[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Isaac & Ors v Secretary of State for the Environment, Food and Rural Affairs & Anor [2002] EWHC 1983 (Admin) (11 September 2002) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2002/1983.html Cite as: [2002] EWHC 1983 (Admin)

[New search] [Printable RTF version] [Help]

IN THE HIGH COURT OF JUSTICE
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		11th September 2002

Mr Justice Forbes :

1. Introduction. In these proceedings, the Claimants challenge by way of Judicial Review the decision of the Defendant (hereafter called “the Secretary of State”), made on 15^th November 2001, whereby he confirmed the decision of his department, the Department for the Environment, Food and Rural Affairs (“DEFRA”), to give grant aid to the Interested Party, the Environment Agency (hereafter “the Agency”), in respect of the Bideford Tidal Defence Scheme (“the Scheme”) pursuant to the provisions of section 147(1)(b) of the Water Resources Act 1991 (“the 1991 Act”).
2. The Factual Background. The Claimants are all members of the Torridge Group, an organisation formed in 1990 by the second claimant, Mr Timothy Langdon, after service as a Torridge District Councillor for the historic North Devon market town of Bideford. Torridge District Council (“the Council”) is and was at all material times the relevant Planning Authority for the area that includes Bideford. I am told that the aims of the Torridge Group are to “improve accountability in local government and economic prosperity within the Torridge District”: see paragraph 6 of the witness statement dated 19^th December 2001, prepared and filed on behalf of the claimants by Mr John Dunkley of Earthrights, Solicitors (“Mr Dunkley’s witness statement”).
3. Bideford is situated at the first natural narrowing of the River Torridge and suffers from occasional tidal flooding. A Grade 1 listed medieval long bridge spans the river and links the east and west parts of the town. The historic town quay (“Bideford Quay”) is located at the west end of the long bridge. Situated within Bideford Quay is a rich concentration of listed buildings lying within the Bideford town centre conservation area. As members of the Torridge Group (and, in the case of the first claimant, Mr William Isaac, as a member of North Devon Friends of the Earth), the claimants have been actively involved in campaigning for a flood defence system for Bideford Quay which they claim will be less environmentally damaging than the Scheme: see paragraph 8 of Mr Dunkley’s witness statement.
4. In August 1989, South West Water (the predecessor of the National River Authority (“the NRA”)) completed and published an engineer’s report (“the 1989 report”) which identified the need for alleviating Bideford from the effects of tidal flooding. The 1989 report contained proposals for an overall scheme (“the overall scheme”) for the entire Bideford waterfront and envisaged the work being carried out in four phases over a number of years. One specific section of the overall scheme consisted of proposals for Bideford Quay, namely Part 4C of Phase 4 (“Part 4C”) and is the Scheme with which these proceedings are concerned.
5. I am told that, following publication of the 1989 report, extensive consultation was carried out with organisations such as (inter alia) the Nature Conservancy Council (now English Nature), English Heritage, the Countryside Commission, the Devon Wildlife Trust, Devon County Council and Torridge District Council, that no objections to the overall scheme were raised at that stage and that none of the consultees then considered that a formal environmental statement was necessary (i.e. an environmental impact assessment carried out pursuant to the Town and Country Planning (Assessment of Environmental effects) Regulations 1988 (“the 1988 Regulations)): see paragraph 5 of the witness statement dated 18^th March 2002, prepared on behalf of the Agency by the Project Executive for the Bideford Tidal Defence Scheme, Mr Julian Kelvin James (“Mr James’ witness statement”).
6. In 1992, the NRA submitted to the Council an application for planning permission to carry out the works specified in Part 4C. The application was called in by the Secretary of State for his decision, pursuant to section 77 of the Town and Country Planning Act 1990. In September 1993 a public local inquiry (“the inquiry”) was held before a duly appointed inspector in order that all relevant aspects of the proposed development could be considered. In particular, the Secretary of State wished to be informed about the following (see paragraph 7 of Mr James’ witness statement):

(i) the effect of the proposal on the setting, character and appearance of Bideford long bridge, the listed buildings on Bideford Quay and the Bideford Conservation Area;

(ii) the effect of the proposal on the visual amenities of the surrounding area;

(iii) the effect of the proposal on the natural environment, including the Taw/Torridge Site of Special Scientific Interest and Special Protection Area (respectively “the SSSI” and “the SPA”), and the trees on the quayside subject to a Tree Preservation Order;

(iv) the need for the proposal in its current form and the relative merit of alternative flood protection methods;

(v) the effects of the proposal on Bideford Harbour;

(vi) the form of any landscaping that would be necessary if the scheme were to proceed; and

(vii) whether any permission granted should be subject to conditions and, if so, the form they should take.

7. At the inquiry, the Council put forward a case broadly in support of NRA’s application. It accepted that flood prevention works to the quay were essential, that the works were part of an overall strategy to protect the town as a whole and that, overall, the application scheme would meet the conservation policies of the development plan (see paragraphs 54 and 59 of the inspector’s report). The Council pointed out that it was English Nature’s opinion that the SSSI and the SPA would not be significantly affected and submitted that this view should be accepted as correct (see paragraph 60 of the report). The inspector summarised the Council’s conclusion as follows (see paragraph 65 of his report):

“65. It is accepted that the NRA proposals would have some effect on the character and appearance of the area, but is not agreed that these interests would be damaged. Any assessment of the merits of the scheme should take full account of the benefits and opportunities which would be achieved. The proposal should be seen as a logical further step in the historic evolvement of the quay area which combines flood defence with the retention of the working quay which is central to the vitality and character of the town.”

8. The Torridge Group appeared at the inquiry and its detailed objection was put forward by Mr Langdon (see paragraphs 96 to 101 of the inspector’s report). Mr Isaac put forward a separate objection and gave evidence in his private capacity (see paragraphs 108 to 114 of the report). Furthermore, by the time of the inquiry English Heritage had also decided to object to the proposed development and had retained engineering consultants, Sir William Halcrow and Partners Ltd (“Halcrow”), to give evidence on its behalf, the essential thrust of its objection being summarised by the inspector as follows (see paragraph 74 of the report):

“74. The basis for the E(nglish) H(eritage) objection to the application proposal is that the combination of an extension of the quay into the river, coupled with an increase in height, would have permanent and damaging effects on the conservation area, the bridge and other listed buildings. Moreover, the justification of the favoured option and the dismissal of alternative solutions was not presented in a credible or reasoned manner.”

9. The inspector completed his report in December 1993 and recommended that planning permission be granted subject to conditions, the main one being that the proposals should be modified to provide lower level landing stages for the MV Oldenburg and fishing trawlers (see paragraphs 149 to 152 of his report). However, the inspector did accept that there were a number of adverse aspects to the proposed development, as can be seen from paragraph 148 of his report, in which he summarised his conclusions as follows:

“Summary of Conclusions

148. The proposed development would harm the setting of the ancient Long Bridge and the listed buildings on The Quay, would restrict the views of the river from the town and would detract from the character and appearance of the conservation area. However, these objections are offset by the need to provide flood defences for the centre of Bideford and by other benefits which would be gained. The Option C/C* alternative would be cheaper and less objectionable in terms of environmental impact, but would not provide as reliable a flood defence system, and therefore would not be acceptable. …”

10. The Secretary of State duly gave his decision by letter dated the 29^th June 1994 (“the 1994 decision letter”). He identified the principal issues to be considered in determining the application as follows (see paragraph 10 of the letter):

“a. the impact of the proposed scheme on the setting, character and appearance of the ancient Long Bridge, the listed buildings on Bideford Quay, the surrounding Conservation Area and the effect of the proposed development on the wider environment, in the light of current national and local planning policies;

b. the need for and benefits arising from the scheme and its effect on port operations in Bideford; and

c. in the light of any harm identified, the relative merits of alternative flood prevention measures.”

11. In the event, despite expressing agreement with the inspector’s appraisal of each of the principal issues (see paragraph 11 of the 1994 decision letter), the Secretary of State refused planning permission for the proposed development because of his concerns with regard to the proposed planning conditions. In my view, the content and effect of the Secretary of State’s 1994 decision letter is accurately and fairly summarised in paragraphs 11 and 12 of Mr James’ witness statement, as follows:

“11. The Secretary of State agreed with the Inspector’s appraisal of the main issues (see paragraph 11 of the Secretary of State’s letter to the NRA dated 29 June 1994) … He stated:

(a) “The Secretary of State agrees that, because of its scale and bulk, the proposed scheme would interfere with important views of Bideford Bridge and would weaken the visual links which bind the town and its quay to the river estuary. In his view, it would thereby significantly detract from the character and appearance of the conservation area, contrary to the aims of national policies and local development plan policies and emerging plans which seek to preserve and enhance the historic fabric of the area.” (See paragraph 12 of the letter.)

(b) “…the Secretary of State accepts that there is an urgent need to protect this historically important town centre from further flooding,” (See paragraph 13 of the letter.)

(c) “Having accepted that the NRA proposals represent the only viable option before him, the Secretary of State agrees that the urgent need to provide flood defences for the town and the other benefits that would be gained outweigh the harm identified.” (See paragraph 15 of the letter.)

12. In spite of these conclusions, the Secretary of State refused to grant planning permission. This was not because of any environmental concerns, but rather because he was not satisfied that the conditions identified by the inspector as being necessary for the grant of planning permission (in particular the need to improve loading arrangements for the MV Oldenburg and the fishing trawlers) fell within the scope of the original planning application made by the NRA (see paragraphs 16-18 of the letter).”

