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[Buy ICLR report:  PTSR 453]
||Neutral Citation Number:  EWHC 3324 (Admin)
||Case No: CO/3232/2016
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
MR JUSTICE HOLGATE
|| THE QUEEN ON THE APPLICATION OF ANDREW PLANT
||- and -
||LAMBETH LONDON BOROUGH COUNCIL
David Wolfe QC and Leon Glenister (instructed by Leigh Day, Solicitors) for the Claimant
James Goudie QC and Jon Holbrook (instructed by Lambeth LBC Legal) for the Defendant
Hearing dates: 15 – 17 November 2016
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mr Justice Holgate:
- Since 1996 Mr. Andrew Plant, the Claimant, has lived as a secure tenant of the Defendant, Lambeth London Borough Council ("LLBC") at 8, Hambridge Way, Cressingham Gardens, London SW2 2NJ. His home is located on the Cressingham Gardens Estate ("CGE"). LLBC is the local housing authority for its area and responsible for the CGE under the Housing Act 1985 ("the 1985 Act"). He challenges by judicial review the resolution of LLBC's Cabinet on 21 March 2016 (inter alia) to authorise the redevelopment of the entire estate. This involves the displacement of all existing tenants and owners and the demolition of existing homes prior to redevelopment. In so far as owners are unwilling to dispose of their interests LLBC will need to use compulsory purchase powers. So far as secure tenants are concerned LLBC envisages obtaining any necessary orders for possession under section 84 and ground 10 (landlord's intention to demolish) in Part I of Schedule 2 of the 1985 Act.
- Permission to apply for judicial review was granted by May J on 19 August 2016. On 26 September 2016 Cranston J ordered that the substantive hearing should take place before the end of November 2016.
- CGE comprises 360 dwellings. They are occupied by a mixture of secure tenants, leaseholders through the exercise of a statutory "right to buy", persons who have bought leases from persons who had exercised that right and some freeholders. LLBC states that around 62% of the right to buy properties have been sold on to incoming purchasers, no doubt a reflection of the estate's good location within the Borough and the capital.
- The estate was built in the 1960s on the edge of Brockwell Park to a relatively low density and using more traditional materials, notably brick. From 1963 Edward Hollamby OBE, the Borough Architect, led a team of architects which was responsible for a substantial programme of innovative, attractive local authority housing estates in Lambeth of which CGE was one. Although the estate does not qualify for listing under the Planning (Listed Buildings and Conservation Areas) Act 1990, English Heritage (now Historic England) has noted that, for example, the quality of the open spaces contributes to CGE's character. The estate is well situated for commuting and LLBC accept that it is seen as a desirable place in which to live.
- However, since 2012 LLBC has taken the view that CGE is a costly estate to manage and maintain and that there are serious problems in the condition of many of the properties. They also consider that refurbishing the properties would not overcome intrinsic problems in the estate's design which have become apparent since the 1960s. For example, there are numerous staircases throughout the estate which make accessibility, particularly for the disabled, a serious problem.
Events from October 2012 to November 2015
- On 22 October 2012 LLBC's Cabinet approved a report on the Lambeth Estate Regeneration Programme ("LERP"). The report identified estates suitable for regeneration on the basis of three criteria: (1) whether the costs of bringing an estate up to the Lambeth Housing Standard ("LHS") were prohibitive, (2) whether bringing an estate up to the LHS would fail to address underlying issues such as the basic condition of the homes, and (3) whether wider regeneration benefits would justify the inclusion of an estate in the programme. The Council included CGE in phase 1 of the regeneration programme. This was partly because the cost of refurbishment per dwelling was high and yet structural problems would still remain. But in addition the low density of the existing built development on the estate provided scope for increasing the number of homes provided.
- In December 2012 LLBC began what became a protracted process of discussion and consultation with residents on the regeneration of CGE and alternatives to redevelopment.
- On 6 November 2014 LLBC launched a consultation with residents on five options, but on the basis that ultimately the authority could only adopt an option which would be "affordable". In summary, the options were as follows:-
Option 1 – refurbish all of the 306 homes on the estate;
Option 2 – Demolish 19 homes and redevelop with 38 new homes. Refurbish all other houses on the estate.
Option 3 – Demolish 31 homes and redevelop with 51 new homes. Refurbish all other homes on the estate.
Option 4 – Demolish 120 homes and redevelop with 193 new homes. Refurbish all other homes on the estate.
Option 5 – Demolish all 306 homes on the estate and redevelop with 464 new homes (the full "regeneration" option).
It was pointed out by LLBC that the average cost per home of LHS refurbishment works was more than twice as much for the CGE compared to other estates in Lambeth.
- LLBC was obliged to consult their tenants on these options pursuant to section 105 of the 1985 Act. As part of the process LLBC stated that they would set up 5 working groups which would involve residents, one of which would be concerned with financial modelling. At a meeting on 27 October 2014 it was explained that the modelling would analyse estimated revenue and expenditure for each option by using discounted cash flow ("DCF") techniques to produce a net present value ("NPV") for each option so that comparisons could be made between them.
- In a letter to residents dated 26 February 2015 LLBC's Cabinet member for housing explained that CGE had been identified for regeneration in 2012 because of the cost of bringing its housing up to the LHS and because of the pressing need to provide more homes for rent across the borough. In December 2014 LLBC had decided to provide a large proportion of these new homes on six estates, one of which was CGE. The letter also explained that because LLBC was unable to afford options 1 to 3 and because those options would fail to deliver the number of new homes expected from the CGE, a report would be presented to the Council's Cabinet in March 2015, recommending that they be withdrawn from consultation with the residents.
- On 9 March 2015 the Cabinet resolved to accept that recommendation and continue the consultation with residents solely on options involving "significant regeneration" of CGE. A resident of the estate, Eva Bokrosova, brought a claim for judicial review against LLBC in respect of its decision to change the basis of the consultation exercise before it had been completed. The matter came before Elizabeth Laing J. In her judgment delivered on 24 November 2015 she allowed the application and quashed the decision of 9 March 2015 (R (Bokrosova) v Lambeth London Borough Council  EWHC 3386 (Admin);  PTSR 355).
- In summary, the Judge held:-
(i) In late 2014 LLBC had embarked upon a "detailed and sophisticated programme of consultation" with residents. The effect of the decision on 9 March 2015 had been to renege on those arrangements and to prevent the Council from considering the representations from residents on three of the options (paragraph 79).
(ii) Assuming, without deciding, that a sufficiently significant change in circumstances could have entitled LLBC to alter the consultation process in that way, on the evidence presented to the Court no such change had occurred. Therefore, by removing options 1, 2 and 3 from the consultation exercise the authority had acted unlawfully (paragraphs 83 - 87);
(iii) With regard to section 31(2A) of the Senior Courts Act 1981, if LLBC had not altered the arrangements for consultation, the financial position on all of the options would have been before the Council "much more fully" and in those circumstances it was not "highly likely" that LLBC's decision would have been the same. Consequently, the Court was not required by section 31(2A) to refuse relief (paragraph 90);
(iv) If, contrary to (iii), the test in section 31(2A) for refusing relief had been met, on balance general public interest factors outweighed the need to hold LLBC to its consultation promises to the tenants of the CGE and so under section 31(2B) of the 1981 Act relief would have been refused. Those public interest factors included the Council's very difficult financial position, the balance to be struck between the interests of the residents of CGE and the Council's other tenants and those on the housing waiting list, the urgent need for works to be carried out to the CGE, and the need for residents to have certainty about the future of their estate (paragraph 91).
(v) Relief should not be refused on the grounds of delay (paragraphs 92-7).
- Two further points concerning the judgment should be noted. First, at paragraph 80 Laing J accepted that the decision had been politically sensitive and difficult for LLBC because it involved balancing the interests of different groups, on the one hand tenants, homeowners and leaseholders on the CGE and on the other hand the Council's tenants living elsewhere in the Borough whose rents (at that stage) could be adversely affected by a decision to spend more on CGE. Second, it is common ground between the parties in the present proceedings that the Judge's summary of the factual background up to March 2015 contained in paragraphs 4 to 64 of her judgment is accurate. I gratefully adopt that summary.
Events leading to the present claim for judicial review
LLBC's consultation document issued on 19 January 2016
- On 19 January 2016 LLBC sent out a further consultation document to residents entitled "The Future of Cressingham Gardens Estate".
- Under the heading "Where are we now?" the document informed residents that in July 2015 LLBC had decided to choose option 5, redevelopment of the entire estate, as its preferred option.
- In a section dealing with LLBC's responsibilities, the authority states that its goal was to address the "housing crisis facing the Borough". The objective was to increase the supply of new homes and enhance the quality of existing social homes. It pointed out that over 21,000 people are on the waiting list for a council home in the Borough, 1,800 homeless families are living in temporary accommodation and 1,300 families are living in severely overcrowded homes. In October 2012 the Cabinet had approved a programme to examine how its lower density and/or poorer quality estates could provide additional new homes and that Cressingham Gardens had been identified as one of those estates.
- The consultation document then dealt with LLBC's Housing Revenue Account ("HRA") :-
"The...HRA is a ring-fenced pot of money held by the Council to look after the homes it owns. All the money needed to manage, maintain and improve the Council's social housing comes from this account. Also there are strict rules set by Government, which control how the Council must manage the [HRA], for example it is not allowed to run a deficit."
Under the heading "Where does the HRA get its money from?":-
"Money comes into the HRA from Council tenant rent and service charges. In the last few years Council rents in Lambeth have been rising. However, in the summer 2015 budget, the Government announced that Council rent would be reduced by 4% over the next 4 years. This year on year 1% reduction, which starts in 2016, will mean £28.4 million less income by 2020. This reduction is not going to be replaced.
The HRA is also losing income because of measures such as the Government's "High Value Empty Homes Payment" and Right to Buy." (emphasis added)
The document informed residents that LLBC could only use money in the HRA to fund management of the Council's housing, maintaining repairing and improving the Council's housing stock, capital investment on that stock (e.g. major improvements or repairs), and interest and loan repayments relating to amounts borrowed to fund capital expenditure on HRA properties.
- The document dealt with the question of whether LLBC could use the HRA in order to borrow money for the purposes of regeneration. It explained that the Government had set a limit on the amount of money that the Council could borrow through the HRA, the difference between the current level of borrowing and that limit is known as the "HRA headroom", and "for the foreseeable future there is little room for the Council to borrow more without putting the financial viability of the HRA at risk".
- Referring to the LHS programme, the document explained that in 2012 the LLBC agreed to bring all homes in Lambeth up to the LHS. That standard was co-produced with residents. It was estimated that the LHS programme would cost £499m. The Council estimated in 2012 that it would be able to fund £431m of that figure through a combination of borrowing and grants. The Council had made a grant application to the Greater London Authority ("GLA") in 2010/11 for £217.5m to support the LHS programme. However, the Council was subsequently awarded only £100.5m to support the programme between 2011 and 2015. Later on the Council had been awarded an additional grant of £23.3m from the GLA, but that still left a shortfall for meeting the earlier cost estimate. The document explained that in view of reducing levels of income for the HRA through the exercise of Right to Buy and also rent reductions imposed by central government, along with the shortfalls in grant, the Council had to prioritise how it would deliver LHS to residents. From this information it was plain to consultees that LLBC could not afford to bring up to the LHS all of its dwellings in need of refurbishment. Accordingly, the Council had to choose which of its estates should be refurbished and which should not.
