35. In my judgment, the basis of the Company’s case was not in public law, but only in private law. The Company’s complaint was that the Council had failed to comply with the Agreement, and the Company accordingly was seeking to enforce the Council’s compliance. Subject to being contradicted by a closer analysis of the principles or by binding authority, such a complaint and such enforcement would appear to me respectively to involve a private law claim and a private law remedy, both of which are contractually based, albeit with common law and equitable aspects.

36. In answer to this, Mr Knafler first relied on the fact that the Council’s obligations under clause 11.3 were, in reality, public law duties in that they can be traced directly to section 93 and to paragraph 71 of the 2003 Guidance. The fact that a contractual obligation is framed by reference to a statutory duty does not, in my view, render that obligation a public law duty. Of course, where the statutory duty is owed to a contracting party independently of the contractual obligation, he can normally expect to be able to seek a public law remedy by reference to the duty, as well as, or instead of, a private law remedy by reference to the obligation. However in the present case, the Council’s public law duty, namely that arising under section 93, was owed to the Secretary of State in relation to the provision of grants. There was, as it seems to me, no question of that duty being owed to providers such as the Company.

37. Mr Knafler next relied on the fact that the nature of the Agreement, involving as it did the Council performing public administrative functions, was such that a claim brought under it would be a public law claim. That cannot, I think, be right. Virtually any contract entered into by a local authority, almost by definition, will involve it acting in such a way, as otherwise it would be acting ultra vires. Yet, it is clear that, as Mr Knafler rightly accepts, in the case of alleged breaches of many such contracts, a private law claim is the only type of claim which can be brought.

38. Thus, the mere fact that the party alleged to be in breach of contract is a public body plainly cannot, on its own, transform what would otherwise be a private law claim into a public law claim. There are, of course, circumstances where, in a contractual context, a public body is susceptible to public law remedies. However, where the claim is fundamentally contractual in nature, and involves no allegation of fraud or improper motive or the like against the public body, it would, at least in the absence of very unusual circumstances, be right, as a matter of principle, to limit a claimant to private law remedies.

39. Mr Knafler referred to a passage in the sixth (1999) edition of de Smith, Woolf and Jowell’s Principles of Judicial Review, at paragraph 3–019, which includes the following three sentences:

‘If a public function is being performed, and contract law does not provide an aggrieved person with an appropriate remedy, then action taken under or in pursuance of a contract should be subject to control by judicial review principles. Where a public body enters into a contract with a supplier, a dispute about the rights and duties arising out of the contract will often be determined by private law. However, the decision of a public body to enter, or not [to] enter, into a contract may be subject to judicial review.’

40. The point made in the third sentence of that passage (which is expanded in paragraph 5–035 of the book) has no application here. It is true that the result of the review of which the Company complains did result in the determination of the Agreement and in the offer of a new contract whose terms it considered objectionable. This does not mean, however, that its claim is within the scope of the third sentence in that passage. Its claim is that the 2004 review was not carried out in accordance with the Agreement, not, for instance, that the Council acted in bad faith or was guilty of an improper motive in carrying out, or in failing to carry out, the 2004 review in accordance with clause 11.3. The Company’s complaints that the Agreement was not properly determined, and that it was not offered a new contract on appropriate terms, are solely based on the contention that the Council failed to comply with its (purely contractual) obligation to carry out the 2004 review in accordance with clause 11.3.

41. Mr Knafler relied on the first sentence in the passage I have quoted from de Smith, on the basis that, if private law could not provide a satisfactory remedy in the present case, then the Company should be entitled to resort to public law remedies. As discussed above, it does indeed appear that the Company is only entitled, in terms of private law remedies, to damages for breach of clause 11.3, and it seems likely that such damages would be very difficult to assess. Indeed, it is quite possible that they would only be nominal, as the only consequence of the breach of clause 11.3 was its reflection in the terms of the new contract offered to the Company, and, as the Judge pointed out when considering the terms of the order, the Council had no obligation to enter into a new contract with the Company.

42. However, it cannot be right that a claimant suing a public body for breach of contract, who is dissatisfied with the remedy afforded him by private law, should be able to invoke public law simply because of his dissatisfaction, understandable though it may be. If he could do so, it would place a party who contracts with a public body in an unjustifiably more privileged position than a party who contracts with anyone else, and a public body in an unjustifiably less favourable position than any other contracting party.

43. Equally importantly, it appears to me that it would be wrong in principle for a person who would otherwise be limited to a private law claim should be entitled to base his claim in public law merely because private law does not afford him a sufficiently attractive remedy. It is one thing to say that, because a contracting party is a public body, its actions are, in principle, susceptible to judicial review. It is quite another to say that, because a contracting party is a public body, the types of relief which may be available against it under a contract should include public law remedies, even where the basis of the claim is purely contractual in nature.

44. Mr Knafler relied on a number of cases relating to the circumstances in which, when making a claim in relation to a contract with a public body, the other contracting party can make a claim in public law. Two of those cases appear to me to be of some relevance to the present dispute, and, indeed, to support the conclusion that the Company cannot rely on public law in this case.

45. In Mercury Energy Ltd v Electricity Corporation of New Zealand Ltd [1994] 1 WLR 521, Lord Templeman, giving the judgment of the Privy Council, said this at 529B:

‘It does not seem to me likely that a decision by a state enterprise to enter into or determine a commercial contract to supply goods or services will ever be the subject of judicial review in the absence of fraud, corruption or bad faith.’

