Moreton, R (on the application of) v Medical Defence Union Ltd.

Factual and Procedural Background

The court considered a preliminary issue concerning whether the defendant, Medical Defence Union Limited (MDUL), is subject to judicial review on the basis that it is either a "public body" or exercises a "public function" affecting the claimant, pursuant to CPR 54.1(2)(a)(ii). The claimant is one of several individuals pursuing private law claims against a healthcare professional for alleged negligent treatment. The MDUL directors decided not to provide indemnity to this professional against the claimant's claim, despite indemnity being a discretionary benefit of membership. While the MDUL agreed to indemnify three other claims, it declined assistance in the remaining cases without providing reasons. If this decision stands, approximately seventy-four claims will fail due to the professional's lack of financial resources to satisfy judgments. The claimant seeks judicial review to challenge the exercise of discretion by the MDUL in refusing indemnity.

Legal Issues Presented

1. Whether the MDUL is amenable to judicial review as a "public body" or by virtue of exercising a "public function" in relation to its discretionary decision not to indemnify a member.

Arguments of the Parties

Claimant's Arguments

• The MDUL, though a private company limited by guarantee, is subject to public law scrutiny because it is woven into the fabric of public regulation concerning healthcare professionals, particularly dentists.
• The government has statutory duties to provide dental services and regulate dentists, with the General Dental Council (GDC) enforcing professional standards including requirements for indemnity or defence society membership.
• The MDUL’s provision of discretionary indemnity is integral to the system of dental service provision and regulation, effectively constituting a public function.
• Reference was made to case law extending judicial review to private bodies performing public functions or woven into public regulatory frameworks, such as R v The Jockey Club, ex parte Aga Khan and R v Advertising Standards Authority Ltd ex parte Insurance Service Plc.
• Reliance on a Department of Health consultation and a circular evidencing a form of partnership or arrangement between government bodies and defence organisations for indemnity provision.
• Suggested that public law principles such as natural justice and equity should apply to the MDUL’s exercise of discretion.

Defendant's Arguments

• The MDUL is a private mutual company limited by guarantee, not an insurance company, governed by its Memorandum and Articles and the Companies Acts.
• Its indemnity benefits are discretionary and not contractual entitlements; members have only a right to have requests fairly considered.
• Provision of indemnity is not a governmental function nor is the MDUL woven into government provision or regulation of dental services.
• Statutory duties to provide dental services and regulate dentists do not impose a requirement that indemnity be provided through the MDUL or any similar body.
• Insurance companies providing indemnity are not subject to judicial review, highlighting the absence of a public function in MDUL’s role.
• There is no evidence of a partnership or delegation between the government and the MDUL; the circular relied upon does not establish such a relationship.
• The MDUL’s discretion and internal remedies under company law suffice; public law review is inappropriate.
• Public law principles cannot override the MDUL directors’ fiduciary duties or the terms of the company’s constitution.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the nature of the MDUL as a private mutual company limited by guarantee, governed by its statutory contract with members and the Companies Acts. The discretion to grant indemnity is absolute and may be exercised without providing reasons. The court noted that members have no contractual entitlement to indemnity, only a right to fair consideration. The claimant’s argument rested on the MDUL’s alleged integration into public regulation of dental services, supported by statutory duties to provide dental services and regulate dentists, and regulatory guidance requiring indemnity or defence society membership.

The court rejected this, finding no statutory or regulatory basis to conclude that the MDUL performs a governmental function or is woven into government provision or control. The existence of insurance companies providing similar indemnity without being subject to judicial review further undermined the claimant’s position. The regulatory framework’s recognition that MDUL membership suffices for professional standards indicated acceptance of discretionary indemnity as effective cover.

The claimant’s reliance on principles extending judicial review to private bodies performing public functions was considered but found inapplicable because no relevant public function or government delegation was identified. The alleged partnership or arrangement with government bodies was disproved by the evidence, which showed only an agreement on sharing litigation costs without creating a public function or control over MDUL.

The court also rejected the application of public law principles such as natural justice or equity to the MDUL’s discretionary decisions, emphasizing the internal governance mechanisms available to members under company law and the fiduciary duties of directors. The court concluded that the hardship caused by the MDUL’s decision, while regrettable, did not justify subjecting the MDUL to judicial review.

Holding and Implications

The court’s final decision was to decide the preliminary issue in favour of the defendant, holding that the MDUL is not amenable to judicial review in respect of its discretionary decision not to provide indemnity.

The direct consequence is that the MDUL’s decision stands, and the claimant’s judicial review claim cannot proceed on the basis of public law scrutiny of the MDUL’s discretion. No new precedent was established beyond reaffirming the established legal position that private mutual defence organisations exercising discretionary powers under their constitutions are not public bodies or performing public functions for judicial review purposes.