- The document then went on to explain LLBC's Regeneration Programme. Estates had been included in the programme using the following criteria:-
- The cost of delivering the Lambeth Housing Standard would be too expensive and would not be good value for money.
- Lambeth Housing Standard works would, in themselves, not address the fundamental condition of the homes nor address many of the wider social and economic problems faced by residents.
The consultation document explained that there was not sufficient funding within the Council to build new homes. Consequently, it proposed to set up a subsidiary company of which 100% would be owned by the Council, "Homes for Lambeth", as a special purpose vehicle ("SPV") which could borrow from financial institutions the funds needed to regenerate selected estates.
- The wider benefits from regeneration would justify the investment. This includes occasions where the existing estate is relatively low-density and where there is an opportunity to create additional much needed new homes.
The document then summarised each of the five options for the future of CGE under three headings, which covered an overview of each option, "value for money" and the number of new homes to be provided. For example, in respect of option 1, the full refurbishment scheme, the consultation document pointed out that no new homes would be provided. As regards "value for money" the document stated:-
"Any money spent on refurbishing homes to LHS standard on Cressingham Gardens will mean that there is less money to be spent improving other homes. This means that the Council has to make sure that any refurbishment work represents value for money. Unfortunately, the predicted cost of bringing homes on Cressingham Gardens up to LHS is disproportionately higher than the average – for every home refurbished to LHS on Cressingham, on average, 2 homes elsewhere in the Borough could be brought up to the same level."
"Given the limited funds available in the Council's Housing Revenue Account, the Council has to make difficult decisions regarding which estates to refurbish and which estates to redevelop."
Thus it was made plain to consultees once again that a decision to refurbish dwellings on CGE would divert funds away from other Council homes in need of refurbishment. Moreover, because the average cost per home of refurbishment on CGE was so much greater, fewer homes would be refurbished in the Borough overall if a refurbishment option were to be chosen for CGE.
For option 5, full redevelopment, the document explained that this option would be paid for by Homes for Lambeth. Consequently, no money would be required to be provided from the HRA. However, these homes would need to create an income in order to pay for the costs of the option.
The consultation document was supplemented by information provided to residents at exhibitions held in January and February 2016 and also by Q&A information sheets. For example, a Financial Q&A sheet was published on 16 February 2016. The consultation document asked residents to respond by 19 February 2016, but it appears that that date was subsequently extended.
The People's Plan
A group of CGE residents opposed to the redevelopment of the estate produced their own option and a lengthy response to LLBC's consultation proposals. On 19 February 2016 an executive summary of The People's Plan ("TPP") was provided to the Council. The full version of the TPP was submitted on 4 March. The document was accompanied by substantial appendices (Appendix A to Appendix N). It contained a critique of the five options put forward by LLBC, including their financial viability. The TPP's option provided for the construction of 37 new homes, of which 33 would be available at Council rents. This proposal involved the demolition of only 18 existing properties. The remainder of the estate would be refurbished. The authors stated that their proposal had a positive NPV of £6.6m over 30 years compared to what they claimed would be a negative NPV of £19.4m for LLBC's option 5 assessed over a 60 year period. It is common ground between the parties that the option proposed by the TPP was a variant of LLBC's option 2.
Financial information provided by LLBC
On 6 January 2016 Gerlinde Gniewosz, who had served as a resident's representative on LLBC's financial viability working group, made a Freedom of Information Act ("FOIA") request for a full version of the Council's 30 year HRA business plan, prior to the publication of the Council's consultation document. On 7 January LLBC responded that the request would be dealt with by 4 February. On that date LLBC told Ms. Gniewosz that they would need more time to comply with the request as the business plan was "still being worked on". The Council said that it would respond by 6 March 2016. In the meantime, the first viability workshop meeting had been held on 28 January and a second and indeed final meeting of that workshop was held on 18 February. At neither meeting was the HRA business plan available. The Council provided a summary of the HRA 30 year business plan on 16 April 2016, that is after the decision challenged in these proceedings had been taken on 21 March.
Feedback Exhibition on 25 February 2016
On 25 February 2016 LLBC held a public exhibition in order to give feedback to residents on the consultation process thus far, an update on the Council's views on the financial viability of each option and an explanation as to how the Council's Cabinet would make its decision. One of the Council's presentation boards stated that "some residents on the estate have prepared an alternative regeneration plan for the estate which has been called the 'People's Plan'. This is not something we are consulting on, but the Plan will be considered by the Council's Cabinet alongside other feedback". Another presentation board stated that the officers would be making a recommendation to the Cabinet in favour of option 5, the complete demolition and redevelopment of the estate. It also stated that the Cabinet would review the options for the estate, along with the TPP, against the same criteria as had been used for other estates in the regeneration programme. LLBC said that all options would have to meet four criteria, the first of which was:-
"Viability: option achieves a positive Net Present Value (NPV)".
In addition to those four criteria, the presentation board referred to other criteria which would be applied, including the giving of greater weight to options which provided higher numbers of new homes and/or new homes for Council rent.
On 26 February 2016 LLBC sent an email to all residents again explaining why the Council's preferred option 5 would be recommended to the Cabinet. This information was also added to the Council's website and included in a letter sent to residents on the same date.
The Officers' Report to the meeting of LLBC's Cabinet on 21 March 2016
On 11 March 2016 the officers' report to the Cabinet was published and placed on LLBC's website. The report was produced by the Housing Regeneration Team and recommended the Cabinet to authorise the redevelopment of the entirety of the CGE. The report was a detailed document and was accompanied by substantial appendices A-L, covering such matters as options analysis, key issues raised during the consultation, financial appraisal of LLBC's options, financial appraisal of the TPP option, an Equality Impact Assessment ("EqIA"), a survey in 2015 of housing needs, a copy of the TPP (excluding its appendices) and a detailed report on the consultation which had been carried out.
Paragraph 1.34 of the report stated that it had been made clear to residents during the consultation exercise that the financing of refurbishment had to be considered entirely separately from the financing of redevelopment. Homes that are to be refurbished would remain within the HRA and would be dependent on funding through that account to enable capital investment to take place. That required a judgment to be made as to whether there is any funding available within the HRA and, if there is, whether that funding should be allocated to the refurbishment of a particular estate using a "value for money" test. On the other hand, the redevelopment of homes would be funded by other means outside the HRA which would depend instead on the viability of redevelopment as a commercial proposition. It had also been made clear to the residents that the NPV appraisals for refurbishment scenarios were theoretical, because they assumed that funding would be available from the HRA for that purpose, whereas elsewhere it was explained that that was not in fact the case (paragraph 1.35).
In paragraph 1.37 officers stated that several clear conclusions could be drawn from the responses to the consultation exercise including:-
(i) There was a huge discrepancy in the level of engagement of residents on CGE, with some not participating at all while a few were very heavily engaged. Of nearly 200 questions included in the final Q&A document nearly half had been submitted by just 2 leaseholders and of 16 emails to LLBC raising questions around half had been sent by the same 2 individuals. The workshop sessions were dominated by repeat attendance from only a few individuals;
(ii) Out of those who had responded, the preference remained for the refurbishment only scheme (option 1). But the opinions of residents on the estate appeared to be quite polarised. There remained strong support for and against redevelopment, but there was little support for the intermediate options 3 and 4;
(iii) A sizeable proportion of the residents spoken to by Council officials at the events simply wished that a decision be made by LLBC one way or the other and to bring to an end the seemingly endless consideration of what the future of the estate should be.
Paragraph 1.38 added that the above conclusions aligned with the outcome of the Test of Opinion survey conducted before the Cabinet Decision in July 2015 (see paragraph 15 above) and also with the experience of officers working on the estate.
Even before July 2015, 50 tenants of the CGE had already applied to be added to the housing transfer list and of that number 35 had asked to move away from the estate. It was also apparent from the take-up between July and November 2015 of the Key Guarantees offered by LLBC that there were a significant number of households who simply wished to leave CGE (see paragraph 1.39).
Paragraphs 1.19 to 1.26 summarised the reasons why LLBC considered that CGE should be in the programme for estate regeneration, or re-development:
(i) The average cost per dwelling of refurbishment on CGE was twice the average cost for all dwellings in the LHS programme. Furthermore, LLBC's estimated cost of £9.4m for refurbishing all the properties on CGE was conservative and could be significantly more. Other potential costs, such as the replacement of windows, had not yet been included;
(ii) Structural problems had been identified on the estate, for example roofs and severe damp problems. In such cases refurbishment would be so disruptive that in the worse cases tenants would have to move out, potentially for many months to allow the properties to dry out;
(iii) There is the potential for new homes to be added if CGE were to be redeveloped;
(iv) A survey in 2015 revealed significant overcrowding on the estate which could not be resolved through refurbishment alone;
(v) The CGE performs poorly in terms of access for the disabled.
Paragraph 1.45 stated that for a refurbishment option on the CGE to be considered viable the:
"refurbishment component of the option must be considered to be value for money AND funding can be allocated from within the HRA"
The "value for money" issues were considered in section 2 of the report and funding was considered in section 3.
Table 1 of the officers' report set out a comparison of the 5 options drawn from the conclusions of the viability analysis. The NPVs for the refurbishment element of options 1 to 4 were all substantially negative, ranging from -£493,000 to -£662,000. The NPV for the redevelopment element of the options was positive in each case. For option 5 the NPV was said to be +£824,000.
The officers' advice on the TPP was summarised in the report at paragraphs 1.47 to 1.48. Paragraph 1.48 described the TPP as essentially a refurbishment option, a variant on option 2, a point which is accepted by the Claimant in these proceedings. They advised that regardless of the Council's technical assessment of the TPP proposal, the fundamental question of whether it was realistic depended upon exactly the same issues as those applying to other options containing a significant amount of refurbishment. Viability depended upon the same problem of finding resources from the HRA for the refurbishment of retained homes. There was also the issue as to whether refurbishment alone would resolve other problems with the condition of the estate (see eg. paragraph 5 above). In addition to the lack of funding, paragraph 1.47 drew upon a detailed technical assessment contained in Appendix B to the officers' report. This indicated that "there would be some very problematic (quite probably irresolvable) technical difficulties" in the delivery of the TPP proposal.
