Council leader Cllr Myles Cullen said the authority had been working with expert counsel and health consultants to prepare a potential legal challenge – a judicial review – against the Primary Care Trust decision.

"We are pleased to see the formal reference by the Joint Health Overview and Scrutiny Committee to the secretary of state for him to make the final decision, and within that process the district council intends to make its own submission to the secretary of state," he added.

"The reference by the JHOSC to the secretary of state may make an application for judicial review unnecessary.

"It is prudent both the council and the PCT avoid incurring unnecessary public expenditure on court proceedings, especially as permission to pursue a judicial review case is usually refused if there is another statutory process which is under way or could be used as an alternative."

However, the rules of the High Court required an application for judicial review to be submitted within certain timescales.

On advice from counsel, the council had written to the PCT informing it the local authority was willing to postpone making a decision on judicial review for a period of two months to allow for progress to be made on the reference to the secretary of state.

The PCT had been asked to take part in a 'gentleman's agreement' that if the council subsequently started the judicial review process, the PCT would not claim the council was out of time with its application.

Depending on the response from the PCT, it might be necessary to convene a special meeting of the full council to consider whether an application for judicial review should be made.

Director for West Sussex PCT, Brian Hughes, said: "West Sussex Primary Care Trust became aware only on Tuesday afternoon of Chichester District Council's intentions with regards to judicial review.

"The PCT intends to study the contents of the letter and will respond in due course after we have sought legal advice.

"The Fit for the Future programme has already been a long process which we would not like to see prolonged unnecessarily because this creates uncertainty for our patients, staff and the public."