Neutral Citation Number: [2016] EWHC 1780 (Admin)
Case No: CO/5599/2015
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 19/07/2016

Before :

Nathalie Lieven QC sitting as a Deputy High Court Judge
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Between :

	DATAMATICS UK LTD	Claimant	
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	SECRETARY OF STATE FOR THE HOME DEPARTMENT	Defendant	

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Ramby de Mello (instructed by Veja & co) for the Claimant
Rory Dunlop (instructed by Government Legal Department) for the Defendant 

Hearing dates: 29 June 2016
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Judgment Approved
Nathalie Lieven QC:
1.	This is an application for judicial review to quash a decision of the Defendant dated 9 October 2015 to revoke the Claimant’s sponsorship licence. Permission to bring judicial review proceedings was given by Timothy Dutton QC sitting as a Deputy High Court Judge on 9 February 2016. Mr Justice Collins having granted interim relief on 18 November 2015. 

2.	The Claimant is a company which specialises in providing IT services and solutions. It employs over 600 people in India and 50 in the United Kingdom. At all material times prior to the decision under challenge it had a licence under Tiers 2 and 5 of the Points Based Sponsor Guidance, issued by the Defendant, to sponsor employees for the purpose of immigration control.

3.	The Claimant and the Interested Parties, who are jointly represented by Mr Ramby de Mello, raise three grounds of challenge. Firstly that the decision was unreasonable, for a number of reasons including that  the Defendant failed to make proper inquiries in accordance with her duties under Secretary of State for Education v Tameside MBC 1977 AC 1014. Secondly, that the Sponsorship Guidance is an authorisation scheme under Council Directive 2006/123/EC “the Services Directive”, and that the Defendant’s decision fails a proportionality test. Thirdly, that the Sponsorship Guidance is incompatible with s.55 of the Borders, Citizenship and Immigration Act 2009 (and article 3 of the UN Convention on the Rights of the Child).

4.	The relevant facts of the case are as follows. On 4 May 2015 the Claimant issued a Certificate of Sponsorship (“CoS”) to Aritra Kumar Ghosh, the Second Interested Party, a non-EEA national, on the basis that he would be employed as a Software Developer at Amba House, 15 College Road, Harrow HA1 1BA. 
 
5.	On 18 June 2015 and 8 July 2015 the Defendant’s officers visited the Claimant’s premises - Amba House, 15 College Rd, Middlesex HA1 1BA.  

6.	On 18 June 2015 an officer interviewed Mr Ghosh. They also interviewed three other people who had Certificates of Sponsorship.   The following are excerpts from the interview of Mr Ghosh:

“Q. Where will you be working?
A.	The company has many clients.  I am having interviews with clients.  Whoever clear [sic] me I’ll work for them.
...
Q. Who will direct duties at client site?
A. The client will direct the duties.
...
Q. How do you find work?
A. Contacts are given by the company (Datamatics)
Q. Who approaches the client?
A. Contacts only by the company.  We consultants approach the client directly.
Q. What happens when you find the work?
A. I will work for the company at the client site and be paid by Datamatics.
Q. What work are you doing atm?
A. Updating skills, attending interviews, meeting clients.
...
Q. Will you work here at Amba House?
A. No I will be deployed elsewhere.”

7.	On 8 July 2015 an officer interviewed Mr Gandhi, the Claimant’s director.  The following are excerpts from his interview:
“Q. Why does our data say that all employees including ICTs work here at 15 College rd?
A.	Our staff work at other sites on a short term basis.  They move around a lot.
...
Q. How do you send your consultants to 3rd parties?
A. Some clients ask for job roles, some ask for projects to be completed others just ask for staff numbers to be sent.”

8.	 Mr Gandhi, the director of the Claimant company, was also interviewed and  clarified Mr Ghosh’s  answer by saying Tech Mahindra, HCL and Orange ‘ask for people only to fill vacancies’; Dell and CRISIL ‘ask for people and services like projects’ and three other companies ‘ask for projects, services.  The sponsor directs the work of migrants.’ The companies referred to are all ones that work with the Claimant. 

9.	During the visit, the officers took away copies of contracts which the Claimant had with Tech Mahindra, JCL, Orange, DELL and CRISIL.

