The Committee considered a report that set out the information regarding the process whereby the decision had been taken to seek a Judicial Review of the Secretary of State for Communities and Local Government’s appointment of Pricewaterhouse Coopers LLP (PwC) to undertake a best value inspection of certain council functions. The main points of the discussion may be summarised as follows:

The Committee received information from the Interim Monitoring Officer that:

• The Local Government Act 1999 had introduced a statutory duty on “Best Value Authorities” (like the Council) to make arrangements to secure continuous improvement in the way in which its functions are exercised having regard to a combination of economy, efficiency and effectiveness and to consult about those arrangements. Until 4th April 2014, the responsibility for undertaking and appointing inspectors as to the delivery of that duty was vested in the Audit Commission under the Local Government Act 1999. On that day, the Secretary of State took to himself the powers to appoint Inspectors to undertake Best Value Audits (The Local Audit and Accountability Act 2014 (Commencement No. 1) Order 2014 which brought into effect section 34 and Schedule 10 of the Local Audit and Accountability Act 2014 and amended the 1999 Act.).  Therefore, the Secretary of State’s decision to launch the PwC Audit was unprecedented.  In addition, in the absence of clear reasons, it was difficult to address the proper scope of the inspection. This meant that officers did not know what was a legitimate information request and one that was outside the proper scope of the investigation. Which was an important concern, both having regard to the cost of the inspection and any potential criminal liability which might attach for non-compliance with a request.
• The Metropolitan Police Service had indicated that there was no credible evidence of criminality and therefore any references made by the DCLG regarding a future police investigation should be considered as speculative.  In addition, that consideration of criminality it was noted does not form part of the Best Value Duty.
• Following the announcement of the inspection by Secretary of State in April 2014, officers had sought to engage in a dialogue with the DCLG as to the specific issues that were of concern but to no avail. Thus, the view was reached that the only way to ensure that there was proper scrutiny of the Secretary of State’s decision-making and to limit the Council’s liability for the then unquantified costs of the inspection was to seek permission for a Judicial Review of that decision.  Counsel had been engaged to provide advice on the approach of the Council to the decision.  Jonathan Swift QC had been selected as he had great experience (as Senior Treasury Counsel) of advising Government Ministers and Departments on Judicial Review matters.
• Judicial Review Proceedings had to be commenced within three months of the decision having been challenged.  It was considered that during the Pre-Election Period there should be no decision as to what action should be taken but to allow any new Administration to have the opportunity to review the position before litigation was commenced.  At a Conference with Counsel on 23rd June, having received advice from Counsel that the authority had a 60% chance of success in seeking Judicial Review, the Mayor approved the commencement of the proceedings.  The Committee noted that Counsel’s assessment was maintained throughout the process. 
• On 26th June 2014 the action had been commissioned by the Interim Monitoring Officer and had been undertaken in accordance with the Council’s agreed scheme of delegation.  The Interim Monitoring Officer stated that the reason for doing so was that the deadline for bringing proceedings was too close to allow for either an Individual Mayoral Decision or at a meeting of the Cabinet, either of which would require the development of a report. The renewal of the application was undertaken by the Service Head, Legal Services on 5th September 2014 following consultation with the Mayor and Head of Paid Service and endorsed at Conference with Counsel on 11th September 2014.
• The costs for the Judicial Review had been estimated at £40,000 while the potential liability of the best value inspection was unlimited at £1,000,000.  Although if the process found that the Secretary of State had been misadvised to proceed with the inspection, then that liability would not have occurred.  Therefore, assessing the risk of cost against the reward of eliminating the liability, the action was considered justified.  In the event, permission had not been granted and the Council’s costs had been substantially less than originally estimated.  The Council’s costs were £29,745 for Counsel’s fees and the Council will also pay £8,500 to Treasury Solicitors for the Secretary of State’s costs and £490 on Court fees. The total expenditure on the Judicial Review proceedings was therefore expected to be £38,735.
• It had been provided with a confidential and legally privileged synopsis of Counsel’s legal advice on the Judicial Review of the Secretary of State’s decision on 4 April 2014. 
• Where redactions had been made to the synopsis that was because they were not relevant to the Judicial Review proceedings.  In response the Committee stated that it would wish to see any brief to counsel and written advice of counsel in regard to the decision to seek a Judicial Review.  As a result of a full and wide ranging discussion on the Counsel’s legal advice it was noted that whilst the Committee does have a need to know and therefore a right to see such written advice there were no such documents in this instance.  In addition, since advice was taken on a wider range of matters than just the Secretary of State’s decision at the meeting with Counsel, the advice on those other matters had been excluded from the confidential briefing prepared for the Committee and was still subject to legal privilege.  Notwithstanding these comments the Committee indicated that OSC Members should have the opportunity to review the written notes of the Counsel’s legal advice in its entirety, and the Interim Monitoring Officer agreed to make this available.  Finally, regarding the synopsis and whether it was appropriate to name officers as attendees at a meeting, the minutes of which are privileged, it was noted that this may be possible.  However, it would depend on how it is linked to restricted material and whether it was proposed that this be open or exempt.  It might also depend on the seniority of the officers concerned.
• It is common practice for Counsel’s legal advice to be provided verbally and that the reputational risk to the Council had been considered prior to commencing the Judicial Review of the appointment of PwC to undertake a best value inspection.

After having considered the process leading to the decision to seek Judicial Review, including evidence of the advice received from Counsel on the likelihood of success, the Committee concluded that this was a reasonable course of action to undertake. However, the Committee did have concerns with regard to how the Council had managed its relationship with both the DCLG and PwC and the impact of seeking the Judicial Review on the Councils relationship with the DCLG. It also questioned the use of delegated powers to take the decision to seek Judicial Review, on the basis that its significance marked it out as deserving member input, despite it not meeting the agreed criteria for a Key Decision.

As a result of discussions on this item the Chair Moved and it was:-

RESOLVED that:

The Council be asked to note the Overview and Scrutiny Committee’s findings that the decision to proceed with the Judicial Review was not unreasonable, having had regard to the advice received from Counsel that there was a substantial chance of success.

However it also resolved to express its concerns regarding:

1. how the authority’s relationships with both the Department for Communities and Local Government and PricewaterhouseCoopers were managed;
2. the extent of the consideration given to the impact of seeking Judicial Review; and
3. the use of delegated authority to take a decision of this significance.

Action by:

David Knight – Senior Democratic Services Officer