Contractual context limits scope of judicial review – but where does it leave us?

 

The High Court's judgment in The King (on the application of Rydon Group Holdings Limited) v Secretary of State for Levelling Up, Housing and Communities & Others [2025] EWHC 2182 (Admin) examines the difficult question of whether the full range of public law protection is available in a contractual context, set against the background of the response to the Grenfell Tower tragedy.

In this case the court concluded that the contractual context meant that judicial review was limited to the grounds of fraud, corruption or bad faith. However, viewed alongside other recent caselaw on judicial review where there is a contract involved, the decision appears to make this an even more complex and uncertain area of law.

Background

Rydon Group Holdings Limited (Rydon) is the parent company of Rydon Maintenance Limited, which was the principal contractor for the refurbishment of Grenfell Tower before the tragic fire in 2017. As part of the efforts to improve the safety of other high-rise buildings, the Secretary of State for Levelling Up, Housing and Communities (SoS) called on developers in 2022 to agree to fund or undertake at their own cost the remediation of unsafe buildings (self-remediation). Many developers signed voluntary pledges committing to do so, but Rydon was not among that group. After negotiations between the SoS and the industry, a single set of contractual terms was developed to give binding effect to the principle (the self-remediation terms or SRTs). Rydon was invited to comment on the draft terms but did not do so, and did not sign up to the SRTs at that stage.

The Building Safety Act 2022 (BSA), which was introduced in large part as a response to the Grenfell tragedy, also makes provision for the remediation of certain defects in buildings with two or more dwellings that are at least 11 metres high or have at least five storeys. Regulations made under the BSA established a Scheme aimed at securing that those in the building industry remedy defects in buildings relating to fire safety and contribute to costs associated with remedying such defects. Signing up to the SRTs was a condition of joining the Scheme. Anyone who did not join the Scheme, despite being invited, would be named on a published "Prohibitions List", preventing them from carrying out major developments of land going forward. Rydon joined the Scheme and entered into a contract with the SoS containing the SRTs in 2023. 

In 2024, the SoS made three decisions relating to the remediation of cladding on certain high-rise residential buildings for which Rydon was the developer. Those decisions were: (a) to determine that Rydon was “unfit” to carry out the remediation works; (b) to direct that remediation should take place through the Building Safety Fund (BSF) pursuant to the SRTs of the contract between Rydon and the SoS; and (c) that the buildings should remain within the BSF and should not be transferred to Rydon for remediation. Instead, Rydon was required to reimburse the BSF for works to be undertaken by third parties.

Rydon challenged these decisions on various public law grounds.

Judgment

The key point of interest dealt with by Choudhury J was amenability to and scope of judicial review.

Not all decisions of a public body will be subject to judicial review. Judicial review can only be brought in relation to the exercise of a public function, and will not generally apply to private law matters even if a public body is involved. The court will consider whether the nature of the power and function that has been exercised has a sufficient public law element to make it amenable to judicial review, taking into account a broad range of factors.  

Parties' arguments on amenability

Rydon pointed to the statutory background for the Scheme, established through legislation, and contended that it was effectively compelled to enter into the contract and the SRTs to avoid being placed on the Prohibitions List, meaning this was not a freely negotiated commercial contract. Rather, Rydon characterised this as a means of enforcing statutory objectives in the public interest, which Rydon said justified the decisions being amenable to judicial review on the full range of public law grounds.

The SoS accepted that the decisions were amenable to judicial review but pointed to previous caselaw illustrating that in deciding whether or not to enter into a contract, a public authority is not subject to judicial review except on the grounds of fraud, corruption or bad faith. The SoS argued that the same principle should apply here where the relevant decisions were made pursuant to contractual powers. The SoS did not accept this was a situation of compulsion in circumstances where the SRTs followed detailed negotiations in which Rydon chose not to participate.

Conclusion on amenability

The court reviewed authority on the more limited scope of judicial review in certain contractual situations and concluded that "the contractual context need not be purely commercial for the limited scope of judicial review to apply, as political and other considerations may be at play and rightly taken into account by the authority". Choudhury J read previous caselaw as establishing that ''the fact that a contractual obligation is 'framed by reference to a statutory duty' does not render that obligation a public law duty. More would be required in the form of 'at the very least, a relevant and sufficient nexus' between the contractual obligation in question and a relevant public law power".

Choudhury J highlighted the contractual context, since the decisions in question were taken pursuant to the terms of the contract and the SRTs, and considered that the SoS's underlying objectives of creating the self-remediation Scheme in the interests of public safety did not diminish that contractual context. It was significant that none of the impugned decisions were made in the exercise of statutory or prerogative powers, and the terms were not dictated by statute, with the legislative regime being in broad terms and not going into this level of detail. As such, the court disagreed with Rydon's assertions that the source of the decision was the BSA and Regulations, and found no "nexus" between the contractual provisions pursuant to which the decisions were made and any statutory power. The statutory context was not determinative of the question of whether the full range of judicial review was available, even though the contract was specifically referenced in the Regulations.

On the "compulsion" argument, Choudhury J explained that it was "not unusual for a private entity to have to enter into a contract with a particular provider (eg with an insurer) as a condition of participating in a given market'' and that this commercial reality did not change the nature of the contract, noting also that the terms in this contract had in fact followed extensive negotiations, albeit that Rydon did not participate. Nor did it matter that the SoS was not operating in a commercial market.

Accordingly, in this situation amenability of judicial review was found to be limited to grounds of fraud, corruption or bad faith, none of which were alleged.

Other grounds

Nevertheless, the court went on to consider the substantive grounds of challenge put forward, in case it was wrong about the scope of judicial review. Even at this stage the court emphasised the need to consider each ground against the particular contractual context, and to ensure the court did not allow public law standards to cut across the contractual position.

All six procedural and substantive grounds, ranging from predetermination to irrationality, were dismissed.

Comment

The court in this case upheld a narrower scope of judicial review for decisions taken under a contract, even when there was a statutory background and a clear public interest objective. This approach can be contrasted with:

1. the Court of Appeal finding a contractual dispute resolution process amenable to judicial review where there was a significant link to statutory powers and functions in Shashikanth;
2. comments from Fordham J about the application of conventional judicial review grounds where contractual arrangements are an important means of implementing and discharging statutory duties; and
3. analysis of many of the same authorities as were discussed in this case as a "spectrum" of public and private law elements rather than watertight categories in finding a sufficient public law element where a contractual discretion was being exercised in the context of public law and statutory duties.

The fact that all these decisions were within the last 18 months indicates the prevalence of this tricky issue of the boundary between public law and private law.

Undoubtedly the contract in this case was set against a statutory background and was effectively one of the means chosen by the public authority to achieve public interest objectives, including those contained in primary legislation. The contract was an integral part of a scheme established by secondary legislation. Yet the outcome was different to all the cases mentioned above – judicial review was restricted to only very limited grounds that are notoriously difficult to make out. This illustrates just how fact and context-specific outcomes in such cases are, with analysis at a granular level of detail needed to distinguish between the cases. Parties on both sides of contracts involving public bodies should consider their particular situation carefully against the ever developing body of caselaw to understand what role public law may play.