12. As the result of the Secretary of State’s decision, the NRA engaged Halcrow to appraise and design a modified quay scheme that would provide lower level landing stages for the MV Oldenburg and the fishing trawlers, as had been recommended by the inspector and in respect of which he had suggested the imposition of an appropriately worded planning condition, a method of dealing with the matter that was rejected by the Secretary of State (correctly, in my view) and which led to his refusal to grant planning permission for the proposed development (see above and paragraphs 16 to 19 of the Secretary of State’s 1994 decision letter).
13. As it seems to me, the way the matter then progressed is succinctly and clearly set out in the following passage from Mr James’ witness statement:

“14. As part of the appraisal process, consultation took place on a range of design options. Details of six options were sent to:

Torridge District Council

Devon County Council

English Heritage

Bideford Trawlermen’s Association

Landmark Trust (Operators of the Oldenburg)

Bideford Town Council

Torridge Group

NRA internal consultees

English Heritage requested that a formal environmental impact assessment be carried out.

15. The legislative requirements relating to environmental impact assessment are set down in the 1988 regulations … In accordance with regulation 5 … the NRA sought an opinion from the relevant planning authority, in this case, Torridge District Council, on whether a formal environmental statement was required. … The Council replied that a formal environmental statement was not required (see the letter dated 10^th October 1995).

16. Although there was therefore no specific legal requirement to carry out an environmental impact assessment, the Agency, in accordance with good environmental working practice and in order to assist in complying with its environmental duties under section 16 of the Water Resources Act 1991 … voluntarily commissioned an environmental assessment, including a Townscape Appraisal by the Cooper Partnership, landscape and environmental consultants. The findings of the environmental assessment were documented in an Environmental Appraisal Report of June 1997 … and, although there was no legal requirement to advertise its existence (as it was not produced under the 1988 Regulations), the report was widely circulated and submitted with the planning application.

17. The Environmental Appraisal Report (at page 2) … judged the Part 4C works on Bideford Quay to be “largely of only local importance; and unlikely to give rise to particularly complex or adverse effects”. This confirmed the view taken by Torridge District Council that the Part 4C works did not require a formal environmental statement pursuant to the 1988 Regulations because coast protection work falls within Schedule 2 of the 1988 Regulations (see item 10(1)) and therefore does not require a formal environmental statement unless it “would be likely to have significant effects on the environment by virtue of factors such as its nature, size or location” (see regulation 4 and the definition of “Schedule 2 application” in regulation 2(1)).”

14. The Agency itself was created by the Environment Act 1995 (“the 1995 Act”). The 1995 Act also transferred to the Agency the flood defence functions of its predecessor, the NRA. So it was that, in early July 1997, it was the Agency that submitted a second application to the Council for permission to build the Part 4C flood defence works to Bideford Quay (i.e. the Scheme).
15. On 2^nd September 1997, the Council granted planning permission for the Part 4C works and did so without any formal environmental impact assessment having been prepared and submitted with the application. However, although it has always been the Agency’s view (and that of the NRA) that no environmental impact assessment was actually required for the reasons set out in Mr James’ witness statement, nevertheless, as already indicated, before the application was submitted to the Council, appropriate steps had been taken to obtain a voluntary environmental assessment of the Scheme which showed that view to be correct (see paragraphs 15 to 17 of Mr James’ witness statement, quoted above).
16. It is common ground that the requirements of Council Directive 85/337/EEC (“the Directive”), on the assessment of certain private and public projects on the environment, were incorporated into the domestic law of England and Wales by the 1988 Regulations. It is also worth noting at this stage that it is accepted by the claimants that it is the planning authority that has the duty and responsibility to decide whether a formal environmental impact assessment is required pursuant to the 1988 Regulations and that, if the planning authority acts correctly in that regard, then the project in question will have been subjected to the standards of environmental impact assessment that are required by the Directive: see paragraph 7(1) of the written skeleton argument prepared by Mr Fordham on behalf of the claimants.
17. Mr Fordham also made it clear (i) that the claimants do not contend there has been any defective implementation of the Directive into the domestic law of England and Wales and (ii) that the claimants accept that it is now too late to challenge the lawfulness either of the Council’s original decision to grant planning consent for the Scheme or of its subsequent refusal to revoke that consent: see also paragraph 7(1) of Mr Fordham’s skeleton argument.
18. Following the grant of planning consent the Agency applied to the Ministry of Agriculture, Fisheries and Food (“MAFF”, the predecessor of DEFRA) for funding for the project. The statutory basis for the payment of grants towards the capital costs of flood defence works undertaken by the Agency is section 147 of the 1991 Act, as amended by the 1995 Act (as to the material words of the relevant statutory provisions, see below). These statutory provisions are now administered by DEFRA as the successor to MAFF. Section 147(2)(b) of the 1991 Act provides that grants shall be subject to such conditions as may, with the approval of the Treasury, be prescribed by regulations made by the relevant Minister (i.e. the Secretary of State). Section 147(3)(a) of the 1991 Act provides that no grant shall be made unless the plans and sections for a scheme have been approved by the relevant Minister.
19. However, by its letter dated 9^th July 1998, MAFF refused the Agency’s application for funding, mainly because of what was said to be:

“… the inadequate appraisal of alternative options and the absence of contributions towards the cost of elements of the preferred option that are not regarded as essential for flood defence purposes.”

In paragraph 2 of the same letter MAFF also emphasised that:

“… it is our responsibility to ensure that the best value for money is obtained for taxpayers’ money by identifying the most economically efficient option for providing flood defences that also meets (MAFF’s) technical and environmental criteria. We are not satisfied that that objective has been achieved in this case.”

20. Between July 1999 and July 2001, there was correspondence between the claimants, MAFF, the Agency and Van den Noort with regard to the Dutch Self Closing Waterdam System (“the DSCW”), a flood defence option that is apparently favoured by the claimants. On 18^th July 2001, Mr Langdon wrote on behalf of the Torridge Group to the relevant Minister, making a number of objections to the Agency’s proposals and stating that it would be inappropriate to proceed with the Scheme. I accept as accurate the summary of that letter which appears in paragraph 3(6) of Mr Fordham’s written skeleton, as follows:

“(Mr Langdon) referred, particularly, to the inadequate appraisal of alternative options (which had led to the initial rejection of funding) and specifically mentioned the DSCW which had not properly been considered by the Environment Agency. In that letter Mr Langdon referred also to the inadequacy of the benefit/cost analysis conducted by the Environment Agency and attached a report from Colin Green of the Flood Hazard Research Centre at the University of Middlesex …”

21. On 4^th April 2001, English Nature wrote a short letter to the Agency and confirmed that it had “no objection to the proposals included within the “Project Appraisal Report” for the project” (i.e. the Scheme).
22. On 13^th August 2001, the Parliamentary Under Secretary of State for DEFRA (by that date the successor to MAFF), Mr Elliott Morley M.P. (“the Minister”), wrote a letter to Mr Langdon (the Chairman of the Torridge Group), the material terms of which were as follows:

“I am aware of the concerns of local residents and DEFRA has subjected the (Agency’s) submission to a thorough evaluation. It has also evaluated the information provided by your Group which questions aspects of the economics of the scheme and puts forward an innovative tidal defence system. You also drew attention to the South West of England Regional Development Agency’s (SWRDA) proposed Regeneration Study for Bideford. I understand that SWRDA has recently confirmed its continuing support for the (Agency’s) proposals as the study will not re-open the question of the future usage of the Town Quay.

The (Agency’s) submission satisfies essential technical, economic and environmental criteria and it has achieved a priority score set for this financial year; it has the support of Torridge District Council.”

On the original of the Minister’s letter there was the following further handwritten comment:

“I have looked carefully at your submission, but I think we need to make progress.”

23. By letter dated 15^th August 2001, DEFRA informed the Agency that its application for grant aid towards the cost of the Scheme had been approved in the sum of £3,691,000 “subject to the terms and conditions set out in the Department’s grant memorandum as well as the (Agency’s) Financial Memorandum”.
24. On 17^th August 2001, as Chairman of the Torridge Group, Mr Langdon wrote to both the Agency and the Minister and called on the Minister to reconsider the decision to grant funding for the Scheme. In each of the letters, Mr Langdon also stated that if the decision was not reversed “this group (or certain of its members) will commence judicial review proceedings in respect of (the Minister’s) decision on the basis that it is Wednesbury unreasonable and/or irrational and therefore unlawful.”
25. On 28^th August 2001, the Chairman of North Devon Friends of the Earth (“NDFOE”), Mr P. Scott, wrote to DEFRA and the Agency, suggesting that there had been a failure to comply with the 1988 Regulations because no environmental assessment had been carried out. On 9^th October 2001, the Minister wrote to Mr Scott in the following terms:

“… I am now in a position to provide you with a substantive reply to your letters of 17 and 28 August and 2 September … about part 4C of the EA’s planned tidal defence scheme at Bideford …

…

Finally you asked about the criteria for DEFRA approval for grant aid and about other statutory approvals. The conditions for grant are set out in a memorandum relating to flood defence grants under the Water Resources Act 1991 and the Land Drainage Act 1991 (both as amended). In deciding whether to approve works for grant, DEFRA requires to be satisfied that the proposed works are technically, environmentally and economically sound and sustainable. We regard the scheme as meeting our normal environmental criterion on the basis that planning approval was obtained. However, grant aid approval does not relieve an operating authority of any obligation it may have statutory or otherwise. No doubt the EA can let you have details of other approvals obtained for this scheme. I am content that this scheme has been considered appropriately.”

