The Hon. Mr Justice Burnett :
Introduction
- This is a claim for judicial review of a decision of the Higher Education Funding Council for England ("HEFCE") to recover from Queen Mary University of London ("QM") a total £852,000 of research support grant funds relating to the year 2006/7. The basis upon which the recovery is to be made is that HEFCE considers that QM was in breach of the terms or conditions applicable to obtaining such a grant. The term was concerned with "open competition".
- The issues, shortly stated, amount to this :-
i) Is it for the court to determine as a primary fact finder whether QM was in breach of the material terms and conditions or is that a question for HEFCE subject to traditional public law grounds of review? (The precedent fact issue).
ii) What is the meaning of the term "open competition" in the relevant policy and documentation of HEFCE?
iii) Was the decision making process fair?
iv) Was the decision to recover the money taken by somebody properly authorised to do so?
v) Did the decision maker appreciate that there was a discretion whether to recover all or part of the sum in the event that a breach was established?
vi) Should the court, in its discretion, grant any relief even if an error of law is established?
A number of subsidiary issues arise around the principle ones which I have identified. I shall refer to those as they arise for consideration.
Background
- HEFCE distributes something over £7 billion of public funds a year to universities and other higher education institutions in England ("HEIs"). It amounts to a very large part of the funding available for such higher education. Much of the funding is based upon student numbers. However, there is an additional element directed towards research funding. This case is concerned with medical research but HEFCE's responsibilities for funding research range across the whole spectrum of academic endeavour.
- Another important source of research funding for HEIs is the charitable sector. That is particularly important in the medical context. It is often the case that grants from charitable bodies may not cover the entire cost of the research project which the institution proposes to undertake. That may present little difficulty to institutions with substantial resources of their own that can be directed towards making up the difference. But many institutions are not in the happy position of having such reserves. In July 2004 the Department for Education and Skills (together with the DTI and HM Treasury) published a "Science & Innovation Investment Framework 2004-2014". Its underlying aim was to put in place structures and funding to enhance research and development, and in particular the United Kingdom's science base. Amongst much else it considered the contribution made by charities in the "UK Research Environment". In paragraph 3.3.1 it noted that charity support for university research averaged about £320 million per annum in the five years to 2000. In paragraph 3.3.4 it stated that the Government would develop an additional element of quality research funding to support that provided by charities and added:-
"This will be allocated through the block grant in relation to the charity income in departments that are above a minimum threshold level of quality (the grant will not be differentiated by quality above this threshold). Only charity income which has been awarded through open competition, excellence and priority using a method of independent external peer review for the allocation of grants will be counted."
Thus, it is clear that "open competition", which is not further defined in the document, was a founding principle upon which these funds were to be made available.
- It would have been possible for HEFCE to initiate a procedure which required applications to be made by HEIs which were then each carefully checked and adjudicated upon prior to the distribution of funds. That is not what occurred. HEIs were invited to submit details of qualifying charitable support. They were all assumed by HEFCE to be compliant in the first place. The available funds were then divided up amongst all of the applicants on that basis. The reason why this procedure was adopted was to avoid imposing a heavy, time consuming and expensive bureaucratic burden upon HEFCE. Every penny spent on administration would come from money otherwise available to HEIs. So the system amounted to one of "self-certification" but it was subject to a control mechanism. There were to be random audits of applications. It was as a result of a random audit of QM's application that the suggested breach of terms and conditions was identified and the question of repayment arose.
Statutory Provisions
- HEFCE is a statutory corporation established by Section 62 of the Further and Higher Education Act 1992. The material provisions of Section 62 are as follow:-
"(1) There shall be established –
(a) a body corporate to be known as the Higher Education Funding Council for England to exercise in relation to England the functions conferred on them, and
(b) a body corporate to be known as the High Education Funding Council for Wales to exercise in relation to Wales the functions conferred on them.
(2) The Higher Education Funding Council for England shall consist of not less than twelve nor more than fifteen members appointed by the Secretary of State, of whom one shall be so appointed as chairman.
….
(9) Schedule 1 to this Act has effect with respect to each of the councils"
The schedule referred to in subsection (9) includes within its provisions at paragraph 10:
"Delegation of Functions
The council may authorise the chairman, the chief officer or any committee established under paragraph 8 above to exercise such of their functions as they may determine".
It was common ground between the parties that the scheme of delegation put in place by HEFCE pursuant to that paragraph provided that the chief officer should make decisions of the sort under challenge in this case.
- Section 65 of the 1992 Act identifies activities that are eligible for funding by HEFCE. Subsection (3) sets out in detail the circumstances in which grants, loans or other payments may be made. The provision of money is qualified by a proviso namely "subject in each case to such terms and conditions as the council think fit." Subsection (4) provides :-
"The terms and conditions on which a council may make any grants, loans or other payments under this section may in particular-
(a) enable the council to require the repayment, in whole or in part, of sums paid by the council if any of the terms and conditions subject to which the sums were paid is not complied with, and
(b) require the payment of interest in respect of any period during which a sum due to the council in accordance with any of the terms and conditions remains unpaid,
but shall not relate to the application by the body to whom the grants or other payments are made of any sums derived or otherwise than from the council."
