Distal Point Ltd & Ors v NHS Central East Integrated Care Board

Where a public body exercises contractual powers under a standard-form public service contract, its discretion may be constrained by express duties of reasonableness and good faith, together with the body’s applicable policy. The decision-maker must use a rational process, consider all obviously relevant matters, exclude irrelevant matters, and record reasons which withstand scrutiny. The intensity of review may increase where there is unequal bargaining power, a financial conflict of interest, or a serious effect on livelihood. Failure to meet contractual activity targets does not automatically disentitle a provider to payment for services actually delivered. Reconciliation and clawback decisions must account for the services requested and provided, including urgent work which affected the provider’s ability to meet activity targets. A decision made without evidence of the relevant committee’s reasoning, consideration of waiver, or engagement with material contextual factors may be invalid.

The claimants operated NHS dental practices under General Dental Services contracts. During and after the Covid-19 pandemic they prioritised urgent dental treatment, which generated fewer Units of Dental Activity than routine work. The defendants later sought to recover more than £1 million through contractual reconciliation and clawback decisions for 2022/2023.

The claimants alleged that they had been promised income protection and relied on those assurances. They also challenged the reconciliation decisions under clause 10 of the contracts and chapters 4 and 9 of the Guidance, alleging irrationality, unreasonableness and bad faith. The court had to determine whether the pleaded assurances were made, whether they generated an estoppel, and whether the clawback decisions were lawfully reached.

1. Estoppel. The court rejected the pleaded assurances that the claimants could continue operating as Hubs after 30 June 2022 and would receive guaranteed full contract value without clawback. Those representations were not proved. The court nevertheless found that the defendants repeatedly represented that the claimants should do the right thing for patients, prioritise urgent treatment and not chase UDAs, and that the defendants would do the right thing by them in reconciliation.
2. Those representations were clear and relied upon. However, the claimants knowingly accepted the risk that a proper reconciliation might result in partial clawback. The necessary legal detriment for estoppel was not established, and the estoppel claims therefore failed.
3. Contractual decision-making duties. Clause 10, read with chapters 4 and 9 of the Guidance, required the defendants to exercise contractual powers in good faith, reasonably and as a responsible public body. The decision-maker had to use a rational process, consider relevant matters, exclude irrelevant matters, and document the decision and reasons. The duty applied to reconciliation, clawback and waiver decisions. It incorporated both process error and outcome irrationality in the Wednesbury sense.
4. The claimants’ failure to meet UDA targets did not itself justify full recovery. The defendants had to assess the real services requested and delivered, including the higher volume of urgent dental work, the representations made to the claimants, and the discretion to waive clawback in exceptional circumstances. The contractual mid-year review provisions also formed part of the safeguards surrounding the exercise of the power.
5. The defendants failed to disclose the report, reasoning, constitution and records of the committee which made the challenged decisions. There was no evidence that it considered the claimants’ urgent work, the relevant representations, or any waiver. The process therefore breached clause 10 and the Guidance and was irrational, unreasonable and in breach of good faith.
6. The decisions dated 26 January 2024 concerning the six contracts and the 2022/2023 Q2–Q4 reconciliation were declared invalid and of no effect. The estoppel claims were dismissed.