10.	In a letter dated 3 September 2015 the Defendant informed the Claimant of her decision to suspend the Claimant’s sponsor licence.  The Defendant considered that the Claimant was in breach of its sponsor duties because;

a.	It was in breach of the general sponsor duties because Mr Ghosh had said in interview that the “client” rather than Datamatics would direct his work. The letter referred to paragraph 39.46 of the Sponsor Guidance. 
b.	 It was in breach of its general sponsor duties as Mr Ghosh had not been brought into the UK to undertake a specific project or service. The vacancy for which the CoS was assigned was not genuine. Further, the claimant had provided false information in this respect; 
c.	The Claimant had breached its sponsor duties by failing to make reports that it was required to provide under the terms of its Licence, e.g. it had failed to report that three persons it had sponsored had  not in fact commenced employment and it had failed to report that a migrant it sponsored was working at a client site.

The Claimant was informed that the licence was suspended with immediate effect and given 20 days to make any representations. 

11.	On  9 September 2015 the Claimant, through Mr Gandhi, responded in a detailed letter. In respect of the suggestion that the clients rather than Datamatics directed Mr Ghosh’s work, Mr Gandhi explained that in essence this was a misunderstanding. The client, in this case Care Homes Sites, interviewed Mr Ghosh to ensure his suitability for working on their premises. He was not interviewed in order to search for jobs. Mr Gandhi also referred to the fact that the other people at Datamatics, with CoSs, who had been interviewed, had been accepted by the UKBA as working in accordance with the Sponsor Guidance. He made reference to the contracts with various other companies. Mr Gandhi said that the Claimant supplied the work orders. Mr Gandhi argued that the Claimant was the employer of Mr Ghosh and that the Defendant had misunderstood what was said in interview and misconstrued its contracts with customers.  Mr Gandhi admitted that the Claimant had made errors in reporting, but suggested that in one case the UKBA already had the relevant information, and in another case the location of the work was not permanent.  The Claimant did not suggest, in this letter, that revocation would have an adverse effect on any children.

12.	In a letter dated 9 October 2015 the Defendant revoked the Claimant’s Tier 2 licence “the decision letter”. The decision letter set out three issues which were found to be contraventions of the Sponsor’s Guidance.

13.	Firstly, there was reference to Mr Ghosh’s answer in interview that “the client will direct the duties”. Reference in the letter was made to paragraphs 39.44 and 46 in the Guidance and then paragraphs 8 to 10 of the decision letter state;

8.	“In your representations you have stated that you never said that the work undertaken by your sponsored workers is directed by the clients and that this point has been misinterpreted by our compliance officers. However the interview record confirms that you stated “some clients ask for job roles, some for projects and some ask for staff numbers” [sic]. Therefore we accept that some of your clients request projects and you provide them with a service which is allowed under the points based scheme. However you have also confirmed that you also supply staff to clients which is a clear breach of paragraphs 39.44 and 39.46 of the Tier 2 and 5 Sponsorship Guidance as stated above.
9.	This is corroborated by the HCL contracts you supplied during the compliance visit which clearly states that you are supplying staff. Furthermore the CRISIL contract you supplied substantiates that you are providing staff and your organisation has been referred to as a recruitment agency. Additionally we note that the Orange letter dated 30 June states that the services for Srinivasan Jagadeeshan have been extended and the duties have been decided by the client along with the time scale of each task. This confirms that your client is directing the duties for your sponsored workers. We are not satisfied that you have addressed this issue as you are acting as an employment agency supplying labour to third parties.
10.	 This contravenes Annex 5 y) of the Tier 2 and Tier 5 Sponsor Guidance which \ states:
We will revoke your licence if:
You are an employment agency or business and you have supplied migrants that you are sponsoring to a third party as labour.”

14.	Secondly, the decision letter at paragraphs 11-16 refers to Mr Ghosh’s interview to demonstrate that he had not been brought to the UK to undertake a specific project or service.