Terms and Conditions
- HEFCE provides funding under the terms and conditions found in its "model financial memorandum between HEFCE and Institutions". The memorandum falls into two parts. Part 1 contains the terms and conditions which apply to all institutions with which HEFCE deals. Part 2 contains conditions specific to individual institutions. Paragraph 9 of Part 1 of the memorandum states that "in exercising its powers… the council will act reasonably at all times." Paragraph 11 makes clear that payments will be subject to conditions set out in the memorandum together with such other conditions as from time to time the council may prescribe.
- The terms and conditions found in this document cover a wide range of subject matters. Those commencing at paragraph 16 are headed "Responsibilities of the Institution" and essentially require good governance and appropriate financial management. There is a requirement found in paragraph 25, for example, that the governing body is responsible for delivering value for money from public funds. There are obligations to provide information and to have due regard to applicable legislation. An institution must, by paragraph 35, ensure that it has an effective policy of risk management. There are even terms which require institutions to manage their estates in a particular way. Paragraph 46 of the memorandum provides as follows :-
"If the institution fails to comply with any conditions attached by the Council to the payment of funds, the Council reserves the right to require the institution to repay all or part of those funds".
- It can be seen, therefore, that paragraph 46 of the memorandum takes much of its language from Section 65(4) of the 1992 Act. It is pursuant to paragraph 46 that HEFCE has required QM to repay the sums in issue in these proceedings.
The Terms and Conditions in Issue
- The framework document to which I have referred shows that the government made funds available to augment those provided by charitable institutions on the basis there set out, which included a requirement that the charitable grant had been the subject of open competition. The board of HEFCE adopted the "open competition" criterion when implementing the Government's commitment to provide an additional element of funding to support charitable research income. Although it was their intention to make an announcement via an electronic publication at about the end of April 2005 it was not until 27 June 2005 that HEFCE issued circular letter number 16/2005 to all Vice Chancellors and Principals. The circular, which was entitled "New Support Element for Charities Research Income", was issued over the hand of Sir Howard Newby, the chief executive of HEFCE. In paragraph 6 of the circular the eligibility criteria for allocation of such funding were set out as follows :-
"a. research income which is awarded through open competition, excellence and priority using a method of external peer reviews.
b. research income which is awarded by a charity registered in the United Kingdom or an overseas body with exclusively charitable purposes, consistent with the definition set out by the Charity Commission for England and Wales.
c. in any one year, only the first £500,000 of the annual release from the deferred capital ground account of each capital grant is eligible. This is to avoid unhelpful volatility in allocating the new elements. There will be no threshold for recurrent income."
It is the first of the criterion with which we are concerned. The circular went on to indicate that further guidance on the criteria was to be found in Annex A. The Annex repeats verbatim the eligibility criteria and itself records that it is giving further 'guidance'. Paragraph 5 of Annex A identifies one of the purposes of the guidance as being to provide clear criteria which would enable institutions to satisfy themselves that they qualify. That same paragraph makes plain that data provided by the institutions would be subject to normal external audit procedures. It is paragraph 6 of Annex A that gives the guidance on the first criterion:-
"Open competition and external peer review
……. only income which is awarded through open competition, excellence and priority using a method of external peer review is eligible. This means the income reported must have been available to more than one institution within a process where no credible candidate was excluded; and awarded to the institution which demonstrated the highest quality research proposal according to external peer review. Income awarded outside open competition, such as grants from closed or associated charities providing research income to single institutions, is ineligible."
The underlined words became the focus of particular submissions because they were excluded from the comparable paragraph in the next document to which I turn.
- In September 2005 HEFCE issued its "Research Activity Survey 2005" which was provided to HEIs to enable them to update information on their research activity. In essence, this was the document against which HEIs provided information that informed the distribution of research funds for the following academic year (2006-2007). One of the areas covered is charitable support funding. It refers to the earlier circular 16/2005 in this context (see paragraph 11c of the executive summary) and also suggests that definitions would be found in various of the annexes. Annex C is concerned with income from charities. The three eligibility criteria set out in the earlier document are repeated (see paragraph 2) and then further guidance on the eligibility criteria is given in paragraph 6 of the Annex. That provides
"only income which is awarded through open competition, excellence and priority using a method of external peer review is eligible. This means the income reported must have been available to more than one institution and awarded to the institution which demonstrated the highest quality research proposal according to external peer review. Income awarded outside open competition, such as grants from closed or associated charities providing research income to single institutions, is ineligible."
There is no evidence to suggest that the omission of the words that I have underlined in the earlier paragraph was deliberate or in any way calculated. The evidence is to the effect that it was inadvertent.
