specialist nursing need care is required.” 

Marlene Turner says that she discussed the importance of the provision of a permanent home with Yvonne Brown, a social worker employed by Wandsworth.  She stated that Mary Court would be ideal not least because it was known to offer a permanent home for life (see paragraph 8 of the First Affidavit of Marlene Turner).  A similar assurance was given in October 1994 by Janet Shepherd, an employee at Mary Court (see paragraph 10).  It was repeated in December 1994 by the Manager and Deputy Manager (Gill Rushden) (see paragraph 12).  Marlene Turner says that her family would not have agreed that the second Applicant should move to Mary Court:
“unless the provider of the residential care offered a permanent home for the rest of the second applicant’s life” (see paragraph 15).   

The second Applicant also relies upon the Placement Agreement which refers to the closing date of the period as permanent (see above) and evidence given on behalf of another resident which refers to similar promises.

The Respondent’s evidence does not disclose any serious dispute but that the Applicants were assured that they would be able to stay at Mary Court for as long as they wished, provided only that their health did not require specialist nursing.  Colleen Bullen, the Senior Care Worker at Mary Court originally wrote a letter dated 21 January 2000:-
“Residents have moved into Mary Court  believing it to be a home for the remainder of their lives and on the occasions I have shown people around, I have used the term “home for life”, as stated in the brochure, as they need to feel reassured that at their time of life they will not have to move again.”

 She subsequently appears to wish to have qualified that earlier letter in a witness statement dated 4th March 2000.  In that statement she says that she was aware of the policy of Servite and Mary Court:-
“That the aim should be to offer residents a home for life, subject to the residents needs not changing to the type of care which is outside the scope of the care provided at Mary Court.  Whilst I have told perspective residents and their relatives, probably including Louisa and Linda Goldsmith, of Servite Houses aim to provide a home for life, I may not have always mentioned that this is subject to the changing needs of residents.” (See paragraph 3.)

At paragraph 18 she says:-    

“Whilst I accept that the expression “home for life” appears in the brochures and formed part of my conversations with perspective residents and their relatives, I have never used the expression ‘a permanent home for life”.

Caroline Franceschina, the Manager, confirms the policy of Mary Court (see paragraph 9 of her statement).  She says:-
“In the circumstances, I could not give a categorical assurance as to a residents or prospective residents continued occupation of her room at Mary Court, simply because of the possibility they will need nursing care….I always make it absolutely clear that the period of residence is limited to the period of time that Mary Court is able to cater for their resident’s needs.” (paragraph 10).

She concludes:-

“I deny that I have ever afforded a promise of a home for life at Mary Court to Louisa Goldsmith or any member of her family, other than with the specific qualification that her residence was subject to Mary Court being able to provide the necessary care for Louisa Goldsmith’s needs” (see paragraph 22).

Jill Rushdon, the Deputy Manager gives similar evidence as to the nature of any assurances given (see in particular paragraph 5).

I conclude, on the basis of the evidence of the manager and employees at Mary Court, that both the first and second Applicants were assured that they would be able to remain at Mary Court for the rest of their life, so long as their health did not lead to the requirement of nursing care.  It was argued on behalf of Servite that the conversations with the resident’s relatives and the brochure amounted to no more than an expression of an aim or objective and did not amount to any assurance.  I reject that submission.  In the context of relatives, naturally concerned as to how the residential needs of their aged mother and aunt should be met, the references to a permanent home were bound to be understood as assurances that they would be allowed to remain subject to specialist care needs.  The distinction between such an assurance and a mere expression of a hope or objective was bound to be far too subtle to be appreciated by the concerned relatives.  Nor, in my judgment, was it intended as anything other than a promise designed to reassure and comfort those relatives.  Were it otherwise, I can see no point in any such expressions being used at all.  But I should add that neither the relatives nor the Applicants were given or could have expected any absolute assurance.  The expression “home for life” is not accurate.  There was no assurance or promise of a home for life, since no one could know whether the health of the Applicants would permit of continued residence at a residential home where specialist nursing care was not available.  Thus, although it is true that the eventuality to which the promise referred, namely a deterioration in health requiring specialist nursing care, never in fact occurred, no relative could have had any unconditional confidence that their aged relative would be able to remain for the rest of her life at Mary Court.

LEGISLATIVE SCHEME
Section 47 of the National Health Service & Community Care Act 1990 (“NHSCCA 1990”), which came into force on 1 April 1993, provides for the assessment of the needs of those who may be in need of community care services. “Community Care Services” include the provision of accommodation under Part III of the National Assistance Act 1948 (see Section 46(3) of the 1990 Act).  The Applicants’ needs were assessed pursuant to Section 47(1) which provides:-
“…where it appears to a local authority that any person for whom they may provide or arrange provision of community care services may be in need of any such services, the authority – 

a)	shall carry out an assessment of his needs for those services; and

b)	having regard to the results of that assessment, shall then decide whether his needs call for the provision by them of any such services.”

Both Applicants were assessed as requiring residential accommodation according to the criteria identified in Section 21(1)(a) of the National Assistance Act 1948.  That section not only sets out the criteria according to which the need for residential accommodation is to be judged, but imposes a duty upon local authorities to make arrangements to provide accommodation for those in need of care and attention which is not otherwise available to them.  Section 21 provides:-
“Subject to and in accordance with the provisions of this Part of this Act, the local authority may, with the approval of the Secretary of State, and to such extent as he may direct, shall, make arrangements for providing –

a)	residential accommodation for persons aged 18 or over who by reason of age, illness, disability or any other circumstances, are in need of care and attention which is not otherwise available to them.”

It can be seen from the terms of Section 21(1) that the obligation is only triggered once the Secretary of State has given his approval and made directions.  Such directions have been made in Appendix I to LAC (93.10).

Paragraph 2(1)(b) of the Secretary of State’s Approvals and Directions require a local authority to make arrangements for persons ordinarily resident in their area.  Unless arrangements are made with another local authority and subject to arrangements being made pursuant to Section 26, a local authority must provide accommodation in premises managed by that authority.  Section 21(4) provides:-

“Subject to the provisions of Section 26 of this Act, accommodation provided by local authority in the exercise of their functions under this section shall be provided in premises managed by the authority….”

References to accommodation include references to board and other services, amenities and requisites provided in connection with accommodation (see Section 21(5)).

The nature of the arrangements which a local authority may make, pursuant to the duty to make arrangements under Section 21, has been extended by the provisions of Section 26(1).  That section provides:-
“Subject to sub-sections 1(A) and 1(B) below, arrangements under Section 21 of this Act may include arrangements made with a voluntary organisation or with any other person who is not a local authority were:-

a)	the organisation or person manages premises which provide for regard, accommodation falling within sub-section (1)(a) or (aa) of that section and

b)	the arrangements are for the provision of such accommodation in those premises”  .