Many of the issues raised by the Claimant in this judicial review relate to the manner in which the LLBC handled funding and financial issues in particular the inability of the HRA to afford refurbishment options. But it will be apparent already from the above summary of the officers' report that these funding issues were not the only primary consideration. In addition, the Council had at the forefront of its consideration the judgment which it needed to make on "value for money" issues. This was essential in view of the lack of funds to meet the costs of refurbishing all of LLBC's dwellings. Indeed section 2 of the officers' report deals with that very issue before turning to consider the funding and financial issues in section 3 of the report.
Paragraph 2.11 of the report set out the officers' reasons for recommending the complete redevelopment of the CGE:-
"While recognising preferences expressed by residents for refurbishment and taking on board all those elements of the estate that residents like, it would not be value for money to commit funds to refurbishing properties on the estate because:
- as stated to residents, it would cost significantly more to refurbish properties at Cressingham Gardens than elsewhere;
- it is highly unlikely that refurbishment would resolve all the problems with the properties (as evidenced through the Tall Report);
- there are inherent design problems with the estate, such as inability to cater for disabled residents; and,
- there is significant overcrowding in the properties on the estate.
It is important to note that these reasons were central to the decision of the LLBC and are not the subject of any legal challenge in this claim for judicial review.
All of the options that have been considered represent significant refurbishment and consequently none of them can be justified" (emphasis added)
Paragraph 2.12 explained why option 5 was judged to be preferable to option 4. The latter would leave two thirds of the estate requiring refurbishment, for which there was no funding.
From the officers' assessment of the TPP it was concluded that that proposal was not a viable proposition, technically very difficult and costly to achieve (paragraph 2.13). Furthermore, given that the TPP option was a variant of LLBC's option 2, it is clear that the option put forward by residents must also have been unacceptable to the Council on the same "value for money" grounds referred to previously.
Paragraph 2.9 of the report stated that if the recommendation in favour of option 5 were to be accepted by the Cabinet, then the Key Guarantees for existing tenants and home owners (set out in Appendix K to the report) would be implemented subject to any refinement and improvement through a subsequent consultation exercise.
Having rejected on "value for money grounds" the options which included refurbishment, the officers' report then turned to the funding issue. Paragraph 3.1 of the report was particularly important and stated:-
"Because the Council is the freehold owner of most of the properties on the estate all income and expenditure for the estate falls within the Council-wide HRA. This means there are strict budgeting controls that prevent the Council from running a deficit in any one year. Moreover, the Council cannot borrow more than is currently planned because borrowing via the HRA is capped by Central Government either by means of a fixed 'headroom' limit or because the HRA simply cannot afford to borrow more (i.e. there is insufficient income to pay any higher interest payments). Furthermore, grants from Central Government, such as were previously available for the Decent Homes programme, are now severely limited, if not curtailed altogether. This means that money spent on the estate from within the HRA is money that is not available to be spent on other Council-wide properties. Hence the Council has to make some difficult decisions about how best to spend its scarce resources." (emphasis added)
At least two points are self-evident from this paragraph. First, one of the reasons given for the non-availability of HRA funding for refurbishment was the Council's inability to borrow more money on the HRA given the insufficiency of its income to service the interest payments on any additional borrowing (ie even if headroom below the borrowing cap was not a constraint). This was given as a free-standing reason. Second, it followed that any spending from the HRA on the refurbishment of properties within the CGE would depend upon resources being diverted from other Council estates within the Borough. This separate financial reason for rejecting refurbishment is therefore consistent with the "value for money" considerations which the report had already given as a freestanding ground for rejecting options 1 to 4 and, by the same token, the option put forward in the TPP.
Paragraph 3.2 explained that refurbishment costs had to fall within the HRA because refurbished properties would remain Council properties. However, in the case of redevelopment, existing properties would be demolished and land would be transferred to a different owner so that redevelopment costs could be funded by money borrowed from outside of the HRA. It was for this reason that the Council was proposing to set up an SPV, namely an independent company that would be wholly owned by the Council. Properties owned by the SPV would cease to be accounted for within the HRA so as to free those properties from the budgetary constraints applicable to that account. The SPV would be able to raise private sector funds outside of the HRA for schemes with a sound business case (see paragraph 3.3). However, it was not possible to make a sound business case for investing in the refurbishment of properties on the estate. A typical Council property would cost around £16,000 to refurbish but properties on the CGE were estimated to have an average refurbishment cost in excess of £30,000 per property. This expense could not be offset by greater income and although future maintenance costs would fall, that decrease would not be sufficient to make the investment worthwhile to a private investor. For these reasons it was judged that properties for refurbishment would have to remain within the HRA (see paragraph 3.4).
Paragraphs 3.5 to 3.9 summarised the outputs from the discounted cash flow analysis conducted by independent consultants instructed on behalf of the Council, Airey Miller. Paragraph 1.8 of Appendix B to the officers' report repeated the four criteria which an option would have to meet, including the requirement for a positive NPV.
Paragraph 3.10 advised the Cabinet that, looking at the issues simply from a financial perspective, they should choose option 5 because each of the other options would not provide "value for money" and would require the diversion of considerable sums from tenants and leaseholders on other Council estates over the next few years. To put the matter into context, the Cabinet was reminded that the programme of estate refurbishment agreed in 2010 and initially estimated to cost some £499m over 5 years, had had a funding gap of some £56m even before the Chancellor of the Exchequer's Budget in 2015. Subsequently, that funding gap had grown to more than £85m for various reasons, which included increases in the costs of refurbishment and the Government's decision that Council rents should decrease by 1% per year over a 4 year period.
Paragraph 3.11 reiterated that quite apart from financial considerations, there were other reasons for preferring option 5 over the other options (as had previously been noted in the report). That was a cross-reference (inter alia) to the "value for money" considerations identified in section 2 of the report.
Section 7 of the report summarised the EqIA which had been undertaken in June 2015. A subsequent review had confirmed that no further data had emerged since then which would require the EqIA to be revised.
The minutes of the Cabinet meeting on 21 March 2016
The minutes reveal that there was a very full discussion of the issues during the course of this meeting. An opportunity was given for representations to be made to the members by a number of residents and their representatives, including the claimant and Gerlinde Gniewosz. The minutes record that a substantial number of points were raised on behalf of residents. In relation to the TPP, senior officers stated that it had been assessed in the same way as other options. "The specific points for its refusal were around the technical assessment (particularly the proposed homes in the underground car park having issues with floor-ceiling heights), servicing for properties, providing good quality homes and that it would create single aspect homes". As regards "the modular homes being proposed in the undercroft parking area, the Council had benchmarked costs against similar schemes elsewhere and this indicated the People's Plan build cost of £50k per unit was inaccurate".
The Cabinet resolved to authorise the redevelopment of CGE in accordance with the approach set out in section 2 of the officers' report. It also resolved to implement the Key Guarantees set out in Appendix K to the report, subject to any improvement in those guarantees through further consultation with residents (see also paragraph 2.9 of the officers' report referred to above).
Overview and Scrutiny Committee
On 4 April 2016 Councillor Ainslie requested that the Cabinet's decision of 21 March 2016 be called in by the Overview and Scrutiny Committee (the committee established pursuant to section 9JA of the Local Government Act 2000). The request contained a large number of detailed questions directed at LLBC's assessment of the merits of the TPP's proposal and the decision to select option 5. The request asked for the decision to be referred back to the Cabinet for full re-consideration. On 6 May 2016 the officers provided a report for the OSC meeting on 9 May 2016. The report considered in detail each of the questions raised in a document some 30 pages long. In the concluding section the members of the OSC were informed that their options were to refer the decision back to the Cabinet for re-consideration with a written explanation of the nature of the Committee's concerns, or to refer the matter to Full Council if the Committee considered the decision to be contrary to the Council's Budget and Policy Framework, or to decide against referring the decision back to the Cabinet (with or without such recommendations to the Cabinet as the OSC should see fit).
The minutes of the OSC meeting reveal that a very full discussion took place. Originally, the meeting had been scheduled to last some 2 hours, but it was extended by a further 30 minutes. It appears that a group of residents had produced a written response to the officers' report which had been supplied to members of the OSC. In addition, oral representations were made by a number of residents including Gerlinde Gniewosz. Residents pointed out that the business plan for the HRA which the Council had supplied to them in April 2016 showed that the account would be, as they put it, "bankrupt" in 2 years' time and "this highlighted fundamental problems within housing". Plainly, therefore, residents had appreciated by this stage (and before this claim for judicial review was begun) how serious the financial position of the HRA was.
The senior officers responded to a number of questions posed to them by members of the OSC. They stated that (inter alia):-
"The HRA business plan linked to in the report was over 30 years and showed the capacity to borrow was declining as Central Government brought in a 4 year rent reduction or a loss of £80m from the HRA budget, and this was reflected in the declining ability to borrow, with a £190m deficit forecast by the end of the HRA business plan. As highlighted by residents, if there were no changes made, this would go into deficit in four years' time."
"The debt cap in the HRA was constant as it was set by Government, however, the HRA business plan required a balance of reserves and this now meant that the debt cap was no longer the constraining factor on funding, but rather the affordability of the debt."
"…. The problem Lambeth had was that the HRA revenue income was reducing and, as shown by the latest HRA business plan, there was not sufficient money to borrow further monies from the HRA….."
The OSC resolved not to refer the decision back to the Cabinet, but they made a number of recommendations to the Cabinet which included requirements for a thorough "lessons learned" exercise to be undertaken in respect of the CGE (taking into account the entire process from 2012) and that continued scrutiny take place of the total costs to residents living on the redeveloped estate to ensure that these would not become prohibitive or unfair to current residents, taking corrective action as necessary.
Summary of grounds of challenge
Mr. David Wolfe QC and Mr. Leon Glenister appeared on behalf of the Claimant. Mr. James Goudie QC and Mr. Jon Holbrook appeared on behalf of the Defendant. I am grateful to all counsel for their helpful written and oral submissions.
The Claimant's counsel refined their grounds of challenge (and the references to the documents upon which they rely) in speaking notes they produced for their opening and reply. In summary they now raise the following seven grounds:-
LLBC acted unlawfully by choosing an option which failed to meet its own mandatory criterion, namely that the scheme should have a positive NPV. LLBC wrongly took into account its proposal to make a payment of £7.5m to fund initial costs of option 5. Alternatively, it failed to take into account in its appraisal of that option the future repayment of that sum by the SPV to LLBC. If neither error had been committed, the NPV of option 5 would have been assessed as negative.
(a) In its decision of 21 March 2016 LLBC's Cabinet failed to take into account, or were significantly misled as to, the up-to-date position regarding the 30 year business plan for the HRA; and/or
(b) the consultation with residents was unfair and unlawful by LLBC having failed to provide consultees with proper information on the 30 year business plan so that they could make representations thereon.
(a) The Cabinet's decision of 21 March 2016 involved a breach of Article 1 of the First Protocol ("A1P1") to the European Convention on Human Rights ("ECHR"), by interfering with the ability of secure tenants to rely upon a statutory right to buy; and/or
(b) the members of the Cabinet were misdirected in law as to the interference with that right to buy; and/or
(c) the consultation with residents was unfair and unlawful by LLBC having failed to provide adequate or proper information to consultees on the effect of option 5 on the right to buy.
