A council was not entitled to use its statutory contractual powers under section 123 of the Local Government Act 1972 for the sole or dominant purpose of punishing a firm of solicitors which had brought a substantial number of personal injury claims against the council. So found His Honour Judge Stephen Davies on 24 January in Trafford v Blackpool Borough Council  EWHC 85 (Admin).
Background: The claimant, Joanna Trafford, set up her firm North Solicitors in 2008 primarily as a personal injury litigation practice. She found office space at the council-owned Enterprise Centre, which provided ‘modern office accommodation aimed at start-up and developing businesses from primarily the Blackpool area’. The construction of the centre had been partly funded by a European Regional Development Fund grant, which stipulated that the units could be occupied only by small and medium-sized private sector enterprises. The units were offered on three-year leases, contracted out of Landlord and Tenant Act 1954 protection, and tenancy selection was delegated to the Enterprise Centre management board (ECMB) to be taken by reference to specific criteria.
In November 2012 the council’s corporate asset management group considered the pressures on the Enterprise Centre budget arising from the claimant’s firm, which had ‘submitted several tripping claims against the council on behalf of clients’. A decision was subsequently taken ‘to end the council’s relationship with the claimant as soon as possible’ by ‘not offering… a new tenancy when the current one expired’.
As the council indicated in its evidence: ‘High-volume claims such as these are a considerable drain on the council and divert resources from the council’s core functions of providing services and infrastructure for the benefit of the residents of the borough. As such the council considers that such claims are contrary to its interests.’
And although the council ‘is well aware that it cannot prevent any person from carrying on business in any manner they see fit, provided that it is lawful’, it ‘can however choose who it enters into commercial relationships with, be it as landlord and tenant or otherwise’.
The claimant therefore challenged the council’s decision on various grounds including: improper/unauthorised purpose, Wednesbury illegality and procedural fairness. She argued that even in the context of making decisions about whether or not to enter into contracts, a public body such as the council must operate in accordance with public law duties. But in any event there was a relevant public element given the circumstances in which the Enterprise Centre came to be constructed and operated using public funding for the purpose of providing public benefit to the wider community.
The council contended (among other things) that it was performing a purely private function in circumstances where it owed no public duty to the claimant. Furthermore, the ‘decision was taken in the context of a purely commercial relationship in relation to purely commercial premises, where the claimant and the defendant had entered into a lease on purely commercial terms, and on a contracted-out basis, so that the claimant could have had no legitimate expectation, whether in contract or in public law, that she would be offered a further tenancy on expiry’.
The council’s actions to terminate the tenancy were, said the judge, ‘an act of retaliation, pure and simple, to “punish” the claimant’s firm by causing it some difficulty and inconvenience’. He also noted that there was ‘no suggestion or evidence that her firm has acted in any way illegally or improperly in… bringing… such claims’. The judge considered several relevant authorities including Molinaro v Kensington & Chelsea BC  EWHC Admin 896, where Elias J (as he then was) had considered the impact of public law for public authorities conducting apparently private law functions.
In his view, the important question in such cases was the nature of the alleged complaint. For if abuse of power is alleged the courts should, in general, hear the complaint. This is because public law bodies ‘should not be free to abuse their power by invoking the principle that private individuals can act unfairly or abusively without legal redress’. However, sometimes ‘the application of public law principles were cut across the private law relationship and, in these circumstances, the court may hold that the public law complaint cannot be advanced because it would undermine the applicable private law principles’.
In Hampshire County Council v Supportways  EWCA Civ 1035, Neuberger LJ (as he then was) noted that ‘in order to attract public law remedies, it would be necessary for the applicant for judicial review to establish, at the very least, a relevant and sufficient nexus between the aspect of the contractual situation of which complaint is made and an alleged unlawful exercise of relevant public law powers’.
In the circumstances, Judge Davies indicated that while the starting point is that this was a decision under section 123 of the Local Government Act 1972, which gives a very wide power for councils to dispose of land, equally the council had delegated the decision to the ECMB in the context of the Enterprise Centre having been built with public funding and for public purposes, that is to support small and medium-sized enterprises. The court therefore concluded that the decision was in principle amenable to judicial review.
The judge then found on the facts that the council had failed to exercise its legal power to dispose of land (section 123) for the purpose for which it was conferred.
In his view: ‘The exercise of a power with the sole or the dominant intention of punishing the claimant and subjecting her firm to a detriment, in circumstances where there was no evidence that the claimant was actually doing anything at all unlawful or improper, was in my judgement the intentionally improper exercise of the power conferred on the defendant and the exercise of that power for unauthorised purposes.’
Consequently, the decision was ‘fundamentally tainted by illegality’ and should be quashed. It was also Wednesbury unreasonable since ‘there was no rational connection between the decision and the objective’. In addition, the decision was procedurally unfair since the council was not entitled to make its decision by reference to criteria not contained in its tenant selection policy without affording the claimant the opportunity of making representations.
As Lord Bridge noted from Wades Administrative Law, fifth edition (1982), pp 355-356, in R v Tower Hamlets London Borough Council, Ex parte Chetnik Developments Ltd: ‘Statutory power conferred for public purposes is conferred as it were upon trust, not absolutely – that is to say, it can validly be used only in the right and proper way which parliament when conferring it is presumed to have intended.’
And although private individuals are free, subject to law, to act out of malice or revenge, a public authority must act ‘reasonably and in good faith and upon lawful and relevant grounds of public interest’. For ‘unfettered discretion is wholly inappropriate to a public authority, which possesses powers solely in order that it may use them for the public good’.
But while comedic monologist Marriott Edgar referred to Blackpool in The Lion and Albert as being ‘noted for fresh-air and fun’, the council’s decision here seems unlikely to have brought much fun to anyone involved.
Nicholas Dobson, Freeth Cartwright