Ombudsman route for complaints

The Ombudsman scheme applicable to local authorities by virtue of Part III of the Local Government Act 1974 is strikingly similar to the statutory regime applicable to the Parliamentary Commissioner for Administration, though there are subtle differences. The local Commissioners deal with complaints against any local authority (including its committees, members and officers), any joint board composed exclusively of local authorities, new town/urban development bodies and police authorities.

Complaints may be referred to the Local Commissioners through a councillor but the public may also despatch complaints directly to the Local Commissioners (s26(2) LGA 1974). In all cases, the complainant must first give the local authority a reasonable opportunity to investigate and reply to the complaint (s26(5) LGA 1974).

Local Commissioners have wider powers than the PCA in respect of publication of their decisions. The relevant local authority must advertise the fact of the Local Commissioner’s report (s30(5)), and make it available for public inspection for a period of 3 weeks (s30(4)). The relevant authority must, within three months, consider the report and notify the Commissioner of any action it has taken (or proposes to take) as a consequence (s31(2)). If the Commissioner is not satisfied with the action proposed by the local authority, he may make a further report including recommendations. The ultimate sanction is enforced publication in the local newspaper, at the expense of the authority concerned (s31(2D-H)). As with the PCA, there is a good record of successful complainants to the Local Commissioners obtaining redress of one sort or another.

Maladministration

By Section 5 of the 1967 Act, the PCA may investigate action taken ‘in the exercise of administrative functions’ by or on behalf of any central government department. A complaint may only be upheld if injustice has been caused by the maladministration. These provisions apply equally to complaints made to the Local Commissioners pursuant to LGA 1974, s21. The term ‘maladministration’ is not defined in these statutory provisions, and the Ombudsmen have a wide discretion as to what it constitutes in any particular case, subject only to challenge on grounds of Wednesbury unreasonableness.

In Balchin Sedley J accepted that the following list once coined by Dick Crosman provided a good definition of the sort of administrative acts which could amount to maladministration:- ‘Bias, neglect, inattention, delay, incompetence, ineptitude, arbitrariness, and so on’. Sedley J stated further that the Court would merely check whether the Ombudsman’s view was within the range of meaning which ‘the English language and the statutory purpose together make possible’.

It is clear from both the legislation and subsequent case law that it is no part of an Ombudsman’s remit to consider the merits of a decision taken without maladministration. His role is confined to an investigation into the manner in which a decision has been reached and implemented, (although some have argued that it is difficult to see how a blatantly ‘bad’ decision can have been reached without being tainted by maladministration). But just as the Divisional Court has been able to grant JR applications on the ground that the decision-maker has failed to take account of relevant considerations and/or taken into account irrelevant considerations, an Ombudsman is able to provide similar justification for a report adverse to the public body concerned, on the basis of a flawed decision-making process.

Matters Precluded from Investigation

Schedules to both the 1967 Act and LGA 1974 provide that the Ombudsmen are specifically prohibited from investigating certain matters. These include areas such as the investigation of crime, the conduct of foreign affairs and personnel issues.

Perhaps most importantly for those dealing with councils, the Acts prohibit the investigation of commercial/contractual matters. Although the provisions in the two Acts are similar, they are not identical. By Schedule 3, paragraph 9 to the 1967 Act, the PCA is prohibited from investigating ‘action taken in matters relating to contractual or other commercial transactions’. There are only two exceptions to this strict rule, namely the compulsory acquisition of land (or acquisition of land in circumstances in which it could be acquired compulsorily), and the disposal of land acquired compulsorily. The wide ambit of the words ‘action taken in matters relating to’ suggests that it may not even be possible for a commercial organisation wishing to query the pre-contractual decision-making process.

By contrast, although LGA 1974 Schedule 5, paragraph 3(1) uses language similar to that found in Schedule 3 to the 1967 Act (the Local Commissioners are prohibited from investigating ‘action taken in matters relating to contractual or other commercial transactions’), various transactions are specifically excluded from this general prohibition. By Schedule 5, paragraph 3(3), Local Commissioners are expressly able to investigate ‘transactions for or relating to the acquisition or disposal of land’ and ‘all transactions … in the discharge of functions exercisable under any Public General Act, other than those required for the procurement of goods and services necessary to discharge those functions’.

The exclusion of matters relating to the acquisition or disposal of land from this general prohibition is of considerable importance, for example, to developers of land and other similar organisations.