The officers' report to the Cabinet significantly misled members by advising that the proposal in the TPP involved locating dwellings in a building with inadequate ceiling heights contrary to the London Housing Design Guide, and/or the report misinterpreted that Guide.
The officers' report to the Cabinet substantially misled members as to the treatment in the financial analysis of the cost of £430,000 for carrying out "weathertight" repairs to the properties on the CGE.
Appendix B to the officers' report to the Cabinet significantly misled members by stating that the main reason why the TPP presented a positive NPV for its proposed option (rather than a negative NPV as shown by LLBC's appraisal) was that it wrongly assumed that 80% of the income from rents and service charges would be available for funding refurbishment, whereas LLBC considered the available percentage of income to be only 33%.
LLBC failed to obtain sufficient information for inclusion in the officers' report to the Cabinet, alternatively the report significantly misled the members of the Cabinet, by overstating the costs per home of converting undercover car parking to housing in the TPP's proposed option.
At the beginning of the hearing I referred to the fact that witness statements and other documents filed on behalf of the Claimant appeared to raise additional complaints or grounds. I said that I proposed not to deal with any of those points unless I was asked during the hearing to do so. Mr. Wolfe QC responded on behalf of the Claimant that the Court should only deal with the seven issues I have summarised above. I have therefore proceeded on that basis.
In this judgment it is appropriate to deal with the issues raised in the following order:-
(i) Statutory framework and general legal principles
(ii) Ground 2
(iii) Ground 4
(iv) Ground 7
(v) Ground 6
(vi) Ground 5
(vii) Ground 1
(viii) Ground 3
Ground 2 is relevant to the financial assessment of all the options which include substantial refurbishment (options 1 to 4 and the TPP). Grounds 4 to 6 are concerned essentially with LLBC's assessment of the TPP option. Grounds 1 and 3 affect LLBC's assessment of option 5.
It is self-evident from the papers before the Court that views amongst residents of the CGE are divided and that some are strongly critical of the Defendant's decision-making. It has to be emphasised that it is no part of the Court's role to become involved in the rights and wrongs of the competing arguments. Instead its function is limited to the question of whether the consultation or decision-making has been vitiated by one or more errors of public law such that it is appropriate to quash the decision made on 21 March 2016. The Court:-
"… must not ... stray from its proper province of reviewing the propriety of the decision-making process into the forbidden territory of evaluating the substantial merits of the decision"
(R (Smith) v North Eastern Derbyshire PCT  1 WLR 3315 at paragraph 10). It is also worth bearing in mind what was said by Laws J (as he then was) in R v Somerset County Council ex parte Fewings  1 ALL ER 513, 515:-
"Although judicial review is an area of the law which is increasingly, and rightly, exposed to a good deal of media publicity, one of its most important characteristics is not, I think, generally very clearly understood. It is that, in most cases, the judicial review court is not concerned with the merits of the decision under review. The court does not ask itself the question, 'Is this decision right or wrong?' Far less does the judge ask himself whether he would himself have arrived at the decision in question. It is, however, of great importance that this should be understood, especially where the subject matter of the case excites fierce controversy, the clash of wholly irreconcilable but deeply held views, and acrimonious, but principled, debate. In such a case, it is essential that those who espouse either side of the argument should understand beyond any possibility of doubt that the task of the court, and the judgment at which it arrives, have nothing to do with the question, 'Which view is the better one?'. Otherwise, justice would not be seen to be done: those who support the losing party might believe that the judge has decided the case as he has because he agrees with their opponents. That would be very damaging to the imperative of public confidence in an impartial court. The only question for the judge is whether the decision taken by the body under review was one which it was legally permitted to take in the way that it did."
Statutory framework and general legal principles
LLBC's general power of management
Under the heading "general powers of management" section 21(1) provides:-
"The general management, regulation and control of a local housing authority's houses is vested in and shall be exercised by the authority and the houses shall at all times be open to inspection by the authority"
I accept the submission of Mr. Goudie QC that this provision confers a very broad discretion upon a local housing authority to manage its houses, without providing any lexicon of the matters which it is to treat as relevant.
Thus, although, it is for the Court to determine whether a consideration is legally capable of being relevant, the general principle is that it is for the decision-maker, in this case LLBC, to decide (a) whether to take a relevant consideration into account and, if it does so decide, (b) how far to go in obtaining information relating to that matter. Such decisions may only be challenged on the grounds that it was irrational for the authority not to take a legally relevant consideration into account or, having done so, not to obtain particular information (see CREEDNZ Inc. v Governor General  1 NZLR 172; In Re Findlay  AC 318, 333-4; R (Khatun) v Newham LBC  QB 37 at paragraphs 34-35); R (Faraday Development Limited) v West Berkshire Council  EWHC (Admin) paragraph 132). Mr. Wolfe QC accepted that these propositions are correct and apply in the present case.
The test is whether, in the circumstances of the case, no reasonable authority would have failed to take into account the specific consideration relied upon by the Claimant, or to obtain further information. Lord Scarman held in Findlay that this test is satisfied where, in the circumstances, a matter is so "obviously material" to a particular decision that a failure to take it into account would not be in accordance with the intention of the legislation, "notwithstanding the silence of the statute" (see also Derbyshire Dales District Council v Secretary of State for Communities and Local Government  1 P&CR 19; R (Hurst) v HM Coroner for Northern District London  2 AC 189 at paragraphs 57-59 (and also paragraphs 78-79); R (National Association of Health Stores v Department of Health  EWCA Civ 154 at paragraphs 63 and 75; Faraday (supra) at paragraph 134).
As Lord Brightman observed in R v Hillingdon LBC ex parte Puhlhofer  AC 484, 51:-
"The ground upon which the courts will review the exercise of an administrative discretion is abuse of power – e.g. bad faith, a mistake in construing the limits of the power, a procedural irregularity, or unreasonableness in the Wednesbury sense – unreasonableness verging on an absurdity: see the speech of Lord Scarman in Reg. v. Secretary of State for the Environment, Ex parte Nottinghamshire County Council  AC 240, 247-248. Where the existence or non-existence of a fact is left to the judgment and discretion of a public body and that fact involves a broad spectrum ranging from the obvious to the debatable to the just conceivable, it is the duty of the court to leave the decision of that fact to the public body to whom Parliament has entrusted the decision-making power save in a case where it is obvious that the public body, consciously or unconsciously, are acting perversely."
It is also important to keep in mind the point that Parliament has entrusted the general function of managing the housing stock within the Borough to a democratically elected body, which can be expected to well understand the potentially competing interests of the residents of one estate in comparison to others.
Both sides drew upon case law decided in the context of planning control. They were right to do so. The circumstances are analogous. In R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions  2 AC 295 Lord Hoffmann stated (at paragraph 69) :-
"In a democratic country, decisions as to what the general interest requires are made by democratically elected bodies or persons accountable to them. Sometimes the subject matter is such that Parliament can itself lay down general rules for enforcement by the courts. … On the other hand, sometimes one cannot formulate general rules and the question of what the general interest requires has to be determined on a case by case basis. Town and country planning or road construction, in which every decision is in some respects different, are archetypal examples. In such cases Parliament may delegate the decision-making power to local democratically elected bodies or to ministers of the Crown responsible to Parliament. In that way the democratic principle is preserved."
This can affect the intensity of review carried out by the courts under CPR Part 54. For example, in R (Morge) v Hampshire County Council  1 WLR 268 Baroness Hale of Richmond stated: -
"Democratically elected bodies go about their decision-making in a different way from courts. They have professional advisers who investigate and report to them. Those reports obviously have to be clear and full enough to enable them to understand the issues and make up their minds within the limits that the law allows them. But the courts should not impose too demanding a standard upon such reports, for otherwise their whole purpose will be defeated: the councillors either will not read them or will not have a clear enough grasp of the issues to make a decision for themselves. It is their job, and not the court's, to weigh the competing public and private interests involved."
Similarly, in Wychavon District Council v Secretary of State for Communities and Local Government  PTSR 19 Carnwath LJ (as he then was) stated that the courts should guard against undue intervention in policy judgments by expert tribunals, such as planning Inspectors, acting within their areas of specialist competence. Their decisions should be respected unless it is quite clear that they have misdirected themselves in law (see paragraphs 31, 33 and 43). The same approach applies when the Court reviews the policy judgments of experienced planning committees, whether in relation to the formulation and adoption of local planning policy or taking decisions on planning applications (see eg. R (Bishop's Stortford Civic Federation) v East Herts District Council  PTSR 1035 at paragraph 40; R (Trashorfield Limited) v Bristol City Council  EWCH 757 (Admin) at paragraph 13).
In a judicial review concerned with a challenge to the introduction by a local authority of road traffic regulation orders (AA and Sons Ltd v Slough Borough Council  RTR 29 Green J reacted to the Claimant's reliance upon a "traditional Wednesbury" challenge by stating (in paragraph 26): -
"However, this nowadays does not readily capture the essential task confronting any judge. It is now to be treated as trite that the margin of appreciation which a decision maker has is heavily fact and context dependent: see for a summary of some of the leading case law on this per Lord Mance JCS in Kennedy v Charity Commission  2 WLR 808 at -. In the present case the following considerations apply. First, as with planning cases, it is important not to read officers' reports with an overly strict eye and it is necessary to consider them in the round setting aside drafting infelicities and errors unless they are material and likely to lead to unfairness. Secondly, in a case such as the present a wide margin of discretion must be accorded to the decision makers who are possessed of local, specialist, knowledge that the court does not have and which the court should hence be loathe to second-guess. Thirdly, this wide margin will extend to such (non exhaustive) matters as the modus operandi of the consultation exercise, the weighing of the pros and cons of the proposed scheme, and the extent to which they consider it necessary to investigate particular issues in greater or lesser depth and detail." (emphasis added)
In my judgment, these principles apply by analogy in this judicial review of the manner in which LLBC has carried out its functions in the present case. The decisions challenged were taken by members of the Cabinet, including the member responsible for housing, who would be familiar with the Council's circumstances, including its financial structure and state, the Council's housing estates and their condition and the issues faced by the Council and its residents, including the crisis caused by a serious and longstanding shortage of housing. The Cabinet members also drew upon the specialist expertise of the officers advising them. A wide margin of discretion should be accorded to LLBC in its management of the Borough's housing estates. I also adopt the approach of Green J, namely that this includes the extent to which the Council thought it necessary to investigate particular issues in greater or lesser detail, the carrying out of the consultation exercise and the evaluation and weighing of the pros and cons of the proposed options.