26. From August 2001 onwards there was a substantial amount of correspondence between the claimants, Mr Scott, DEFRA and the Agency which culminated in a meeting with the Minister’s advisers on 31^st October 2001, when the claimants’ concerns with regard to the Agency’s benefit/cost analysis were discussed. On 9^th November 2001, DEFRA’s Chief Engineer, Mr Reg Purnell, sent an e-mail to Mr James Park, the Head of DEFRA’s Flood Management Division, in which he summarised and commented upon what had taken place at the meeting, as follows:

“In July and August the Torridge Group put forward a critique by Colin Green from Flood Hazard Research Centre of the Environment Agency’s Project Appraisal Report for the Bideford Scheme. Mr Morley, in his reply said that we would deal directly with Colin Green in considering his review. You subsequently chaired a meeting on the 31 October attended by the Agency, Torridge Group, Colin Green and DEFRA staff with the objective of the meeting of examining Colin’s evidence in order to make recommendations to Ministers whether he should confirm (or otherwise) his decision to grant aid the Bideford scheme.

In presenting his evidence Colin made the valid point that the level of damage per house at risk of flooding was greater than one might normally expect. He said that this appeared to be in large part due to the frequent nature of the flooding and he went on to question whether such a frequency of flooding was sustainable; whether the population had recognised the risk of flooding by taking remedial action such as stop-boards and what evidence the Agency had of such frequent flooding. In this respect he pointed out that the Torridge Group had undertaken some ground-truthing which did not support the Agency’s contention of flood risk. The Torridge Group had so far approached twelve houses, the occupiers of which had stated they had suffered little or no damage during current periods of occupancy.

Dealing first with the frequency of flooding I questioned Colin on his acceptance or otherwise of the Agency’s tide-level frequency curves for Bideford. I knew from his report he had some difficulty in accepting these. After some discussion he seemed to accept the validity of the Agency’s assessment of tidal data which led to the broad assumption that flooding on the quay could be expected at a frequency of about 1 in 1 year. This frequency of flooding seemed to be supported by the Agency’s record of past events and by the Torridge Group except they contend this frequent flooding does little damage. The discussion suggested that the major difficulty is quantification of the flood damage from these frequent low level events. The Agency had based their calculations on generalised data from Middlesex University and their assessment of house floor levels in the flood risk area. Colin Green and the Torridge Group obviously had difficulty in accepting this, suggesting that there was no evidence of the level of damage suggested by the Agency. They questioned whether the Agency had accurate information about floor levels in the at-risk area.

There was also discussion about the level of damage that would be incurred by water levels just below floor-level and utility of installing flood-boards in reducing damage. The Agency cited a flood in 1977 where they had taken careful note of the properties that were flooded but, alas, were unable to provide any verifiable data on this event. Since then they have confirmed that floor levels of all houses in the at-risk area have been levelled in, i.e. the data is accurate (letter dated 5 November).

To further support their case Colin Green suggested that with such frequent flooding “ground truthing” was an obvious way forward. He said the Torridge Group had interviewed a number of residents and found little evidence of flood damage. A survey that the Agency letter of 5 November suggests is flawed.

After some discussion it was clear that we would not easily arrive at a realistic assessment of the damages caused by the more frequent flood events. I would tend to concur with the Agency who have provided evidence to support their claims and refute the Torridge Group data.

The point was then made that if we accepted the Agency’s tidal curve analysis then quite clearly Bideford was at risk of serious flooding and in such events the generalised data used by the Agency was less likely to be wrong. A point that was half accepted by Colin Green. It was suggested that if we discarded the impacts of the more frequent events or just merely moved up the threshold of flooding, then the Bideford scheme remained worthwhile with a cost:benefit ratio well in excess of 1. Then the only question then was what scheme to go for?

Colin Green’s counter to this was that if the data for the more frequent flooding was so blatantly wrong how could we possibly accept the rest of the Agency argument?

I have no doubt that Bideford is at risk of flooding, indeed it has suffered mainly low-level flooding with monotonous regularity over a number of years. Further at some stage there will be a significant flood which will cause extensive damage and misery. What is unclear is the threshold of flooding; evidence from the two parties seem diametrically opposed. If we discard the contested data and just take into account the less frequent and most damaging flood events (the frequency and impact of which appears to be accepted) then the economics for a scheme at Bideford remain beyond question. All that then remains is to decide the most appropriate scheme.

The Torridge Group oppose the Agency’s scheme and favour some kind of gated option. They argue that the Agency scheme will make it difficult to regenerate the Bideford frontage and object on aesthetic grounds. From an economic point of view, the Agency’s option is the most economically efficient since gated structures carry a risk that they will not operate and hence flooding would occur. In addition the preferred option is a hybrid scheme to which the local authority are contributing in recognition of the non flood defence benefits. As far as the aesthetics of the scheme are concerned and the ability to regenerate that is a matter for others and clearly the local authority who are responsible for these matters have given the scheme planning permission and want it to go ahead.

In conclusion, I see no reason to change my original recommendation to approve the scheme.”

27. On 15^th November 2001, the Minister wrote to the first claimant, Mr Isaac, to inform him (and the Torridge Group) that he had decided to confirm DEFRA’s decision to grant the Agency funding for the Scheme. So far as material, the Minister’s letter was in the following terms:

“As requested by Mr T. Langdon in his letter of 21 October, I am writing to you, further to my Private Secretary’s acknowledgment to Mr Langdon of 12 September, about the Torridge Group’s concerns about the Environment Agency (EA)’s planned tidal defence scheme for Bideford Town Quay. This reply also takes account of the further submissions made by the Group since that acknowledgment, including those provided at the meeting which officials held on 31 October with Colin Green about his reports on The EA’s economic appraisal of this scheme.

As you will know from your attendance at that meeting, Colin Green’s main concern about the economic appraisal was that the level of damage per house at risk of flooding was higher that he would have expected. He felt that this put into question data on three aspects - frequency of flooding, tide level frequency curves and floor levels of the properties at risk. Officials have considered the concerns on all these aspects alongside information provided by the EA, and remain of the view that, even allowing for a different interpretation of some of the data, the scheme remains economically worthwhile. They also consider that the EA has appraised an appropriate range of options. This view needs to be considered in the context that Bideford is at risk of serious flooding.

It also remains the case that the South West of England Regional Development Agency continues to support the EA’s plans for the Town Quay.

I am therefore confirming DEFRA’s decision to grant aid these works.

In Mr Langdon’s letter of 29 October he asked if I would take steps to ensure that no irrevocable action would be taken which would deprive your Group of an effective opportunity to seek judicial review if my decision was as outlined above. DEFRA’s approval for grant aid on this scheme was given in August and the Agency could have started work at any time after that. However officials at DEFRA suggested to the Agency that they might delay until we had had the opportunity to consider your concerns. Having reached a view on your concerns, it would be inappropriate for DEFRA to seek to delay the scheme further.”

28. The current status of the Bideford Quay works is summarised in paragraphs 23 to 25 of Mr James’ witness statement. The contract for the construction of the works was awarded to Edmund Nuttall on 1 August 2001. The terms of the contract included provision for its cancellation in the event that DEFRA approval for grant aid was not obtained. The setting up of site offices commenced on 12^th October 2001, with site clearance commencing on 12^th November 2001. Construction of the permanent works started on 26^th November 2001. Expenditure on the project to the end of February 2002 was £1,075,000 with (at the date of Mr James’ witness statement) a further £3,125,000 required to complete the works. The work is due to be completed by the end of 2002. I am told that if the contract were to be cancelled, the Agency would be liable to the contractor for a claim calculated in accordance with the terms of the contract (see paragraph 24 of Mr James’ witness statement). As at the date of Mr James’ witness statement, the costs of restoring Bideford Quay to its original condition was estimated at £1,000,000, but increasing in amount as more work is carried out.
29. These proceedings were issued on 20^th December 2001. Permission to apply for Judicial Review was granted by Collins J. on 11^th February 2001. There was no application by the claimants for any form of interlocutory injunction to prevent the construction works from being carried out pending the hearing of the substantive application.
30. The Legislative Framework. So far as material, section 147 of the 1991 Act, as amended by the 1995 Act, provides as follows:

“147. – (1) Subject to subsection (2) below, the relevant Minister may make grants towards expenditure incurred by the (Agency) in –

(a) …

(b) the construction of new drainage works.

(2) Grants under subsection (1) above shall be -

(a) of such amounts as the Treasury may from time to time sanction; and

(b) subject to such conditions as may, with the approval of the Treasury, be prescribed by regulations made by the relevant Minister.

