Factual and Procedural Background
The Plaintiff, born in 1973 and severely physically incapacitated due to cerebral palsy caused by alleged clinical negligence at birth, pursued a claim against the First Defendant, a Health Authority, for clinical negligence. The claim was compromised in 2000 on a 50% liability basis, with damages to be assessed. The Plaintiff sought approval for a structured settlement under section 2 of the Damages Act 1996, proposing a With Profits Structured Settlement (WPSS).
The First Defendant, supported by the Second Defendant (a statutory body administering indemnity schemes under the direction of the Secretary of State for Health, the Third Defendant), refused consent to the WPSS, citing concerns about value for money and claimant disadvantage. The Plaintiff challenged this refusal by judicial review, contending that the refusal was unlawful.
The procedural history includes adjournments of approval hearings, correspondence between parties and government officials, and ultimately the filing of a claim for judicial review in March 2002. Permission to proceed was granted by a single judge in April 2002.
Legal Issues Presented
- Whether the First Defendant's decision not to consent to the WPSS is amenable to judicial review.
- If amenable, whether the refusal to consent was unlawful on grounds of taking irrelevant considerations into account, fettering discretion by applying a blanket policy, or being unreasonable in the Wednesbury sense.
Arguments of the Parties
Plaintiff's Arguments
- The decision by the Defendants is amenable to judicial review because it was exercised by public bodies with statutory powers and influenced by governmental policy.
- The refusal to consent was unlawful as it took irrelevant considerations into account, fettered discretion by applying a blanket refusal policy without individual consideration, and was unreasonable.
- The Plaintiff was deprived of the opportunity to invest damages as advised by financial experts, causing distress and loss of benefit.
- Financial self-interest or 'value for money' considerations by the Defendants were improper where they sought to claw back money rightly belonging to the Plaintiff.
- Concerns about the WPSS product's viability were unrealistic given guarantees and protections available.
Defendants' Arguments
- The decision to give or withhold consent under section 2 Damages Act 1996 is a private litigation matter, not a public function, and thus not amenable to judicial review.
- The First Defendant acted as a litigant with a private interest, similar to any other defendant or insurer, and was free to refuse consent for any reason.
- The policy of refusal was not challenged directly; only the specific decision was under review.
- Financial considerations, including protecting public funds and ensuring value for money, were legitimate and reasonable grounds for refusal.
- The WPSS was a new and untested product with uncertain long-term benefits and risks, justifying a cautious approach.
- The Defendants owed no public law duty to the Plaintiff beyond fulfilling the agreed legal obligations under the settlement.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| R v East Berkshire Health Authority ex parte Walsh [1985] 1 QB 152 |
Distinction between public law rights and private contractual rights; judicial review only for public law issues. |
Used to analyse whether the First Defendant’s decision was a public function amenable to judicial review or a private matter. |
| Davy v Spelthorne Borough Council [1984] AC 262 |
Clarification of public law and private law distinctions relevant to judicial review. |
Supported the need to identify public law rights before judicial review applies. |
| R v British Coal Corporation ex parte Vardy [1993] ICR 720 |
Identification of public functions subject to judicial review despite commercial aspects. |
Illustrated that statutory duties can render decisions reviewable, informing the court’s public/private function analysis. |
| McClaren v Home Office [1990] ICR 824 |
Recognition that employment rights can have public law dimensions when public functions are involved. |
Reinforced the principle that the nature of the function, not just the power source, determines reviewability. |
| Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 (GCHQ case) |
Conditions under which judicial review is available; legitimate expectation and public law rights. |
Applied to determine that no public law right or legitimate expectation arose from the First Defendant’s decision. |
| R v Panel on Take-overs and Mergers ex parte Datafin Plc [1987] 1 QB 815 |
Factors determining whether a body’s decisions are amenable to judicial review. |
Supported the court’s holistic approach to assessing the nature of the First Defendant’s function. |
| Poplar Housing Association Ltd v Donoghue [2001] 3 WLR 183 |