By Section 26(1A): 

“Subject to sub-section 1(B) below,  arrangements made with any voluntary organisation or other person by virtue of this section must, if they are for the provision of residential accommodation with both board and personal care for such persons as are mentioned in Section 1(1) of The Registered Homes Act 1984 (requirement of registration), the arrangements for the provision of such accommodation in a residential care home which is managed by the organisation or person in question, being such a home in respect of which that organisation or person – 

		a)	is registered under Part 1 of that Act or
		b)	is not required to be so registered by virtue of 
Section 1(4)(a) or (b) of that Act (certain small homes)
or by virtue of the home being managed or provided 
by an exempt body.”   

By Section 26(2): 
“any arrangements made by virtue of this section shall provide for the making by the local authority to the other party thereto, payments in respect of the accommodation provided at such rates as may be determined by or under the arrangements and subject to sub-section (3A) below, the local authority shall recover from each person for whom accommodation is provided under the arrangements, the amount of the refund which he is liable to make in accordance with the following provisions of this section.”

The sub-sections of Section 26 which follow make provision for payments by a person for whom accommodation is provided to the local authority, subject to assessment of means.

Since these Applicants were assessed as being in need of residential accommodation, Wandsworth was under an obligation to provide it (see R -v- Royal Borough of Kensington and Chelsea ex parte Kujtim [1999] 2 CCLR 340 at 354C-D).

The effect of Section 26 of the 1948 Act was considered by the House of Lords in R -v- Wandsworth London Borough Council ex parte Beckwith [1996] 1 WLR 60.  The Applicants had contended that Wandsworth was under a duty to maintain some accommodation for the elderly in premises under its own management.  The House of Lords disagreed.  The effect of Section 26 was to permit a local authority to discharge its duty to make arrangements under Section 21 by making all its arrangements for residential accommodation with voluntary organisations or other persons.  That section removed any obligation on local authorities to make direct provision for residential care under their own control.  Lord Hoffman said:-
“the draftsman is therefore not saying that homes in the private sector may be included in the collective of homes which the council has to provide.  He is saying that the concept of “arrangements” which has been used to define the council’s duty in Section 21 is to include arrangements within the private sector.  This produces an altogether different result: it extends the meaning of the concept by which the council’s duty is defined.  Any arrangements which fall within the extended definition will satisfy the council’s duty.” (See page 64).

However, Wandsworth’s duties to meet the assessed needs of the Applicants do not cease once it has discharged its duty to make arrangements under Section 21 by making arrangements with Servite.  It remains under a duty to see that the Applicants’ needs are met and if necessary to re-assess them.  It remains under an obligation to ensure that the arrangements which it has made continue to be sufficient to meet the needs of those qualified for such community care provision.

It is the effect of Section 26 which lies at the heart of the crucial issue as to whether the court has jurisdiction to impose public law standards upon a private provider of community care services. Beckwith highlights the problem.  Now that a local authority, like Wandsworth, can make all its arrangements indirectly through a private service provider, the question as to whether the court can impose public law obligations upon that private law provider, becomes all the more acute.

THE SIGNIFICANCE OF THE ISSUE OF WHETHER SERVITE IS AMENABLE TO REVIEW

Both Servite and Wandsworth contend that this court has no jurisdiction to impose public law standards upon a private sector service provider such as Servite.  Servite lawfully terminated the arrangements it had made with Wandsworth under Clause 17 of the Placement Agreements.  Accordingly the Applicants can only enforce any promise made by Servite in private law.  If the Applicants had no legal contractual  relationship with Servite, they have no redress.  Moreover, Wandsworth discharged its obligation under Section 21 in making arrangements with Servite.  Once those arrangements lawfully came to an end, Wandsworth cannot compel Servite to make provision for accommodation at Mary Court.  It is powerless to do anything more in relation to a private service provider who has lawfully terminated existing arrangements and is unwilling to make fresh arrangements.  It remains under a continuing obligation, pursuant to Section 47 of the NHSCCA, to re-assess the needs of the Applicants and meet those needs by making any arrangements under its power.  But it cannot be compelled to make arrangements with Servite which has lawfully ceased to make provision of residential accommodation in Mary Court.

Even if the Applicants can establish that Wandsworth has breached its public law obligations, that will be of no avail if Servite is unwilling to continue to make provision for residential accommodation at Mary Court.  If Servite is entitled to rely upon its private law rights to terminate the contract, both Wandsworth and the Applicants are unable to compel a change of heart.  Although Mr. Gordon QC on behalf of the Applicants suggested that there might be a prospect of keeping Mary Court open if Wandsworth offered more money, a suggestion to which I shall return later, it is small wonder that the Applicants attempts to demonstrate that Servite was amenable to judicial review formed the substantial part of the argument before me.   This case raises one of the most significant issues in public law today.  It is an issue which will continue to raise its head as courts grapple with the problem as to how they should respond to the increasing contractualisation of Government.  The court must decide whether Servite is performing a public function in providing a community care service, pursuant to arrangements under Section 26 so that it is subject to public law standards.

A PROMISE MADE BY A LOCAL AUTHORITY
The starting point of the Applicants’ argument is that if the promises had been given by Wandsworth, then the court would have required Wandsworth to honour those promises unless the court itself judged that there was an overriding public interest that the home be closed.  The foundation for this argument lies in the decision of the Court of Appeal in R –v- North & East Devon Health Authority ex parte Coughlan [1999] 2 CCLR 285.  In that case the applicant and a few others who were severely disabled had been persuaded to move from a hospital, which the health authority wished to close, to another purpose built hospital.  They were assured that the new hospital would be their new home for life.  After consultation and taking into account the promise, the health authority decided to close that new hospital.  The Court of Appeal held that the express assurance by the health authority that the applicant and the others could live at the hospital for as long as they chose, raised a substantive legitimate expectation.  Once that legitimate expectation had been established, it was for the court to decide whether to frustrate that expectation was so unfair as to amount to an abuse of power.  Further, it was for the court to weigh the requirements of fairness against any overriding interest relied upon to justify breaking the promise.  The court identified three possible categories into which the promise relied upon fell.  The assurances fell into the third category:-
“Where the court considers that a lawful promise or practice has induced a legitimate expectation of a benefit which is substantive, not simply procedural, authority now establishes that here to the court will, in a proper case, decide whether to frustrate the expectation is so unfair that to take a new and different course will amount to an abuse of power.  Here, once the legitimacy of the expectation is established, the court will have the task of weighing the requirements of fairness against any overriding interest relied upon for the change of policy.” (See paragraph 57, page 307).

The court continued:
“In the case of the third (category), the court has when necessary to determine whether there is a sufficient overriding interest to justify a departure from what has been previously promised.” (Paragraph 58, page 307).

The court said:-
“The court’s task in all these cases is not to impede the executive activity, but to reconcile its continuing need to initiate or respond to change with the legitimate interests or expectations of citizens or strangers who have relied, and have been justified in relying, on a current policy or an extant promise.”

