Office for Students refusal to register higher education provider unlawful due to failure to delegate and ‘secret policy’

R (Bloomsbury Institute Ltd) v Office for Students [2020] EWCA Civ 1074

26 August 2020

The Bloomsbury Institute was fighting to survive financially after the Office for Students refused its application for registration. It brought a judicial review challenge which revealed that an unpublished policy had been followed. The policy had been formulated by an official who did not have the power to make the relevant decisions.


The judicial review challenge

The Bloomsbury Institute (“Bloomsbury”) is a private education provider that offers business, law and accountancy courses and reinvests its profits in its college. Most of its students are mature, and many are from disadvantaged and ethnic minority backgrounds. It is an ‘Alternative Provider’ because it does not receive direct grant funding like traditional universities. Alternative Providers have to be registered with, and ‘designated’ by, the Office for Students (“OfS”) (the regulator for all higher education in England). Bloomsbury applied for registration, but its application was refused due to its performance against certain criteria.

Bloomsbury unsuccessfully challenged this refusal in the High Court but has now won its appeal. If its judicial review had failed, Bloomsbury might not have survived financially because, unless it was ‘designated’, its students would generally have been ineligible for student loans. Bloomsbury would only have been able to take on new UK students who were wholly self-funded. Now that the OfS decision has been quashed, Bloomsbury may still have a fight on its hands, but it can continue to press its case. The OfS, meanwhile, has an opportunity to tighten its approach to delegation and to make sure its policies are transparent and reflective of appropriate consultation.

Bloomsbury’s appeal was argued on three grounds:

  1. That the OfS breached its April 2018 scheme of delegation (the “Scheme of Delegation”) because its Director of Competition and Registration did not have authority to set pre-determined thresholds, contained in confidential internal guidance prepared in early 2018 that set out the framework to be used when making registration decisions (the “Secret Guidance”);
  2. That the OfS failed to consult adequately on the Secret Guidance and/or was wrong not to publish it; and
  3. That a threshold test used in the Secret Guidance was irrational.

The decision of the OfS

The OfS is responsible for the registration and ‘designation’ of Alternative Providers. Under the Higher Education and Research Act 2017, the OfS must consult on and publish a regulatory framework containing the initial conditions that higher education providers must meet if they are to be registered. Under the regulatory framework published in February 2018, category B conditions were those concerning quality, reliable standards and positive outcomes for students. One of these was whether a provider was “securing successful outcomes for all its students” (“Condition B3”). The relevant thresholds in the Secret Guidance related to how Condition B3 would be applied.

In April 2018, the OfS produced the Scheme of Delegation, reserving various matters, including “changes to the regulatory framework”, to the OfS Board. Under the Scheme of Delegation, authority to make certain registration decisions was delegated to the Provider Risk Committee of the OfS. Around that time, the Director of Competition and Registration prepared the Secret Guidance.

Bloomsbury then applied to the OfS for registration. Having considered the matter, the Provider Risk Committee decided that, on the basis of unsatisfactory performance against two criteria relevant to Condition B3, Bloomsbury should receive an ‘intention to refuse registration’ letter. This provisional decision was issued in January 2019. The criteria on which Bloomsbury was said to have underperformed were continuation rates from year 1 to year 2, and progression rates to professional employment or postgraduate study. Bloomsbury made representations, but the OfS confirmed its decision to refuse registration in May 2019.

The Court of Appeal judgment

The Court of Appeal considered each of the three grounds of challenge listed above and its conclusions were as follows:

Breach of the Scheme of Delegation

Bloomsbury argued that, if a public body has a scheme for delegating statutory decision-making, decisions must be taken by the person to whom the relevant function has been delegated. The OfS had not delegated certain policy decisions reflected in the Secret Guidance to the Director of Competition and Registration. These were changes to the regulatory framework reserved to the OfS Board. It was common ground that the Secret Guidance had been considered and noted, but never approved, by the Provider Risk Committee. The Secret Guidance was never considered by the OfS Board.

