Supportways Community Services Ltd., R (on the application of) v Hampshire County Council

A public authority conducting a contractual service review must comply with the review arrangements it has adopted. Where costs substantially exceed a statistical upper quartile, the authority must consider evidence addressing whether the costs are reasonable in the particular circumstances. A comparison with statistical figures alone is insufficient.

A flawed review may nevertheless trigger a contractual termination provision where the contract makes the occurrence of a good-faith review, rather than the quality of that review, the operative event. The appropriate remedy may be an order requiring the review to be conducted again, with retrospective effect, without requiring the court to resolve the wider availability of public law remedies in a contractual setting.

The claimant supplied housing-related support services under an interim agreement with the defendant local authority. The agreement required the authority to review the services in accordance with guidance issued under Local Government Act 2000, section 93, and provided for termination twelve months after completion of the review.

The authority reviewed the claimant’s services and concluded that they were not cost effective because their costs exceeded the relevant regional upper-quartile figures. It reduced the funding without separately considering whether the apparently high costs were reasonable in the particular circumstances. The claimant challenged the review and argued that the contract had not terminated. The issues concerned the legal effect of the flawed review and the appropriate remedy.

1. The authority’s arrangements required more than categorisation of the services and comparison with regional statistical figures. Where the upper quartile was substantially exceeded, the provider had to be allowed to supply evidence explaining the apparent high cost, and the authority had to consider that evidence and decide whether the cost was reasonable in the particular circumstances. That was a distinct question from the category into which the service fell. The authority had not performed that exercise and had therefore failed to comply with its own review arrangements.

2. The authority was entitled to consider whether services funded under the agreement were eligible for Supporting People grant purposes. It was not confined to the services described in the contract as support services or eligible service tasks. Contractual provision and grant eligibility were potentially distinct matters.

3. On the proper construction of the agreement, its termination depended on the occurrence of a review, not upon the review’s validity or quality. The agreement was an interim commercial arrangement, and it could not have been intended to continue indefinitely because of a flawed review. A review carried out in good faith and in purported performance of the contractual obligation was sufficient to trigger the termination provision, even though the review was defective. The agreement therefore ended twelve months after the review was completed.

4. The claimant nevertheless had a contractual right to an unflawed review. Damages were accepted to be inadequate, and there was no principled obstacle to requiring the authority to conduct the review again. The court therefore ordered a re-review intended to take effect retrospectively, while leaving the parties to work out the consequential order and permitting further information reasonably required for a genuine review.

5. It was unnecessary to decide the broader question whether public law remedies are available where the circumstances are also governed by contract, because the private law remedy was effectively the same. The parties were required to co-operate in giving practical effect to the order.

Costs were apportioned 60 per cent to the claimant and 40 per cent to the defendant, subject to set-off and detailed assessment if not agreed. Leave to appeal was refused.

First-instance decision in the Administrative Court. The court ordered the defendant to conduct the service review again, with the consequential arrangements to be settled by agreement or, if necessary, by the court.