The second exclusion from the general prohibition is somewhat more difficult to interpret. Local Commissioners are clearly unable to investigate contracts for the provision of basic goods and services. It would also appear that with respect to such contracts Local Commissioners are prohibited by the LGA 1974 from investigating pre-contractual tendering and negotiations. However, the inclusion in LGA 1974 Schedule 5 paragraph 3(3) of the wording ‘required for the procurement of the goods and services necessary to discharge those functions’ suggests that Local Commissioners may have power to investigate all matters relating to contracts entered into by local authorities pursuant to Local Government Act 1972, s111, because by definition, such contractual arrangements will not be ‘necessary’ to the discharge of the authority’s functions; rather, they will be ‘calculated to facilitate, or conducive or incidental to’ such discharge.

Remedies

The guidelines issued by the Ombudsmen do not only apply to adverse reports, but also to ‘local settlements’, i.e. where an authority takes action to settle a complaint during the course of the enquiries. Financial compensation is considered to be appropriate where the complainant has suffered financial loss, and no other action would provide an appropriate remedy.

In an investigation into a complaint against Bristol City Council made by an investor and her agent (a developer), the complaint was upheld because of maladministration – the Council having failed to abide by promises to provide the developer with grants for redevelopment. The Council had pulled out at the eleventh hour. Its failure to honour its commitment to the developer was maladministration. The Ombudsman recommended substantial financial compensation. Financial compensation will often be the most appropriate remedy where a complainant has incurred costs which would not otherwise have been necessary, but for maladministration. It is noteworthy that the thrust of this complaint was the investor’s legitimate expectation, which would have been less likely to succeed, if brought in judicial review proceedings, given the current state of the caselaw.

Financial compensation was also awarded in a complaint brought against Hull City Council by a building contractor. The Council had unreasonably refused to include his name on its approved list of contractors available for improvement grant building work. He claimed that his exclusion from the list had caused him to be deprived of eight contracts for building work. The Ombudsman found that the Council’s policy on making such a list was wrong, and the Council had failed properly to abide by its own policy in any event. There had, therefore, been maladministration. The Ombudsman investigated the circumstances surrounding the eight contracts and decided that the complainant had indeed lost the benefit of the award of four of the contracts. He recommended that the Council compensate the contractor for the lost profit on these four contracts, which he assessed at a total of £10,000.

In a recent decision,  Nottinghamshire City Council was told to pay a total of almost £30,000 to the family of a woman who was wrongly assessed as needing nursing care when a residential home would have been adequate for her needs. The result of the erroneous assessment was that she spent two years in a nursing home at a cost to her of £100 a week more than for residential care. The ombudsman recommended that the council pay £7,000 to cover the costs of unnecessary nursing care and loss of benefits.

Ombudsmen and Judicial Review

A commercial organisation may wish to challenge an adverse finding by the PCA or the Local Commissioners. Until 1988 it appeared that such decisions were not subject to the jurisdiction of the High Court. It is now established that these Ombudsmen are subject to judicial review, whereas decisions of the Insurance Ombudsman are not because of the contractual nature of its power and functions (Aegon Life).

In Eastleigh the Local Commissioner received a complaint that a defect in the sewerage system serving a number of dwellings was caused by maladministration by the Council. The Ombudsman concluded that there had been maladministration causing injustice. The Council sought judicial review of the Ombudsman’s decision on the ground that he had exceeded his powers by questioning the merits of the Council’s policy. The Court of Appeal held that when a Local Commissioner reported on a matter outside his authority, the resulting report was amenable to judicial review.

It appeared for some time that the Eastleigh decision had permitted judicial review of an Ombudsman’s decision only to the extent that he had exceeded his jurisdiction. However, in Dyer, the applicant made a complaint to the PCA concerning the manner in which her various benefit claims had been dealt with by the Department of Social Security. The PCA upheld her complaint, but Miss Dyer claimed that the report had not addressed all of her complaints. The Court held that judicial review of Ombudsmen’s decision was not limited as suggested in Eastleigh. All areas of an Ombudsman’s decision-making process were susceptible to judicial review, as there was nothing in the statutory framework expressly excluding it. However, given the wide-ranging discretion conferred by the 1967 Act, the Court recognised that it would be very difficult, though not impossible, to mount an effective challenge on traditional public law grounds of relevance or unfairness.

In Balchin, however, a decision of the PCA was challenged successfully in similar circumstances. The PCA found that there had been no maladministration by the Department of Transport when dealing with planning matters which adversely affected Mr Balchin. Sedley J decided that the PCA had omitted a potentially decisive element from his consideration of whether there had been maladministration, and therefore quashed the PCA’s decision because he had failed to take account of a relevant consideration.

 

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