“….The court is there to ensure that the power to make and alter policy has not been abused by unfairly frustrating legitimate individual expectations.  In such a situation a bare rationality test would constitute the public authority to judge in its own courts, for a decision to prioritise a policy change over legitimate expectations will almost always be rational from where the authority stands, even if objectively it is arbitrary or unfair. It is in response to this dilemma that two distinct but related approaches have developed in the modern cases." (Paragraph 65, pages 309 and 310). 

The court ruled that the proper approach was to insist upon the “adjudicative role of the court to ensure fairness of the individual” (paragraph 70, page 311).  The court continued by distinguishing R -v- Home Secretary ex parte Hargreaves [1997] 1WLR 906 and rejecting the notion that the decision of the health authority could only be challenged on Wednesbury grounds.  In Hargreaves the sole legitimate expectation of the prisoners was to be treated in accordance with whatever policy was in force at the time.  In this case, fairness in the statutory context required the health authority not to resile from their promise unless there was an overriding justification for doing so.  It was for the court to decide whether there was such an overriding public interest (see paragraph 76, pages 313 to 314).  On this point the court concluded:-

“The fact that the court will only give effect to a legitimate expectation within the statutory context in which it has arisen should avoid jeopardising the important principle that the executives policy making powers should not be trammelled by the courts……policy being (within the law) for the public authority alone, both it and the reasons for adopting or changing it be accepted by the courts as part of the factual data – in other words is not ordinarily open to judicial review.  The court’s task – and this is not always understood – is then limited to asking whether the application of the policy to enable the individual who has been led to expect something different,  is a just exercise of power” (see paragraph 82).

Mr. Gordon Q.C. asserts that the assurances given by Servite must have the same legal effect against Servite as the assurances given by the health authority had in ex parte Coughlan.

 SERVITE AND WANDSWORTH’S CENTRAL ARGUMENT

Servite submits it is a private body.  Its relationship to Wandsworth was commercial and its relationship to those for whom it provides care services is purely private.  Its powers arise out of its private contract with Wandsworth and any remedy, if any, available to the Applicants lies only in private law.  Wandsworth echoes those submissions.  Wandsworth accepts that it continues to owe public law obligations to the Applicants.  It remains under a duty to assess the Applicants’ needs and to meet such needs determined under the assessment.  Wandsworth has made no decision to withdraw the provision of residential accommodation from the Applicants and it remains under a duty to provide such accommodation.  But Servite’s decision to terminate was made lawfully under the placement arrangements and involves no breach of any public law obligation, either on the part of Servite or on the part of Wandsworth.

AGENCY 
At the outset I should consider the argument that Servite was the agent of Wandsworth, discharging functions on behalf of Wandsworth.  In my judgment Servite was not acting as agent of Wandsworth in providing community care services.  Wandsworth had no power to delegate its obligations under Section 21 of the 1948 Act or its duty to meet assessed needs under Section 47 of the N.H.S.C.C. Act 1990. Wandsworth could not lawfully arrange the discharge of its function by another person save by means of arrangements made under Section 101 of the Local Government Act 1972 or by virtue of an order made under Section 70 of the Deregulation and Contracting Out Act 1994.  In Credit Suisse -v- Allerdale Borough Council 1997 QB 306, Hobhouse L.J. said:
“If (Section 101(1) of The Local Government Act 1972) authorises the local authority to arrange for the discharge of any of its functions by a committee, sub-committee or an officer of the Authority or by any other authority.  Save for immaterial exceptions this de-limits how a local authority may discharge its functions.  Any delegation beyond those prescribed limits is unlawful”. (359E-F).

Mr. Gordon Q.C. on behalf of the Applicants sought to argue that Section 26 of the 1948 Act had the effect of authorising a local authority to delegate its obligation under Section 21 to provide residential accommodation to those in need.  He drew attention to what he described as an analogous provision in Section 30(1) of the 1948 Act which provides:-
“A local authority may, in accordance with arrangements made under Section 29 of this Act, employ as their agent for the purposes of that section, any voluntary organisation or any person carrying on…..activities which consist of or includes the provision of services for any of the persons to whom Section 29 above applies”.

Section 29 refers to welfare arrangements for those under particular disabilities.

The existence of Section 30 seems to me to demonstrate the distinction to be drawn between arrangements made under Section 26 and the employment of certain private persons as agents.  Section 26 does not provide that a local authority continues to discharge its duty through those with whom is makes arrangements. On the contrary, once it has made arrangements for the provision of residential accommodation with a voluntary organisation or other person, it has discharged its obligation under Section 21. As Lord Hoffman said in ex parte Beckwith (q.v. supra):-
“Any arrangements which fall within the extended definition will satisfy the Council’s duty.”

THE BASIS FOR REVIEW: STATUTE OR FUNCTION 
The Applicants contend that the provision of community care by a private person in pursuance of arrangements which discharge a public authority’s public law obligations is sufficient to impose public law obligations upon the private service provider.  In order to establish that contention the applicants assert they have no need to rely upon any statutory underpinning.  But Mr. Gordon Q.C. contends that in any event, he can establish on their behalf that there is a sufficient statutory underpinning or, as he put it, more graphically, that Servite and Wandsworth are locked together in a statutory embrace.

In considering the susceptibility of a body to the imposition of public law standards, the court is concerned to decide where a case lies in the spectrum between, at one end, a body whose source of power is statutory and, at the other end, a body whose source of power is  contractual.  Thus, both ends of the spectrum require the courts to determine the issue of amenability by reference to the source of power, statutory on the one hand and contractual on the other.  Between those two extremes lie many cases where the source of power test no longer provides an answer to the question of amenability.  In cases where the source of power is statutory, the constitutional justification for judicial intervention is the ultra vires doctrine (see Lord Steyn in “The Constitutionalisation of Public Law” (May 1999) at page 6).  But, as Lord Steyn points out:-

“The ultra vires principle cannot be the explanation of the judicial review of non statutory powers.  The importance of R v Panel on Take-overs and Mergers ex parte Datafin Plc (1987) QB 815 is that it represents a change from a “source of power” test for amenability to a test depending upon the nature of the function of the body, the exercise of whose powers the court will judicially review”.

Datafin concerned the exercise of a de facto monopoly power by a self-regulatory body. The court was prepared to intervene, not by reference to the source of this power, but rather because of the nature of its function.  Sir John Donaldson M.R. said of the Take-over Panel:-

	“It has no statutory, prerogative or common law powers and it is not in contractual relationship with the financial market or with those who deal in that market” (825C).

The argument in that case had centred upon whether the court’s jurisdiction was limited to bodies whose power was derived from statute or the exercise of the prerogative.  The Applicants succeeded because, as they submitted:-

“This is too narrow a view and that regard has to be had not only to the source of the bodies power, but also to whether it operates as an integral part of a system which has a public law character, is supported by public law in that public law sanctions are applied if its edicts are ignored and performs what might be described as public law functions.” (836C).