(3) No grant shall be made under subsection (1) above towards expenditure incurred in connection with any improvement or construction unless -

(a) the plans and sections for it have been approved by the relevant Minister; and

(b) the relevant Minister is satisfied that the work is being or has been properly carried out. …”

31. The relevant regulations are The Land Drainage (Grants) Regulations 1967, SSSI 1967 No 212. These regulations have been supplemented with a more detailed grant memorandum agreed by MAFF with the Treasury (“the Grant Memorandum”). The Grant Memorandum (revised June 1997) explains the procedure to be adopted in applying for flood defence grants under the 1991 Act and the Land Drainage Act 1991 and sets out the Department’s terms and conditions: see paragraph 6 of the witness statement of Mr James Park, the Head of DEFRA’s Flood Management Division, dated 19^th March 2002 (“Mr Park’s witness statement”). DEFRA has also published a series of notes that are said to be designed to provide guidance to operating authorities on all aspects of the project appraisal of flood and coastal defence schemes (“the Guidance Notes”). Although it is said that the Guidance Notes do not establish formal criteria that must be satisfied for grant aid purposes, compliance with the guidance is likely to produce schemes that are acceptable for grant aid: see paragraph 9 of Mr Park’s witness statement. It will be necessary to refer to some passages in the Grant Memorandum and the Guidance Notes when dealing with the issues later in this judgment.
32. The Approach taken by DEFRA to applications for Grant Aid and to the Agency’s application in particular. In order to deal with the issues, it is necessary to refer both to DEFRA’s general approach to applications for grant aid of the type with which these proceedings are concerned and to the way in which DEFRA actually dealt with the Agency’s application in this particular case in rather more detail than appears above. These matters are helpfully, clearly and succinctly set out in paragraphs 10 to 18 and paragraphs 19 to 35 respectively of Mr Park’s witness statement. Given the importance of each of these matters to the issues that I have to decide, I propose to quote those paragraphs in full (although this does involve some repetition of the facts), as follows:

“10. The criteria for grant aiding flood defence schemes are set out in the Grant Memorandum and separate guidance on priority score arrangements is set out in Notes for Guidance. … DEFRA must be satisfied that each scheme is eligible within the terms of the Acts, is technically sound, economically worthwhile and environmentally acceptable, and achieves an appropriate priority score (derived from an assessment of Departmental priorities, urgency and benefit: cost ratio). All these aspects of any application for grant are considered and assessed by engineers in the River and Coastal Engineering Group (part of DEFRA’s Flood Management Division). They will consider the documents and information presented, seek further information from the applicant if necessary and undertake their own analysis if required in order to satisfy themselves that the criteria have been met. They will then make a recommendation with respect to grant aid. For schemes above set thresholds, or of a novel or contentious nature, the views of DEFRA’s Economics Directorate are obtained on the economic aspect. For schemes involving internationally important conservation sites (to ensure that DEFRA fulfils its role as a competent authority under the Habitats Regulations) or where unresolved objections under the Environmental Impact Assessment (Land Drainage Improvement Works) Regulations 1999 are submitted for Ministerial determination, the views of Flood Management Division’s Environmental Adviser are obtained on the environmental aspect.

11. In order to ensure technical soundness the engineers will use their experience and technical skills (all are required to be chartered engineers) to assess the merits and viability of the various options taken forward to evaluation. They will address aspects relating to design, construction, and cost, in order to satisfy themselves that the options chosen for consideration are soundly based and technically acceptable.

12. Investment appraisal is as much part of the public sector decision-making process as it is in the private sector and is undertaken to ensure that value is obtained for taxpayers money, helping to decide whether it is worthwhile to undertake a particular project and identifying and comparing scheme options. The appraisal system helps stimulate the development of alternative solutions to a particular problem by clarifying the consequences of all options considered. The investment criteria demanded of flood and coastal defence projects is that the benefits of the scheme should outweigh the costs and impacts of implementation and that the most economically efficient option commensurate with achieving an appropriate level of protection is identified.

13. When undertaking an investment appraisal the proposing operating authority is expected to consider the economic impacts of flooding. To do this the authority would need information on frequency and depth of flooding. In the case of a coastal town like Bideford this would mean collecting data on tide levels and preparing statistical predictions. It may be possible to test these predictions against known events but, unless very long records are available, such testing is limited since generally we are dealing with extreme events which, in the case of Bideford, have yet to occur.

14. Using this derived statistical information on flood levels the operating authority would then analyse the impacts of flooding using generalised data provided by the Flood Hazard Research Centre (FHRC) of Middlesex University on behalf of DEFRA. This data relates the expected economic damage to various depths of flooding for a range of properties. Again it is sometimes possible to ground truth such data but care is necessary since the data normally available is based on financial losses i.e. insurance claims rather than losses of national resources (economic impact). By combining the data on flooding level versus return period (risk of flooding) and the level of flooding versus expected damage a graph can be derived which will show the relationship between risk of flooding versus economic damage.

15. It is also necessary for the operating authority to consider all other impacts, including social and environmental impacts. It is not quite so simple to provide measures of the social impacts of flooding. We know the public suffers anxiety and loss of health status in the event of a flood but it is difficult to quantify this impact. Similarly environmental impacts are difficult to measure in absolute terms but a wealth of information is now available, as well as opinions from expert bodies, to allow informed decisions to be made.

16. Armed with this information, the operating authority can compare the benefits to be derived from reducing the risk with the cost of that risk reduction. It would also be necessary for it to consider what the environmental and other impacts of these various options might be before ultimately coming to a final decision on the form of the scheme and whether it should be presented to DEFRA for approval for grant.

17. In the context of an application for a grant, paragraph 10 of the Introduction to the Grant Memorandum provides in relation to environmental issues that:

“It is necessary to comply with the environmental assessment procedures and provide written confirmation from English Nature that they are content (subject to any conditions) with the proposed schemes. Where required, other authorities must provide evidence that the Environment Agency is content with the proposed scheme.”

18. In the preparation of any flood defence scheme, the operating authority would always undertake an environmental appraisal and prepare an environmental report to identify any possible environmental impact the works may have. Normally flood defence works are permitted development and are therefore exempt from planning permission. However, where works require planning permission, it is the planning authority that has the responsibility to decide whether a formal environmental impact assessment is required pursuant to the Town and Country Planning (Assessment of Environmental Effects) Regulations 1988 (“the 1988 Regulations”). This ensures compliance with Council Directive 85/337/EEC on the assessment of the effects of certain public and private projects on the environment. Furthermore, submissions will generally be made and conclusions reached on environmental issues in the context of the planning process. In these circumstances, DEFRA does not consider that it is necessary for it to re-consider the environmental assessment reached as part of the planning process, save in respect of such cases as mentioned in paragraph 10 above, where the views of the Flood Management Division’s Environmental Adviser are obtained.

THE APPROVAL OF GRANT AID FOR THE BIDEFORD QUAY WORKS

19. An application for grant aid for improved flood defences at Bideford Town Quay was submitted to MAFF by the Agency on 11 March 1998. In submitting the application the Agency indicated that the works had planning permission and that, in reaching their decision, the planning authority had taken into account the view of English Heritage, particularly regarding the Long Bridge. Therefore the scheme met the MAFF environmental criterion of being environmentally acceptable.

20. After a thorough assessment of the application, in July 1988 MAFF advised the Agency that on the basis of the case submitted it was unable to approve the application on technical and economic grounds. Failure to gain approval resulted from:

inadequate consideration of alternative options;

an inadequate analysis of the risks of non-operation for a flood gate option;

inadequate support regarding the impact of flood gates on the operation of the port; and

no contribution had been obtained in respect of significant non-flood defence benefits.

21. The Agency then set about addressing MAFF’s concerns. Prior to the submission of the most recent application in May 2001, MAFF staff attended four meetings with the Agency to discuss various aspects of the development of the scheme and two meetings of the Bideford Working Group, at which representatives of all interested parties, including the objectors from the Torridge Group and the Chamber of Commerce, were present. As well as these meetings, there were numerous exchanges by both telephone and correspondence with the Agency and the objectors.

22. In October 1999 MAFF HQ received informally from Colin Green of Middlesex University a copy of a critique of the Agency’s Economic Assessment of the Scheme. … This critique had been commissioned by the Torridge Group, one of the principal objectors. In April 2000 the Torridge Group gave permission for this to be sent to the Agency for their information and comment.

23. The Agency submitted a revised application for grant on 17 May 2001 with confirmation that Torridge District Council would be making a contribution in respect of non-flood defence benefits. The application was given a thorough assessment against the MAFF criteria by DEFRA engineers between May and July 2001.

24. In support of the revised application, the Agency had considered a number of additional alternative options, including the automatic floating gate option suggested by the objectors. The Agency had taken forward for detailed consideration options involving combinations of walls, gates and quay extensions, whilst rejecting options associated with road raising, automatic floating flood gates and manually demountable flood barriers. The automatic flood gate option had been rejected by the Agency engineers on maintenance, security of operation and public safety grounds. This decision was reviewed by DEFRA engineers taking account of Colin Green’s evidence. They identified additional factors related to the extended amount of time that the quay would be closed to traffic when compared with any of the alternative schemes and to the higher construction costs associated with an automatic gated structure when compared with a masonry wall over a similar length, and so supported the Agency’s decision.

25. Full consideration was also given to the economic appraisal supporting the submission for grant aid because of the concerns expressed by objectors, supported by the report submitted by Mr Colin Green of FHRC on behalf of the Torridge Group. The Agency’s consultants had followed both the methodology prepared by Middlesex University (FHRC) and the guidance issued on best practice by MAFF … in preparing their Economic Assessment. The view of DEFRA engineers was that the Agency had undertaken an adequate examination of the scheme costs and benefits, and, taking account of the financial contribution being made by Torridge District Council towards the cost of the scheme, had demonstrated the preferred option was the most economically efficient option. …

26. The application submitted by the Agency had been prepared for their own internal approval process as well as submission to DEFRA. Although it went into some detail on environmental aspects, the only points that the DEFRA engineer had to check, following normal practice, was that (a) planning permission had been obtained, (b) English Nature had no objection … and (c) that reference to Flood Management’s Environmental Adviser was not required as there was no involvement in internationally important conservation sites.