11.	 In your representations you have stated that Mr Ghosh was not being interviewed for his technical abilities or finding a job but required to work in a care home which is a sensitive environment. We accept that Mr Ghosh was being interviewed to be cleared as indicated on interview record. However we note Mr Ghosh clearly stated on interview record dated 18 June that the client will direct the duties. Therefore Mr Ghosh is being supplied to a third party as labour. We are not satisfied that you have addressed this issue.
12.	 Annex 5 ae) of the Tier 2 and 5 Sponsor Guidance states we will revoke your licence if:
You assign a CoS for a vacancy that was not genuine. For example where:
•	 it contains an exaggerated or incorrect job description to deliberately make it appear to meet the requirements of the tier and category you assigned it under when it does not.
•	 it is for a job or role that does not exist in order to enable a migrant to come to, or stay in the UK.
13.	 Furthermore by assigning Mr Ghosh a CoS for a role that does not exist you have provided false information to us.
14.	 Paragraph 2.10 of the Tier 2 and 5 Sponsor Guidance states:
You have a duty to act honestly in any dealings with us. This includes, for example, not making false statements and ensuring all essential information is disclosed when applying for a sponsor licence or assigning or applying for a CoS, or while you are a sponsor.
15.	 In your representations you have stated that Mr Aritra Ghosh confirmed that he had been interviewed by your clients and our officers may have misinterpreted this and thought he is searching for his own job and that there is no vacancy for him. However you have stated in sponsor interview record “Some clients ask for job roles, some roles for projects to be completed other just ask for staff numbers to be sent” [sic]. This confirms you provide staff to third parties as labour and have provided false information on the assigned CoS for Mr Ghosh. We are not satisfied that you have addressed this issue.
16.	Annex 5 j) of the Tier 2 and 5 Sponsor Guidance states we will revoke your licence if:
You have knowingly provided false statements or false information, or not provided information that you held when required to, to us (or the former Immigration and Nationality Directorate, Border and Immigration Agency or UK Border Agency) or any other Government Department, public body or local authority.

15.	Thirdly, the decision letter referred to a number of failures to report in respect of specific sponsored workers. 

16.	The letter concluded by setting out the decision, which was that there had been a contravention of Annex 5(y); Annex 5 (ae); Annex 6 (f) and Annex 6(i) of the Guidance. The claimant was informed that its sponsor licence had been revoked. This is the decision under challenge.

17.	The Sponsor Guidance sets out the requirements for Tier 2 and Tier 5 sponsor status. The most relevant parts of the Guidance appear under the heading “Migrants working on a contract basis” at p.136. The most relevant paragraphs are as follows;

39.44 Where a migrant is working on a contract basis and is being supplied to one organisation by another organisation, their sponsor must be whoever has full responsibility for the duties, functions and outcomes, or outputs of the job. 

39.45 An example is where company A has a contract with a client – Company Z – to deliver an IT solution within agreed timescales. A migrant who is sponsored by company A to work on that project, may be sent to work for the length of the contract at Company Z’s premises, but they remain employed by Company A throughout the period of the contract. As Company A is fully responsible for their duties, functions, outputs or outcomes, Company A must be the migrant’s sponsor. 

39.46 You can only assign a CoS if you have full responsibility for deciding the duties, functions and outcomes or outputs of the job. Where the migrant is carrying out work for a third party on your behalf, they must be contracted by you to provide a time-bound service or project on your behalf. This means a service or project which has a specific end date, after which it will have ended or the service provided will no longer be operated by you or anyone else. They must not be: 

a) Agency workers, hired to a third party to fill a position with them, whether temporary or permanent, regardless of any contract between you and any employment agency or employment business. For more information, please see employment agencies and employment businesses; 

b) Contracted to undertake an ongoing routine role or to provide an ongoing routine service for the third party, regardless of the length of any contract between you and another party.”

18.	The first ground of challenge is that the decision to categorise Mr Ghosh as an agency worker was wrong in law. This argument then involves a number of stages or issues. Mr de Mello argued that the question of whether Mr Ghosh was an agency worker was an issue of precedent fact to be determined by the court; he argued that in any event there could only be one answer and the Defendant was irrational in concluding that Mr Ghosh was an agency worker; and that the Defendant had failed to conduct proper inquiries in accordance with her duties under Secretary of State for Education v Tameside MBC 1977 AC 1065.