Reviewing officers' reports to Committee
In criticising the manner in which certain subjects were reported by officers to the meeting of the Cabinet on 21 March 2016, the Claimant relies upon part of the statement by Judge LJ (as he then was) in Oxton Farms, Samuel Smith Old Brewery (Tadcaster) v Selby District Council (18 April 1997). That passage, which needs to be read as a whole, states:-
"The report by a planning officer to his committee is not and is not intended to provide a learned disquisition of relevant legal principles or to repeat each and every detail of the relevant facts to members of the committee who are responsible for the decision and who are entitled to use their local knowledge to reach it. The report is therefore not susceptible to textual analysis appropriate to the construction of a statue or the directions provided by a judge when summing a case up to the jury.
From time to time there will no doubt be cases when judicial review is granted on the basis of what is or is not contained in the planning officer's report. This reflects no more than the court's conclusion in the particular circumstances of the case before it. In my judgment an application for judicial review based on criticisms of the planning officer's report will not normally begin to merit consideration unless the overall effect of the report significantly misleads the committee about material matters which thereafter are left uncorrected at the meeting of the planning committee before the relevant decision is taken."
Given the Claimant's acceptance of the analogy with officers' reports to committee in planning cases, it is also relevant to have regard to certain related principles which are now well-established (see e.g. R (Luton Borough Council v Central Bedfordshire Council  EWHC 4325 (Admin) paragraphs 90 to 95):-
(i) In the absence of contrary evidence, it is a reasonable inference that members of the planning committee follow the reasoning of the report, particularly where a recommendation is adopted;
(ii) The purpose of the officers' report is not to decide the issue, but to inform the members of relevant considerations, allowing for the fact that the intended recipients, the Cabinet or committee, already have substantial local and background knowledge;
(iii) Part of the officers' expert function in reporting to a committee is to assess how much information needs to be included in a report, in order to avoid over-burdening busy members with material and undermining their ability to read and digest it effectively (see also paragraphs 67 above);
(iv) The Court should therefore focus upon the substance of the report, which should be read as a whole and in a common-sense manner, not legalistically.
Mr. Goudie QC pointed out that the Claimant appeared to be submitting that an error in LLBC's approach could not be excused by relying upon advice from a consultant if that advice is said to be erroneous (paragraph 11 of the skeleton). In this case the Claimant has not relied upon any "factual" error which would vitiate the Council's decision in accordant with the principles in E v Secretary of State for the Home Department  QB 1044. In my judgment, assuming that advice from a consultant is not based upon an error of law (e.g. incorrect legal principle or misinterpretation of policy), the Council cannot be criticised for following that advice unless it was so obviously erroneous, that the authority knew, or ought to have known, that it was acting irrationally (R v Darlington Borough Council ex parte Indescon Ltd  1 EGLR 278, 282; R(Faraday Developments Ltd) v West Berkshire Council  EWHC 2166 (Admin) at paragraph 131.
Section 105 of the Housing Act 1985 provides:-
"Consultation on matters of housing management
(1) A landlord authority shall maintain such arrangements as it considers appropriate to enable those of its secure tenants who are likely to be substantially affected by a matter of housing management to which this section applies-
(a) to be informed of the authority's proposals in respect of the matter, and
(b) to make their views known to the authority within a specified period;
and the authority shall, before making any decision on the matter, consider any representations made to it in accordance with those arrangements.
(2) For the purposes of this section, a matter is one of housing management if, in the opinion of the landlord authority, it relates to-
(a) the management, maintenance, improvement or demolition of dwelling-houses let by the authority under secure tenancies, or
(b) the provision of services or amenities in connection with such dwelling-houses;
but not so far as it relates to the rent payable under a secure tenancy or to charges for services or facilities provided by the authority.
(3) This section applies to matters of housing management which, in the opinion of the landlord authority, represent-
(a) a new programme of maintenance, improvement or demolition, or
(b) a change in the practice or policy of the authority,
and are likely substantially to affect either its secure tenants as a whole or a group of them who form a distinct social group or occupy dwelling-houses which constitute a distinct class (whether by reference to the kind of dwelling-house, or the housing estate or other larger area in which they are situated).
(5) A landlord authority shall publish details of the arrangements which it makes under this section, and a copy of the documents published under this subsection shall-
(a) be made available at the authority's principal office for inspection at all reasonable hours without charge, by members of the public, and
(b) be given, on payment of a reasonable fee, to any member of the public who asks for one."
In Bokrosova Laing J held in relation to the earlier judicial review of LLBC's consultation process that: -
(i) No public law issue had arisen as to whether the arrangements made by LLBC under section 105 were appropriate (paragraphs 72-73);
(ii) Although section 105 does not contain an explicit obligation to consult, its components reflect the elements of lawful consultation described in R v North and East Devon Health Authority ex parte Coughlan  QB 213 paragraph 112. There is no real difference between the requirements of section 105 and the requirements of Coughlan as regards consultation (paragraph 77);
(iii) The section 105 arrangements in this case comprised the detailed and sophisticated programme of consultation announced in LLBC's letters of 21 October and 6 November 2014 (paragraph 79)
I respectfully agree with Laing J. I also accept that those arrangements included viability and financial modelling. I heard no submission to the contrary.
There was some discussion in Bokrosova as to whether there was a significant difference between the common law requirements for lawful consultation and the requirements contained in section 105. To some extent this is academic because the arrangements under section 105 apply only to LLBC's secure tenants, whereas the Council undertook to consult with leaseholders as well, which must engage common law principles (a point accepted in paragraph 10 of LLBC's skeleton). Either way, the exercise undertaken by LLBC was in the context of its very broad powers of management under section 21 of the 1985 Act.
However, Mr. Wolfe QC emphasised the statutory requirements in this case in order to widen the legal objectives of consultation so as to ensure not merely procedural fairness in the treatment of persons whose legally protected interests may be adversely affected, but also to ensure public participation in the local authority's decision-making process. He based himself upon the decision of the Supreme Court in R(Moseley) v Haringey London Borough Council  1 WLR 3947.
It is necessary to summarise the factual context for that decision. Until April 2013 there had been a scheme in England for the payment of Council Tax benefits, made by the Department for Work and Pensions and operated by local authorities. From April 2013 local authorities were required to determine for themselves and then operate a replacement scheme of "council tax reductions" for persons considered to be in "financial need". Before doing so each authority had to consult with such persons as it considered likely to have an interest in the operation of the scheme. Haringey LBC proposed a scheme which would effectively reduce benefits in line with a reduction in grant from central government, rather than increase the level of Council Tax overall or use its reserves or reduce the authority's services or their cost. It posted a consultation document on its website and hand delivered copies to each of the 36,000 households in receipt of Council Tax benefit. The document used language which indicated that the shortfall in central government funding necessarily meant that less benefit would be available under the new scheme (see paragraph 17). The document failed to refer to other options which would avoid or mitigate that outcome. In addition, during the consultation period the Government announced transitional grants to provide additional funding for qualifying replacement arrangements. In the subsequent judicial review, the lawfulness of the consultation process was challenged on the basis that the local authority had not consulted with the public on alternatives to its proposal which had been identified by the Council nor the subsequent transitional relief scheme.
The judicial review succeeded in the Supreme Court. Two main judgments were given, by Lord Wilson (with whom Lord Kerr agreed) and by Lord Reed. Baroness Hale and Lord Clarke specifically agreed with Lord Reed that the Court should have regard to the particular statutory context, which meant in that case ensuring public participation in the decision-making process. But they also thought that they could "safely agree" with both of the leading judgments, given that there was little between them.
Lord Reed JSC held:-
(i) Statutory duties of consultation vary greatly depending on the particular provision, its context, the purpose for which the consultation is to be carried out, and the content of the obligation. A "mechanistic approach" to the requirements of consultation must therefore be avoided (paragraph 36)
(ii) The present case was not concerned with circumstances in which a common law duty to act fairly arose unless there was a promise or practice of consultation. Furthermore, the problem with the consultation was not that it had been unfair. Rather the local authority was discharging an important function in relation to local government finance, which affected its residents generally, and not just the 36,000 households (see paragraphs 35 and 37).
(iii) Such wide-ranging consultation in respect of a local authority's exercise of the general power in relation to finance, was far removed in context and scope from situations in which the common law had recognised a duty of procedural fairness. The purpose here was not to ensure procedural fairness in the treatment of persons whose legally protected interests might be adversely affected, but to ensure public participation in the local authority's decision-making process (paragraph 38).
(iv) Meaningful public participation in this particular process, in a context with which the general public would not be expected to be familiar, required that consultees be provided not only with information about the draft scheme, but also an outline of the realistic alternatives and an indication of the main reasons for the authority's preference for adopting the draft scheme. In this context that satisfied the requirement in Coughlan at paragraph 112 to let consultees know what the proposal is and why it is being considered positively, telling them enough (which may be a good deal) to enable them to make an intelligent response (paragraph 39);
(v) A requirement to provide information about the options does not mean that there necessarily has to be a detailed discussion of the alternatives or of the reasons for their rejection. The consultation required in the present context related to the authority's draft scheme, not the rejected alternatives. It is also important in the context of a public consultation exercise that the consultation documents should be clear and understandable, but not unduly complex or lengthy (paragraph 41).
In the Haringey case the consultation was legally flawed because firstly, it failed to deal with realistic alternatives which ought to have been covered and secondly, it wrongly presented the situation to the public as if there were no alternatives, whereas the true position was that there were other options, albeit ones which the Council did not favour (paragraphs 17 and 42). That formed part of the basis upon which Moseley was explained and distinguished in R (Robson) v Salford City Council  PTSR 1349, at paragraph 35.
Lord Wilson's analysis proceeded instead on the basis of the common law duty of fairness. He held:-
(i) By reference to R (Osborn) v Parole Board  AC 1115 (at paragraphs 67 and 68) the first purpose of a fair consultation is that it "is liable to result in better decisions, by ensuring that the decision-maker receives all relevant information and that it is properly tested" and second that it avoids a sense of injustice on the part of the person who is the subject of the decision. In addition, a third purpose is to reflect the "democratic principle" in a case where the question is not whether a particular institution should be closed, but whether a particular taxation-related scheme applicable to all inhabitants should be made (paragraph 24);
(ii) The four "Sedley criteria" approved in Coughlan should also be approved by the Supreme Court (paragraph 25);
(iii) The demands of fairness are likely to be higher when an authority contemplates depriving someone of an existing benefit or advantage than where the claimant is a bare applicant for a future benefit. The degree of specificity required of the consultation material put forward by the authority will depend upon the identity of the consultees and the subject matter. Members of the public, particularly the economically disadvantaged, may well require more explanation of a proposal with technical content than say another public authority (paragraph 26).