27. On the basis of the information provided, it was concluded that the scheme proposal met the technical, economic and environmental criteria and achieved an appropriate priority score … well above the threshold … A formal recommendation by the DEFRA Regional Engineer to approve the scheme for grant aid was made on 23 July 2001 to Flood Management officials … In view of the continuing local opposition from objectors to the scheme, the recommendation suggested that comments and advice should be sought from DEFRA’s Chief Engineer, Economics Directorate (even though the scheme was below the threshold that requires their involvement) and the South West of England Regional Development Agency before a final decision to approve the scheme for grant aid was made. This approach was agreed.

28. Views from the Economics Directorate were received on 3 August 2001 … They considered the economic aspects of the River and Coastal Engineering Group appraisal and the subsequent evidence of Colin Green from the FHRC … submitted on behalf of the local objectors. They advised that a closer scrutiny should be undertaken of Colin Green’s assertions on do-nothing damages and suggested that the automatic flood gate option might need further consideration.

29. The Chief Engineer, having considered the advice of DEFRA Regional Engineer, Economics Directorate, the critique submitted by Colin Green and the arguments of local objectors, confirmed his support of the proposed scheme on 7 August 2001 … In his view the scheme met the conditions for grant aid. In response to Colin Green’s concerns regarding the high average annual damages to property he countered that this was in part due to the unusually frequent but damaging floods on the Town Quay area. The suggestion from Colin Green that this level of frequent flood damage was unsustainable, thereby casting doubt on the Agency’s economic assessment, was accepted as valid. However, the Agency had evidence that the Quay indeed flooded frequently and, despite the level of damage, the properties continued to be occupied. In the face of this apparent contradiction concerning the level of damage from more frequent events, an alternative approach was to only consider the less frequent but more damaging events. This approach would still result in the preferred option remaining the most economically efficient. With regard to the alternative option of a floating gate put forward by the objectors, the Agency had investigated further with the inventor and, in the face of a risk of non-operation, had felt unable to consider it further. This conclusion was supported by the Chief Engineer.

30. Confirmation was obtained on the 9 August 2001 from the South West of England Regional Development Agency that, with regard to regeneration, they supported the Agency’s scheme … In their view, the studies that the South West of England Regional Development Agency had agreed to fund would not reopen the question of the future usage of the town quay.

31 Having taken into account the views of Economics Directorate, the Chief Engineer, the South West of England Regional Development Agency and the original recommendation of the DEFRA Regional Engineer, I concluded that an appropriate range of options had been considered, the scheme remained economically worthwhile, and that the appropriate environmental procedures had been completed … DEFRA therefore approved the scheme for grant aid on 15 August 2001. …

32. At this stage, the objectors suggested that not all of their concerns about the economic appraisal had been submitted in time to be considered before DEFRA took its decision. DEFRA undertook to consider the additional points raised … and saw merit in meeting Mr Colin Green of the Flood Hazard Research Centre to review all his evidence.

33. As previously noted Colin Green’s main concern regarding the economic appraisal was that the level of flood damage per house was higher than might have been expected. He felt this put the economic assessment into question on three aspects – tide level frequency curves, frequency of flooding and floor levels of the properties at risk. The Agency’s assessment of tidal records leads to an assessment that flooding on the quay could be expected annually, an assessment supported by their records of past flood events. The question then is what damage is incurred from low level frequent flood events. Despite extended discussions the views of the Agency and Colin Green were not readily reconcilable. However, as already noted, if the economic impacts of these low level frequent events were discarded and only the possible damage from less frequent events was considered, the scheme remained both economically worthwhile and the most efficient option. As noted by the Chief Engineer the tidal data showed that at some stage there will be a significant flood which, without improved defences, will cause extensive damage. With regard to the range of options considered, the local concerns appear to favour some kind of gated option. However gated structures carry a risk that they will not operate and hence flooding would still occur. DEFRA’s conclusion was that, even discarding the contentious data, the scheme remains economically worthwhile. …

34. …

35. … the approach adopted by DEFRA was in accordance with its Appraisal Guidance – achieving the objectives of identifying the most appropriate technical solution, ensuring the benefits outweighed the costs; and that the most economically efficient option commensurate with achieving an appropriate level of protection was identified.

36. DEFRA’s decision to grant aid to the works was confirmed on 15 November 2001. …”

33. The Grounds of Challenge and the Issues. Two grounds of challenge are raised in these proceedings. In each case, it is said that the Secretary of State fell into error in the exercise of his discretion under section 147 of the 1991 Act. In paragraph 2 of his written skeleton argument, Mr Fordham identified the central issue which arises from each ground of challenge, as follows:

(i) Ground 1, “The Environmental Issue”: whether, in discharging his statutory function of providing grants for drainage works under section 147 of the 1991 Act, the Secretary of State is entitled to rely on the fact of the grant of planning permission as determinative of the Scheme’s environmental acceptability (see paragraphs 6 to 8 of the claimants’ Grounds for Judicial Review – “the Grounds”); and

(ii) Ground 2, “The Economic Issue”: whether, having identified flaws in the cost/benefit appraisal advanced in support of the application for grant aid, the Secretary of State should have required the specified appraisal to be conducted on a correct basis (see paragraph 9 of the Grounds).

34. Ground 1 - The Environmental Issue. Mr Fordham founded his submissions in support of this particular ground of challenge upon the following two general propositions:

(i) the environmental acceptability of new drainage works is a legally relevant consideration in any decision made by the Secretary of State whether to give grant aid approval under section 147 of the 1991 Act; and

(ii) a decision under section 147 is one for the Secretary of State alone to take and it is for the Secretary of State alone to decide whether a relevant consideration, such as environmental acceptability, has been properly satisfied: accordingly, the Secretary of State should have satisfied himself as to the environmental acceptability of the Scheme in question and should not have regarded that matter as established by the mere fact of the grant of planning permission; by adopting such an approach in this case, the Secretary of State has fallen into error.

35. Mr Fordham submitted that it was obvious that new drainage works such as the Scheme can raise legitimate environmental concerns that are relevant to the proper exercise of the power to award grant aid under section 147. He accepted that section 147 conferred an open discretion upon the Secretary of State, but pointed out that the Secretary of State has issued policy guidance as to what matters were relevant to any decision that he made under that section. It was therefore Mr Fordham’s submission that the promulgation of such guidance serves to identify relevant considerations and principles against which the decision-making in question will take place: see paragraph 6(1) of Mr Fordham’s written skeleton argument.
36. Mr Fordham suggested that the fact that the authority promoting the Scheme (i.e. the Agency) is in other statutory contexts the “environmental” regulator cannot in law dictate that the Scheme must be and is thus demonstrated to be environmentally justified and acceptable. He stressed that it is the Secretary of State who is the sole regulator for the purposes of the exercise of grant aid powers under section 147.
37. Mr Fordham submitted that the Secretary of State’s own policy guidance emphasises the relevance and importance of considerations as to environmental acceptability and environmental impact assessment. In support of that submission and also, in part, his submissions with regard to the Economic Issue (as to which, see below), Mr Fordham referred to the following passages (amongst others) in both the Grant Memorandum and the Guidance Notes:

(a) The Grant Memorandum:

(i) Page 2: “What are the Ministerial Aims, Objectives and Priorities? … 5. … The national policy aim is to reduce risks to people and the developed and natural environment from flooding and coastal erosion by:

(i) encouraging the provision of adequate and cost effective flood warning systems;

(ii) encouraging the provision of technically, environmentally and economically sound and sustainable flood and coastal defence measures; …”

(ii) Pages 3 and 4: “Who should be consulted? … 10. It is necessary to comply with the environmental assessment procedures and provide written confirmation from English Nature that they are content (subject to any conditions) with the proposed schemes. Where required, other authorities must provide evidence that the Environment Agency is content with the proposed scheme. …”

(iii) Page 9: “What are the Criteria for Grant Aid? 13. Schemes must satisfy the following criteria:

(i) proposals must be eligible within the terms of the Acts,

(ii) the scheme must be technically sound and environmentally acceptable,

(iii) the costs must be reasonable and the benefits sufficient to justify the whole cost before grant,

(iv) the choice of scheme option must be based on the decision rule in the Ministry’s Project Appraisal Guidance Notes, (PAGN) and

(v) the terms and conditions set out in this Memorandum must be observed.”

(b) MAFF Funding for Flood Defence and Coast Protection: Notes for Guidance:

Page 2: “Allocating grant aid … 13. Once a detailed application has been lodged, it will be considered by MAFF staff. At this stage, MAFF will seek to confirm that a scheme:

(a) complies with the thresholds at Annex C;

(b) has been given an appropriate priority score; and

(c) meets the terms and conditions set out in the Ministry’s Grant Memoranda and has been through the appraisal sequence set out in the Ministry’s Project Appraisal Guidance (PAG).”

(c) FCDPAG5 - Flood and Coastal Defence Project Appraisal Guidance – Environmental Appraisal:

(i) Page iii: “Foreward: This is one of a series of guidance documents designed to provide advice on best practice for the appraisal of flood and coastal defence projects. …

… The final text is guidance issued by the Ministry for use in the appraisal of flood and coastal defence projects and does not necessarily reflect the views of any of the other contributing parties.”