- QM reported against the criteria set out in RAS 2005. They identified research income from three charities which became the subject of dispute in due course. The dispute in relation to two of those charities was resolved by agreement. One was the William Harvey Research Foundation. QM accepted that the funding it had received from this particular charity did not satisfy the criteria. The second was the Corporate Action Trust. HEFCE in due course accepted that funding from that charity did satisfy the criteria. The dispute arises in respect of funding from the Barts and the London Charity which until recently was known as the St Bartholomew's and the Royal London Charitable Foundation ("the Foundation"). The nature and work of the Foundation is described in the witness statement of Dr Veronica McCabe dated 2 November 2007. The Foundation is a charity for three hospitals namely Barts, The Royal London in Whitechapel and the London Chest in Bethnal Green. The Foundation supports the general activities and needs of the hospitals and also supports research carried out within the area of the three hospitals. As a result there are only three organisations to which the Foundation makes available research funding. The first is the relevant NHS trust which is responsible for the three hospitals. The second is QM's school of Medicine and Dentistry and the third is St Bartholomew's School of Nursing and Midwifery at City University. Additionally those organisations may be provided with funding to support projects which they are undertaking with outside collaboration. Research carried out within the NHS Trust would typically have a clinical hue. That carried out by QM or the School of Nursing and Midwifery at City University would be more likely to be of an academic nature. The policy of the charity is said to "respect the origins of the charitable donations given to the Foundation". The restricted nature of potential recipients of funding from the Foundation is made clear in a range of documents published by the Foundation which includes, for example, under the rubric who can apply?:
"Staff working for Barts and the London NHS Trust, the School of Medicine and Dentistry (SMD), and the School of Nursing and Midwifery are eligible to apply. Other organisations may enter applications but only if they are collaborating with one of the eligible organisations and the research is based at one of the Trust sites."
- The return provided by QM under RAS05 included income of £3,793,000 from the foundation in respect of which QM sought additional funding. That additional funding amounted to £852,000 which was paid over to QM on the basis I have described.
The Audit Process
- The Principal of QM was notified that HEFCE intended to undertake an audit of the external research income on charities submitted in the University's RAS05 return. The audit was to be undertaken by David Adkins. Mr Adkins reviewed the available material and in due course raised questions about the three charities to which I earlier referred. In an email dated 21 December 2006, Mr Adkins identified three centres of concern. First, that the research advisory board of the Foundation (which allocated funds) was comprised entirely of individuals from the only organisations which benefited. Secondly, that members of that board were leading a number of the projects themselves. Thirdly, that the only two HEIs to benefit from the foundation were QM and "to a much lesser extent City University". Mr Adkins went on to express the view that "if open competition exists I find it hard to believe this would be the result." Mr R W Bush of QM responded to the substance of his concerns in an email dated 8 February 2007. He suggested that the funding from the foundation "clearly meets the three eligibility criteria set out in Sir Howard's circular letter 17/2005" which he then recited. His contention was that the criteria were supplemented by paragraph 6 of Annex C of RSA05, which he also quoted. His position, which has remained the position of QM ever since, is that since the Foundation's funds are open to more than one institution, are rewarded following external peer review and the research is of high quality, it therefore fell within the criteria. As Mr Bear QC, who appeared from QM, put it in the course of his submissions, the responsible official of an HEI was entitled to have paragraph 6 of Annex C by his side. If he could place a tick next to each of the sentences in that paragraph then the charitable funding qualified. HEFCE did not accept that argument. Mr Adkins' final report is dated 3 April 2007. He concluded that the income from the Foundation was ineligible for support and he gave his reasons as follows :-
"the research advisory board for the Foundation is comprised of one member of the Foundation plus employees of either Queen Mary (9), Barts and the London NHS Trust (6) or the St Bartholomew's School of Nursing and Midwifery-City University, (2). The composition of the panel would therefore seem more able to judge projects internal to the group than to be in a position to judge on a competitive basis applications from other institutions."
He then set out the total distribution of funds by the Foundation for 2004 and 2005 and continued :-
"the value of grants included in RAS05 from this source by QM would appear to indicate that an even larger proportion of research grants have been made in the past. Evidence has not been produced to demonstrate an environment of awards through open competition for funding within the HE sector. This is a requirement for inclusion of such income in the RAS05 return."
It is apparent from the reasons given by Mr Adkins that he was unaware that it was only three organisations that were eligible for funding from the Foundation, of which two were HEIs. His reference to the make-up of the advisory board was directed to a concern that it might not objectively assess applications from other institutions. As is clear from Dr McCabe's evidence, that concern does not arise because no other institutions are in fact eligible at all for research funding.
- The process of debate continued. On 10 May 2007 Mr Dean Curtis, the Chief Administrative Officer of QM, repeated the earlier arguments and put the matter very succinctly:
"the college has provided evidence, and further is enclosed, that demonstrates that the [Foundation]:
is open to competitive bids from more than one institution; that grants have been made to more than one institution; and comprehensive processes of external expert peer review by UK and International Referees are in place.
The college feels that these detailed arguments have already been made to the auditor but they have been ignored, something I am perplexed at."
Derek Hicks replied to that e mail on behalf of HEFCE on 26 June 2007. In the course of his communication he said :
"the key question for us however, is whether you have been able to demonstrate that the grant income from [the Foundation] included in your return to the 2005 research activity service was awarded to open competition. I should explain that, whilst we would regard evidence that the charity was 'closed' as indicating strongly that open competition was unlikely to have occurred, in the event that it could be shown that a charity was not closed we would not accept this alone as showing conclusively that there had been open competition in awarding a particular grant; we would still expect to see further positive evidence of this in particular cases. Against this background I have to say that it remains our view that QMUL has not shown that its grant income from [the Foundation] was awarded from open competitions. I therefore confirm our decision that this income is ineligible to be taken into account in calculating your QR grant for 2006-07 and we shall now be considering what adjustment should be made to that grant."
