RMP -v- Brent: What the decision means

On April 22nd 2008 Lord Justice Stanley Burnton handed down his judgment in R (on the application of Risk Management Partners) –v– the Council of the London Borough of Brent [2008] EWHC 692 (Admin).

LAML, who were an interested party in the case, say that the court threw “out claims from the private sector that councils are acting beyond their designated powers”.

In fact the Court found the very opposite—Brent had no power to establish or participate in LAML, to become a member of it, or to make a paid up or guaranteed capital contribution to LAML either under section 111 of the Local Government Act 1972 or section 2 of the Local Government Act 2000.

The Court granted RMP a declaration to that effect and ordered Brent to pay RMP’s costs of the claim.

LAML go on to say that “Harrow Council was also named in the case, but no finding of ultra vires was made against Harrow”. Like LAML, Harrow was merely an interested party in the case, not a defendant. The reason no finding was made against it—or against LAML— is because their actions were not the subject of this claim for judicial review.

LAML also claim that “the Judgment states that authorities do have powers, pursuant to well-being powers under s2 of the Local Government Act 2000 to join LAML.” That is simply incorrect. The judge said no such thing.

What he did find was that if a local authority bases its decision to enter LAML on what savings it might make on its insurance premiums then its decision will be unlawful under the “well-being” power in s.2 Local Government Act 2000 (paragraph 114 of the judgment). In that regard, it is worth noting that LAML continues to broadcast its primary message to authorities, that “it aims to save its growing membership up to 15 per cent per annum on their insurance premiums over the next five years”.

The only other comments by the judge in respect of the section 2 well-being power were made obiter and without having heard argument: “I think that a local authority could pursuant to its well-being power enter into a contract with a company for the provision of advice as to the avoidance of damage to property in its area through fire or accident, or for the avoidance of accidents to persons living or working there. In other words, a local authority could purchase what has been referred to as risk management services.” If so, he thought, it could contract with the company for the provision of such services and insurance, and provide guarantees and financial assistance to the company for that purpose pursuant to section 2(4).

But whatever the merits of these views expressed obiter, the simple fact is that LAML is not such a company: its principal object is to provide insurance for London local authorities. It is no part of LAML’s objects to provide risk management services in respect of property or persons living or working in any particular local authority area generally. And neither are the capital contributions required by LAML to meet the FSA’s requirements for its business, which is insuring local authorities themselves, made for such purposes.

Finally, it may be noted that LAML sought permission to appeal against the very judgment that it now claims is a “vindication of LAML’s actions”.