(ii) Page 1: “Introduction. This guide, one of a series on the appraisal of flood and coastal defence in England and Wales, covers the environmental aspects of project appraisal. …

The six volumes of this series are designed to provide an integrated suite of guidance on all aspects of project appraisal. The documents are intended to assist knowledgeable practitioners; they are not comprehensive manuals or textbooks and they do not define government policy. However, compliance with the guidance is likely to produce projects that are acceptable for central government support.”

(iii) Page 2: “1.2 Objectives. The broad objective of this document is to assist flood and coastal defence operating authorities to improve decision-making with regard to environmental impacts and to facilitate compliance with regard to environmental legislation. …”

(iv) Page 8: “2.2 Environmental appraisal and assessment … Furthermore, an environmental appraisal is required for all flood and coastal defence schemes, and must be carried out prior to application for grant-aid … In certain circumstances, the environmental appraisal must be in the form of an Environment Impact Assessment …”

(v) Page 11: “2.2.2 Undertaking environmental appraisal/Environmental Impact Assessment. When undertaking an environmental appraisal (whether or not it includes an Environmental Impact Assessment …), sufficient environmental information must be obtained by a combination of reviewing existing information and collection of new data, in order to identify the likely significance of alternative scheme options. …”

(vi) Page 23: “Environmental valuation 3.1 Introduction At the scheme design stage any environmental appraisal will need to consider which of the feasible options are best from an environmental perspective. The potential environmental impacts and benefits of the options will be considered during the environmental assessment. However, there also needs to be consideration of environmental benefits and costs when undertaking the economic appraisal of the scheme options. Finally, the environmental benefits and costs must be included in the finalised scheme analysis. …”

38. Drawing together the various strands of his argument, it was Mr Fordham’s principal submission on this aspect of the case that the Secretary of State had been obliged to decide whether he was satisfied, on the basis of (inter alia) the environmental information that was before him, that the best flood defence option for Bideford Quay had been correctly identified by the Agency. He accepted frankly that making good this central submission was essential to the success of the claimants’ case on the Environmental Issue.
39. Mr Fordham then referred in particular to the Minister’s letter to Mr Scott dated 9^th October 2001 (see above) and to paragraphs 18, 19 and 26 of Mr Park’s witness statement (see above) and submitted that this evidence demonstrated clearly that the fact that there had been a grant of planning permission had been treated as sufficient to satisfy DEFRA on all the environmental aspects of the Scheme. Mr Fordham suggested that, in approaching the environmental considerations in this way, the Secretary of State had unlawfully abdicated his function of satisfying himself on a matter that was legally relevant to his decision-making, namely the environmental impacts of the Scheme. Mr Fordham accepted that the Secretary of State was entitled to regard the fact that planning permission had been granted as a highly material fact, but submitted that the Secretary of State had fallen into error in not addressing and deciding the environmental issues for himself and in treating the fact of planning permission as, in effect, determinative of that particular relevant consideration.
40. On behalf of the Secretary of State and the Agency, Mr Hoskins submitted that the claimants’ case on the Environmental Issue could not succeed because the submission upon which it was entirely dependent, namely that it was the function of the Secretary of State to decide for himself whether he was satisfied, on the basis of the environmental information before him, that the Agency had correctly identified the best option (see paragraph 38 above), was misconceived.
41. It was Mr Hoskins contention that there is no basis whatsoever for the argument that the Secretary of State was under a specific legal obligation of the sort identified in Mr Fordham’s principal submission on this aspect of the matter (“the environmental obligation”). He referred to the terms of section 147 of the 1991 Act, to Mr Fordham’s concession that the section conferred a completely open discretion upon the Secretary of State and pointed out that there was no detailed statutory or regulatory scheme for the exercise of that discretion. I am satisfied that Mr Hoskins’s submissions in this regard are correct and I reject Mr Fordham’s submissions to the contrary effect.
42. Mr Hoskins submitted (correctly, in my view) that, in effect, Mr Fordham had endeavoured to establish the existence of the environmental obligation, an obligation that is not imposed on the Secretary of State by the terms of either the Statute or the Regulations, from the wording of the guidance documents that had been issued by MAFF (i.e. the Grant Memorandum and the Guidance Notes – see above). Mr Hoskins pointed out that, far from creating and imposing any specific obligations on the Secretary of State, it is clear from the terms of the Grant Memorandum and the Guidance Notes that they are designed to provide guidance to operating authorities, such as the Agency, that is intended to be flexible and non-binding: see, for example, the wording of the Introduction to FCDPAG5 (quoted above) and paragraph 3 of the Introduction to the Grant Memorandum, which is in the following terms:

“3. The Memorandum can only be a guide. Individual cases will obviously vary, and final decisions on grant eligibility must therefore always rest with the Ministry.”

I agree with Mr Hoskins’ observation that the wording of the Grant Memorandum and the Guidance Notes to that effect could not be clearer.

43. I therefore accept Mr Hoskins’ submission that Guidance Note FCDPAG5 provides a framework by which the developer (in this case, the Agency) should identify its preferred option, taking into account all the relevant criteria. I agree with his further submission that this is precisely what the Agency did in its Project Appraisal Report. I also agree that it is clear that the Agency applied to the Secretary of State for grant aid for its preferred option, having scrupulously followed the guidance established by FCDPAG5.
44. As already indicated, I agree that neither the Grant Memorandum nor Guidance Note FCDPAG5 can be said, on any basis, to impose any legal obligation on the Secretary of State of the sort contended for by Mr Fordham. In my view, it is important to note that the claimants’ case on the environmental issue was, in effect, put forward on that somewhat limited basis, namely that the approach taken by the Secretary of State in considering the environmental aspects of the Scheme had resulted in the breach of such an obligation, and was not based on any suggested irrationality or breach of legitimate expectation on his part. However, I accept without hesitation Mr Hoskins’ submission that the Secretary of State is not under any legal obligation to revisit and to decide for himself an operating authority’s decision as to what is the preferred option for the flood defence works in question. Accordingly, for those reasons I reject Mr Fordham’s principal submission in support of this ground of challenge (see paragraph 38 above).
45. Finally, I accept Mr Hoskins’ further submission that it is clear from the facts of this matter that, to the extent that it was necessary to do so, appropriate consideration was given by DEFRA to the environmental impact of the Scheme that had been selected by the Agency as its preferred option. Not only did DEFRA have regard to the grant of planning permission (with all that that entailed: see paragraphs 15 to 17 of this judgment and paragraphs 18 and 19 of Mr Park’s witness statement, supra) but, as indicated above, the Agency had also carried out its own detailed environmental appraisal of the Scheme and the other options and this was also properly considered and taken into account by DEFRA in the course of its decision making. As it seems to me, therefore, it is clear from paragraphs 26 and 29 of Mr Park’s witness statement and from the terms of the Regional Engineer’s report on the Scheme that the environmental impact of the Scheme was, in the event, specifically and sufficiently addressed by DEFRA.
46. In this connection, it is worth quoting the following passage from page 10 of the Regional Engineer’s report (although it contains some immaterial inaccuracies as to the planning history):

“Option selection does not fully depend on economics alone. The scheme works have to be demonstrated to be acceptable in the broad context of the environment. The main ways this is tested is by consultation and the Planning Approval Process. Initial proposals were given planning approval in 1992. Subsequent local objections led to a planning enquiry which was held in 1993. The current proposals are based on modified proposals derived from the in(spector’s) consideration of the project. At that time the modified proposals were not given planning approval as the inspector considered the changes to have been too major. The revised proposals have, however, been subject to the planning application procedure and were formally approved in 1997. This approval overruled the objection from English Heritage but they have accepted that award of planning approval and do not propose to pursue their case further. …

In terms of the natural i.e. non built environment the main test is to secure the agreement of English Nature to the proposals. This has been achieved. Details of all consultations and the process by which the scheme has been developed can be found in the appendices to the (Agency’s) report.

In conclusion I consider that the (Agency’s) preferred solution of option C is correct from the economic point of view and it has the necessary environmental clearance to proceed.”

It is to be noted that the appendices to the Agency’s report, to which the Regional Engineer made reference, included the Agency’s detailed environmental appraisals of the Scheme and the other options.