19.	In my view the question of whether Mr Ghosh, or any other sponsored worker, is an agency worker and the question of whether the Claimant is acting as an employment agency, within the meaning of the Guidance, is not a matter of precedent fact for the Court to determine, but is a matter for the Defendant, subject to challenge on normal public law principles. In R v SSHD ex p Khawaja 1984 AC 74 the House of Lords found that whether an individual was an “illegal entrant” was a question of precedent fact for the court, see Lord Fraser at 97E. The reasons for this conclusion, in broad terms,  were the language of the statute itself , and the fact  that liberty was at stake, see Lord Bridge at p.122B-F. In R (A) v Croydon London Borough Council 2009 1 WLR 2557 the House of Lords held that the question whether the individual was “a child” was one of precedent fact for the court. The reason for this was that it was a statutory test laid down by Parliament and that there was at least in principle a right or wrong answer, see Baroness Hale at para 27 and 32. 

20.	Applying those tests here, the questions in issue were not ones of precedent fact. The test is not set down by Parliament as a statutory test, but rather in Guidance; there is no issue of liberty or equivalent impact; and there is a high degree of judgement for the decision maker, i.e. the Secretary of State, in deciding whether an individual is an “agency worker” or the claimant a “recruitment agency”. There is no one factual answer as there would be to whether a person was or was not a child in  (A). 

21.	Further, in R (New London College) v Secretary of State for the Home Department 2012 EWCA Civ 51,  which was a challenge to the revocation of a Tier 4 Sponsor Licence, the Court of Appeal held that the correct approach to such a challenge was on a rationality basis, see [75] of judgement of LJ Richards. This is a strong indicator that the fulfilment of the terms of the Guidance is not one that involves the determination of precedent facts. 

22.	The next part of Mr de Mello’s argument was that the question of whether Mr Ghosh was an agency worker could give rise to only one answer, and he relied at least in part on the Agency Workers Regulations 2010 and argued that Mr Ghosh was not an agency worker within regulation 3 of those Regulations. I am not convinced that the test under these Regulations is necessarily the same as the test under the Sponsorship Guidance. The purpose of the two schemes is entirely different. The Sponsorship Guidance is about immigration control, and as Mr Dunlop explained, the effect of the sponsor’s licence for Tier 2 is that the employee does not have to meet the resident labour market test. That is one reason why sponsored workers have to work for the sponsor company, and if working at other premises or companies must do so on a specific project. Otherwise the effect of the CoS would be to allow them to avoid the resident labour market test.  This is quite different from the purpose behind the tests in the Agency Worker Regulations as to whether someone is an agency worker, or the company is a temporary work agency. I therefore do not think it is appropriate to simply read across from definitions in the 2010 Regulations to the interpretation of the Sponsor’s Guidance. 

23.	In any event, it seems to me clear that whether the Court approaches the matter on a rationality, or proportionality basis, taking the criteria set out in the Sponsorship Guidance,  the Defendant’s decision that there was a breach of the Guidance here was lawful. Mr Ghosh said in terms in his interview that “the client will direct the duties”. It is possible that he slightly misinterpreted the question and/or that the answer could have been slightly misinterpreted. However, the surrounding evidence pointed very clearly to at least some of those being sponsored being agency workers within the meaning of paragraph 39.46 of the Guidance and the Claimant indeed acting as a recruitment agency. Mr Ghosh said in interview that he was not working at Amba House, as was stated in the Certificate of Sponsorship. It seems that in practice, certainly at the time of the interview, he was preparing to be interviewed by companies to which the claimant supplied workers. If he got those jobs he would then be working at the relevant companies. There was no evidence to suggest that he would be working on specific projects under the control of the Claimant; or indeed that he would be working under the direct control of the Claimant at all.  As Mr Dunlop pointed out at the time of the interview Mr Ghosh was not working, he was preparing for interviews for jobs where he might work in the future.

24.	There was a judgement to be made about the degree of control that the sponsor was exercising over the workers who were being supplied. Mr de Mello suggested that the sponsor was exercising sufficient control, but that was a matter for the Defendant, subject to her making a rational decision taking into account the relevant matters, both of which in my view she did. 