There were further exchanges of e mails which added little. Then on 7 August 2007 Mr Hicks wrote to Professor Smith at QM confirming the conclusions already articulated and indicating that an adjustment to funding would follow. The details were to be worked out by the Analytical Services Group of HEFCE. In fact no such arrangements have yet been put in place. These were overtaken by the commencement of these proceedings and thus deferred.
Precedent Fact
- Section 65(4) of the 1992 Act provides an explicit power to HEFCE to require the repayment of grants in the event of a breach of the terms or conditions on which they were paid. It enables them to do so via the mechanism of a term or condition to that effect. Clause 46 is such a term or condition. Mr Bear submitted that the document in which Clause 46 appears, even if not formally a contract, was at least akin to a contract. He argued that whether there has been a failure to comply with terms or conditions is similar to a breach of contract in private law terms. Thus, he submitted, the terms and conditions themselves suggest that the question of failure to comply should be judged objectively. Additionally, the statute is also in objective terms. He emphasised the general proposition that where the exercise of executive power depends on establishing an objective fact the court will usually decide that fact for itself. He recognised that apparently objective language does not always dictate that outcome. He identified four reasons why the Court should decide the question on non-compliance itself, rather than review HEFCE's factual conclusions on a traditional public law basis:
a) that the funding conditions are contained in a bilateral arrangement, namely between HEFCE and QM, and that it is unusual and unfair to reserve to one of those parties a decision regarding compliance, if the only mechanism of subsequent challenge is conventional judicial review, and especially as there is no in built appeals mechanism.
b) The arrangement is in fact multilateral because all HEIs are subject to the general conditions and all claims are interrelated because HEFCE distributes all the funds available to it.
c) A decision about whether a term or condition has been complied with affects rights and remedies, and on the basis on which the scheme operates leads to money being taken back which HEIs will have committed themselves to spend. The consequences of a repayment may be disruptive and serious for an HEI.
d) Ordinarily a restitutionary claim, to which this is similar, would call for a court to make primary findings of fact.
- Mr Beloff QC, who appeared for HEFCE, emphasised the very wide discretion contained in section 65(3) concerning the making of grants. He submitted that section 65(4) contains a power to impose a term or condition. Clause 46 is that term. The question of repayment arises exclusively under Clause 46 and not directly under the statute. He suggested that this was a classic administrative scheme that should attract ordinary judicial review principles and that it would be administratively entirely inconvenient if a precedent fact regime were superimposed. He emphasised that there is in fact no contract and no civil claim. It is a statutory scheme operated by HEFCE. It is a classic instance where decisions concerning whether conditions have been satisfied are for HEFCE to determine subject to review on ordinary public law grounds.
- My attention was drawn to a number of authorities in which the question of "precedent fact" has been considered. R v Home Secretary ex p. Khawaja [1984] 1 A.C.74 was a case in which the House of Lords was asked to revisit its previous recent decision in Zamir. It had been decided, inter alia, that if the immigration authority had reasonable grounds for believing that a person was an illegal entrant, the decision to remove him and to detain him until he was removed was for the authority. It was not subject to review by the courts save on conventional public law grounds. Thus, in Zamir the House of Lords had rejected the argument that the Secretary of State could only detain someone as an illegal entrant if he was in fact such. It was good enough, said the House of Lords in Zamir if the Secretary of State had reasonable grounds for believing the person to be an illegal entrant. As is well known, in Khawaja the House of Lords reversed the earlier decision of Zamir on that point. In the course of his speech, Lord Scarman referred to "the well established principle that where the exercise of an existing executive power depends upon the precedent establishment of an objective fact it is for the court, if there be a challenge by way of judicial review, to decide whether the precedent requirement had been satisfied" (108G). He explained that the House of Lords had earlier implied the "reasonable grounds" words into the statutory scheme and did so because of the difficulties which would arise in the absence of such an implication being made. Lord Scarman's view, with which other members of their Lordships House agreed, was that whilst the principle applied by the House in Zamir was correct in appropriate cases, the House had given insufficient weight to the interference with liberty that was involved in that type of case. At page 109G Lord Scarman explained that the principle could not "extend to interference with liberty unless Parliament has unequivocally enacted that it should."
- The immigration field has thrown up this issue in a number of different contexts. Khawaja was particularly concerned with liberty but a similar question arose in the context of multiple applications for asylum in R v Home Secretary ex parte Oniboyo [1996] 2 All ER 901. Sir Thomas Bingham MR said this at 912b-d :-
"the role of the court in the immigration court varies depending on the legislative and administrative context. Where an exercise of administrative power is dependent on the establishment of an objective precedent fact the court will, if called upon to do so in case of dispute, itself rule whether such facts establish to the requisite standard. Thus, for example, where power to detain and remove is dependent on a finding that the detainee is an illegal entrant, one who has entered clandestinely or by fraud and deceit, the court will itself rule whether the evidence is such as to justify that finding 'see [Khawaja v Home Secretary]'. By contrast, the decision whether an asylum-seeker is a refugee is a question to be determined by the Secretary of State and the Immigration Appellate Authorities, whose determinations are susceptible to challenge only on Wednesbury principles (see Bugdaycay v Secretary of State for the Home Department [1987] AC 514). I am of opinion, although with some misgivings, that the judgement whether a fresh 'claim for asylum' has been made should be assimilated with the latter, and not the former, class of judgement."
