R v Secretary of State for the Environment, Ex parte Nottinghamshire County Council (Bradford City Metropolitan Council v Secretary of State for the Environment, Nottinghamshire County Council, Ex parte, Nottinghamshire County Council v Secretary of State for the Environment)

Statutory guidance framed by reference to principles applicable to all local authorities may use one general set of principles that responds to authorities’ differing circumstances and produces different outcomes. It need not apply every component principle identically to every authority.

Courts retain responsibility for construing statutory limits and reviewing abuse of administrative power. However, where expenditure guidance embodies political and economic judgment, complies with the governing statute and requires approval by the House of Commons, judicial intervention for unreasonableness is constitutionally exceptional. Detailed review requires a prima facie case of bad faith, improper motive or consequences so absurd that no bona fide political judgment could have produced them.

The Secretary of State issued expenditure guidance to local authorities under the Local Government, Planning and Land Act 1980, as amended by the Local Government Finance Act 1982. The guidance appeared in a Rate Support Grant Report approved by the House of Commons. Nottinghamshire County Council and the City of Bradford Metropolitan Council challenged their expenditure targets by judicial review.

Kennedy J dismissed their applications. The Court of Appeal allowed their appeals because the guidance was not, in its view, framed by reference to principles applicable to all local authorities. It rejected the councils’ separate allegation of Wednesbury unreasonableness. The Secretary of State appealed.

The central questions were whether section 59(11A) permitted general principles whose operation differed according to authorities’ circumstances, and whether the financial consequences of the guidance justified judicial intervention for unreasonableness.

1. Disposition. The House unanimously allowed both appeals. The Court of Appeal’s order was set aside and Kennedy J’s order refusing relief was restored.

2. Construction of section 59(11A). Lord Bridge of Harwich delivered the principal reasoning on statutory construction. Lord Scarman, Lord Roskill, Lord Templeman and Lord Griffiths agreed with that conclusion and reasoning. The requirement that guidance be framed by reference to principles applicable to all local authorities required principles of general application. It prohibited ad hoc selection between individual authorities. It did not require every principle to operate identically upon every authority or prevent the principles from recognising relevant differences in spending circumstances.

   The respondents’ construction was inconsistent with the scheme and purpose of the Local Government, Planning and Land Act 1980 and the Local Government Finance Act 1982. It would prevent guidance from making legitimate distinctions between high- and low-spending authorities or mitigating severe consequences by reference to previous expenditure. Similar statutory expressions concerning principles “applicable to” or “to be applied to” all authorities were used interchangeably. The challenged guidance therefore complied with section 59(11A).

3. Contemporaneous exposition. Per Lord Bridge, provisions of the 1982 Act retrospectively authorised grant adjustments by reference to earlier guidance. The report containing that guidance had been submitted to and approved by the House of Commons while the responsible department was promoting the Bill. Where the retrospective provisions were ambiguous, the prior report could be considered as a contemporanea expositio of the draftsman’s purpose.

4. Judicial review. Lord Scarman delivered the principal reasoning, with which the other Law Lords agreed. The courts could construe the statute and investigate illegality or abuse of power despite parliamentary approval. Policy concerning public expenditure and the distribution of taxation was, however, committed to the minister and the House of Commons. Where the proposed action complied with the statute and required Commons approval, the court could not substitute its assessment of fairness or economic wisdom.

   The Wednesbury principles in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 were useful shorthand, but not an exhaustive statement of judicial review. In this constitutional and financial setting, detailed examination was justified only by a prima facie case of bad faith, improper motive or consequences so absurd that the minister must have taken leave of his senses. None was established. The evidence showed consultation, consideration of relevant matters and a bona fide attempt to restrain expenditure through principles applicable to all authorities.

5. The Secretary of State received his costs in the Court of Appeal and the House, divided equally between the respondent councils. The cause was remitted to the Queen’s Bench Division to proceed consistently with the judgment.

• House of Lords: Unanimously allowed the Secretary of State’s appeals, set aside the Court of Appeal’s order and restored Kennedy J’s order refusing relief. The cause was remitted to the Queen’s Bench Division.
• Court of Appeal: Lawton, Slade and Dillon LJJ allowed the councils’ appeals on the construction of section 59(11A), but rejected their allegation of Wednesbury unreasonableness.
• High Court, Queen’s Bench Division: Kennedy J dismissed the applications for judicial review on both the statutory-construction and unreasonableness grounds.