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Big Society Bites Back: judicial remedies & public funding cuts

As I write this article from the secluded environment of Lincoln's Inn a helicopter circles over demonstrators congregating on the fields outside. The demonstrators are readying themselves for the TUC March against Public Sector Cuts. On the desk beside me are a dozen flyers collected on the walk from the nearby tube station which urge me to 'Take Action' against the Big Society. The origin of the flyers are not Anarchist or Communist groups nor even public sector workers whose jobs might be in danger but from mainstream organisations with middle class origins affected by recent public funding spending cuts. It is instructive to see whether these groups, likely more predisposed to seeking redress through litigation, will follow in the footsteps of the Marsh Farm Outreach.

A month ago Mr Ockleton sitting as a High Court Judge in the Queens Bench Division heard similar concerns expressed by a collective known as the Marsh Farm Outreach (“MFO”) who describe themselves as a grassroots community group made up of volunteers living on the Marsh Farm Estate in Luton, Bedfordshire. The group were praised by Mr. Ockleton for their energy, drive and ingenuity in trying to establish an Outreach Workshop project aimed at bringing unemployed residents of Marsh Farm into employment. Mr. Ockleton faced resolving a judicial review application brought by Mr. Glenn Jenkins of MFO on their behalf against the Marsh Farm Community Development Trust (“MFCDT”)  a body established to distribute government funding under the New Deal for the Communities Programme. MFO contended that MFCDT had misused its powers, failed to honour its legitimate expectation and therefore unlawfully withheld grant funding from it.

Judicial Review proceedings were a new step for MFO. In 2010 it took positive action by, amongst other things, camping on the grounds of a parish church which Andrew Stunnell the Minister for Communities and Local Government attended. This led to a reversal of his decision to refuse the group funding for their Outreach Project workshop.

How did the dispute which fostered the Judicial Review proceedings arise? Mr. Jenkins describes himself as a founding member of MFO. MFO is a Community Interest Company, whose aim since at least 2001 has been to secure funding for social enterprise projects on the Marsh Farm Estate in Luton. The Defendant MFCDT is a company which supports and administers applications for grant monies as part of the New Deal for Communities programme. MFCDT derive their funding from Government derived grant monies. Any application for funding over £250,000 or for 'novel and contentious projects' must be approved by MFCDT and  the Government Office. MFCDT receive an agreed level of annual funding which is set out within its Annual Delivery Plan for distribution between nominated projects. A sum of up to £48.6 million of funding was made available over a 10 year period for projects up to the 31st March 2011 including that of MFO.

In its Annual Delivery Plan for 2010/11 MFCDT had included a potential funding of £839,985 for a novel and contentious project proposed by MFO which would deliver jobs and skills to local residents over a short period ending by 31st March 2011. For a number of years MFO had difficulty persuading MFCDT and the Department that it could deliver the project but hard campaigning and local support eventually meant that conditional approval was secured. Contracts were drawn up and signed by MFO and MFCDT in October 2010. Unfortunately those were discovered to be null and void given that MFO had been put into administration for a small amount of unpaid debts. This was sufficient to give rise to a rethink by the Government Department as to MFO's suitability to receive funding for the project.

By the time that MFCDT had secured further conditional approval for MFO or an alternative organisation to deliver the relevant project a number of payments became due for other projects that MFCDT was contractually committed to. MFCDT  therefore withdrew financial support from MFO and authorised a transfer of funds to other causes.

Judicial review proceedings were commenced by Mr. Jenkins on 28 January  2011 against MFCDT based upon:

•  a purported legitimate expectation that MFO would receive the funds that had been set out by MFCDT in its Annual Delivery Plan

•  an alleged abuse of power by one of MFCDTs officers who, it was suggested, transferred monies to other projects outwith the discretionary powers provided to him under MFCDTs Financial Regulations. Mr. Jenkins suggested that the relevant officer had committed those monies to other projects before MFCDTs board had met to consider or the issue in detail or ratify the transfer

•  a purported assurance by MFCDT that it would resign contracts with MFO once  they had rescinded any order for administration

Mr. Jenkins sought, amongst other remedies:

1) Interim Injunctive Relief

a) a freezing order in relation to the funds of MFCDT until resolution of the issues at  a substantive hearing

2) Substantive Relief

a) an account of monies previously set out in its Annual Delivery Plan for MFO;
b) a payment up of £706,000 or such monies as remained to MFO or other suitable  delivery body;
c) a declaration of unlawful conduct on the part of MFCDT.

The Interim application was considered by HHJ Purle QC sitting as a Judge of the High Court at an expedited hearing at Birmingham District Registry on 3rd February 2011. MFCDT resisted any order being made upon the grounds that there was no proprietary claim to the monies, that in the absence of a proprietary claim the Claimant would be placing himself in an advantageous position over other individuals receiving funds from the Defendant as an unsecured creditor and that there was no undertaking offered by the Claimant.

HHJ Purle QC was mindful of the commercial realities of a party seeking relief by way of freezing Order in such circumstances and agreed that it was not appropriate to utilise a freezing order in such circumstances where to do so would be to put a Claimant in a better position than ordinary creditors. On the specific facts there was insufficient evidence to reach a conclusion on the matter sufficient to disturb the status quo and that the absence of a cross-undertaking in damages, whilst not determinative, was sufficient to cause the Court to deny the relief sought.