Another example where the court, having considered the legislative scheme in its context, has concluded that it should approach an issue as one of precedent fact is R ...On the application of Maiden Outdoor Advertising Ltd) v London Borough Council [2004] J.P.L.820. Collins J was concerned with powers contained in Section 11 of the London Local Authorities Act 1995 concerning unauthorised advertising. In the absence of appropriate consent for the advertisement, the local authority was provided with power to enter onto private premises and remove an unauthorised hoarding without compensation. One of the questions being argued was whether the issue of consent was one to be determined as a precedent fact by the court. At paragraph's 35 & 36 Collins J said :-
"35. Section 11(1) requires that there be no express or deemed consent. Whether there is such consent is a matter of fact which must be established before any action can be taken under s.11. As I have already said, there is no right of appeal and the action under s.11 will result in the compulsory removal without compensation of someone's property and an obvious loss of income.
36. Therefore, and consistently with the approach of the House of Lords in Khawaja v Secretary of State for the Home Dept [1984] A.C.74 there being a need to establish a precedent fact, the court is entitled, if there is a material dispute, to resolve it for itself. This seems to me to be all the more important in a case such as this where there is no appeal provided for."
Mr Bear emphasised as parallels with this case that the HEFCE terms and conditions make no provision for an appeal in the event of a disagreement, and neither does the statute. He also drew a parallel because money had in the first instance been paid to QM and is to be re-paid, albeit by way of off-set of future grants. The second point is of much less weight given that what is contemplated here is the recoupment of money that should not, on HEFCE's case, have been paid in the first place.
- Mr Beloff placed particular reliance upon the decision of the House of Lords in R v Monopolies and Mergers Commission ex p. South Yorkshire Transport Ltd [1993] 1WLR 23. The Secretary of State had made a reference to the Monopolies and Mergers Commission under Section 64 of the Fair Trading Act 1973. A jurisdictional pre-condition governed whether the Commission could accept the reference, namely whether it concerned "a substantial part of the United Kingdom". The House of Lords was called upon to decide what the words "a substantial part of the United Kingdom" meant. Having determined that question, the House of Lords recognised that it was the decision maker who must reach a conclusion when applying the correct meaning to the facts before it. In such a case, the court would only substitute its own opinion if the decision were irrational. Mr Beloff submits that this case is a clear example where apparently objective words identifying a pre-condition were not regarded as giving rise to a precedent fact jurisdiction.
- In my judgment the question of a failure to comply with a term or condition upon which money is provided by HEFCE does not call for the application of the precedent fact approach. The reality is that even where Parliament has not used subjective language, it is the exception rather than the rule that factual matters will fall within the precedent fact category leading the court to take on the primary fact finding role. The reasons for my conclusion are as follows :-
i) Whilst we are concerned with a statute that empowers HEFCE to impose a term requiring re-payment in the event of breach of other terms or conditions, those other terms and conditions may cover a very wide range of topics. That much is clear from the documents to which I have referred.
ii) It follows that while some terms and conditions may be clear cut, so that the question of breach is similarly capable of a straightforward "yes" or "no" answer, many will not be. In this area it is clear, for example, that questions concerning academic judgment might well arise. There is no restriction on the nature of the terms that HEFCE may impose, save that they must properly relate to HEFCE's functions.
iii) For that reason I consider it most unlikely that either Parliament (or HEFCE when drafting clause 46) intended that disputes about compliance with terms and conditions should be determined by a court as a primary fact-finder. Indeed, one purpose, as it appears to me, of Section 65(4) was to enable HEFCE to recover money without the need for a private law action, which judicial review proceedings involving the determination of precedent facts can soon come to resemble.
iv) HEFCE may require an HEI to comply with conditions prior to the grant of money. If HEFCE considered that an HEI did not fulfil the criteria for a grant and therefore declined to make one, the HEI concerned could challenge that conclusion only on a conventional public law basis. So if, on the facts of this case, HEFCE had adopted a policy of scrutiny prior to payment and refused the application, its decision would have been reviewable on the ordinary basis and not precedent fact. The mechanism for payment adopted by HEFCE entailed what is in effect a provisional payment, subject to possible audit. It would be anomalous if a decision following audit should require the court to adopt a precedent fact approach, when that in advance would not.
v) The terms and conditions connected with a payment of a grant are entirely a matter for HEFCE. Those terms and conditions might themselves be the subject of judicial review. They are not, in reality, closely analogous to the terms and conditions of a contract entered into as a matter of agreement between parties.
The Meaning of "Open Competition"
- It is clear that the criteria identified in the framework document were articulated to ensure that HEIs that had access to what amounted to private charitable funds, not widely available to others, should not have those funds augmented by public money. All parts of the material criterion were directed to that end. The reference to "excellence" needs no elaboration and the need for appropriate peer review was similarly directed at insuring that only truly worthwhile projects attracted public money. The term "open competition" was not further defined in the framework documents. Mr Bear drew my attention to a number of places within the circular and RAS05 where the passages in the relevant annexes were described as definitions. However, it is clear that those annexes were not seeking exhaustively to define the material criterion but to provide guidance as to its application.
