A recent test case has alarmed human rights campaigners about the legal implications of local authorities outsourcing services to independent providers. Lauren Revans reports.

When does an independent provider become a "public authority" in the eyes of the law? As the boundaries between the public, private and voluntary sectors become increasingly blurred, and the Human Rights Act 1998 becomes more widely used, this is a question that judges can expect to be asked over and over again in the months and years ahead.

Lord Chief Justice Lord Woolf concluded in the court of appeal last week that while the degree of public funding of the activities of an otherwise private body is certainly relevant as to the nature of the functions performed, by itself it does not determine whether the functions are public or private.

In what has been widely recognised as a test case of "general public importance", the three judges ruled that the role performed by disability charity Leonard Cheshire Foundation (LCF) in providing residential care for local authority-funded residents with disabilities "manifestly did not involve the performance of public functions".

"Except for the resources needed to fund the residents of (LCF's first-established home) Le Court, there is no material distinction between the nature of the services LCF has provided for residents funded by a local authority and those provided to residents funded privately," their written judgement concludes. "There is no other evidence of there being a public flavour to the functions of LCF or LCF itself. LCF is not standing in the shoes of the local authorities."

The appeal was the latest legal step by three residents of Le Court who mounted a judicial review challenge last April following the charity's decision to cease to operate the 50-bed home in its present form.

The residents, who claimed they had been promised a "home for life", argued that the planned "redevelopment" would infringe their rights under article eight of the European Convention of Human Rights, which guarantees respect for private and family life.

But a High Court judge dismissed their challenge, ruling that LCF was not a "public body" within the meaning of the 1998 Act, so it did not have duties imposed by it and its actions were therefore not capable of being judicially reviewed.

Lord Woolf has now reinforced that dismissal, agreeing that "the claimants have no public law rights".

This decision has not only disappointed the three local authority-funded residents who brought the challenge - and who are now applying to the House of Lords for leave to appeal - but has alarmed human rights campaigners concerned about the implications for other service users whose local authorities have outsourced their services to independent providers.

Human rights pressure group Justice believes that defining exactly what constitutes "public functions" at a time when more and more public services are being delivered through partnerships is "a problem of great significance".

In a written submission to the court in support of the appeal, Justice argues: "[A public function's] nature cannot be fundamentally altered by the adventitious fact that such a function is being discharged using contracted third parties who are ostensibly 'private' entities. If it is or would be a public function when discharged by a pure public authority, it is no less a public function when discharged by a third party."

The group also stresses that, just as a local authority cannot avoid its statutory obligations by means of delegation, neither can it lawfully contract out of them. "It follows that any contacts or arrangements made by a pure public body must comply fully with the 1998 Act if they are not to be unlawful," its submission concludes.

The complexities of determining when a private or voluntary-sector organisation's functions are "functions of a public nature" - and therefore when an organisation is a "public authority" under section six of the 1998 Act - are highlighted by the differences between the LCF judgement and Lord Woolf's judgement in a separate case last April in which the claimants accused a housing association of breaching their human rights by attempting to re-possess their home.

In this case, Poplar Housing and Regeneration Community Association Ltd v Donoghue (see box), Lord Woolf deemed the role of the housing association to be "so closely assimilated" to that of the local authority that it was in fact performing public functions to which human rights provisions applied.

The appeal court judgement - the only one other than the LCF judgement really to address the "public function" definition issue since the 1998 Act came into force in October 2000 - states that when an outsourced body performs an activity that a local authority would otherwise be legally bound to perform it does not mean that that activity is necessarily a public function, but then goes on to refer to "a feature or combination of features which impose a public character on the act".

Such features might include the extent of control that the outsourcing body continues to exercise over the outsourced function; the degree to which the outsourced activity is enmeshed with the activities of the outsourcing body; how directly the outsourced activity is funded by a public authority; and whether the organisation carrying out the outsourced function has powers or duties derived originally from statute.

Claire O'Brien, Human Rights Act project researcher for the London School of Economics, says the decisions made in these two cases illustrate how "complicated and subtle" the interpretation of section six of the 1998 Act remains in the absence of any real guidance.

"This proves there is not going to be one rule for everything across the board," O'Brien says. "It is not the case that everything outsourced is or is not human rights territory."

O'Brien believes the courts are struggling to balance Parliament's decision to pass legislation allowing local authorities to outsource services in order to raise standards against the need to protect people's human rights. She suggests that government departments should produce relevant guidance for local authorities, against which outsourced functions can be measured to determine human rights eligibility.

Human rights solicitor Bernadette Livesey believes the courts' lack of clarity about what does or does not constitute a public function is the result of "badly drafted" legislation and a deliberate decision by the Lord Chancellor at the time the bill was going through Parliament not to define it properly, but to leave it to be determined through litigation.

Although local authorities retain an obligation to service users of its outsourced functions under the National Assistance Act 1948, Livesey argues that this does not amount to an effective recourse for people wishing to complain about those services.

"Your remedy is against the local authority. But what do you do when it is not the local authority that is making you unhappy? They are not in a position to do anything about it. The remedy lies with someone who is not actually causing the problem."

Calling for the House of Lords to define the remit of the 1998 Act, Livesey warns: "There's a real worry that people who carry out public services for public authorities after this judgement seem to have fewer obligations and, as the way that services are provided has changed, inevitably that raises the question about how people who use these services are protected."

The Poplar case

The appeal court concluded that Poplar Housing and Regeneration Community Association was a public authority under the 1998 Act because it was created by Tower Hamlets local authority; was subject to supervision and regulation by the local authority; was in receipt of grants from it; and had statutory duties to co-operate with local housing authorities.

By comparison, Leonard Cheshire Foundation was not acting under any statutory power, was not subject to the same extent of regulation and was not created by any local authority. There was no material distinction between services for privately or publicly funded residents; the degree of public funding for placements was not determinative; and there was no integrated relationship between LCF and any of the relevant purchasing authorities.