The Court of Appeal considered it to be well established that a public body can choose to whom it delegates delegable functions, and the courts will only intervene if the choice is irrational or beyond the public body’s powers. The OfS could legitimately have delegated all relevant matters to the Director of Competition and Registration, but it had not done so. The Scheme of Delegation was not the sort of document to be subjected to fine analysis, but it did need to be interpreted objectively and without speculation. The aspect of the Secret Guidance that crossed the line into being a change to the regulatory framework was the Director of Competition and Registration’s decision to make little allowance for the presence in the student population of certain providers, such as Bloomsbury, of significant numbers of students disadvantaged by socio-economic factors or having left school without A-levels. The court considered that this was clearly a policy decision of the sort reserved to the OfS Board.

Because the Director of Competition and Registration had not been delegated the power to make such policy decisions, the refusal of Bloomsbury’s application for registration in line with the Secret Guidance was rendered unlawful.

 

Publication and consultation

Bloomsbury argued that any internal guidance setting out how decision-makers should exercise their discretionary powers must be published; that individuals have a right to know what policy is applicable to their case, so they can make representations on it; and that decision-makers are obliged to follow published policies unless there are good reasons for departing from them. There was argued to be a statutory, as well as a common law, duty to publish any part of the Secret Guidance that affected how the OfS’s discretion would be exercised. By the time the Court of Appeal heard Bloomsbury’s claim, the relevant parts of the Secret Guidance had in fact been published (in October 2019). The OfS nevertheless maintained that it had been under no obligation to publish.

In addition, Bloomsbury argued that the OfS was obliged to consult on policy decisions about how Condition B3 would be assessed, including the matters in the Secret Guidance referred to above. This was said to arise under legislation and the common law. The requirements of fairness were said to be particularly exacting in this case because it involved depriving Bloomsbury of an existing benefit (since Bloomsbury had been registered under the previous system for many years).

The Court of Appeal reviewed past cases and noted that the test that might normally have to be met in order to successfully challenge a consultation exercise (a “finding that something has gone clearly and radically wrong”) has little application where the policy in question has been kept secret. In such cases, the issue is not that something has gone wrong in the consultation, but that insufficient information has been provided to allow informed and meaningful consultation to occur at all. The Secret Guidance was not revealed to higher education providers, so Bloomsbury and others in a similar position had no opportunity to comment on it. The published regulatory framework concerning Condition B3 was silent on the policy in the Secret Guidance to make little allowance for the presence of large numbers of disadvantages students. This should have been consulted on and, at least under the Scheme of Delegation, approved by the OfS Board. The failure to do these things also rendered the refusal of Bloomsbury’s application for registration unlawful.

 

Irrationality

Bloomsbury argued that one stage of the evaluation process, relating to ‘demographic group threshold analysis’ was irrational, including because it yielded perverse results and obscured certain factors affecting student outcomes. Lord Justice Bean did not need to decide the point, but said he found the OfS’s explanation “very hard to follow; and I believe that I was not alone in that respect”.

 

Conclusion

This case is a useful reminder of two elementary public law principles relevant to all public bodies charged with making discretionary administrative decisions (and those affected by such decisions).

First, public bodies can choose to whom they delegate delegable functions, but are then bound to follow the scheme they have put in place. It is essential that schemes of delegation are unambiguous and easily understood so they can be followed correctly.

Second, it is important that public bodies are mindful of when proposed, or actual, policies need to be promulgated. This is particularly so if statutory transparency and publication obligations apply. The requirements for lawful consultation will be difficult (if not impossible) to meet if important matters relevant to the subject matter of the consultation are kept secret.

further information

Kingsley Napley LLP regularly represents parties in judicial review challenges. Our lawyers also blog regularly about public law matters. Follow our Public Law blog for the latest commentary.

Should you have any questions about the issues covered in this blog, please contact Adam Chapman or a member of our Public Law team.

 

 

About the author

Nick Wrightson is a Senior Associate in our Public Law team. Nick has an administrative and public law practice focused on judicial review litigation and supporting clients through public inquiriesNick’s experience includes representing public bodies, private companies, individuals, representative bodies and charities – often in high stakes, politically and commercially sensitive cases.

 

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