- Both parties were at one in emphasising that in approaching the use of language in the circular from HEFCE and also RAS05 I should avoid approaching either as if it were a statute or trust deed. Whilst accepting that close textual analysis was inappropriate, Mr Bear nonetheless developed an argument based upon the finest of textual analyses. In essence, he suggested that by the use of the language in the annex to RAS05, HEFCE had defined the term "open competition" as being satisfied so long as two HEIs were able to compete for the available funds. He argued that the additional sentence in the Annex to the circular, with its reference to "no credible candidate" being excluded, was concerned with candidates who fell within the charities' internal selection criteria but were then excluded for some improper reasons. So, for example, if a charity decided only to give grants to institutions within a particular county but failed to consider an application from an institution within the geographical boundaries it had set, that is what the qualification was directed at. In that way the two definitions, he submitted, may be synthesised to deliver a coherent result.
- Mr Beloff felt constrained to develop his own fine textual analysis in response. However, the essence of his submission was that if QM is correct in its definition of "open competition" it would result in grants which on any sensible view could not be described as having been awarded in open competition qualifying for augmented public funding. He suggested that it would be inappropriate to seek to develop an exhaustive definition of the term, because the boundaries between "open competition" and "closed competition" might not be clear cut.
- It seems to me that the approach of Mr Bear on behalf of QM would lead to an artificial meaning of the words "open competition" and label grants as having been awarded in open competition when they were no such thing. The term is one that is widely used in the academic context and elsewhere, not least in the employment world and artistic or architectural prizes. In my view it is evident that something cannot be described as "open competition" if individuals or bodies who appear to have the necessary skills to carry out the work are not able to compete for the funding. The reference within paragraph 6 of Annex A of the circular to "a process where no credible candidate was excluded" is to my mind a statement of the obvious. A credible candidate is one who appears to possess the necessary skills and resources to undertake the relevant research. The precise boundaries of what constitutes 'open competition' may be unclear. Yet without doubt, the basis upon which the Foundation makes research funds available cannot be considered one of "open competition". That much is clear from the explanation of its policy advanced by the Foundation itself and set out in its documentation. It provides research funding to only two HEI's and to one other body, namely the NHS Trust. It is, of course, perfectly entitled to do just that. Many charities have purposes which restrict those who can benefit in such a way that denies open competition. But it does not follow that the recipients of such largesse are entitled to the additional funding made available through HEFCE.
- It follows that, in my judgment, HEFCE was entitled to conclude that the basis upon which the Foundation made funds available to QM did not satisfy the criterion for "open competition". I should add that had I been deciding the question on the information before me as a matter of "precedent fact" I would have come to the same conclusion.
- A subsidiary issue arose in the course of submissions on this aspect of the case. Mr Bear complained that HEFCE was wrong to focus on QM and the School of Midwifery and Dentistry at the City University for competition purposes, but should also have recognised the NHS Trust as an 'institution'. HEFCE's response was that it is concerned with HEIs and not institutions of other disparate sorts. That, in my judgment, is correct. Nonetheless, it seems to me that this aspect of the disagreement between the parties does not bear on the ultimate answer to the question whether this funding resulted from an "open competition".
Was the decision making process fair?
- QM suggests that HEFCE did not genuinely engage with the representations they were making in response to the problems identified by Mr Adkins. They complain that nothing changed as between his audit report and his final view. They suggest that because the wording is essentially unchanged the inference is that he did not engage in the process.
- I do not consider that the exchanges between QM and HEFCE evidence a closed mind or otherwise support the contention that the procedure followed was unfair. Additionally, two deponents confirm that the question was considered with an open mind. They are Mr Hicks and Mr Thirunamachandran. That is confirmed by the fact that HEFCE went back to QM on a number of occasions seeking further information (for example 13 December 2006 and 21 December 2006). One should not overlook the fact that the initial dialogue between HEFCE and QM concerned funding provided to QM by three charities. HEFCE changed its mind on one of those and QM on another. There was a meeting between Mr Curtis of QM and Mr Hicks on behalf of HEFCE which explored the issues. It is clear, in my judgment, that HEFCE did consider the points raised by QM. The problem, so far as the Foundation was concerned, was that HEFCE's officials took a fundamentally different view of the matter from that advanced by QM on its narrow reading of the Annex to RAS05.
Was the decision to recover the money taken by somebody properly authorised to do so?
- As I indicated in paragraph 6 above, it was common ground that the scheme of delegation put in place pursuant to paragraph 10 of Schedule 1 to the 1992 Act authorised the chief officer to make a decision concerning repayment. It did not authorise any other officials to do so. There is, and could be, no complaint that the analysis and preparatory work was undertaken by the auditor, Mr Adkins, and other officials employed by HEFCE. As with almost every organisation, those charged with making decisions are entitled to consider and rely upon the work of others in collating and analysing material and distilling information into an easily digestible form. Decision making in large organisations would become impossible if that were not so. The complaint made by QM is that the decision to require repayment was not made by the chief officer at all. To determine whether this is so, it is necessary to look in detail at the evidence of the decision making process. The evidence is to some extent piecemeal because the delegation question comes before the court by way of amendment to the original grounds for which permission is needed.
