R (on the application of Unison) v Monitor
| Jurisdiction | England & Wales |
| Year | 2010 |
| Date | 2010 |
| Court | Queen's Bench Division (Administrative Court) |
National Health Service - NHS Foundation Trusts - Private patient income - Claimant challenging decision of statutory regulator relating to cap on “income … derived from private charges” - Whether regulator’s approach too narrow and unlawful - Meaning of “income … derived from” - Whether “income … derived from” involving looking beyond immediate source of income - Whether cap only applying to income deriving from provision of foundation trust services, staff or facilities to separate entity over which trust had control -
In 2000 the Government introduced NHS foundation trusts in order to increase the scope and range of private sector activity with NHS services. Foundation trusts were authorised to provide goods and services for the purposes of the health service in England and, because they had broader freedoms than NHS trusts, a cap was considered necessary to mitigate the risk that they would focus on private patient activity at the expense of NHS patients. The defendant, as the independent regulator of NHS foundation trusts (“the regulator”), was given powers under section 44 of the National Health Service Act 2006F1 to restrict foundation trusts’ abilities to provide goods and services for purposes other than those of the NHS. The regulator was required by section 44(2) to exercise its powers with a view to securing that the income of foundation trusts “derived … from private charges” should not exceed a specified cap, known as the “private patient income cap” (“the PPI cap”), which was set as a proportion of the total income of the foundation trust in a base financial year. For the year 2004/2005, the regulator used a method of applying the PPI cap (“option (1)”), which included within the cap income earned from the provision of private health care, but which excluded income arising through associates and investments and income derived from the provision of goods and services to third parties providing private health care, on the ground that foundation trusts did not have control over them. The claimant union brought judicial review proceedings against the regulator, claiming that it had adopted too narrow a construction of “income … derived from private charges” in section 44(2) of the 2006 Act for the purpose of determining whether the PPI cap had been exceeded. In November 2008, following consultation, the regulator adopted a broader method (“option (2)”), under which income from a wider range of joint arrangements was also included. The regulator rejected the broadest method (“option (3)”), which additionally included investment income from bodies over which the foundation trust had a limited or short-term interest and charges for the provision of facilities, goods or services to providers of private health care. The union renewed its claim, which had been stayed pending the consultation, claiming that option (2) was unlawfully narrow in that it did not look beyond the source of the income, with the result that foundation trusts had breached the statutory limits on private patient income, and that option (3) should be adopted as the only lawful method.
On the claim—
Held, allowing the claim, (1) that it was for the court to determine the correct legal meaning of “income … derived from private charges” in section 44(2) of the National Health Service Act 2006; that the phrase had to be construed according to the central purpose of the PPI cap, which was to ensure that the principal activity of NHS foundation trusts remained their core function of providing health care to NHS patients; that section 44 did not require that to come within the cap the charges had to be imposed, or the services provided, by a foundation trust itself, or even an associated entity, since what mattered was that income should be received which was derived from such charges; that the concept of “income derived from” a particular source, such as private charges, required an inquiry into the real, rather than the immediate, source of the income which might entail going beyond the fund or the place from which the income flowed; that there was no basis in the statutory language of section 44 for option (2) to limit, as it did, the application of the statutory cap so that it only applied to income deriving from the provision of foundation trust services, staff or facilities to a separate entity over which the foundation trust had control; and that the concept of “income … derived from” meant that any income from an intermediate structure, interposed to perform private work in that way, was caught by the cap and income could be derived from private charges even though not arising from the provision of goods and services directly to patients (post, paras 74, 77–81, 86).
(2) That the regulator had a duty to secure the objective identified in section 44(2) of the 2006 Act and the cap operated as a legislative constraint on the regulator’s otherwise broad discretion as to the manner in which it exercised its powers with a view to ensuring that the cap was not exceeded; that provided the regulator adopted the correct legal approach to the concept of “income … derived from private charges” it was entitled to adopt sensible approximations and assumptions where precise measures of private patient income were difficult to obtain; that, however, in adopting option (2) the regulator had not considered fully the statutory concept of “income … derived from private charges”, nor whether option (2) fitted with that concept; that neither did the regulator’s adoption of option (2) accord with the need to address the reality of the matter or the statutory purpose; and that, accordingly, the regulator’s decision to adopt option (2) as the cap on private patient income was wrong in law (post, paras 77, 82, 84, 85, 87, 95, 97, 98).
Per curiam. The interpretation which statutory agencies place on legislation they administer is challengeable not only on irrationality grounds. While respect must be accorded to agencies entrusted by Parliament with the task of administering legislation, it would not be conformable with the rule of law for them to be given free rein, subject only to an irrationality challenge, to interpret the legislation in whatever manner they wished. However, if statutory agencies adopt the correct legal interpretation the court will not substitute its own judgment for how that approach fits in its precise application to particular facts (post, para 60).
The following cases are referred to in the judgment:
Commissioner’s Decision, Supplementary Benefit R(SB) 21/86
Comr of Inland Revenue v Farmers’ Trading Co Ltd [
Comr of Inland Revenue v NV Phillips’ Gloeilampenfabrieken [
Cozens v Brutus [
Kemp v Minister of National Revenue [
Moyna v Secretary of State for Work and Pensions
Pennine Raceway Ltd v Kirklees Metropolitan Borough Council (No 2) [
Pepper v Hart [
R v Monopolies and Mergers Commission, Ex p South Yorkshire Transport Ltd [
R (T-Mobile (UK) Ltd) v Competition Commission
Zim Properties Ltd v Procter [
No additional cases were cited in argument.
The following additional case, although not cited, was referred to in the skeleton arguments:
Egmont Co-operative Dairies Ltd v Comr of Inland Revenue [
CLAIM for judicial review
By a claim dated 1 February 2008 the claimant, Unison, a public sector union (“the union”), sought judicial review of the definition by the defendant, Monitor, the independent regulator of NHS foundation trusts (“the regulator”), of “income … derived from private charges” in section 44(2) of the National Health Service Act 2006 for the purposes of determining whether an NHS foundation trust’s income exceeded the private patient income (“PPI”) cap. In May 2008 the regulator obtained a stay of the claim in order for it to carry out a consultation process. On 26 November 2008 the regulator modified its definition of “income … derived from private charges” and applied a broader test to the PPI cap. The stay was lifted in May 2009. The union continued its claim for judicial review on the ground that the regulator’s modified definition was still too narrow and contrary to the test as embodied in section 44 of the 2006 Act. The Secretary of State for Health and the Foundation Trust Network of the NHS Confederation were served with the proceedings as first and second interested parties, respectively.
The facts are stated in the judgment.
Peter Oldham and Stephen Robins (instructed by
Michael Fordham QC and David Pievsky (instructed by
Javan Herberg and Mark Vinall (instructed by
Robert Jay QC (instructed by
The court took time for consideration.
9 December 2009. CRANSTON J handed down the following judgment.
Introduction1 The legal question in this case is the proper interpretation of the phrase “income … derived from private charges” in section 44 of the National Health Service Act 2006. The context in which these proceedings are brought, however, is a fiercely contested dispute about the future direction of the National Health Service (“the NHS”). In broad outline the issue is the extent to which NHS foundation trusts are able to provide goods and services for purposes other than those of the NHS. Since...
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