25.	I accept that there is not an absolutely clear cut line between someone working as a consultant at a client firm, and the Claimant acting as a recruitment agency. As Mr Dunlop, for the Defendant accepted, a consultancy relationship could fall within the terms of the Guidance if the working “off-site” was for a specific project. However, it seems clear from the documentation produced in respect of CRISIL, Dell and HCL (all companies to which the Claimant supplied workers), that the work undertaken by people sent from the Claimant was largely as temporary workers rather than in relation to any specific project. It should be noted that the Defendant’s decision letter at paragraphs 8 and 9 do not simply rely on the facts of Mr Ghosh’s situation, but also to the wider evidence of the sponsor’s activities. 

26.	The agreement between the Claimant and HCL makes express reference at clause 6(h) and (j) to the UK Agency Workers Regulations 2010. The agreement with CRISIL refers to the Claimant as the “recruitment agency”. The agreement with Orange, in respect of Mr Jagadeeshan is for the provision of various IT services and not for work on any specific project.

27.	Mr de Mello said that the Claimant was acting as a recruitment agency for EEA workers, but not for the migrant workers the subject of the Sponsor’s Licence. However, this differentiation does not appear in the documentation and was not explained or alluded to by Mr Gandhi in his interview with the Compliance officers. It was also not explained or suggested to the Defendant in the letter from Mr Gandhi of 9 September 2015. Although it is correct to say that the minded to revoke letter of 3 September did not set out all the issues raised in the final decision letter, Mr Gandhi in his letter did make extensive reference to the contracts with third party companies, and did not suggest there was a key difference between migrant and EEA workers. In any event for Mr Ghosh to be working as an agency worker, or for the sponsor to be acting as a recruitment agency does not require that in every case the relationship is precisely the same. Even if some of Mr Ghosh’s colleagues were genuinely working for the sponsor, within the terms of the Guidance, that does not mean that there were not material breaches of the licence in respect of some parts of the operation. 

28.	Finally, in respect to this ground, I accept Mr Dunlop’s submissions as to the importance in this field of sponsors being assiduous in their recording and compliance with the Sponsor’s Licence and Guidance. I have been shown the principles set out by Mr Justice Haddon- Cave in R (Raj and Knoll Ltd) v SSHD  2015 EWHC 1329 (Admin) at para 21, recording  propositions  drawn from other cases. The thrust of these principles is that the sponsor is being given a high level of trust and responsibility under the sponsorship scheme, which the Defendant is entirely justified in monitoring and enforcing very rigorously. These principles have been endorsed by the Court of Appeal in Raj and Knoll [2016] EWCA Civ 770, with the limited caveat set out at [31] of Tomlinson LJ’s judgment. 

29.	For these reasons I consider the Defendant’s conclusions in the decision letter were in no way unreasonable, and were indeed entirely justified on the evidence. I should also add that in my view the investigations that were undertaken by the Defendant were again wholly reasonable and proportionate. The Defendant’s officers interviewed Mr Gandhi and a number of the workers. She also considered a number of documents that were submitted to her. She gave the sponsor a full opportunity to respond to the 3 September 2015  letter and to  draw attention to any material that it thought relevant.  There was no breach of the Tameside duty of proper investigation here. 

30.	The second ground of challenge is that the Tier 2 sponsorship scheme is an “authorisation scheme” as defined under the Services Directive Council Directive 2006/123/EC , as transposed into UK law by the Provision of Services Regulations 2009. The purpose of advancing this argument was that if the Directive and Regulations did apply then it would be appropriate to apply a proportionality test, rather than an irrationality test. 

31.	Although reference in the skeleton arguments was made to the Directive, given that there is no argument about transposition, and there are no differences material to this case between the Directive and the Regulations, it is appropriate to refer to the Regulations. 

32.	Regulation 4(1) defines “authorisation scheme” as “an arrangement which in effect requires the provider or recipient of a service to obtain the authorisation of, or to notify, a competent authority in order to have access to, or to exercise, a service authority”. 

33.	There are a number of reasons why this ground fails. Firstly, the sponsor licensing scheme is not in my view even arguably an “authorisation scheme”. There is no requirement for a person carrying out the activities of the Claimant, or an equivalent company, to obtain the Defendant’s authorisation to carry out the service activity. The requirement is only to obtain a licence or authorisation if the provider wishes to employ non EEA workers. That is an entirely different thing.