That statement is plainly unhelpful to the Company’s case: the only basis on which its claim is founded is breach of contract. Later, at 529G, Lord Templeman made the following observation, which also seems to apply to the present case:

‘The causes of action based on breach of statutory duty, abuse of monopoly position and administrative impropriety are only relevant if the causes of action based on contract are rejected. If the causes of action based on contract are rejected, the other causes of action will only constitute attempts to obtain, by the declaration sought, specific performance of a non-existing contract. The exploitation and extension of remedies such as judicial review beyond their proper sphere should not be encouraged.’

46. In Mercury Communications Ltd v Director-General of Telecommunications [1996] 1 WLR 48, Lord Slynn of Hadley, (who gave the only reasoned speech) referred in a passage at 57E–G to the importance of maintaining a degree of ‘flexibility as to the use of different procedures’, namely public law and private law procedures. That case was concerned with the question of procedure than with that of remedy. Lord Slynn explained in the same passage that the plaintiff had properly brought private law proceedings because the dispute was ‘in substance and in form … as to the effect of the terms of the contract even if it can also be expressed as a dispute as to the terms of the licence’. In the present case, the issues which we are considering concern the meaning and effect of the Agreement.

47. In these circumstances, I conclude that the Company has no claim which it can pursue by way of judicial review, and in particular by seeking public law remedies. Since preparing this judgment, I have had the opportunity of reading the judgment of Mummery LJ which deals with this aspect of the appeal on a somewhat broader basis, and with which I agree.

54. First, neither side has taken up an extreme position. Mr Knafler for the Company has not contended that judicial review is available against the Council simply because it is a public authority. Mr Straker for the Council has not argued that the mere existence of a relevant contract excludes the possibility of judicial review against a public authority.

55. Secondly, a public authority could, in principle, both be subject to claims in private law for breach of contract and to judicial review for breach of public law duties or abuse of public law powers in connection with a contract made by it.

56. Thirdly, in order to attract public law remedies, it would be necessary for the applicant for judicial review to establish, at the very least, a relevant and sufficient nexus between the aspect of the contractual situation of which complaint is made and an alleged unlawful exercise of relevant public law powers.

57. Fourthly, the respective positions of the parties on where to draw the line of the crucial private law/public law divide are helpful. Mr Knafler wants a mandatory remedy in respect of what he contends is a defective support services review conducted by the Council. He does not mind whether it is private law decree of specific performance, as was granted by the judge, or a mandatory order in public law, which was declined by the judge. He argues that the judge was right to grant specific performance, as there was a contract containing an obligation which he contended had not yet been properly performed by the Council. Alternatively, if the judge was wrong to order specific performance, he should have made a mandatory order in public law in accordance with Mr Knafler’s primary case. The alternative private law remedy of damages was inadequate. The Company was entitled to have the support services review obligation properly performed in public law, as it was relevant to the grant of a new contract by the Council. There was, he contended, a sufficient public law element in the situation to attract the protection of public law. The obligation in the contract to carry out a support services review was underpinned by public law considerations derived from the 2000 Act, the Scheme, the 2003 guidance and the Council’s published rules about reviews.

58. Against that Mr Straker’s position is quite simply that the review was carried out by the Council under the express provisions for one, and only one, review; that, in accordance with the agreed terms, the contract expired at the end of 1 year after the review; that the judge was clearly wrong to order specific performance to require the carrying out of a further review under a contract which did not provide for one and which had, in any event, expired; and that Mr Knafler could not opt for a public law remedy to compel the performance of a private law contractual obligation on the ground that such a remedy was unavailable in private law.

59. Fifthly, I agree with Neuberger LJ that this was not a public law case. The action of the Council in conducting the support services review was not amenable to judicial review, because there was no sufficient nexus between the conduct of the review and the public law powers of the Council to make this a judicial review case. The required public law element of unlawful use of power was missing from the support services review. The substance of the dispute between the Council and the Company was about the expiration of the Agreement after the Council had conducted the support services review under clause 11. The Council had entered into the Agreement with the Company in April 2003. The trigger provision for the expiry of the Agreement was the conduct of the support services review as contained in clauses 1.1, 2.2 and 11.2–11.3 of the Agreement. The source of the power of the Council’s support services review was in the Agreement, not in the legislation or in the non-statutory 2003 Guidance and published rules. The Agreement governed the review. It spelt out the agreed consequences of a review for the life of the Agreement. Formal notice of the result of the review was given by the Council on 16 July 2004. The breach of the Agreement found by the judge did not, he held, prevent it from being a valid review for the purposes of triggering the expiration provisions. The Council declined the request of the Company to re-open the review, contending that the effect of the clause under which the support services review was conducted by it was to bring the Agreement to an end. The Company did not want the Agreement to come to an end. It sought an order quashing the review, an order requiring the Council to conduct a review ‘according to law’ and a declaration that, until the completion of the review, the Agreement remained extant.

60. Sixthly, although the grounds for the judicial review application use public law language of a ‘decision’ taken by the Council on cost-effectiveness matters in the review, of taking account of irrelevant considerations and failing to have regard to have regard to relevant considerations and of procedural unfairness in the review process, this terminology does not alter the substance of the dispute as to whether or not the Agreement had come to an end in accordance with its terms. That turns on the provision of the Agreement that that the Agreement comes to an end at the expiration of 12 months from the review. Termination of the Agreement turned on the operation of the contract according to agreed terms, not on the exercise of a statutory or common law public law power of the council which was amenable to judicial review.

61. Seventhly, it cannot be right in principle for a party to a contract with a public authority to have recourse to public law remedies simply on the ground the private law remedies, such as specific performance, are not available after the relevant contractual obligations have expired, or because they are too vague and uncertain to be specifically enforceable by the court, or because alternative private law remedies, such as damages for breach of contract, are inadequate. The relevant remedies are those available in private law for breach of contract.