Sir John Donaldson referred to the judgment of Lord Parker C.J. in R -v- Criminal Injuries Compensation Board ex party Lain [1967] 2 QB 864 at 882 when he said:-
“The only constant limits (to the remedy of certiorari) throughout were that it was performing a public duty” (836E)”

He concluded:-

“In all the reports it is possible to find enumerations of factors giving rise to the jurisdiction, but it is a fatal error to regard the presence of all those factors as essential or as being exclusive of other factors.  Possibly the only essential elements are what can be described as a public element, which can take many different forms, and the exclusion from the jurisdiction of the bodies whose sole source of power is a consensual submission to its jurisdiction.”
(838E-F).

Lloyd L.J. concluded:-

“I do not agree that the source of the power is the sole test whether a body is subject to judicial review, …..of course the source of the power will often, perhaps usually be decisive.  If the source of power is a statute, or subordinate legislation under a statute, the clearly the body in question will be subject to judicial review.  If, at the other end of the scale, the source of power is contractual, as in the case of private arbitration, then clearly the arbitrator is not subject to judicial review: see R v National Joint Council for the Craft of Dental Technicians Ex parte Neate [1953] 1 QB 704

But in between these extremes, there is an area in which it is helpful to look not just at the source of the power, but at the nature of the power.  If the body in question is exercising public law functions, or if the exercise of its functions have public law consequences, then that may…..be sufficient to bring the body within the reach of judicial review.  It may be said that to refer to “public law” in this context is to beg the question.  But I do not think it does. The essential distinction, which runs through all the cases to which we referred, it between a domestic or private  tribunal on the one hand and a body of persons who are under some public duty on the other.” (847A-D).

He later repeated that it was not just the source of power that matters, but also the nature of the duty (848H).

Thus, Datafin is authority for the proposition that a body which performs a public duty is amenable to judicial review.  This, however, exposes the difficulty, present in this and many other cases, in identifying whether a body is forming a public duty.  The ability of the courts to grapple with problems derived from the increasing privatisation of governmental functions, has, as it seems to many, been inhibited by the court’s approach to identifying a public function following Datafin.  As Murray Hunt has pointed out in his Chapter entitled “Constitutionalism and the contractualisation of Government in the United Kingdom” (Chapter 2  - The Province of Administrative Law edited by Michael Taggart 1997), the courts continue to rely upon references to a statutory source or statutory support in order to justify intervention and secondly, continue to rely on the fact that a particular power has a contractual source to justify a refusal to intervene (see page 30).

The historic reliance by the courts upon the ultra vires doctrine as the justification for judicial intervention has led to a continuing search for statutory underpinning. It has also led courts to pose the question whether, if the organisation did not exist, or in terms of the instant case, the services were not provided by the private body, the State would have had to intervene, either to create such a body or to provide such services.

The application of this test can be found in R -v- Advertising Standards Authority ex parte the Insurance Service Plc [1990] 2 Admin L.R. 77 in which it was held that the authority was exercising a public law function because if it did not exist, its function would be exercised by the Director General of Fair Trading. (See page 86).  In R –v- Chief Rabbi of the United Hebrew Congregations of Great Britain and the Commonwealth ex parte Wachman [1993] 2 All E.R. 249), Simon Brown J. observed that cases where non-governmental bodies were held to be reviewable were those in which it could be said:-
“Were there no self regulatory body in existence, Parliament would almost inevitably intervene to control the activity in question.”

The application of the test led to the decision that the Football Association was not amenable to review; there was no sign of any statutory underpinning, nor could it be said that if it did not exist, the State would intervene.  R -v- Football Association Ltd ex parte Football League Ltd. [1993] 2 All E.R. 833.

The test has been heavily criticised. (See Mr. Pannick Q.C. 1992 Public Law 5-6, Lord Steyn in the article to which I have referred to above and Mr. Murray Hunt at page 32).  

In the instant case, the test provides no assistance whatever.  Although Mr. Gordon Q.C. contended that it was satisfied in the because if Servite did not provide the services, Wandsworth would have to make other arrangements, that advances the case of the Applicants no further.  Wandsworth remained under a duty to provide arrangements for residential accommodation once Servite terminated the placement arrangements made with Wandsworth.  But the arrangements which Wandsworth were empowered to make in discharge of its duty continued to be arrangements which could be made with a private person pursuant to Section 26 of the 1948 Act.  There is no warrant for the assumption that Wandsworth would itself have to provide residential accommodation; for the future they may make arrangements for another private person or voluntary organisation to make the provision.  Thus what was called the “but for” test can have no application in a case such as this.

THE BASIS FOR DECLINING JURISDICTION : CONTRACTUAL POWERS

Datafin also preserved the principle that if the source of a power lies only in contract, the court has no public law jurisdiction  (see the passages already cited at 838F and 847B).  R –v- Disciplinary Committee of the Jockey Club ex parte Aga Khan [1993] 1 WLR 909 demonstrates that principle.  The Jockey Club’s functions were not public because they derived purely from the contractual relationship between the club and those who agreed to be bound by the rules of racing.  Thus even if, as Sir Thomas Bingham M.R. suggested (at page 923G), the government would have created a public body to exercise the Jockey Club’s functions if the Jockey Club were not to do so, nevertheless, its functions were not governmental because its powers derive only from agreement between the parties (see 924C).  Hoffman L.J. said:-

“….ex parte Datafin….shows that the absence of a formal public source of power, such as statute or prerogative, is not conclusive.  Governmental power may be exercised de facto as well as de jure…….what one has here is a privatisation of the business of government itself.” (Page 931 D and H)

Later he said, in a passage of particular resonance in this case:-

“All this leaves is the fact that The Jockey Club has power.  But the mere fact of power, even over a substantial area of economic activity, is not enough.  In a mixed economy, power may be private as well as public.  Private power may affect the public interest and the livelihoods of many individuals.  But that does not subject it to the rules of law.  If control is needed, it must be found in the law of contract, the doctrine of restraint of trade….and to the other instruments available in law for curbing the excesses of private power.

It may be that in some cases the remedies available in private law are inadequate…..I do not think that one should try and patch up the remedies available against domestic bodies by pretending that they are organs of government.” (Page 932-933).

Thus the Jockey Club was not amenable to judicial review because the source of its powers were purely contractual.  

STATUTORY UNDERPINNING

However, both Sir Thomas Bingham M.R. and Hoffman L.J. referred additionally to the feature that The Jockey Club’s functions were not integrated into a system of statutory regulation.  Sir Thomas Bingham M.R. said:-
“It has not been woven into any system of governmental control of horseracing, perhaps because it is itself controlled horseracing so successfully that there has been no need for any such governmental system and such does not therefore exist.  This has the result that while the Jockey Club’s powers may be described as, in many ways, public, they are in no sense governmental.” (See Page 923H and Hoffman L.J. at 931H-932A).

