Held, (1) claims against the council dismissed. Since the contract clearly identified the parties to the contract as B and the college, and made no reference to the council, and the contemporaneous documents all referred to the college as B’s counterparty, as a matter of fact the college was not the council’s agent. An agency was not implicit in the local authority’s duty to fund maintained schools under regulation 22(1) of the School and Early Years Finance (England) Regulations 2012, especially in circumstances where the contracting college incurred expenditure relating to the provision of sixth-form education. On a proper construction, section 49(5) and (6) of the School Standards Framework Act 1998 did not operate so as to render the local authority the principal under any contract into which the maintained school entered under which it would be liable to pay money. Accordingly, the council was not a party to the contract, the contracting party was instead the college, and the claims against the council failed (paras 84–85, 86–87, 93, 95, 97, 100–101, 102, 103, 105, 106, 108, 250).

(2) Claims against the college and the council dismissed. A scheme issued by a council pursuant to section 48 of the School Standards Framework Act 1998 generally only imposed obligations on the maintained school as to how it should conduct itself and did not define the legal powers of the school, except that a particular provision within a scheme could impose a limit on the school’s power to contract if that provision made it sufficiently clear that compliance with it constituted a limitation on the extent of the school’s power. On construction of the college’s scheme, the obligations in the scheme regulated only as between the college and the council how the college should exercise its powers and did not constitute a legal limit on the college’s vires. However, on its true construction, paragraph 3(4)(a) of Schedule 1 to the Education Act 2002 imposed a statutory condition precedent to the power of a governing body to borrowing money, namely obtaining the consent of the Secretary of State, which limited the governing body’s power to borrow rather than simply imposing a requirement as to the manner of its exercise. That requirement applied both when money was borrowed and/or when security was granted in respect of such borrowing, and not only when both things were done together. “Borrowing” for the purposes of paragraph 3(4)(a) could encompass a hire contract, and what constituted “borrowing” turned not on how the transaction was structured or labelled but involved consideration of the economic substance of the transaction. Since the established accounting tests for identifying a finance lease involved an analysis as a matter of substance and not of form, if they identified the contract as a finance lease, it would therefore constitute “borrowing” so as to engage paragraphs 3(3)(a) and 3(4)(a). Applying the applicable accounting standards, the contract was a finance lease. It followed that the contract involved “borrowing”. Since the contract was entered into without the permission of the Secretary of State, the contract was accordingly ultra vires the college and void, and the claims against both the college and the council failed for that reason (paras 172–173, 174–175, 176–181, 249, 250, 271, 278, 281, 284, 287, 289, 292, 507).

(3) Claim in misrepresentation and/or misstatement dismissed but claim in unjust enrichment allowed. The rule that a public body could not make a legally enforceable promise that it had the capacity that it in fact lacked, or could not be held by a doctrine of estoppel to a representation it had made that it had the capacity that it lacked, was not confined to cases where the claimant sought to place itself in the same position as if the defendant had had vires, but could also extend to cases where the claimant sought only to assert a reliance interest. A distinction between a representation by the public body that the transaction was valid and a representation that it had or would obtain power to enter into a transaction was also not on its own decisive. Given that the substance of the claimants’ case was that they were led to believe that they could and had entered into a valid contract with the college and the representation in question was based on a letter from the college shortly before the contract was signed, and given further that the loss sought by the claimants was one which protected their expectation interest, the finding of ultra vires in relation to the contract accordingly barred any misrepresentation or misstatement claim against the college but not against the council, which was not a party to the contract and had not established that it would have been outside its own capacity to enter into the contract. However, since the claimants had not established that, but for the contract, they would have entered into a contract with a third party on essentially similar terms, and further since the defendants’ representations were only expressions of opinion and were true when made and there was no reliance as a matter of fact on the statements, any misrepresentation or misstatement claim failed. However, the defendants had been unjustly enriched at the expense of the first claimant, which was accordingly entitled to recover in unjust enrichment for the period subsequent to the missed annual instalment payment (paras 362, 363, 364, 365, 366, 368, 369, 371–373, 385–386, 387, 398–400, 407–412, 423, 431, 433–434, 440, 507).

(4) Counterclaim dismissed. On the facts, the college was entitled to bring an unjust enrichment claim in respect of certain of the invoices it impugned. However, the defence of change of position to a claim brought by a public body to recover monies paid out under an ultra vires contract was available even where the change of position occurred before rather than after the receipt in question. That defence being established on the facts and there being no surviving asset to defeat that defence, the counterclaim failed (paras 453, 468–469, 475, 478, 481–482, 486, 493–494, 499, 507).

Per curiam. If a public body lacks statutory power to enter into a contract of a particular kind, it does not have contractual capacity to do so as a matter of private law. However, where a public body has capacity to enter into a contract of a particular kind but the way in which it takes the decision to do so can be impugned on public law grounds, the nullity, as a matter of public law, of its decision to contract does not, without more, equate to a lack of contracting capacity as a matter of private law. Public law unlawfulness provides a defence to a private law claim in contract only when the facts which give rise to that public law unlawfulness also give rise to a private law defence. Relief is discretionary and can be upheld on various grounds intended to avoid injustice to the defendant or third parties, such as if the contract was entered into with a person acting in good faith who would be prejudiced by the declaration of invalidity, particularly where there was delay in bringing the challenge. Accordingly, a decision by a public body to enter into a contract which it did not have power to conclude gives rise to a private law defence of lack of contracting capacity but if the public body had power to enter into contracts of the relevant type but is alleged to have acted unlawfully in reaching its decision to contract, the consequence of such public law unlawfulness in private law depends both on the nature of the unlawfulness and on whether the counterparty had notice of the relevant breach of public law duty (paras 150, 153–155, 159, 162).