It is trite law that the content and application of the principles of procedural fairness and consultation are highly sensitive to the statutory and factual context. For the purposes of the present case I note the following:-
(i) The first of Lord Wilson's purposes, which included "the proper testing" of all relevant information (paragraph 24 of Moseley), referred back to paragraph 67 of Osborn where the central issue was whether, and if so in what circumstances, a prisoner was entitled to an oral hearing before the Parole Board. Neither Moseley nor the present case concern a right to an oral hearing;
(ii) The present case is concerned with a proposal which would result in persons losing valuable benefits, their homes, for example, through the termination of a secure tenancy;
(iii) The present case is more analogous to cases concerned with a proposal for the closure of a public institution such as a care home or school. LLBC has chosen option 5, the demolition and redevelopment of the entire estate. It has rejected the refurbishment options for CGE which, given its view on the lack of funding, would require monies for refurbishing other Council estates to be diverted to CGE. The Claimant has not suggested in these proceedings that any of the challenges raised are concerned with LLBC's assessment of the "value for money" factors nor with any argument that funds should be diverted in this way. No evidence has been shown to me that consultees responded by making any such suggestions;
(iv) Thus, the consultation exercise carried out by LLBC was correctly directed towards the residents of CGE. It was not required to be a wider consultation exercise affecting all residents of the Borough, or all residents of the Authority's housing estates or any group of them. The consultation was not concerned with public-participation in the Council's decision-making process on a subject as broad as local taxation, or a scheme for relief from local taxation. The context here is somewhat removed from Moseley and the satisfaction of the broader democratic principle engaged in that case (per Lord Wilson) or the approach taken by Lord Reed;
(v) LLBC was entitled to put option 5 forward in the consultation exercise as its preferred option. There was no requirement for LLBC's discussion of the options it had rejected to be so detailed.
In Bokrosova Laing J treated Lord Reed JSC's judgment as shedding light on the purpose of section 105 of the 1985 Act, namely to ensure the participation of tenants in decisions which would substantially affect their homes (paragraph 77). I am prepared to take the same approach, subject to recognising that the context for the present case is very different from the situation that Lord Reed was dealing with. Here the main focus should be on whether the consultation process was unfair to the residents affected by LLBC's proposal and on whether the four "Sedley criteria" were satisfied (see paragraph 75 of Bokrosova). Lord Reed JSC took the view that the subject matter in Moseley did not engage the common law duty of procedural fairness (paragraphs 37-38). But here the outcome of the Claimant's challenge largely rests on whether there has been procedural unfairness so as to vitiate LLBC's decision.
In Moseley Lord Wilson JSC adopted as a second purpose of proper consultation, the avoidance of a sense of injustice on the part of the person affected by the decision (paragraph 24). In Osborn Lord Reed JSC said that "such persons ought to be able to participate in the procedure by which the decision is made, provided they have something to say which is relevant to the decision to be taken" (paragraph 68 with emphasis added), or one might say to the issue which is the subject of a legal challenge.
This is in line with well-established authority. For example, in Malloch v Aberdeen Corporation  1WLR 1578, 1595 B-C Lord Wilberforce stated:
"A breach of procedure, whether called a failure of natural justice, or an essential administrative fault, cannot give him a remedy in the courts, unless behind it there is something of substance which has been lost by the failure."
Likewise, in George v Secretary of State (1979) 77 P&CR 609, 617 Lord Denning MR said that "there is no such thing as a technical breach of natural justice" "One should not find a breach of natural justice unless there has been substantial prejudice to the applicant as the result of the mistake or error that has been made." More recently, in Hopkins Developments Limited v Secretary of State for Communities and Local Government  PTSR 1145 the Court of Appeal held that the issue is whether "there has been a procedural unfairness which materially prejudiced the applicant" (paragraphs 45 and 62). Thus, by way of example, in R (Midcounties Co-operative Limited) v Wyre Forest District Council  EWHC 964 (Admin) Ouseley J refused to grant any relief in relation to a failure to comply with a statutory requirement for consultation on a draft document where there was no evidence that the claimant would have said anything of substance on that material (paragraphs 104 to 106).
When I drew this line of authority to the attention of Mr. Wolfe QC, he asserted that Ouseley J had taken a different approach in R (Buckinghamshire County Council) v Secretary of State for Transport  EWHC 481 (Admin), although he did not cite any passage from the authority or provide a copy. In my judgment it is apparent that the Judge applied the same fundamental principles in that case too. The difference between HS2 and Midcounties is that in the former case the Judge held that the consultation representations which were not taken into account did contain additional points of substance which were not covered in other representations addressed by the Secretary of State and therefore were not taken into account by the decision-maker (paragraphs 827 to 843). That is not the present case at all.
Mr. Goudie QC relied upon the judgment of Sullivan J (as he then was) in R (Greenpeace Limited) v Secretary of State for Transport  Env LR 29 in which he held that a consultation exercise which is flawed in one or more respects is not necessarily so procedurally unfair as to be unlawful. A decision-maker will usually have a broad discretion as to how to carry out a consultation exercise. In reality, a conclusion that a consultation exercise was unlawful on the grounds of unfairness would be based on a finding by the Court not merely that something went wrong, but that something went "clearly and radically wrong" (paragraphs 63 - 63). This statement was cited with approval by the Court of Appeal in R (Royal Brompton and Harefield NHS Foundation Trust v Joint Committee of Primary Care Trusts  EWCA Civ 472 (paragraph 13). However, I also bear in mind that in R (Baird) v Environment Agency  EWHC 939 (Admin) Sullivan LJ clarified his earlier statement by saying that it was not putting forward a different test to the correct formulation which is "whether the process was so unfair as to be unlawful". He had merely indicated that in reality a conclusion that that test is satisfied is likely to be based on a factual finding that "something has gone clearly and radically wrong" (paragraph 51).
The Housing Revenue Account
During the hearing Counsel for both sides helpfully produced an agreed note about the HRA. Section 74 of the Local Government and Housing Act 1989 imposes an obligation on a local housing authority to keep an HRA. It is to deal with the credits and debits in respect of homes provided under Part II of the 1985 Act, land acquired or appropriated for that purpose, and other specified types of residential property (section 74(1)). Section 76(2) requires the authority in January and February each year to draw up proposals, in effect a budget, for the financial year starting in April, so that the estimated rents and other charges in respect of homes within the HRA and the expenditure on repairs, maintenance, supervision and management of such property will avoid a debit balance in the account (section 76(3)). As Lord Nolan put it in R v Secretary of State for the Environment  1 WLR 615, 617 the object of the legislation, broadly stated, is to ensure that the cost to the authority of providing housing accommodation is met out of rental income supplemented so far as is appropriate by any Government subsidiary, and does not add to the burdens of council tax payers or business rate payers. Ring fencing is achieved by controlling what may be debited and credited to the HRA and curtailing the powers of the authority to make transfers to and from the HRA (section 75 and schedule 4).
The Claimant's submissions
From September and October 2014 Ms. Gniewosz had been asking LLBC to produce full 30 year cash flow models for each of the options and the 30 year forecasts for the HRA, including debt headroom (Bokrosova at paragraph 9). The debt headroom figures referred to the amount of capital which could be borrowed by LLBC within the cap imposed by central government, and applied to housing works carried out by the authority, such as a refurbishment scheme. Residents wanted to examine the figures to see how near the authority would be to that borrowing limit. Paragraphs 40 to 43 of the judgment of Laing J summarised the financial information relevant to this subject which was produced by LLBC during the hearing of the first judicial review.
Following the judgment of Laing J, on 6 January 2016 Ms. Gniewosz issued a FOIA request for the latest 30 year business plan. Initially, LLBC said that it would respond by 4 February 2016. That date was then extended to 6 March 2016. In a "Question and Answer" document issued on 12 February 2016 LLBC stated that a summary of the HRA Business Plan was available on request. The document also stated that a draft of the plan for 2016/2017 already existed:-
"…which will be finalised and a summary of which will be published in the near future."
Nevertheless, it is important to note a point accepted in paragraph 55(6) of the Claimant's skeleton, namely that the Q&A document made it plain that the HRA debt level of £160m was far below the cap of £408m. On 8 March 2016 LLBC sent an email stating that the authority was still working on publishing its business plan, but that this had been subject to "pressures" created by (inter alia) the increasing numbers of cases in which the RTB was being exercised and the 1% a year reduction in rents imposed by Central Government. On 16 April 2016 (i.e. after the Cabinet's decision on 21 March 2016) LLBC published a summary "dashboard" of its latest 30 year HRA business plan showing a capital borrowing headroom in that account of £67.738m in 2016/17 and similar, if not larger, levels of headroom in most of the following years covered by the plan. Mr. Wolfe QC makes the point that this stood in stark contrast to LLBC's dashboard summary dated 30 December 2013, which was the only HRA analysis that consultees had previously seen. That had estimated that in 2016/17 the headroom would be only £5.125m and in 2017/18 only £13.184m.
Once the claim for judicial review had been issued and permission granted LLBC was asked to disclose the full 30 year HRA in existence at the time of the Cabinet decision dated 21 March 2016. Ultimately this was provided on 28 October 2016.
The availability of headroom against the capital limit on borrowing is contrasted by Mr. Wolfe QC with LLBC's consultation document issued on 19 January 2016 which referred to the headroom between the current level of the Council's borrowing and the cap set by Government, stating that "for the foreseeable future there is little room for the Council to borrow more without putting the financial viability of the HRA at risk." He submits that on the financial documents produced by LLBC in the judicial review and which were in existence at least from January 2016 onwards, the reliance upon the borrowing headroom as a constraint was unjustified and therefore had the effect of misleading consultees. Moreover, it is submitted that members of the Cabinet who took the decision on 21 March 2016 were also unaware of the correct position.
The Defendant's submissions
Mr. Goudie QC did not seek to explain why the January 2016 consultation document had raised the "headroom" point. But he maintained that that did not render the consultation process unfair or vitiate the decision on 21 March 2016. He relied upon the witness statement of Ms. Christina Thompson, the Defendant's Director of Finance. (I also note that the position had previously been explained by her in a two page note sent to the Claimant's Solicitors on 13 June 2016 - see paragraph 19 of LLBC's response to the pre-action protocol letter). In paragraphs 5 to 15 of her witness statement she explains that the "affordability of debt" in the HRA involves two separate factors. First, there is the amount of headroom available. Second, even where there is sufficient headroom so that the capital cap on borrowing does not prevent the Council from taking out a further loan, there is a separate revenue question as to whether it can afford to pay for the interest on that loan, or to service the debt. The income to pay such debt charges can only come from the ring-fenced HRA which (a) cannot go into debit and (b) in accordance with CIPFA good accounting practice, should maintain an appropriate balance, or reserve, of at least £10m on the account.
In summary, Ms. Thompson says that LLBC's estimates of expenditure have had to be increased but at the same time rental revenue has been declining, partly because of the Government's imposition of rent reductions over 4 years. Thus, for the year 2017/18 the dashboard produced in December 2013 predicted that rental income (net of voids) would be £146m, whereas the equivalent figure on the dashboard published in April 2016 is now reduced to £130m. Ms. Thompson explains that this changing profile means that LLBC has been obliged to reduce the overall size of its borrowing so as to reduce the interest payments on that debt and the revenue burden they impose on the HRA. The Council has had to do this in order to avoid a revenue deficit on the HRA. Of course, because LLBC has reduced the level of its borrowing in order to reduce the cost of servicing its debt, the headroom relative to the Government's cap on the capital amount of the Council's borrowing (£408m) has increased. That was an inevitable consequence. In these circumstances it also follows that what might appear at first sight to be more room for LLBC to take out additional borrowing because of the increased headroom, is entirely theoretical or illusory. Because the HRA is ring-fenced and cannot be run at a deficit (a revenue constraint), it was and remains impossible for LLBC to pay any increased interest charges for the foreseeable future. The Council simply cannot afford extra debt on its Housing Revenue Account. The dashboard published in April 2016 shows the HRA in the "red" (i.e. which includes any balance below a reserve of £10m) between 2017/18 to 2034/5. Even the balances shown for 2015/16 and 2016/17 are only marginally above the reserve figure.
