Knot Builders Ltd, R (On the Application Of) v Construction Industry Training Board

Factual and Procedural Background

This appeal concerns grants made available by the Respondent ("the Board") to employers to encourage training in the construction industry, and the corresponding liability of those employers to pay a levy which funds such grants. The legislative framework includes the Industrial Training Act 1982 ("the Act"), the Industrial Training (Construction Board) Order 1964 ("the 1964 Order"), and successive levy orders under the Act. The Board's relevant grant years span from 2014/15 to 2017/18, referred to as years 1 to 4 for convenience.

The Appellant, referred to as "the Claimant", is a company resulting from a corporate restructure and was formerly known as Hudson Contract Services Limited. Until 25 March 2018, the Claimant provided services to clients who engaged self-employed operatives in the construction industry, contracting with those operatives and providing payroll services. The Claimant bore the risk that operatives might be employees.

In a decision dated 26 June 2020 ("the Decision"), the Board rejected the Claimant's grant application for year 2 and partly rejected applications for years 3 and 4. The Claimant sought judicial review of this Decision. After a two-day hearing, Judge Ellenbogen ("the Judge") partly allowed the Claimant's application, remitting one aspect to the Board while dismissing the rest. Both parties appealed with permission from Arnold LJ.

The appeal was heard with representation from counsel for both parties. The court ultimately dismissed the Claimant's appeal and allowed the Board's cross-appeal, upholding the Board's approach except for the issue subject to the cross-appeal.

Legal Issues Presented

1. Whether the Board unlawfully failed to consider relaxing the waiting period in the Policy applicable to new entrants, particularly in relation to the Claimant's registration delay.
2. Whether the Board erred in law by applying three requirements to the Claimant's grant application that were absent from the published Policy for certain years, potentially relying on an unpublished or secret policy.
3. Whether the Claimant had a legitimate expectation based on counsel’s statements at a 2015 hearing that it would be eligible for grant in year 2.
4. Whether the Board acted irrationally by treating the Claimant differently from other similarly situated employers.
5. Whether the Claimant met the three requirements applied by the Board for grant eligibility.
6. Whether the Board breached any statutory duty by not registering the Claimant sooner and the consequences for the waiting period.
7. Whether the Board was entitled to dismiss retrospective grant claims based on the Claimant’s restructuring and cessation of employer status for levy purposes.

Arguments of the Parties

Claimant's Arguments

• The Board acted unlawfully by not waiving the waiting period that prevented the Claimant from claiming grant in year 2, especially given the Board’s delay in registering the Claimant.
• Counsel’s submissions in 2015 gave rise to a legitimate expectation that the Claimant was entitled to grants in year 2.
• The Board wrongly applied the three requirements to the Claimant’s grant applications in years 2 and 3, despite their absence from the published Policy for those years.
• If the three requirements applied, the Claimant contended it met them, relying on contractual provisions that placed training responsibilities and costs on clients and operatives.
• The Board breached its statutory duty by failing to register the Claimant earlier, which should have affected the waiting period’s application.