34.	As Lord Mance explained in R (Hemming) v Westminster City Council 2015 2 WLR 1271 at [11] Section 2 of Chapter III of the Directive “suggests that conditions attaching to the actual exercise of a service activity, once any necessary authorisation has been obtained, are a separate matter from the authorisation scheme and authorisation procedures and formalities”, and that Chapter IV “suggests that the actual regulation of access to or the exercise of a service activity is a distinct matter from any prior authorisation scheme and its procedures, with which section 1 of Chapter III is concerned”.

35.	The Claimant refers to Lumsdon v Legal Services Board 2015 3 WLR 121 where the quality assurance scheme (QASA) for criminal advocates was found to fall within the scope of the Services Directive. However, the factual issues relevant to that scheme were entirely different to those in the present case. The sponsor’s licensing scheme is a scheme of immigration control and not an authorisation scheme for the carrying out of a service activity such as criminal justice advocacy. 

36.	Secondly in respect of the Services Regulations, regulation 2(2) (d) provides that the “services of temporary work agencies” are not covered by the Regulations. The Defendant found that the Claimant was acting as a temporary work agency. Therefore this provision would appear on facts to take the case outside the Regulations. 

37.	Thirdly, and in any event, even if a proportionality test was appropriate, in my view it would make no difference to the outcome of this case. For the reasons I have set out above, the Defendant had ample material upon which to conclude that there was a breach of the sponsorship licence scheme, and her decision was proportionate in the light of that evidence. In reaching this view I again take into account the public interest in maintaining full trust and responsibility through the working of the scheme. 

38.	The third ground of challenge is that the Sponsorship Guidance is in breach of section 55 of the Borders, Citizenship and Immigration Act 2009. Section 55(1) and (2) provide that the Secretary of State must make arrangements for ensuring that when she exercises her immigration functions she must have “regard to the need to safeguard and promote the welfare of children who are in the United Kingdom…”.

39.	The Claimant argues that the Guidance is defective because it does not require the Defendant to have regard to the best interests of any children who might be affected by a decision. On the facts of the case it is not disputed that the Defendant did not have regard to any such interests not least because no impacts or effects on children were brought to her attention. 

40.	Section 55 is an overarching duty and the interests of children therefore must be taken into consideration in the exercise of any, inter alia, immigration functions. However, that does not mean that it needs to be expressly referred to in the Sponsor’s Guidance, let alone in any specific decision. In very many cases, probably the vast majority of revocation decisions the impact on children of a decision, even assuming there are children of those being sponsored, will be too remote and indirect to be material to the decision. Where a licence is revoked the migrant is given a period of grace of 60 days in order to try to find another job and sponsor. Further, the migrant has the possibility of seeking further leave to remain if s/he so wishes. A material impact on any children is only likely to be felt at the removal stage, if that happens, and it is open to the migrant at that stage to raise any article 8 issues and to refer to section 55.

41.	It is possible that there could be an unusual case where a revocation decision has a direct and immediate effect on a child, and if such a case occurred and the Defendant was given the full information then she would have to have regard to her s.55 duty. But that is certainly not this case. Given the limited circumstances in which s.55 is likely to arise in the context of the Sponsorship Guidance it does not seem to me to be necessary for any express reference to be made to the s.55 duty in the Guidance. 

42.	Further, the SSHD relies on R (Behary) v SSHD [2013] EWHC 3575 (Admin) at [43]-[46] where  the High Court held that section 55 did not impose a duty on the Defendant to consider the best interests of the dependent children of a mother applying for leave to remain because she had not sought, in her application, to rely on those interests as a reason for remaining in the UK. I have now been sent the Court of Appeal judgment which again dismisses the Claimant/Appellant’s argument on section 55, R (Behary) v SSHD 2016 EWCA Civ 702. .

43.	The argument on section 55 in Behary arose in a different context to the present case, and did not concern an argument that the Guidance was in breach of section 55, but rather focused on the individual decision. However, Burnett LJ held [27] that the Home Office did not have to “chase shadows” where no evidence had actually been presented to them in respect of the welfare of the children.

44.	In Mr Gandhi’s letter of 9 September 2015 he made no reference to any impacts on children and submitted no evidence in respect of them. So quite apart from there being no obligation to invite such representations in the Guidance, there was in my view no breach of s.55 on the facts of the case.

45.	For all these reasons I do not think that the Defendant erred in law and I dismiss the claim.