Mr. Goudie QC says that in essence this position was known to members of the Cabinet when they took their decision on 21 March 2016.
I will consider whether the officers' report to the Cabinet meeting on 21 March 2016 was significantly misleading in relation to the financial position of LLBC and its ability to afford funding for refurbishment options. It is trite law that such reports are to be considered on the basis that they are addressed to members who are experienced in dealing with the affairs of the authority, including financial matters. It is therefore relevant to consider information which the Cabinet had previously been given.
By letters dated 21 and 25 October 2016 LLBC's legal department responded to requests for disclosure by supplying documents which contained advice previously given either to Councillor Matthew Bennett, the Cabinet Member responsible for housing, or to Cabinet. These documents were also referred to in paragraph 52 of the Defendant's skeleton and briefly in paragraph 13 of the witness statement of Christina Thompson. I accept that what is of primary importance is the material supplied to the members of the Cabinet rather than to Mr. Bennett alone. But part of the context for their meeting on 21 March 2016 was their earlier meeting on 11 January 2016 when they had to take into account financial information and issues affecting the HRA so that they could agree a budget for that account for 2016-17. There was no legal requirement for officers to repeat that information in their report to the Cabinet in March 2016. It formed part of the relevant background which members could be expected to have in mind.
On 21 October 2015 Julie Curtis, a Senior Accountant with LLBC, prepared a report on HRA Rent and Budget Setting for 2016-17. The Business Plan relied upon having a minimum balance of £10m in the account (section 3, page 2). The amount of housing stock in the HRA had declined through the exercise of the right to buy to a greater extent than had been expected. The trend of high levels of sales was expected to continue (section 3, page 2). Whereas LLBC had been planning to allow for rents to rise at 1.1% a year, central government had imposed rent reductions of 1% a year for 4 years. That loss of income would also affect the starting point for the revenue base in following years. Rents make up 79% of the revenue available to the HRA. It was estimated that the reductions in rent levels would cause LLBC to lose about £28m over the 4 year period (sections 4 and 5, page 3). Page 4 of the briefing note showed a substantial headroom between the level of debt and the cap on borrowing. On the revenue account it was projected that there would be a surplus for 2016-7 which would be carried forward with a positive balance from the previous year. However, a deficit was projected for 2017-8 substantially reducing the surplus on the account. The same pattern in the following year was expected to produce a deficit on the account, with the position becoming even worse in 2019-20. A key driver underlying these figures was the anticipated decline in the HRA's income. The note stated that the HRA would fall below the minimum balance required of £10m in 2017-8 and would not recover thereafter. It was also pointed out that the HRA would be unable to finance borrowing beyond 2018-9 and the "headroom" would not be breached owing to "affordability", which in the context of the information presented, I take to refer to an inability to afford the cost of servicing debt. Page 5 of the document then went on to show how the HRA budget could be balanced by identifying efficiencies in costs of repairs and management over a 4 year period. With those efficiencies it was predicted that the account would not go into deficit until 2021-2. Even with these efficiencies, the author remained of the view that the headroom would not be breached owing to "affordability." Page 1 of the note referred to the main financial assumptions used in the plan as set out in Appendix 1. Not surprisingly, those assumptions included under the heading "Capital Finance" "minimises borrowing wherever possible." Similar briefing was produced to Mr. Bennett in November 2015, adding the stark point that "if we were to do nothing to reduce expenditure, the HRA would be bankrupt within three years."
A report was produced by the Head of Finance (Neighbourhoods and Growth) for the meeting of the Cabinet on 11 January 2016. It recorded that the proposals for the HRA budget had been discussed with LLBC's Tenant's Council on 17 November 2015. The report reminded members that the HRA had to be operated as a ring-fenced account and without budgeting for a deficit. Under the Localism Act 2011 the subsidies formerly available had been abolished and LLBC, like other authorities, had been required to operate its HRA on a self-financing basis (paragraphs 1.2 to 1.6). Paragraph 1.7 told the members of the Cabinet that "the rent reduction of 1% each year for four years means that the utilisation of borrowing up to the limit [ie the limit set by central government of £408m] is now unlikely due to affordability." I agree with Mr. Goudie QC that this paragraph explicitly and unequivocally told members that the real constraint on borrowing was not the lack of headroom for taking on more debt, but the inability to pay for the cost of servicing debt charges.
The report to the Cabinet meeting on 11 January 2016 also told members that rents account for 80% of the income in the HRA, the effect of the 1% a year reduction in rents over 4 years would reduce the income previously budgeted for by £28.5m and that consequently the HRA would be reliant on reserves to balance the budget, which was not sustainable (paragraphs 2.3.2, 2.3.3 and 2.3.6). Taking into account also stock losses, the overall budget for the HRA in 2016-7 would reduce and was expected to continue to reduce over the coming years. As a result, expenditure budgets would need to be reduced in line (paragraph 2.7.2). Under the heading "Capital budgets" members were told that expenditure on the balance of the LHS programme was having to be re-profiled because of the reduced level of income available to the HRA (paragraph 2.10.1). Members were reminded of the prudent advice to maintain a minimum balance of £10m in the HRA (paragraphs 2.10.1 and 2.11.1).
Taking the information provided to Cabinet members as a whole, it is plain that by January 2016 they understood that the Government's cap on borrowing in excess of £408m was not a constraint for LLBC to increase their level of debt. Instead, the real constraint, then and for the foreseeable future, was the reduction in the income within the HRA which constrained the housing authority's ability to service debt. The budgetary figures showed LLBC's inability to take on the additional revenue cost of further borrowing. A short passage referred to by Mr. Wolfe QC from the informal briefing provided to Cabinet members on 3 March 2016 did not alter the position. That simply referred to the need to clarify future headroom and borrowing capacity in the context of funding for works already in the LHS programme which remained to be carried out.
Paragraph 3.1 of the officers' report to the Cabinet meeting on 21 March 2016 can now be seen in context. It stated that LLBC could not afford to borrow more than is currently planned because borrowing through the HRA is capped by central government either by means of a fixed "headroom" limit or because the HRA "simply cannot afford to borrow more (ie. there is insufficient income to pay any higher interest payments). That second explanation is entirely consistent with the position which had carefully been explained to members in the earlier report. They cannot have been left in any doubt that the HRA could not afford to fund any additional refurbishment costs, because paragraph 3.1 went on to say that if money were to be spent for such work on CGE it would need to be diverted from other LLBC estates. That was relevant to the "value for money" analysis which had already been set out in section 2 of the report (and see also paragraph 1.48). The absence of borrowing capacity in the HRA was reiterated in paragraph 3.4.
No challenge is made by the Claimant to the legitimacy of the approach set out in paragraph 1.45 of the report to the meeting on 21 March 2016, where it was stated that for a refurbishment option on the CGE to be considered viable:
"refurbishment component of the option must be considered to be value for money AND funding can be allocated from within the HRA"
The Claimant has not suggested that section 2 of the officers' report was significantly misleading, or revealed any error of law, in relation to the "value for money" assessment. That in itself was a sufficient reason for the refurbishment options to be rejected, as the report makes clear. But in any event, the report was not significantly misleading in telling members that no more funding was available from the HRA. The reason given that LLBC could not afford to pay for any more debt was perfectly sufficient. The additional reference to "headroom" was gratuitous. In view of the information previously given to members, the report in March 2016 cannot be treated as "significantly misleading" when it is read in context, or as vitiating LLBC's decision. The "dashboard" which LLBC published on about 16 April 2016 (paragraph 16 of first witness statement of Ms. Gniewosz) made it plain that the HRA would fall below the minimum balance of £10m from 2017-8 onwards.
I turn to the complaint that the consultation exercise was unfair and unlawful. Given that LLBC's senior officers and Cabinet knew by 11 January 2016 that the authority could not afford to service any more borrowing and that the "headroom" limit was no longer the real constraint to funding refurbishment, it is incomprehensible that the consultation document issued on 19 January 2016 should have continued to rely upon the "headroom" point and failed to bring the public up-to-date with the effect of the Council's declining revenues in the HRA, namely that the servicing of additional debt for HRA properties could not be afforded. LLBC has offered no explanation for this. I do sympathise with members of the public who were faced with an important decision affecting their homes and lives and given inaccurate information of this kind in the January 2016 document. Understandably they pursued LLBC for more information on the HRA business plan so that they could test and challenge what was being said about the debt "headroom". That turned out to be a waste of their time. They must have felt frustrated by this and a sense of grievance. However, I must answer the question whether the consultation process was unlawful so as to vitiate LLBC's decision.
As I have already explained, a freestanding reason for LLBC's decision was that the refurbishment options did not represent in its judgment good "value for money". Mr. Wolfe QC did not argue any legal challenge to that freestanding reason for the authority's decision, whether in relation to the consultation process or to the reasoning presented in the officers' report to the meeting on 21 March 2016. Both the consultation document and the officers' report plainly and sufficiently set out the separate importance of LLBC's views on the "value for money" issue (see paragraphs 19-20, 22, 33, 36-38 above).
As to the "headroom" not being a constraint, it is plain from the Q&A documents issued by LLBC on 12 and 16 February 2016 that the authority's debt level of only £160m was way below the cap set by Central Government of £408m (see paragraph 91 above). Moreover, it is clear from paragraph 14 of Ms. Gniewosz's first witness statement that she did understand that according to LLBC the "headroom" point was no longer a constraint. It is highly unlikely that her associates involved in objecting to LLBC's proposal, or in producing the TPP, were unaware of this development. Certainly the public were able to appreciate the change from the consultation material read fairly as a whole.
It is also understandable that residents feel aggrieved that LLBC continued to make financial information available not only after the consultation period closed, but after the decision under challenge was taken by the Cabinet on 21 March 2016. At least some of this information had been requested by Ms. Gniewosz at an earlier stage. Mr. Goudie QC did not submit that this information fell outside the proper scope of the consultation exercise.
But the question remains whether there was any unfairness, or failure to ensure participation in decision-making (Moseley and see also section 105(1) of the 1985 Act), through LLBC failing to explain in the consultation documentation that its inability to service its debt was the real constraint on the provision of HRA funding for refurbishment, or through the subsequent publication of financial information. There is no justification for quashing the decision made by LLBC unless substantial prejudice has been caused, a proposition with which Mr. Wolfe QC did not in truth quarrel (see paragraphs 85 to 87 above). It is therefore surprising that before the hearing began the Claimant's team did not consider adducing evidence on this question as to whether the alleged denial of proper consultation made any real difference, or whether residents had something "relevant to say" on either LLBC's position that it could not afford to service any increase in the size of its debt or on the additional financial data.