This reference to the integration of a private body into a system of statutory regulation has proved a fruitful basis for the extension of the court’s jurisdiction over private bodies.  In 
R -v- Code of Practice Committee of the Association of the British Pharmaceutical Industry ex parte Professional Counselling Aids Ltd. [1991] COD 228, the court held that the Committee, a voluntary self-regulating body, was part of the Department of Health and Social Security’s public control of advertising.

The distinction between a private body whose functions are woven into a system of statutory regulation and private functions can most clearly be seen in the distinction the court has drawn in exercising jurisdiction over the provision of education.  In R -v- Governors of Haberdashers Aske’s Hatcham College Trust ex parte T [1995] ELR 350, Dyson J. ruled that a city technology college was amenable to the jurisdiction of the court.  The college was set up pursuant to the exercise of the Secretary of State’s power under Section 105(1) of The Education & Reform Act 1988.  Moreover, the provision of education by such colleges was the subject of detailed regulations made by statutory instrument.  Their existence and the manner in which they provided education derived from the exercise of statutory power.  The decision in that case concerned a refusal to admit a pupil.  Dyson J. drew the contrast between CTCs and private schools where the source of power is not statute but consensual and the decisions were not made in the exercise of any public law duty or function (see page 357F).  He pointed out that the mere fact that the Education Act 1944 provided machinery for complaints in relation to independent schools and conferred power upon the Secretary of State to strike such schools off the register, was insufficient to render private schools susceptible to judicial review (see Brooke J. in R -v- Fernhill Manor School ex parte A [1993] FLR 623 cited at 360-361).  It must be pointed out that Haberdasher Aske’s owed its existence to the exercise of a statutory power.  But Dyson J. subsequently made clear that that was not an essential factor for the exercise of judicial control.  

It is important to appreciate that a private body may be amenable to judicial review in respect of some, but by no means all, of its functions.  R -v- Cobham Hall School ex parte S [1998] ELR 389 is an example of the jurisdiction of the court being exercised in relation to only some of the functions of a private body.  Cobham Hall School was a private independent school.  But it provided assisted places pursuant to the statutory assisted place scheme governed by Sections 479-481 of The Education Act 1996 and The Education (Assisted Places) Regulations 1995 (see pages 394-395).  Dyson J. said:-
“Mr. Clark accepts that in most contexts, the private independent schools such as Cobham Hall School would properly be said not to be exercising a public law function: see R v Fernhill Manor School ex parte A….in the particular context of the administration of the assisted places scheme, however, the school is exercising a public law function and is, therefore, amenable to judicial review.  In selecting pupils for assisted places and in purporting to reallocate an assisted place, the school is exercising a public function, with the statutory underpinning of the Act and the regulation.  In selecting a pupil for an assisted place, a participating school is exercising the public function of distributing state funding for education.”

Dyson J. continued by citing with approval a significant passage at para 3-031 in de Smith Judicial Review of Administrative Action:

“Conversely not all the activities of private bodies (such as private companies) are subject only to private law.  For example, the activities of a private body (such as a recently privatised company) may be governed by the standards of public law when its decisions are subject to duties conferred by statute or when, by virtue of the function it is performing, or possibly its dominant position in the market, it is under an implied duty to act in the public interest.  A private company selected to run a prison, for example, although motivated by considerations of commercial profit, should be regarded, at least in relation to some of its activities, as subject to public law because of the nature of the function it is performing.  This is because the prisoners, for whose custody and care it is responsible, are in the prison in consequence of an order of the court, and the purpose and nature of their detention is a matter of public concern and interest.” (397-398A-C).

Dyson J. regarded as key factors the following points:-
“(i)	Parliament has empowered the Secretary of State to fund free education in independent schools;

(ii)	Parliament has provided the means by which this is to be done, namely by the Secretary of State entering into participation agreements with independent schools; 

(iii)	The Act and the Regulations define the criteria for the admission of pupils to the scheme;

(iv)	The Act and the Regulations together with the terms of participation agreements give the Secretary of State the power to control important aspects of the running of schools generally….” (398C-E).

That statutory underpinning and penetration formed the basis of the court’s jurisdiction in Cobham Hall is confirmed by the decision of Richards J. to decline jurisdiction in R –v- Muntham House School ex parte R (29 October 1999 unreported).  Although a non-maintained residential special school was subject to a strict regime of statutory control which involved conditions for approval of a large number of matters concerning the manner in which the school was run, Richards J. formed the view that that general regime of statutory control was no different in principle from the registration regime applicable to all independent schools (see page 8).  He contrasted that regime with the regime in Cobham School where:-
“In relation to assisted places, Parliament had made express provision for the funding of free education in independent schools by the means of participation agreements between the Secretary of State and the schools.  Not only was the Secretary of State given extensive powers of control, but the legislative provisions define the criteria for admission of pupils to the scheme and limited power of withdrawal of such places.  That last point, which was the basis of the decision that the school had acted ultra vires in purporting to withdraw a place, reveals the true extent of the statutory underpinning or penetration.  There is nothing  equivalent in the present case.  There are no regulations governing the admission or exclusion of pupils.  The source of the power to admit or exclude is the school’s trust deed.  When a Local Education Authority places a child in a non maintained special school, pursuant to a statement of special education needs or an order of the Tribunal, it enters into a purely contractual relationship with the school.”

Thus, while Cobham demonstrates that it is not necessary to establish that the body owes its existence to the exercise of a statutory power, that case and Muntham House School are authorities for the proposition that a general regime of statutory control over the manner in which a service is provided, will not be sufficient to provide a basis for the court’s intervention.  Both Dyson J. and Richards J. sought to identify a statutory source for the provision of the service.  Statutory underpinning or penetration meant more than statutory control over the manner of provision, it required statutory control over the circumstances in which the services were provided or withdrawn.

If I am to follow the principles established by the education cases to which I have referred, I must be able to identify sufficient statutory penetration which goes beyond the statutory regulation of the manner in which the service is provided.  It seems to me that the resolution of the question as to whether there is sufficient statutory penetration turns on the effect of Section 26 of The 1948 Act.  Does Section 26 enmesh provision of residential accommodation by Servite into a statutory system of community care for those in need of such accommodation?  Servite and Wandsworth argue that Section 26 has precisely the contrary effect.  It empowers a local authority to make arrangements which divorce a private service provider from the public law obligations to which the local authority is subject when making arrangements under that section.  It has the effect, in short, of disentangling Servite from any statutory embrace with Wandsworth.  Section 26 has the effect of permitting a local authority to discharge its public duty by entering into a private arrangements, Section 26 was introduced for the purpose of creating what Miss Laing on behalf of Wandsworth described as a ‘mixed economy’ provision of community care services.  Section 26 has the consequence that both the public and private sector provide such services.  It follows that not only is the relationship between Servite and Wandsworth governed solely by the terms of the contract between them, but the relationship between Servite and the Applicants is solely a matter of private law.  Servite, so it is argued, provides accommodation as a matter of private law and that accommodation is paid for by Wandsworth at the rates for which the arrangements provide (see Section 26(ii) of the 1948 Act).  In short, the provision of residential accommodation is taken outside the scope of the public function by virtue of Section 26. 

