The Claimant, Ms Josephine Hayes, was one of the founding members of the Liberal Democrats (the “Party”). By a Decision Notice dated 1 September 2022, a disciplinary panel of the Party decided to uphold various complaints against her and expel her. Ms Hayes challenged her expulsion, alleging breach of contract by the Party.
Following a five-day trial, Mr Justice Foxton dismissed the claim. His judgment contains an insightful discussion of the Court’s ability to interfere with decisions made under a contractual discretion and what the consequences of a finding of breach may be.
As is well known, the decisions of a contractual decision-maker can only be challenged in relatively narrow circumstances. The question for the court is not whether, on the evidence before it, it would have reached the same answer, but whether the decision fell within the range of contractually-permissible decisions: Braganza v BP Shipping [2015] UKSC 17. The level of scrutiny will be influenced by the type of decision in issue. Where the decision involved an evaluative application of open-textured criteria rather than (say) a primary finding of fact, there is likely to have been a broader range of reasonable decisions open to the decision-maker.
Foxton J also considered an aspect of the law in this area which has hitherto received less attention, namely what the court should do if it finds there has been a breach of contract when exercising a contractual discretion. The first issue to consider is whether the decision is void (i.e. whether the breach was in the nature of a jurisdictional error). This turns on the true construction of the relevant contract, and the nature and gravity of the deviation from the contractual requirements. Secondly, if the decision is found to have been a nullity, the question arises of whether the court should simply leave it to the parties to decide how to act thereafter (which may involve the contractual decision-maker purporting to make a fresh decision), or whether the court itself should step in and make the relevant decision. The answer will depend upon the contractual context. In some commercial cases, the parties may be taken to have intended that the court would make the required decision. But where (for example) the decision concerned membership to a political party, it may be equally clear that the parties did not intend the court to substitute its own view. Foxton J’s analysis has made it clearer that there will be cases where either approach is properly arguable.
Richard Mott and Lauren Hitchman acted for the Party, instructed by DTM Legal LLP.
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