47. I have therefore come to the firm conclusion that, to the extent that it was necessary to do so in the proper exercise of his discretion under section 147 of the 1991 Act, the Secretary of State did give appropriate consideration to the environmental impact of the Scheme. Accordingly, for all the foregoing reasons, the first ground of challenge fails.
48. Ground 2 – The Economic Issue. For the purposes of this particular ground of challenge, Mr Fordham referred additionally to the contents of Guidance Note FCDPAG3, which is entitled “Flood and Coastal Defence Project Appraisal Guidance: Economic Appraisal” and, in particular, to the methodology of the “benefit:cost ratio” by which applicants are required to demonstrate the economic acceptability of the scheme in question. He also referred uncontroversially to and emphasised the investment criteria that are demanded of flood and coastal defence projects if they are to be eligible for grant aid under the 1991 Act, as described by Mr Park in paragraph 12 of his witness statement (see above): i.e. “that the benefits of the scheme should outweigh the costs and impacts of the implementation and that the most economically efficient option commensurate with achieving an appropriate level of protection is identified.”
49. Mr Fordham referred to the history of the Agency’s application (see above) and pointed out that the doubt cast on the reliability of the Agency’s economic appraisal by Mr Colin Green had been accepted as valid by DEFRA’s Chief Engineer: see paragraph 29 of Mr Park’s witness statement. However, it is important to note that, as explained by the Chief Engineer in his e-mail of 9^th November 2001 (supra) and by Mr Park in paragraph 33 of his witness statement, Mr Green’s only real concern (and the only matter that was considered to give rise to a valid point) was essentially with regard to the accuracy of data relating to the possible damage to property that would be caused by low level frequent flood events.
50. Mr Fordham then referred to the way DEFRA had decided to deal with the “major error” in the Agency’s economic appraisal that had been revealed by Mr Green’s critique, namely by discarding the data relating to the economic impacts of the low level frequent flood events and having regard only to the possible damage from less frequent events (“the alternative approach”): see the Chief Engineer’s e-mail of 9^th November 2001 and paragraph 33 of Mr Park’s witness statement.
51. It was Mr Fordham’s submission that the alternative approach was legally impermissible because it was neither a proper nor an appropriate application of the benefit:cost analysis approach that is carefully set out in Guidance Note FCDPAG3. He submitted that DEFRA’s decision to rely on the alternative approach was not a decision made in accordance with the disciplined and “transparent” approach that is to be found in FCDPAG3, it overlooked the nature of the point that had been made by Mr Green despite it having been accepted as valid and, furthermore, it overlooked the following three matters, the importance of each of which is emphasised in the Guidance Note:

the need for an accurate “baseline” figure;

the significance of the frequent event data, which the Guidance Note stressed must be correct; and

the preference for “hard” evidence obtained by “ground-truthing”.

52. Mr Fordham submitted that, having been alerted to and having recognised the “major error” present in the Agency’s benefit:cost analysis, DEFRA should have required a fresh analysis to be carried out on the basis of correct information. He maintained that only after that had been done would DEFRA have been in a position to satisfy itself properly as to the relevant investment criteria, namely (i) that the benefits of the Scheme outweighed the costs and impacts of implementation and (ii) that the Scheme was the most economically efficient option commensurate with achieving an appropriate level of protection (see paragraph 12 of Mr Park’s witness statement). Mr Fordham therefore submitted that, in adopting the alternative approach with regard to the Agency’s economic appraisal, the Secretary of State had erred in law in exercising his discretion under section 147 of the 1991 Act to award the Agency grant aid towards the construction costs of the Scheme.
53. As it seems to me, this particular ground of challenge can be dealt with quite shortly. I agree with Mr Hoskins’ submission that the key words and the essential foundation of Mr Fordham’s submissions on the Economic Issue was his assertion that DEFRA’s decision to adopt the alternative approach had been “legally impermissible”. I also agree that, having regard to the account of its reasons for doing so (see paragraphs 27 to 33 of Mr Park’s witness statement), DEFRA’s decision cannot possibly be stigmatised as irrational. As Mr Hoskins observed, this second ground of challenge is entirely dependent on the submission that, as a matter of law, it was simply not open to DEFRA adopt the alternative approach with regard to the Agency’s economic appraisal. I agree with Mr Hoskins’ further contention that, like the first ground of challenge, the essential foundation for the central or critical submission under the second ground is, in effect, that the guidance provided by FCDPAG3 creates and imposes upon the Secretary of State a regime or methodology that has the force of law and must be observed to the letter. For the reasons given previously in this judgment (see, in particular, paragraphs 41 to 43 above), I am satisfied that such is clearly not the case. In my view, the Secretary of State has a completely open discretion under section 147, the exercise of which power would ordinarily be susceptible to challenge only on Wednesbury grounds (which, as indicated above, do not arise in this case), and there was therefore no legal impediment (either under the statutory provisions or the published guidance) which prevented DEFRA from approaching the matter in the way that it did. In my view, not only was DEFRA entitled to deal with the matter in the way that it did, but its decision to do so was plainly right.
54. Conclusion. Having regard to the present length of this judgment and to the conclusions that I have reached on both grounds of challenge, I do not consider that it is either necessary or appropriate to deal with the Mr Hoskins’ further submission that, as a matter of discretion, I should not grant the relief sought in any event (see paragraphs 32 to 35 of his written skeleton argument), although I readily acknowledge the force of his argument in that regard. Accordingly, for the reasons given above, I have come to the firm conclusion that this application must be and is hereby dismissed.
- - - - - - - - - - - - -

MR JUSTICE FORBES: Yes. I believe you have of course received copies of the written draft judgment in this matter. Thank you for sending the suggested amendments, both of which I accept. There are very minor amendments to the text. I have incorporated those minor amendments into the copy of the judgment, which, I hope, has now been distributed to you in its amended form. Are there any other suggested corrections, Mr Fordham, Mr Hoskins?PRIVATE 

MR FORDHAM: No.

MR HOSKINS: No.

MR JUSTICE FORBES: Thank you very much. In that case I direct that the written draft judgment which I hand down this afternoon is to stand as the transcript of my judgment in this matter and, accordingly, for the reasons contained therein, this application is dismissed. Yes, Mr Hoskins?

MR HOSKINS: My Lord, I do have some costs applications in a very short skeleton.

MR JUSTICE FORBES: Yes, thank you.

(Handed)

MR HOSKINS: My Lord, I seek costs both on behalf of the defendant and the interested party. I understand from Mr Fordham that he does not oppose the application by the defendant, so the only question is: should there be two sets of costs in the matter? The relevant principles are well known. I have referred to the passage in the White Book which referred to the Bolton Metropolitan District Council case. The note is at CPR 54.16.9 and the points I wish to highlight are that the court has a general and overarching discretion in regard to costs, but that in the Bolton case it was indicated that whilst the courts do not generally order an unsuccessful claimant to pay two sets of costs, they may do so, and they may do so where the interested party feels that there was a separate issue, not dealt with by the defendant, or where the defendant and the interested party have separate and distinct interests which require separate representation.

In this case the reason why we submit that the interested party should receive a costs order are the following. Firstly, it was named as an interested party in the claim form, we say correctly, therefore the claimants knew well and realised from the outset that the Agency had a role to play in this case.

The evidence submitted on behalf of the Agency dealt with issues which were not in DEFRA's direct knowledge. The main areas were the history of the matter prior to the application for a grant, but also the current status of the project. DEFRA's involvement, in terms of factual involvement in this whole project, is really just limited to dealing with the two applications for grant. So we submit that it was appropriate for the Agency to take part, take an active part in the proceedings and to provide evidence both of the history and of the current status. We submit that that role, and the significance of it, is well reflected in the judgment. I have cited the paragraphs of the judgment which refer to the evidence of Mr James submitted on behalf of the Agency.

So there was that aspect of the case, the evidential aspect, which meant that it was appropriate for the Agency to intervene, but there was also a separate and distinct interest and that was clearly the financial one, because if Mr Fordham's clients had succeeded there were clearly important financial implications because the project was well advanced, a construction contract had been entered into and it had been entered into on the basis that the Agency had lawfully received a grant award of millions of pounds. And clearly, if Mr Fordham had been successful, there would have been potentially very serious implications, financial implications for the Agency.

Your Lordship has set out in the judgment at paragraph 28 the financial situation and clearly DEFRA did not have the same financial interest, in fact it may have struck lucky because it might have got its money back and not have had to pay its money, but the interests were different and the interests were significant and important.

The final point is the fact that one has to look at how the Agency did approach this, having decided it needed to take an active part, it chose to share counsel with the defendant and it chose to share one counsel. I note that the claimants were represented by two counsel. So the Agency's approach to participation was proportionate and it is on those grounds that we submit there should be two sets of costs.

MR JUSTICE FORBES: Does that mean, and if it is embarrassing to answer this question by all means say so and I would not press the matter, but does that mean that if I were to refuse the order that only half of your costs would be recovered, in effect, in the assessment? In other words, have DEFRA and the Environment Agency agreed that each contribute a moiety towards your costs? Or is there liability to you, as it were, joint and severally? Do you understand?

MR HOSKINS: My Lord, I do. I do not know what the position is. I could take instructions if your Lordship wants.

MR JUSTICE FORBES: Would you mind?

MR HOSKINS: Of course, my Lord.

(Counsel took instructions)

My Lord, there was no formal agreement and I think that it has been proceeded on the basis that DEFRA would bear my costs.

MR JUSTICE FORBES: Yes, I see.

MR HOSKINS: So the issue really is, I guess, the costs of the evidence put together by the Agency.

MR JUSTICE FORBES: Yes, that is really what it comes to, that the Environment Agency's legal department taking time to and obtaining the evidence from, amongst others, Mr James.

MR HOSKINS: Precisely, my Lord. I think there were one, perhaps two, conferences in the matter which were attended both by DEFRA and the Environment Agency, but they were also, in a sense, for evidential purposes as well. So that is what it boils down to.

MR JUSTICE FORBES: Yes. Thank you, Mr Hoskins. Yes, Mr Fordham?

MR FORDHAM: My Lord, I cannot resist and I do not resist the defendant's cost; that is the general rule which I cannot dislodge. I do resist the developer's additional costs; that is contrary to the general rule which Mr Hoskins cannot dislodge. He has made some points in the skeleton argument which really reflect the position which will almost invariably apply when you have an interested party who is a developer that they will be an interested party and named as such, that they will be in a position to say things in particular, background, information, and that therefore those are points which reflect the norm rather than the exception. A developer invariably has a distinct interest from that of the decision-making public authority and will always have things to say. The court has to look for exceptional circumstances or some good reason to dislodge the rule which Mr Hoskins has identified and which is in the White Book at 1171 at the foot of the page with reference to the relevant authority.