In my judgment, Wandsworth and Servite are correct.  The Applicants cannot rely upon Section 26 as the foundation for submitting that Servite’s function is a public function. In most, if not all cases of “privatisation”, legislation is necessary to enable that which had hitherto been provided by government or local authority to be provided by the private sector.  It does not seem to me that reliance can be placed upon the very legislation which enables privatisation to take place.  It is likely that when the powers of local authorities to make private arrangements pursuant to Section 26 were introduced in 1993, no-one gave thought to the question of whether the private service provider was to be subject to public law standards.  Certainly I have had no evidence of any announcement to that effect.  Moreover those in receipt of such services by a private body have no choice in the matter.  A local authority is perfectly entitled to make arrangements for residential needs to be met by a private body.  The role of Section 26 is limited to ensuring that such arrangements are made and that they are satisfactory.  Its effect is to permit community care to be provided by a person for profit whereas previously, it could only be provided by a local authority.  Accordingly, I conclude that the Applicants cannot rely upon the very legislation which permits privatisation as a basis for contending that Servite’s function is a public function, the exercise of which is to be controlled by public law standards.

Servite is a private body which does not owe its existence to Section 26.  Its power to enter into a contract with Wandsworth does not depend upon Section 26, but upon its own private rules.  Wandsworth’s power to enter into contractual arrangements with Servite does depend upon Section 26.  But that feature highlights the distinction between the instant case and the case of Cobham Hall School.  Cobham Hall School was susceptible to judicial review because its power to admit or remove under the assisted places scheme derived from statute.  Legislation added to the public function of admission to an assisted place otherwise to the school’s private function.  By way of contrast in the instant case, Section 26 has nothing to say as to the provision by Servite of residential accommodation.  It merely permits Wandsworth to make an arrangement for such provision.  In my judgment that is a crucial distinction.   It is the distinction between legislation which adds a public function to the private functions of a private body and legislation which permits a public law duty to be discharged by entry into private law arrangements.  It does not seem to me that the Applicants can successfully contend that because legislation permits a public authority to enter into arrangements with a private body, the functions of the private body are, by dint of that legislation, to be regarded as public functions.  I conclude that the Applicants cannot rely upon Section 26 as establishing a sufficient statutory underpinning of Servite’s functions to enable their functions to be identified as “public functions”.

CAN SERVITE’S FUNCTIONS BE REGARDED AS PUBLIC ABSENT ANY STATUTORY UNDERPINNING?

The Applicants’ alternative contention is that the identification of Servite’s public function does not depend upon any statutory underpinning.  Mr. Gordon Q.C.’s core submission is that the provider of health and community care services to those in need is “the very essence of the business of government”.

In support of that submission he relies upon the passage I have already cited from De Smith at paragraph 3-031.  The running of prisons by a private company is merely one example of a function which is public because of its very nature and because it is “a matter of public concern and interest”.

Further support for that proposition can be found in Lord Steyn’s quest for the correct constitutional basis for judicial intervention in his paper “the Constitutionalisation of Public Law” (May 1999).  In that article, he describes part of Murray Hunt’s Chapter in the Province of Administrative Law as:
“The true basis of the court’s jurisdiction over the exercise of non statutory powers” (Page 8). 

Murray Hunt commented upon the failure of the courts to respond to increasing privatisation by government.  He argues for a test which no longer seeks to identify the source of a body’s power:-
“The test for whether a body is “public”, and therefore whether administrative law principles presumptively apply to its decision making, should not depend on the fictional attribution of derivative status to the body’s powers.  The relative factors should include the nature of the interests affected by the body’s decisions, the seriousness of the impact of those decisions on those interests, whether the affected interests have any real  choice but to submit to the body’s jurisdiction, and the nature of the context in which the body operates.  Parliament’s non involvement or would-be involvement, or whether the body is woven into a network of regulation with state underpinning, ought not to be relevant to answering these questions.  The very existence of institutional power capable of effecting rights and interests should itself be a sufficient reason for subjecting exercises of that power to the supervisory jurisdiction of the High Court, regardless of its actual or would-be source.” (See page 32-33).

Lord Steyn comments:-
“In an era when government policy is to privatise public services, to contract out activities formally carried out directly by public bodies and to put its faith in self regulation, it is essential that the courts should apply a functional test of reviewability.”
(See page 8).

If this court is to follow that approach, there is no need for any reliance upon Section 26.  Two features present in the instant case will provide a sufficient basis for the intervention of the court. Since the case has proceeded on the basis that there is no contractual relationship between Servite and the Applicants, absent the imposition of public law standards, they are without remedy.  They had no choice as to whether to enter an establishment provided by Wandsworth or by a private body, since Wandsworth makes no such provision itself; all such residential accommodation is provided privately.  If Wandsworth is correct, they are compelled, without any choice, to subject themselves to private law arrangements which permit Servite to terminate those arrangements without any consultation or any knowledge of the details of those arrangements.  The situation in which they find themselves is underlined by the fact that they would not be in receipt of such services if accommodation was otherwise available to them (see Section 21(1)(a) of the 1948 Act).  But I bear in mind Simon Brown J’s explanation in ex parte Wachman of what was meant by “public law consequences”.  Such consequences mean:-
“Something more than their decisions which may be of great interest or concern to the public or….which may have consequences with the public.” (page 254), 

and

“Whether or not a decision has public law consequences must be determined otherwise than by reference to the seriousness of its impact upon those affected.”

Servite’s decision clearly has an impact upon Wandsworth’s continuing public law obligations.  Wandsworth must re-assess the Applicants’ needs.  Even if they could invoke a breach on the part of Wandsworth of its public law obligations, they can do nothing to compel Wandsworth to force Servite to continue to make provision of accommodation within Servite’s home.  Servite has a right in private law to terminate its arrangements and it has done so.  Thus, unless public law standards can be imposed on Servite, the Applicant’s plight cannot be remedied.

In such circumstances, if the slate was clean, there is much to be said for regarding Servite’s function as a public function.  The nature of the applicants’ interests cannot be understated.  The applicants are in need not merely of residential accommodation, but they have both lived in Mary Court for over four years.  They have regarded that home as their home.  Irrespective of the precise nature and effect of any assurance, the length of time during which they have remained at Mary Court, is an important feature of the care they require now.  The impact of the decision to close Mary Court is grave and as I have said, they have no opportunity to obtain residential accommodation in any property managed by a local authority.