Board's Arguments

• The Board was entitled to apply the waiting period and had no duty to register the Claimant sooner, especially as the Claimant resisted registration and challenged liability for years.
• The three requirements were consistently applied as a matter of policy, notwithstanding their omission in the published Policy for certain years, and were not secret or unpublished.
• Counsel’s 2015 statements did not create a legitimate expectation of grant entitlement; they only indicated the Claimant’s eligibility to apply.
• The Claimant did not meet the three requirements because it did not identify training needs, organise training, or bear the financial burden of training.
• The Claimant’s restructuring in 2018 meant it ceased to be an employer liable for levy, which was material and justified rejecting retrospective grant claims for later years.
• The Board argued that even if the Claimant succeeded on some grounds, relief should be refused on the basis that the outcome would have been the same given the undisclosed restructuring.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
R (Lumba) v Secretary of State for the Home Department [2011] UKSC 12; [2012] AC 245	Public authorities must follow published policies unless there is good reason to depart; individuals have a right to know the policy applied to their case; legitimate expectation principles.	The court applied Lumba to assess whether the Board applied an unpublished policy unlawfully and whether the Claimant had a legitimate expectation that the Board would depart from its published policy.
Construction Industry Training Board v Beacon Roofing [2011] EWCA Civ 1203; [2012] ICR 672	Clarified the criteria for levy liability based on payments under labour-only agreements and the status of employers in the construction industry.	The court relied on this precedent to confirm the Claimant’s status as an employer liable for levy and to reject arguments that the Board should have registered the Claimant earlier.
R (Hudson Contract Services Limited) v Secretary of State for Business and Skills [2016] EWHC 844 (Admin)	Judicial review of the 2015 Order and interpretation of levy liability and the 'Net CIS' change.	The court dismissed the Claimant’s challenge to the 2015 Order, affirming the change in levy calculation and the Claimant’s liability.
Hudson Contract Services Limited v Construction Industry Training Board [2018] EWHC 45 (Admin); [2019] ICR 1001	Judicial review of levy assessments and business model description.	The court dismissed the Claimant’s appeal against the Employment Tribunal’s dismissal of the levy appeal, confirming the Board’s assessment.
Secretary of State for Education and Science v Tameside Metropolitan Borough Council [1977] AC 1014	Limits on public authority duties to investigate and make inquiries.	The court applied Tameside to reject the argument that the Board had a duty to investigate the Claimant’s restructuring from public sources such as published accounts.

Court's Reasoning and Analysis

The court analysed the statutory framework underpinning the levy and grant scheme, emphasizing the close link between levy liability and grant eligibility but noting that liability alone does not guarantee grant entitlement. The court endorsed the Judge’s findings that the waiting period was a clear, published policy and that the Claimant did not make an express request to waive it, nor did an implied request arise sufficiently to engage the Board’s discretion to depart from policy.

Regarding the application of the three requirements (identifying training needs, organising training, and bearing training costs), the court accepted the Board’s evidence that their omission from the Policy for years 2 and 3 was an administrative oversight but that the Board had consistently applied these requirements during those years. The court held that the Board’s approach was not a secret policy and that the Claimant had a fair opportunity to understand and challenge the criteria.

The court rejected the Claimant’s argument that counsel’s statements in 2015 created a legitimate expectation of grant entitlement, reasoning that those statements were not clear and unambiguous representations of grant entitlement but merely indicated the right to apply.

The court found that the Claimant did not meet the three requirements: it did not monitor or identify training needs, did not organise training, and did not bear financial responsibility for training costs. The contractual arrangements placed responsibilities on clients and operatives, not the Claimant. The court emphasized that the Claimant’s business model was a choice and that it could have adopted a model enabling it to meet the requirements.

The court also considered the Claimant’s restructuring in 2018, which resulted in it ceasing to be an employer liable for levy. The Claimant failed to disclose this material fact in its grant application, which undermined its position. The Board’s decision to reject retrospective claims for the period after restructuring was justified.

Finally, the court rejected the Claimant’s contention that the Board breached a statutory duty to register it earlier, noting the Claimant’s active resistance to registration and litigation challenging liability. The Board had no duty to proactively register the Claimant absent clear evidence of liability.

Holding and Implications

The court dismissed the Claimant's appeal and allowed the Board's cross-appeal.

The direct effect of this decision is that the Claimant’s grant applications for years 2, 3, and 4 were properly rejected by the Board based on the waiting period, the application of the three requirements, and the Claimant’s failure to meet those requirements. The Board was not obliged to waive or depart from its published policies absent an express request and compelling reasons. The Claimant’s restructuring and failure to disclose material facts justified refusing retrospective grant claims for the later years.

No new legal precedent was established; rather, the court reaffirmed the proper application of established principles concerning public authority discretion, legitimate expectation, and the interpretation and application of statutory schemes.