MR JUSTICE FORBES: That is Bolton Metropolitan----

MR FORDHAM: That is right.

MR JUSTICE FORBES: Has everybody got a copy of the authority here? Give me the page reference in the White Book.

MR FORDHAM: It is 1171, just so your Lordship has the authority in mind, and it is at the foot of the page.

MR JUSTICE FORBES: Well, I do not think I have the same volume as you. Just give me a moment, Mr Fordham.

MR FORDHAM: While that is happening, if your Lordship will look in 54.16.9 of the version you do have, it is possible that they are the same.

MR JUSTICE FORBES: I am sure it is, it is a well-established principle as you rightly say. 54?

MR FORDHAM: 54.16.9 I will take the chance -- my Lord, you now have what I hope is the Spring 2002 version.

MR JUSTICE FORBES: Yes. 11?

MR FORDHAM: 1171 and it is at the foot of 1171 where the commentary describes the position. They generally follow the event, well I have accepted that, and would generally be made to pay the costs. The defendant, and so on, normally ordered to pay if they lose. Then the claimant will normally be ordered to pay the costs of the defendant, but the courts do not generally order an unsuccessful claimant to pay two separate costs, or here it would be the additional costs of the developer. And then there is the reference to that House of Lords authority your Lordship knows, and then the circumstances of two sets of costs. Then two things are described, my Lord, the second of them plainly does not apply because the defendant and interested party have accepted the appropriateness of sharing representation and your Lordship knows that would be covered in any event by a costs order, so it is really the first: "...a separate issue not dealt with by the defendant".

Well, the normal situation, my Lord, would be if you had a developer taking and succeeding on a separate point, the closest we get in this case is the discretion point. Your Lordship is aware that the submission was made that judicial review should be refused in any event because of the financial position as a matter of the court's discretion. And, of course, that is not a point on which Mr Hoskins succeeded, it was a point on which it was not necessary for the court to rule either way, as your Lordship recorded in paragraph 54, the final paragraph of your judgment. So it is not a situation where the developer is able to say: 'I have succeeded on a separate and distinct issue on which the case has turned'.

Now, my learned friend draws attention to the fact that there are evidential references in the judgment; that of course is right. They are all background matters. I remind your Lordship that when you came to the analysis of the grounds for judicial review each and every reference to the evidence was a reference, not surprisingly, to the evidence of the defendant, the decision maker, and the approach that it had taken.

So, my Lord, for those reasons there is no basis in this case, we submit, for the court identifying some exceptional reason, some good reason, why the general rule should not apply.

MR JUSTICE FORBES: Yes, thank you. Anything else, Mr Hoskins?

MR HOSKINS: My Lord, if I can just briefly comment on that? On the question of whether separate representation was required, well, of course, there was not separate representation, so we are talking about the evidential point. On the evidential matter the claimants raised a large number of factual issues and they chose in the voluminous claim form----

MR JUSTICE FORBES: It would have been open to DEFRA though to get the evidence from the Environment Agency. It does not have to be the Environment Agency that does it, as it were.

MR HOSKINS: My Lord, that is my point, in a sense, because either the Agency which had direct knowledge had to do it or DEFRA would have had to have done extra work to get the knowledge from the Environment Agency. If one accepts Mr Fordham's proposition it means that neither of them is recompensed for doing that work. Someone had to do the work. In this case it was the Agency rather than DEFRA, but it would not be right that Mr Fordham's clients, having lost this case, should avoid paying the costs of defending the case; that is the oddity in this case.

MR JUSTICE FORBES: Yes, it is an unusual state of affairs I have to confess.

MR HOSKINS: So I fully accept that if the Agency had not done it, DEFRA would have done it, but then DEFRA getting its costs would have covered that work. And, as far as Mr Fordham is concerned, that work just simply falls out of the equation and that cannot be right in my submission. Thank you, my Lord.

MR JUSTICE FORBES: Yes. Thank you very much. This is a somewhat unusual state of affairs. In the ordinary way an interested party would not have been entitled to a separate order for costs unless somewhat unusual circumstances exist such as the interested party dealing with a separate issue not dealt with by the defendant, or where the defendant and the interested party have separate and distinct interests which require separate representation. That statement of principle is taken from the well-known authority of Bolton Metropolitan District Council v Secretary of State for the Environment [1995] 1 WLR 1176 and is helpfully summarised in paragraph 54.16.9 of the CPR at page 1171 to 1172 of the White Book, Volume 1.

Mr Fordham resists the application for any order for costs in favour of the interested party on the basis that no such exceptional circumstances exist in this case. However, as it seems to me, Mr Hoskins has made a very fair point, namely that the costs which are being debated are, in effect, the costs of the Environment Agency providing evidence for use at the hearing which would have been evidence available to DEFRA to obtain at DEFRA's expense. Had DEFRA taken the step of obtaining the evidence from the Environment Agency, which was actually provided by the Environment Agency, then there is no doubt that those costs would have been recovered in the subsequent assessment of DEFRA's costs. In this case the order being sought by Mr Hoskins is, in effect, no more than seeking to obtain those costs directly to the Environment Agency which would otherwise have been recovered by DEFRA in the way to which I have earlier referred.

It is important to note that the cost of the legal representation in court, that is to say counsel's fees, will be met by DEFRA in any event and will be sought in the subsequent assessment in the ordinary way. It is, therefore, clear that the costs that will result from any award of costs in favour of the interested party will be to all intents limited to the costs incurred in providing the evidence to DEFRA which DEFRA could have obtained itself and the costs of which would then have been recoverable by DEFRA.

As it seems to me, it is appropriate in those circumstances, in the exercise of my discretion, to make the order sought. In so far as it is necessary to refer to an exceptional circumstance, it is this, namely that as a matter of convenience and good sense the Environment Agency incurred the costs of providing the evidence to DEFRA and did not seek to incur any further or additional costs by way of obtaining separate legal representation at the hearing.

In all the circumstances, therefore, I come to the conclusion that it is appropriate to order that the claimants pay the costs of the defendant and the costs of the interested party, such costs to be assessed on a standard basis, if not agreed. Yes?

MR FORDHAM: My Lord, I am going to invite your Lordship to give us permission to appeal. I recognise, of course, that not only have I lost, but that your Lordship said it was a firm conclusion which you have reached in dismissing my claim for judicial review, nevertheless your Lordship now has to consider whether the prospect of success is so unrealistic as to warrant the refusal of permission to appeal, and again if you want the reference it is in the White Book. It is page 1083.

MR JUSTICE FORBES: Yes, I am familiar with it.

MR FORDHAM: It is the real prospect of success. Now, your Lordship's approach to the case was this, ultimately, that the Secretary of State has a completely open discretion, it is paragraph 53, and that absent an irrationality challenge there is no legal impediment arising from the published guidance and that was the nub of the analysis. It was highly material for both of the grounds. It was critical to the economic point, which your Lordship dealt with in that paragraph 53. It was also the main reason by which your Lordship dealt with the environmental point back at paragraph 44, although there your Lordship went on to deal with the position in the alternative. As to that, we would submit that really it is only when one has analysed whether and what legal obligation arises from the guidance that one can consider whether, on the evidence, the Secretary of State discharged its obligation, the platform for the analysis was your Lordship's conclusion, but I would remind your Lordship that in going on then to analyse that matter your Lordship focused in particular on evidence that related to the environmental impact of this scheme, when of course our point under the guidance was as to the comparative environmental condition in relation to the options and those other matters your Lordship dealt with at paragraph 45 and 46, environmental impact of this scheme, in particular at the end of 45. And then the quote from the regional engineer's report, again focusing on the scheme. But the point of principle is the legal consequences, if any, and your Lordship said none, of adopting guidance of this kind.

The alternative approach would be to accept the submission which your Lordship recorded at paragraph 35, but did not go on to accept, namely that, and it is at the end of paragraph 35, in promulgating this kind of guidance one identifies legally relevant considerations and principles against which the decision-making question will take place. And the alternative, and of course I am not trying to persuade your Lordship that you were wrong to be attracted to it, but the alternative thesis would be to accept that just because one sets out for an applicant the case that they have to address and that they have to meet, does not mean that the decision maker does not have the role of considering against those legally relevant matters whether they have succeeded when he comes to make his decision. Now, my Lord, it comes to that and whether that is an argument which, in your view, is unrealistic in terms of its prospect of success or whether, as I would submit, it can be said to have a prospect which can properly be characterised as a real prospect. Those are my submissions.

MR JUSTICE FORBES: Thank you very much. Is there anything you want to say, Mr Hoskins?

MR HOSKINS: I do not think so, my Lord.

MR JUSTICE FORBES: Thank you. No, I am not persuaded that this is an appropriate case in which I should give permission to appeal. My reasons are that in my view there is no real prospect of success in any such appeal and there are no other exceptional reasons for giving permission to appeal. So those are the reasons which I will record in the form and I will, in accordance with my normal practice, read back to you what I am just about to write down now. What I have written down in the box provided for my reasons for refusing permission is the following:

"(1) There is no real prospect of any appeal succeeding and (2) there are no other exceptional circumstances for granting permission to appeal."

Unless there is anything else? Thank you both very much.

MR HOSKINS: Thank you, my Lord.

* * * * *