- Mr Derek Hicks, who is regional consultant to HEFCE for London, provided a witness statement on 22 November 2007. In paragraph 12 he said this:-
"the data audit process for RAS05 was undertaken over several weeks, concluding with a final audit report issued on 3 April 2007. In deciding to issue the final audit report, my colleague, Julian Knight, had concluded that on the basis on the findings of the auditor the Foundation's grants were ineligible for inclusion in QMUL's form RAAS05. (This is a decision he is authorised to make on HEFCE's behalf.)"
He went on to explain in a little further detail his understanding of who made the relevant decision in paragraph 13 of that statement:-
"Although it is my understanding and the understanding of those HEFCE officers to whom I have spoken (notably the Director (Research and Knowledge Transfer) Mr Rama Thirunamachandran) that Mr Knight's letter and the audit report constituted HEFCE's decision in this matter, in light of HEFCE's duty of candour to the court I attach at exhibit DH2 a paper submitted to HEFCE's Chief Executive's Group meeting on 8 May 2007. (I have redacted the names of institutions other that QMUL.) That document details a funding adjustment of £1,087,084 for QMUL, and asks the CEG to "agree the implementation of the funding adjustments". My understanding and I am told that of Mr Thirunamachandran is that the CEG paper was intended to be information only. Be that as it may the CEG did agree this paper on 8 May 2007."
Mr Thirunamachandran provided some explanation in his second statement made on 30 April 2008. It was contained in paragraph's 10 and 11 which were are as follows:-
Delegation
"10. Although I am advised it is primarily a matter for legal submission, I find the Claimant's case on delegation, in so far as it is clear at all, unrealistic. I would have thought it was plain that not every calculation performed or act carried out by HEFCE could be carried out by its chief executive in person. Quite obviously he cannot himself personally audit QMUL's claim, check whether it is eligible, calculate the amount of overpayment, or engage in lengthy correspondence and meetings with QMUL to explain HEFCE's position and to listen to their concerns. He was made aware of the finding of ineligibility, and the quantum of grant accordingly overpaid, in the CEG paper of 8 May 2007, and he approved the findings and recommendations in that paper.
11. I should also comment that, although both HEFCE and the Claimant refer to "clawback" in practice it is not envisaged that money will actually be paid by the Claimant to HEFCE. Instead future grants will be adjusted downwards by an amount equal to the overpayment. Under HEFCE's scheme of delegation the chief executive may 'delegate to the appropriate Director the responsibility for managing grant funding that relates to his/her strategic responsibilities' The appropriate director in this case is me."
- So the position on the evidence provided by Mr Hicks and Mr Thirunamachandran is that the Chief Executive's Group (which of course includes the Chief Officer) in fact made the decision more by luck than judgment. On the evidence I have recited the Chief Executive would not have appreciated that he was making the primary decision. Nonetheless, since the Group's denial of approval would have had the effect of reversing the earlier decision taken by Mr Knight, if the evidence were to suggest that the question regarding QM was properly before the Group, the resulting decision would have been made within the scheme of delegation. Mr Knight was not himself authorised by the scheme of delegation to make the decision.
- The paper referred to by Mr Hicks is dated 8 May 2007. It contained all the information available to the Chief Officer on this issue and was presented by Mr Thirunamachandran. The copy within the trial bundle is subject to the redaction of the names of two other HEIs who were subject to the audit. Paragraphs 2 and 9 of the paper together with a table summarising the audit findings contain the substance of the repayment issue.
"2. CEG is invited to:
a) Agree implementation of the funding adjustments to 2006-07 QR grant as advised to the institutions in the audit reports
b) Agree that the Director (Research and Knowledge Transfer) should conclude any funding adjustments for X and Y following discussion with them
c) Note the approach for the audit of Research Income from Charities in RAS06.
d) Note future action to improve date quality.
[paragraphs 2 to 7 concern timing and background]
8. The total amount due to HEFCE following RAS05 audits is approximately £7 million.
Audit Findings
| |
Institution |
Funding reductions Agreed (£) |
To 2006-07 Unresolved |
QR grant Total (£) |
| 1 |
|
212,293 |
0 |
212,293 |
| 2 |
|
0 |
0 |
0 |
| 3 |
|
260,598 |
0 |
260,598 |
| 4 |
|
0 |
0 |
0 |
| 5 |
|
509,604 |
0 |
509,604 |
| 6 |
|
0 |
1,227,145 |
1,227,145 |
| 7 |
|
1,840,288 |
0 |
1,840,288 |
| 8 |
|
0 |
0 |
0 |
| 9 |
|
248,700 |
0 |
248,700 |
| 10 |
|
0 |
0 |
0 |
| 11 |
|
0 |
0 |
0 |
| 12 |
|
406,910 |
1,084,584 |
1,491,494 |
| 13 |
Queen Mary UoL |
1,087,084 |
0 |
1,087,084 |
| 14 |
|
0 |
0 |
0 |
| 15 |
|
0 |
0 |
0 |
| 16 |
|
0 |
0 |
0 |
| 17 |
|
0 |
0 |
0 |
| 18 |
|
863,267 |
0 |
863,267 |
| |
Total |
5,428,744 |
2,311,729 |
7,740,473 |
9.With the exception of X and Y where discussions are ongoing around the eligibility of income from one specific donor at each institution, audit reports have been issued to the institutions, together with an indication of the funding adjustment. In the cases of X and Y we are still pursuing evidence of "open competition" relating to the eligibility of the two donors mentioned. All other institutions have been advised that ASG will be in contact soon to request re-submission of the RAS05 returns having excluded donors agreed as ineligible."