The basis for imposing public law standards on Servite advocated by Murray Hunt and endorsed by Lord Steyn, which finds powerful support in De Smith, presents enormous attraction.

However, I am compelled to decline to follow so enticing a path.  I am inhibited by the approach of previous courts. True it is that there is abundant authority for a flexible application of judicial review in response to changing social conditions (see Lord Roskill in R -v- Liverpool Corporation ex parte Liverpool Taxi Fleet Operators’ Association [1972] 2 QB 299 at 310). In R -v- Jockey Club ex parte RAM racecourses [1993] 2 All ER 225 Simon Brown J said 
‘There are many different types of institution…ruling different aspects of our national life. Some flexibility of response by the courts is surely required. And for this there is ample scope – above all in the well-settled principle which establishes that merely because some public body is amenable to judicial review it by no means follows that it is reviewable in all its functions…Why should not the court be prepared similarly to approach the question the other way and extend the review jurisdiction to certain (even if relatively few) functions of what may ordinarily be regarded as non-governmental institutions when those particular functions can be seen to have an essentially public character’. (2476)

If courts are to intervene by the imposition of public law standards upon a private body they must adopt a careful and principled approach.  Courts, as Lord Steyn in his paper points out, are constrained by “The principle of institutional integrity” (Page 7). Were it otherwise judges would infringe the very basis of the British constitution, namely the separation of powers between the legislature, the executive and the judiciary.  

The fatal impediment to the amenability of Servite to judicial review lies, in my view, in the fact that the source of its powers is purely contractual, and the absence of any statutory underpinning. 

Once the placement arrangements had been made the relationship between Wandsworth and Servite was commercial.  True it is that Servite must satisfy the requirements of Section 26 in order to be eligible to enter into arrangements for the provision of a residential care home by being registered under part I of the Registered Homes Act 1984 (see Section 26(1A) of the 1948 Act.  But it does not follow that Servite owes any public law duty to anyone.  In R -v- Newcastle upon Tyne City Council ex parte Dixon 92 LGR 168, the Newcastle Association Care Homes sought to invoke a public law duty of restraint upon the local authority when the Council had proposed to impose a stricter contractual regime on residential care operators and those laid down in the Registered Homes Act 1984.  Auld J. held that the relationship between the Council and the registered residential home owner was “a purely commercial relationship”.  He approved of the submission on behalf of the Council that:
“Contracts for provision of such services are contracts for public works and in the meaning of Section 17 of the Local Government Act 1988, into which Councils were obliged to enter on a commercial basis.  He added that it would also conflict with the Council’s primary community care obligations under the Act of 1948, as amended, to arrange accommodation and care of residents in such homes if the courts were to regard the Act of 1984 as inhibiting their ability contractually to secure such arrangements.” (See page 178-179).

Potts J adopted a different approach in  R -v- Cleveland County Council ex parte Cleveland Care Homes Association [1994] LGR 641 (not cited before me but sent after argument had closed). He held that the Council was amenable to judicial review when formulating its policy for making contractual arrangements with private service providers. But that case does not assist in deciding whether the private service provider is itself amenable to judicial review. It concerns only the local authority’s function. 

Datafin and Aga Khan stand as authorities for the proposition that the courts cannot impose public law standards upon a body the source of whose power is contractual and absent sufficient statutory penetration. Servite’s powers derive from a purely commercial relationship.     

Furthermore, I have been unable to find any legislative underpinning, but have been faced merely with a statute which appears to permit local authority to enter into merely private arrangements for the provision of community care. For the reasons I have already given, the question as to whether Parliament would have inevitably intervened if the service was not provided by Servite is of no assistance in this case.  In those circumstances, it seems to me wrong for a court of first instance to identify Servite’s function as a public function absent any of the features upon which courts have in the past relied.  That is not to say that a fresh approach ought not to be adopted so that the court can meet the needs of the public faced with the increasing privatisation of what were hitherto public law functions.  But any advance can, in my judgment, only be made by those courts which have the power to reject the previous approach enshrined in past authority.  I conclude that Servite was not exercising a public function.  Any remedy which the applicants may have in relation to the assurance that they were given by Servite must lie in private law.

DID WANDSWORTH BREACH ANY PUBLIC LAW OBLIGATION?
Wandsworth made no promise.  It denies that it knew of the promise in the brochure until on or about 12 June 1999 (Helen Dobson’s first statement para 9).  There is, however, evidence that social workers employed by Wandsworth knew of the promise at the time they were making the placements (see Haywood para 7).  This case, therefore, is not a case where a public body seeks to renege upon a promise. It is, consequently, to be distinguished from ex parte Coughlan. Nonetheless, Mr. Gordon Q.C.  contends that Wandsworth ought to have known of the promise. The issue of a brochure dealing with termination is a requirement in the Code of Practice.   It ought to have taken account of the promise in reassessing the applicants’ needs in the light of Servite’s decision to cease to provide residential accommodation at Mary Court.  If it had taken account of that promise, it was bound to consult with Servite and the Applicant’s relatives in an attempt to persuade Servite to maintain residential accommodation for those who were assured that they would not have to leave unless their nursing requirements dictated otherwise.  The consultation which has taken place between Servite and Wandsworth has taken place after the decision to close and in the light of a fait accompli.  No consideration of the plight of the Applicants took place before the decision to close.  Had such  consultation taken place, in the light of the assurance given in the brochure, the applicants’ needs might have been assessed as requiring residence at Mary Court and not merely in a residential home.  Wandsworth might have taken the view that it was necessary to provide extra funding to persuade Servite to provide residential accommodation at Mary Court at least for those to whom promises had been made.  In summary the applicants contend that Wandsworth:-
“In law….must do all in its power to ensure that Mary Court remains available to the applicants as their home for life and that it is neither closed nor adapted for other uses by Servite.”

These arguments must be considered in the light of my conclusion that Servite is under no public law obligation to the applicants.

It seems to me to follow that Wandsworth is powerless to make arrangements with Servite for the continuing provision of residential accommodation for these Applicants at Mary Court.  Once the placement agreement had been lawfully terminated by Servite, I do not understand how, in complying with its public law obligations, Wandsworth could compel Servite to maintain residential accommodation at Mary Court.  Indeed, on my interpretation of Section 26 of the 1948 Act the necessary consequence of making arrangements with a private body is that it permits the private body to terminate those arrangements in accordance with its private law rights under those arrangements.

