London & South Eastern Railway Ltd & Anor v British Transport Police Authority & Ors

Section 33(4) of the Railways and Transport Safety Act 2003 states funding aims for police services agreements. It does not, without clear words, override existing contractual charging provisions. A public authority cannot impose materially different charges unilaterally where the agreement fixes the applicable proportions. Existing terms may be changed by agreement, lawful termination followed by a new agreement, or another clearly conferred power. An arbitration provision concerning the terms, construction or operation of an agreement cannot be used where the alleged dispute is only whether the Authority had power to override the agreement. A statutory power to adjust contributions for previous deficits does not permit recovery of a deficit caused by the Authority’s own unlawful charging method.

The claimants, train operating companies, challenged the British Transport Police Authority’s decision to apply a new model for allocating British Transport Police costs. Their existing police services agreements fixed charging proportions by reference to a 1999 review and contained four-year termination provisions. The Authority invoiced the claimants on the basis of the new model, which increased their liabilities, while reducing charges for other interested train operators.

The central issue was whether section 33(4)(b) of the Railways and Transport Safety Act 2003, together with article 10 of the British Transport Police (Transitional and Consequential Provisions) Order 2004, authorised the Authority to override or vary the existing agreements unilaterally.

1. The claim succeeded. The existing agreements were deemed to be police services agreements under section 33 of the Railways and Transport Safety Act 2003, but article 10 of the British Transport Police (Transitional and Consequential Provisions) Order 2004 did not vary their contractual terms.
2. Section 33(4) imposed aims: broadly, matching income and expenditure and securing contributions which approximately reflected the nature and extent of the services likely to be undertaken for each customer. It did not confer a power to rewrite existing contractual charging provisions. The provision concerned the setting of terms for agreements made under the Act, not an ex post facto power to impose a construction which the agreed words could not sensibly bear.
3. The Secretary of State had powers under section 73 to terminate or vary existing agreements. The existence of those powers supported the conclusion that clear statutory language would have been required before existing contractual rights could be overridden. The Authority therefore could not require the claimants to pay more than the proportions fixed by their agreements unless they agreed to a variation or the agreements were lawfully terminated.
4. The section 35 arbitration mechanism was unavailable. There was no dispute about the terms, construction or operation of the agreements; the issue was whether the Authority possessed a statutory power to override them. The Authority could not create an arbitrable dispute by imposing an obligation it had no power to impose.
5. Any agreed reductions in the charges payable by the winning operators were unlawful because they resulted from the same unlawful assumption that the Authority could impose the new model on all operators. The variations were entered into without regard to the material consideration that the increased charges could not lawfully be imposed.
6. The court rejected reliance on section 33(5) as a means of clawing back the shortfall. That provision addressed prospective budgets which later proved too high or too low and unforeseen expenditure. It did not authorise recovery of a deficit caused by the Authority’s own unlawful charging method.
7. The challenge was not barred by undue delay under section 31(6) of the Supreme Court Act 1981. The claimants challenged the decision promptly, reasonably awaited the Authority’s response, and issued proceedings shortly after the disputed invoices. The interested operators’ financial prejudice did not justify withholding relief because they could have allowed for the possibility of success.
8. The court made, or proposed to limit relief to, a declaration in the terms approved by Underhill J. It made no determination on Arriva’s different contractual terms, which remained for arbitration, and left the suggested state-aid issue undecided.

First-instance judicial review proceedings. Permission was initially refused by Mitting J on 12 July 2007, but Underhill J granted permission on renewal and permitted amendment of the claim.