Recommendation: CEG is invited to:
- Agree the implementation of the funding adjustments to 2006-07 QR grant as advised to institutions in the audit reports (as noted in the table (excluding X and Y) and
- Agree that the Director (Research and Knowledge Transfer) should finalise any funding adjustments for X and Y following discussions with them.
- In reproducing parts of this document I have substituted the names of the two HEIs referred to in paragraphs 2 and 9 with the letters X & Y. Neither X nor Y is QM. There are 18 HEIs listed in the table. 9 have nothing in either the agreed column nor the unresolved column. 7 have a sum agreed as a funding reduction, but nothing unresolved. 2 are identified as having unresolved issues (those are X and Y).
- The 'agreed funding reductions' column has caused confusion. Mr Thirunamachandran explained in paragraph 2 of his witness statement dated 30 April 2008 that it did not suggest that the institution concerned had agreed to a clawback. It meant that the figures in the Audit Report had been agreed within HEFCE, so that the report could be issued to the institutions affected. So it was not suggested that QM had agreed to the reduction indicated. Similarly, it must follow that the reference in paragraph 9 to excluding donors 'agreed as ineligible' could not refer to agreement from QM as to ineligibility because both before and after the meeting of the Chief Executive's Group QM continued to argue that their income from the Foundation should not be excluded from the calculation of additional funding.
- The figure shown in the table for QM (£1,087,084) was the figure contained in the Audit Report. That included overpayment in respect of the William Harvey Research Foundation income as well as that from the Foundation. The question is whether the Chief Executive approved the adjustment in respect of QM.
- In the course of the hearing a minute was produced which recorded what the Chief Executive's Group agreed:
"RT presented the findings of the RAS05 Research Income from Charities audit. The findings of this audit showed that a large sum of money was involved.
RT advised that fourteen institutions had agreed to the findings of the auditors' report and CEG agreed the recommendation that the funding adjustment should be made immediately. A number of other institutions were disputing the findings of the auditors' report so there would be not [sic] adjustment made until these were sorted. "
Whatever the meaning of the word 'agreed' in the paper before the Group, its use in the minute is unequivocal. The Group agreed to make funding adjustments only in respect of those institutions that had 'agreed the findings of the auditors' report.' Whatever else QM may have done by this time, it had emphatically rejected the findings of the auditors' report in so far as it concerned the Foundation. QM were disputing those findings and so it could not fall within the fourteen identified in this minute in respect of whom the Group sanctioned an adjustment. That number is itself impossible to reconcile with the table found in paragraph 8 of the paper. On the assumption that the Group was fully informed about QM's position, QM would fall within the category in respect of which the Group decided that no adjustment would be made until the disputes were sorted. HEFCE's officials and those from QM continued to discuss the issue as part of that process in the e mail exchanges I have set out. There is nothing to suggest that the question of an adjustment for QM went back to the Chief Executive at a later stage.
- It follows, in my judgment, that the Chief Executive did not make the decision as he should have done within the scheme of delegation.
Discretion
- Because the Chief Executive did not make the decision in question, the issue of whether he appreciated that he had a discretion whether to recover any or part of the overpayment does not strictly speaking arise. Mr Thirunamachandran states that all concerned are well aware that there is a discretion whether to recover any of the overpayment; and that it is also within the contemplation of the condition that part only should be recovered. Nonetheless, HEFCE's starting position is that an overpayment of this sort should be recovered unless there are strong reasons why not. It was pointed out in submission that QM had never put forward any reasons why the discretion should be exercised to relieve them of all or part of the burden of repayment, albeit that repayment would be effected over time out of future grant. That is not surprising because it is patent from all the exchanges that QM was focussing on the principle of repayment rather then any discretionary aspect.
- Mr Beloff submits that even if an error crept into the decision making process, I should nonetheless dismiss this claim and withhold relief because the outcome would inevitably have been the same. He drew attention to the evidence of Mr Thirunamachandran and Mr Hicks to that effect. He reminded me of the judgments in Ex parte Cotton. There the Court of Appeal accepted if the outcome of a fresh decision making process would inevitably be the same that might lead the court to deny relief in judicial review proceedings even when the earlier process was infected by an error of law. Mr Bear cautioned against that approach in this case.
- It is right that my conclusion is that the charitable support received by QM from the Foundation was not the result of open competition. Given the approach of HEFCE the Chief Executive would take the same view. But he has a discretion whether to require the repayment of all or part of the overpayment that has occurred. It may be that he would follow the approach articulated by Mr Thirunamachandran, irrespective of what QM might put forward to persuade him to take a more lenient view.
- This is a case in which the statute requires a scheme of delegation if the Council itself is to be relieved of decision making. The Council put in place a scheme of delegation which was not followed. Where a discretionary decision has been taken by someone not authorised to do so in these circumstances, in my judgment the decision should be quashed and remitted to the correct decision maker, in this instance the Chief Executive, to consider the matter.