Wandsworth fulfilled its public law obligation by making arrangements pursuant to Section 26 with Servite.  Once those arrangements came to an end, it remains under a public law obligation to re-assess the needs of the applicants.  It is correct that pursuant to Section 47 of the N.H.SC.C. Act 1990 and Section 21 of the 1948 Act a local authority may be under a duty to provide accommodation at a particular address where the needs of an individual applicant so dictate.  In R -v- Avon C.C. ex parte M 2CCLR 185, a local authority was held bound to provide accommodation to a child suffering from Downs Syndrome at a particular home.  But in this case the Applicants’ needs were assessed to require residential accommodation not residential accommodation at Mary Court.  I can well understand that after over four years at Mary Court, quite irrespective of any promise, the Applicants have learned to regard Mary Court as their only home.  But that is of no avail to the Applicants unless they can establish that to remove them is a breach of Wandsworth’s public law obligation.

Wandsworth’s public law obligations are limited to an obligation to reassess their needs in the light of Servite’s lawful termination of the provision of residential accommodation at Mary Court.  Wandsworth’s refusal to do more than offer a re-assessment stems from its inability under the arrangements to compel Servite to keep Mary Court open as a residential home.  The situation in which the Applicants find themselves stems from the very fact that Wandsworth is permitted to discharge its public law obligations by entering into commercial arrangements with Servite.  It is of no avail to the applicants to criticise Wandsworth for entering into arrangements which permitted Servite to terminate provision of a residential home at Mary Court.  Irrespective of any promise, Wandsworth ought to have appreciated that applicants and their relatives would have expected Mary Court to be a permanent home; to place them in accommodation which was only temporary would hardly have met their needs.  Any disruption and removal was bound adversely to affect their quality of life. I have no information, because none was relevant to this application, as to any scrutiny by Wandsworth of Servite’s business plan when the home opened. I have only been furnished with evidence of losses from 1996-1997, but for all I know, those losses had occurred in earlier years.  I have no information as to how such significant losses came to arise in 1996, assuming they did not occur earliersave for a reference to the fact that many homes faced financial difficulties in that period and were forced to close.  Nor has it been explained how Servite repeated the assurances it gave in 1996 in its brochure at a time when losses were severe.  None of those considerations assist the Applicants in this case where Wandsworth has rendered itself powerless to insist upon provision of residential accommodation at Mary Court. 
Nor do I think that Wandsworth was bound to seek to persuade Servite to change its mind, once it had learnt of Servite’s decision. Although there was a suggestion by Mr. Gordon Q.C. that Mr. Jay Q.C. had accepted in argument that there was a prospect of keeping Mary Court open if Wandsworth offered more money, there is no evidence that that was.  Wandsworth was faced with the lawful exercise of Servite’s private law right of termination.

Accordingly, I conclude that Wandsworth was not in breach of any public law obligation in relation to the termination by Servite of provision of residential accommodation at Mary Court.

In the light of my conclusion, I need not consider the argument advanced by the Applicants that it was open to Wandsworth to offer more money to persuade Servite to keep Mary Court open as residential accommodation.  Wandsworth submitted that it was neither under an obligation to increase the sums previously paid in accordance with the arrangements and had no power to do so. It already paid more than other boroughs for residential accommodation.  Helen Dobson sets out the additional costs involved (2nd Statement Paras 3-5).  It also relied upon the Choice of Accommodation Directions 1992 which entitle a local authority to refuse to accept an applicant’s preference in cases where needs can be met by providing cheaper accommodation.  I need not resolve that issue. For the reasons I have given, Servite was under no obligation to offer to provide such accommodation nor could Wandsworth compel such an offer.

Further, in the light of my conclusion, it is not necessary for me to consider the application of Article 8 of the European Convention on Human Rights.  In ex parte Coughlan, the Court of Appeal relied upon that article in support of its conclusion that closure of the home which the health authority had promised would be provided, amounted to a breach of Miss Coughlan’s rights under Article 8 and was not justified by the derogation under Article 8(2) (see pages 318-319).  I need only record that Wandsworth denied that until the Human Rights Act 1998 comes into force, any reliance can be placed on that article.  However, for the reasons I have given, it is not Wandsworth but Servite which has interfered with the exercise of the Applicants’ rights under Article 8(1) and certainly until the coming into force of that Act, Article 8 cannot be regarded as imposing any public law obligation upon Servite.  Once the Act has come into force, it may be, and I put it no higher, that the courts will have to reconsider the obligations of a provider of a home by a private person under arrangements made with a public body.

DELAY
The final topic which I must consider relates to Wandsworth’s and Servite’s contention that the Applicants have been guilty of delay and that, for that reason alone, permission to apply should be refused.  The decision to close Mary Court was, as I have said, communicated on 10 June 1999.  Thereafter, there took place what I regard as understandable efforts in correspondence to dissuade Servite from its decision without recourse to litigation.  The chronology thereafter is as follows:-

	16.7.99….	first applicant instructed solicitors
	17.8.99….	letter before action sent to Servite
	24.8.99….	response from Servite
	31.8.99….	application for emergency legal aid submitted on behalf
			of first Applicant

	 2.9.99….	second Applicant instructs solicitors

	 3.9.99….	application for emergency legal aid submitted on behalf
			of second Applicant
	
	 7.9.99….	legal aid granted

	 8.9.99….	(just within the 3 month period) proceedings issued.

Thereafter on 21 October 1999 Mr. Justice Potts directed that the application for permission be heard orally on notice on 1st February 2000 by consent.  That hearing was adjourned and undertakings were given to keep the home open which had the effect that residential accommodation has continued to be provided to the Applicants, on payment by Wandsworth, until 17th May 2000.

The Applicants were criticised for not arranging this hearing earlier.  I agree that it would have been better if this hearing had taken place earlier than in the week leading to the Easter Vacation.  Rule 53.4 requires an application for permission to be made promptly and in any event within 3 months from when the grounds of the application first arose.  Although criticism can justifiably be levelled as to the failure to arrange for this hearing earlier, it does not seem to me that touches upon the question as to whether the application for permission was made promptly.  Once the solicitors had been instructed, it seems to me that matters did proceed with sufficient expedition.  It would have been better had solicitors been instructed earlier.  But I take the view that the decision to close Mary Court must have come as an unpleasant surprise to the Applicants and their relatives and their attempts to deal with the matter by correspondence were justifiable.  In all the circumstances, I do not regard the Applicants as having been guilty of acting without promptness.  Accordingly I do not refuse permission on the grounds of delay.

CONCLUSION
I hold:-

1.	that in providing residential accommodation at Mary Court Servite was not performing  a public function and is not under any public law obligation to the Applicants;

2.	that Wandsworth was not in breach of any public law obligation to the Applicants;

3.	permission should be granted to apply for Judicial Review;

4.	that the Applicants were not guilty of delay.

I cannot conclude this matter without expressing my sympathy for the Applicants.  This case represents more than tension between public law and private law rights, but a collision.  If I am right in my reasoning, it demonstrates an inadequacy of response to the plight of these Applicants now that Parliament has permitted public law obligations to be discharged by entering into private law arrangements.  Whether the solution lies in imposing public law standards on private bodies whose powers stem from contract or in imposing greater control over public authorities at the time they first make contractual arrangements may be for others to determine.