Merseyside Passenger Transport Authority & Anor v Secretary of State for Transport

A minister exercising a broad statutory grant-making power must use it to promote, rather than frustrate, the policy and objects of the governing legislation. Conditions requiring local beneficiaries to contribute and accept cost-overrun risks may be lawful. In a perversity challenge, the issue is whether the evidence compelled the decision-maker to reach the claimant’s view. It is not whether another view was available.

The claimants challenged the Secretary of State’s decision to withdraw the proposed £170 million grant contribution for Merseytram Line 1. The scheme’s estimated cost had increased substantially, and the Secretary of State required assurances that no further central Government funding would be sought.

The claimants relied on legitimate expectation, unfairness or unreasonableness, and frustration of the statutory scheme. They argued that the Secretary of State had unlawfully required the constituent districts to support or underwrite the project.

1. The judicial review application, including the claim for damages, was dismissed. The claimants were ordered to pay the defendant’s costs, subject to detailed assessment.
2. The provisional funding letter was capable of generating a legitimate expectation, but its conditions had not been satisfied. Any expectation arising from it had also ended when the final bid was rejected. The parties thereafter proceeded on the basis of later conditions, which were not met.
3. The unfairness challenge was in substance a perversity challenge. The Secretary of State was entitled to regard the risk of further funding requests as a matter of judgment. The evidence left room for different views and was not compelling enough to make his conclusion unreasonable.
4. Under section 56 of the Transport Act 1968, the Secretary of State’s broad grant-making discretion had to promote, rather than frustrate, the Act’s policy and objects. Applying Padfield v Minister of Agriculture, Fisheries & Food (1968) AC 997, conditions requiring local beneficiaries to contribute and accept responsibility for overruns were lawful.
5. The Secretary of State could consider the districts’ role in appointing the Authority, funding it through the levy, and bearing the practical consequences of reallocating its income. The conditions did not frustrate the statutory scheme or unlawfully transfer Merseytravel’s implementation functions.

First-instance judicial review proceedings. The judgment records that appeal papers had been lodged, but gives no later appellate decision.