No clear line between public and private functions; importance of overall context. |
Informed the court’s nuanced approach to the public/private function distinction. |
| R v Disciplinary Committee of the Jockey Club ex parte Massingberd-Bundy [1993] 2 All ER 207 |
Judicial review requires infringement of public law rights, not just statutory powers. |
Used to conclude that the First Defendant’s decision lacked a public law duty to the Plaintiff. |
| R v Bolsover District Council ex parte John Pepper (2000) |
Exercise of statutory powers to contract is not necessarily public law unless public duty is involved. |
Supported the conclusion that the First Defendant’s decision was private in nature. |
| R v London Borough of Camden ex parte Hughes (1993) |
Distinction between private law functions and public law responsibilities. |
Reinforced that private contractual decisions are not generally subject to judicial review. |
| R v Lord Chancellor ex parte Hibbit and Saunders (1993) |
Public law review depends on the subject matter of the exercise of power. |
Applied to assess whether the First Defendant’s decision involved public law considerations. |
| R. v Tower Hamlets London Borough Council ex parte Chetnik Developments Ltd [1988] AC 858 |
Statutory discretion must be exercised for proper purposes and not abused. |
Guided the court’s analysis on whether the Defendants’ policy and decision were lawful. |
| Bromley London Borough Council v Greater London Council [1983] AC 768 |
Fettering discretion by rigid policy is unlawful. |
Referenced in argument about whether the Defendants unlawfully fettered discretion. |
| R v Police Complaints Board ex parte Madden [1983] 1 WLR 447 |
Duty to exercise discretion independently and not to follow binding decisions of others. |
Considered in assessing whether NHSLA had unlawfully fettered its discretion. |
| Wells v Wells [1999] 1 AC 345 |
Principles on discount rates and investment assumptions for damages awards. |
Applied to confirm that the Defendants’ approach aligned with established legal principles on damages. |
Court's Reasoning and Analysis
The court conducted a detailed examination of whether the First Defendant’s decision not to consent to the WPSS was amenable to judicial review. The analysis focused on the nature of the function performed by the First Defendant in the context of clinical negligence litigation. Although the First Defendant is a public body with statutory powers, the court concluded that its refusal to consent was a private law matter akin to a litigant exercising its rights in litigation rather than a public law duty owed to the Plaintiff.
The court applied established legal principles distinguishing public from private law functions, referencing authoritative case law. It found no enforceable private law right to a WPSS, nor any legitimate expectation that the First Defendant would consent. The involvement of the Second and Third Defendants, who directed policy and indemnity arrangements under statutory schemes, did not transform the decision into a public law act affecting the Plaintiff’s rights.
Regarding the lawfulness of the decision if it were reviewable, the court acknowledged the wide statutory discretion vested in the Secretary of State and the NHS Litigation Authority to manage clinical negligence claims efficiently and economically. The Defendants’ policy to refuse WPSS consent pending further review was deemed a legitimate exercise of discretion aimed at protecting public funds and ensuring value for money.
The court rejected the Plaintiff’s contention that the policy constituted an unlawful fetter on discretion, emphasizing that NHSLA acted under statutory direction from the Secretary of State. The decision was consistent with established legal principles on damages investment (notably Wells v Wells) and was not irrational or unreasonable in the Wednesbury sense.
Consequently, the court concluded that the refusal to consent was lawful and that the Plaintiff was not entitled to the relief sought.
Holding and Implications
The court held that the First Defendant's decision not to consent to the With Profits Structured Settlement was not amenable to judicial review as it constituted a private law decision made in the context of litigation.
Alternatively, if the decision were reviewable, it was lawful, rational, and within the statutory discretion of the Defendants, who acted to protect public funds and ensure value for money consistent with their statutory duties.
The direct consequence is that the Plaintiff’s application for judicial review was dismissed, and the Defendants are not required to fund the WPSS.
No new legal precedent was established; the decision reaffirms established distinctions between public and private law functions in the context of statutory bodies engaged in litigation and confirms the legitimacy of financial prudence policies in managing public funds within statutory schemes.