Mr. Jenkins appealed with the matter being reconsidered upon application by Lord Justice Stanley Burnton on the 9th February 2011.The Appeal Court also dismissed the application and noted that a particularly strong case is required for the granting of interim relief where the substantive claim was to be heard shortly (in this matter 8 days later). Echoing the sentiments of HHJ Purle QC Lord Justice Burnton also found that if there are limited funds available to the Defendant it is not for the Court to prefer one Claimant as against another and that there was no cross-undertaking offered.

It should be noted that at both interim hearings the applicant had not sought to advance any claim that the monies were being held by MFCDT on trust for MFO and had they done so the Court may have taken a different view as to the appropriateness of granting the freezing Order. The Court would then have had to apply its mind to whether there had been sufficiently cogent evidence adduced such as to then establish that contention and sufficient to upset the status quo.

Prior to the hearing before Mr CMG Ockleton MFCDT filed a detailed reply to the application raising the following issues:

• Mr. Glenn Jenkins was a private individual with no locus stand
• MFCDT was not a public body susceptible to a claim in judicial review
• there was no unequivocal representation by the Defendant that the monies originally intended for MFO could not be used for other contingency projects and therefore no legitimate expectation
• there was no express agreement to re enter a contract with MFO once its liquidation was discovered
• the conduct of one of the Defendants officers in committing funds before approved by the Defendant board did not affect the ability of that Board to authorise the decision after the event..

The Court avoided potential difficulties caused by Mr. Jenkins acting as a private individual by permitting MFO to join proceedings as an interested party. MFCDT took no objection to the application made for the first time during submissions. Mr. Ockleton ultimately expressed reservations as to whether Mr. Jenkins had standing as an individual but found in his favour on the issue.

I suspect that had the decision turned upon this point alone the Court would have had to express its opinion in more detail taking into account the previous approach of Mr. Justice Stanley Burnton as expressed in R (on the application of Grierson -v- OFCOM [2005] EWHC 1899 as to the standing of such individuals. In the present matter MFCDT sought to compare the position of Mr. Jenkins with the Claimant in Grierson in that he was seeking to derive a personal benefit in having an account of the funds of MFCDT that he would not otherwise be entitled to, that he sought to derive a benefit for MFO without their express agreement and that MFO had given no assurances as to how they would apply the funds.

Mr. Ockleton also found that MFCDT had a sufficient public element to be subject to judicial review. MFCDT had sought to emphasise their autonomy from governmental control as to spending but the Court noted that for decisions as to novel and contentious projects over £250,000 formal approval and ratification by the Minister was required and that New Deal for Communities guidance is met through appraisal before any expenditure occurs. It may be the case that similar delivery bodies can revisit this issue on the basis that the NDC funding agreement has now ceased and will be replaced by other structures but this is an indication that the government is unlikely to abrogate its responsibility by partial outsourcing of  delivery vehicles for distribution of funds unless they are in truth autonomous.

As to matters of substance Mr. Ockleton found that whilst this case was arguable in substance it was 'quite hopeless'. The case failed by Mr. Jenkins failing proving his claim to legitimate expectation. In resolving that issue the Court noted that the inclusion of monies in an Annual Delivery Plan which provides the Defendant with a discretion as to how to apply those monies does not itself raise a legitimate expectation. Mr. Jenkins was unable to point to an express and unequivocal representation that the monies would be provided.

In my view this case was always therefore likely to fail. Recently HHJ Langan QC in the case of R (on the application of Grimsby Institute of Further and Higher Education ) -v- Chief  Executive of Skills Funding ( formerly Learning and Skills Council) [2010] EWHC 2134 accepted the pre-requisite of an express and unequivocal representation as one of the elements required to establish a legitimate expectation.

Mr. Ockleton went on to find that as regards the actions of the individual officers of MFCDT there was no abuse of power. In this instance the monies that had been included in Annual Delivery Plan for MFO were likely to have been committed to other projects well before any question of abuse or reassignment by an official of the Defendant arose.

Mr. Ockleton further noted that all funding monies issued under the New Deal for Communities programme should be spent by 31st March 2011 which would have been unrealistic for MFO in this instance.

Mr. Jenkins who was in receipt of funding via the Legal Services Commission was responsible for the costs of MFCDT who themselves had to divert manpower and funds to meet this legal challenge.

It is clear from the judgment in Marsh Farm that the Court has sympathy for such collectives and groups who operate to better society. The judgment and reasoning however illustrates that regardless of that sympathy if judicial review is to be used as an effective tool such groups will need to give adequate consideration to the thresholds for review rather than simply being motivated by a desire for 'Taking Action' in a simplistic manner. If the number and nature of groups now amassing themselves to march is an indicator of discontent as to reductions in funding I have a strong suspicion that the issue will soon be revisited.

It appears an unlikely rallying cry but as I finish the article I note the words which I have just heard delivered by the leader of the opposition to the TUC rally:

“David Cameron: you wanted to create the big society – this IS the big society... the big society united against what your government is doing to our country. We stand today not as the ­minority, but as the voice of the mainstream majority.”

If the voice of the mainstream majority is to be heard through judicial review, the judgment in Marsh Farm will be a salutary lesson.

Article by Boyd Morwood