In R (on the application of Underwritten Warranty Co Ltd (t/a Insurance Backed Guarantee Co)) v FENSA Ltd EWHC 2308 (Admin) the High Court had to decide whether the decisions of FENSA Ltd, an operator of a self-certification scheme forming an integral part of regulation in the construction industry, were susceptible to judicial review. While decisions in this area are notoriously fact-specific, this case is an interesting example of how the courts go about determining whether or not a body is amenable to judicial review.
- The scheme was “part and parcel of the statutory scheme for building control”, but this was not sufficient to render the decision-maker susceptible to judicial review.
- Factors pointing against the decision-makers’s decisions being amenable included the considerable latitude afforded to it by the Secretary of State, and the existence of a market with competition between decision-makers.
The claimants, the Underwritten Warranty Co Ltd (“UWC“) and its parent company, brought an application for judicial review of FENSA Ltd (“FENSA“).
UWC is an insurance broker specialising in the provision of “insurance backed guarantees” (“IBGs“). These protect consumers if, for example, an installer ceases to trade while work is still under guarantee, and form a key part of a self-certification regulatory system under the Building Regulations 2010 (the “Regulations“).
Under the Regulations, there are two ways of certifying that certain types of building work comply with building regulation standards; the first is through local authority control, and the second is through self-certification schemes. The Regulations state that a number of named entities (including FENSA) are entitled to run self-certification schemes, known as “Competent Persons Schemes” (“CPS“). The Secretary of State has also issued conditions with which all CPSs have to comply, and created the United Kingdom Accreditation Service (the fourth interested party in the case), which is responsible for ensuring that the conditions are met.
FENSA recognised the IBG issued by UWC and approved it for use by members of FENSA’s CPS. After UWC’s existing underwriter ceased trading, UWC replaced it with an entity regulated by the Channel Islands Financial Ombudsman (rather than the Financial Ombudsman Service (“FOS“)) and structured as a cell company. The change also meant that consumers would no longer have access to the Financial Services Compensation Scheme (“FSCS“). As a result of these changes, FENSA concluded that UWC no longer met its requirements and that FENSA could no longer recognise UWC as an approved provider of IBGs. UWC applied for judicial review of that decision.
FENSA argued that it was not amenable to judicial review, and after considering the relevant authorities, Dove J agreed. In his view, while self-certification schemes were “part and parcel of the statutory scheme for building control”, this was not sufficient for the decision to be susceptible to judicial review, particularly given that self-certification had been designed as an alternative system to regulation by local authorities or other independent building inspectors. Should no party choose to operate a CPS, Dove J thought that Parliament would not intervene, but that the alternative system of local authority control would continue.
Dove J found that the source of FENSA’s power to operate a CPS was not merely being named in the Regulations, but also in its compliance with the conditions issued by the Secretary of State. These conditions afforded considerable latitude to operators of CPSs on how they chose to construct their CPS; operators were provided with key objectives, but how they met these was largely up to them. In practice operators of CPSs competed in a market for the business of installers’ self-certification, which pointed against judicial review being available. Dove J also thought it was of importance that the arrangements put in place by FENSA to comply with conditions set by the Secretary of State and its relationship with its members were “purely contractual”, but noted that this factor did not exclude judicial review.
Despite his findings on amenability, Dove J also proceeded to consider UWC’s detailed grounds of challenge, concluding that they had no merit. UWC had four main grounds of challenge. The first was that FENSA had acted irrationally and perversely by failing to treat like cases alike. UWC pointed to evidence that FENSA had endorsed the use of another IBG which was based on a protected cell model and which was not covered by the FSCS. Dove J agreed that like cases should be treated alike, quoting Lord Hoffman in Matadeen v Pointu 1 AC 98, who thought that this was an “axiom of rational behaviour”. The judge found however that the case pointed to by UWC was a “bespoke”, “one-off” arrangement. Other examples provided by UWC were also dismissed, with Dove J finding there was no evidence of differential treatment by FENSA.
UWC also claimed that FENSA had failed to make reasonable enquiries into the alternative arrangements that UWC had put in place. Dove J dismissed this argument, noting that the enquiries made were adequate and appropriate but that even if further dialogue had taken place, UWC would not have been able to overcome the basic reason for FENSA’s decision.
Finally, UWC argued that FENSA had given inadequate reasons for its decision, and that it had contravened the requirements of procedural fairness by failing to give UWC an opportunity to respond to its concerns. These arguments were also rejected. Dove J found that while the emphasis of FENSA’s reasoning had varied over time, the reasons it gave (the cell company structure, the absence of FSCS access and ability to use the FOS) were “clearly interlinked”, so that there was no deficit in the reasons given. On the procedural fairness point, UWC had been “fully aware” of the potential difficulties with its substitute underwriter. FENSA had raised concerns regarding the insolvency arrangements, and the answer UWC gave had not allayed those concerns or met with the requirements of the contract between FENSA and UWC.
Decisions in this area are usually very fact-specific, as noted by Dove J citing R (on the application of Holmcroft Properties Limited) v KPMG LLP and Others  EWHC 323 (Admin) . While the principles are “tolerably clear”, application of them to particular cases is not always straightforward, and Dove J admits in the judgment that he did not find the case easy to resolve.
In this instance FENSA’s decisions were not found to be subject to judicial review, although FENSA was specifically named in the Regulations and the regulatory scheme was set up by Parliament to serve the public interest by ensuring installations comply with appropriate standards. Ultimately however, the fact that the system provided for alternative forms of regulation (both through the alternative system of local authority control and through alternative operators of CPSs) seems to have been decisive.