After the Court raised this question during the first day of the hearing, the Claimant's team did seek to address it by producing at the beginning of the second day a third witness statement from Ms. Gniewosz. Understandably Mr. Goudie QC forcefully and persuasively objected to the introduction of this late evidence. But I decided to consider this material to see whether it was capable of making a difference to the outcome of this case. If I were to conclude that it did not, then the Claimant and residents would know that the Court had taken into account all the material upon which they wished to rely.
In my judgment it is clear that this latest evidence does not support the Claimant's argument under ground 2. Ms. Gniewosz and residents on CGE have known about LLBC's financial position for some weeks before the case started. The gist of it was plainly set out in, for example, Ms. Thompson's witness statement dated 29 September 2016 and supporting financial documents have been made available. There was no attempt by the Claimant to suggest that that analysis of non-affordability of debt was disputed (or would have been disputed) or was flawed in some way. A good deal of the third witness statement of Ms. Gniewosz deals with the "headroom" point which is irrelevant to this argument. Only paragraph 10 deals with the affordability of debt point. It does not suggest that LLBC's figures are incorrect or that its analysis is wrong in relation to options 1 to 4. The witness statement simply refers to additional income streams under the TPP's proposal which it is said would arise from the creation of new housing. But that argument overlooks LLBC's rejection of the TPP's proposal to create additional homes in the undercroft car parking areas. Any representations along these lines could not possibly have affected LLBC's conclusion that the authority's reducing income prevented it from taking on more debt or its decision to reject refurbishment options or to select option 5.
Paragraph 11 of Ms. Gniewosz's third witness statement raised a wholly different point which had not been raised in any part of the Claimant's skeleton or the speaking notes produced by his counsel for the hearing or in Mr. Wolfe's oral submissions (which were substantially concluded by the end of the first day of the hearing). The question I raised during the hearing did not justify introducing a completely new point into the claim in this way. It relates to the analysis of the effect on the HRA of option 5 through removing rental income from the existing Council homes. It had not been argued that LLBC failed to take this factor into account in their analysis. Instead it now appeared to be suggested in some very generalised way that this aspect of the financial modelling might have been conducted differently, but without any real explanation as to the extent of the difference this would have made to LLBC's appraisal. The "initial analysis" referred to was not even shown to the Court. This vague, unsupported and late suggestion could not properly be relied upon to show substantial prejudice so as to make good the allegation of unlawful consultation. In my judgment, the effect of the financial information produced after 21 March 2016 was to confirm the serious financial difficulties faced by LLBC and its inability to service any greater level of debt.
The last sentence of paragraph 11 of the witness statement then moved to a different point, relying once again upon additional income streams said to be available in the TPP's proposal. I have already rejected this argument in paragraph 111 above.
In any event, as I have previously explained LLBC rejected the refurbishment options (and chose option 5) on "value for money" grounds which have not been challenged, and are not open to challenge, for any public law error. It is also necessary to recall at this point that it has never been suggested that LLBC should consider diverting funds which would be spent on the refurbishment of other LLBC dwellings to the CGE.
For the above reasons I conclude that the consultation exercise carried out by LLBC was not unlawful and that there is no basis for quashing its decision made on 21 March 2016 under ground 2.
This is the first of four grounds of challenge which concern the way in which the officers' report to the Cabinet advised members about certain aspects of the option proposed in the TPP.
The TPP proposed to create 23 two-bedroom homes in the existing undercover car parks on the CGE (paragraphs 3.2 and 6.2 of the TPP). In an email to residents dated 11 March 2016 LLBC included a summary of that part of the officers' report which expressed concerns about this proposal. It stated that the ceiling heights would be too low. Ground 4 focuses on this aspect. But it should be noted straight away that the summary also stated that the proposed homes "would fall far short of acceptable design standards," referring to other aspects of the design.
Appendix B to the officers' report to the Cabinet contained an appraisal of the TPP. Paragraph 1.26 stated that LLBC had commissioned design and engineering specialists to review the technical elements of the proposal. Nine criticisms were made of the proposal to convert the existing car parks to housing, one of which was:-
"Insufficient floor to ceiling heights mean that new residential accommodation would not be able to meet the requirements of the London housing design guide (LHDG) without expensive and potentially significant excavation works."
Mr. Wolfe QC criticised that passage as being significantly misleading. He submitted that it involved a misinterpretation of the Design Guide.
Paragraph 5.4.1 of the Guide contains the following standard:-
"The minimum floor to ceiling height in habitable rooms is 2.5m between finished floor level and finished ceiling level. A minimum floor to ceiling height of 2.6m in habitable rooms is considered desirable and taller ceiling heights are encouraged in ground floor dwellings."
The accompanying explanatory text reiterates that ceiling heights are expected to be at least 2.5m, with a preference for 2.6m or more and adds:-
"For projects creating new dwellings in existing buildings and developments in sensitive historic contexts, including infill developments within conservation areas, lower ceiling heights may be permitted by the local borough."
Paragraph 82 of the Claimant's skeleton relies upon the relaxation of the guidance for "infill developments". Paragraph 83 goes on to claim that in paragraph 9(e)(i) of LLBC's response dated 13 June 2016 to the pre-action protocol letter it was "accepted that the assertion made in the Cabinet report was wrong." That involved a plain misreading of the Council's response in which it was pointed out that the relaxation relied upon by the Claimant was concerned with the conversion of "heritage assets" (such as listed buildings and unlisted buildings in conservation areas). They also drew attention to a report prepared by consultants, Tibbalds, in February 2016 which advised that the ceiling height in the undercroft parking area was "generally low (it varies, but on average is about 2.3m)." Downstand beams reduce the clearance in some parts to 1.8m. LLBC's response ended by describing the complaint as no more than a "quibble."
In my judgment, the Defendant was being over-generous to the Claimant in going so far as to treat this complaint as a "quibble". It is wholly misconceived and should never have found its way into the Claim, let alone be argued at the hearing.
Assuming that the design guide is analogous to a policy document such as a development plan, the meaning of which is an objective question of law for the Court to determine, it is not to be construed as if it were statute or contract. The language used should be read in context (Tesco Stores plc v Dundee City Council  PTSR 983). The explanatory text relied upon by the Claimant refers to the creation of new dwellings, not simply in "existing buildings" but in "existing buildings and developments" in "sensitive historic contexts", which is why it goes on to give as an example "infill developments within conservation areas." The officers were fully entitled to treat the ceiling heights in the undercroft parking constructed in the 1960s as sub-standard for residential purposes, because they were below the normal minimum figure of 2.5m.
The Claimant's complaint is simply that the undercrofts should have been treated as buildings where the standard could be relaxed in the discretion of the authority. But that was a matter of judgment for the officers when reporting to the Cabinet. tTe issue of whether the paragraph permitting relaxation was relevant to the undercrofts involved an issue of judgment as to the application of the guidance, not its interpretation. A complaint of that nature has to demonstrate that the judgment made was irrational (see Tesco at paragraph 19; Barker Mill Trustees v Test Valley Borough Council  EWHC (Admin) at paragraphs 22, 33 and 83-4). Here the buildings in question were not listed and they were not located in a conservation area. Mr. Wolfe QC pointed to a suggestion by English Heritage that although CGE did not qualify for listed building status, it might be considered for designation as a conservation area. However, no such action has been taken. It is impossible to suggest that officers acted irrationally by failing to treat the undercroft car parks (or surrounding buildings) as "heritage assets", or the paragraph on relaxation of standards as applicable.
In any event, the complaint in ground 4 fails to read the officers' response as a whole, as we are required to do. Appendix B contained many other criticisms of the proposal including lack of daylight, privacy issues, north facing single aspects, and large areas of unusable space. The criticism levelled at the Defendant's treatment of ceiling heights is not only misconceived, it fails to recognise that LLBC made a careful assessment which identified a number of serious flaws in the proposed conversion of the undercrofts. That was a matter for the judgment of the officers who advised the Cabinet and cannot be impugned.
For these reasons ground 4 must be rejected. The design guide was not misinterpreted or misapplied and the members of the Cabinet were not misled.
The Claimant submits that the Cabinet was significantly misled because the costs per home of converting the undercroft parking to residential use were overstated in the officers' report; alternatively, officers failed to obtain sufficient further information on those costs for inclusion in the report.
Paragraph 6.2 of the TPP states that using a cost for creating dwellings in the undercover parking areas of £52,000 per 2-bedroom home, a positive NPV would be generated even if the homes were to be let on Council rents. Mr. Wolfe QC submitted that this figure was taken from costs estimates produced by a quantity surveyor, S. J. Morrow. However, in paragraph 1.29 of Appendix B to their report to the Cabinet, officers stated that the estimates they had obtained indicated a cost per unit of closer to £200,000. Mr. Wolfe QC points out by reference to paragraph 30 of the witness statement of Julian Hart (the Defendant's Housing Regeneration Programme Manager) that the financial appraisals were very sensitive to these figures. Using the Council's financial model and substituting a cost per unit of £200,000 for £52,000, produced a negative NPV of £2.15m instead of a positive NPV of £717,000.
In paragraph 9(e)(ii) of the Defendant's response dated 13 June 2016 to the pre-action protocol letter it was explained that officers had relied upon advice from consultants Airey Miller. The advice was contained in an email from a surveyor, Mr. David Cane, dated 8 March 2016. The email set out the assumptions which he had adopted when giving his opinion. They included at least one factor which TPP did not take into account. Consistently with the view expressed elsewhere in the officers' report that the existing ceiling heights were inadequate (see ground 4 above), the Council's surveyor took into account the need to reduce levels under the building to achieve minimum heights. He went on to add that, although he accepted that a conversion of the undercroft would avoid certain costs required for a new building (eg. roofs and frames), "the consequential costs of adapting the existing building would most likely outweigh the savings." Taking into account all of his comments, Mr. Cane stated that "as a broad-brush exercise, without specific information, I would estimate that the range for costs would be £200,000 to £240,000 per unit."
Mr. Wolfe QC criticised the Defendant for failing to obtain more detailed cost estimates and for preferring the estimate produced by Mr. Cane in this way to the exercise carried out by Mr. Morrow.
These criticisms do not amount to a public law error vitiating LLBC's decision. It was a matter for the officers to judge how much information to obtain on this issue and then how much to include in their report to the Cabinet. Their judgment to rely upon the advice of Airey Miller cannot be criticised in these proceedings unless it was irrational in the public law sense. On matters of technical expertise of this kind an appropriate margin of discretion must be allowed to the officers and the Defendant's professional advisers (see paragraphs 62 to 73 above). I do not accept that the material put before the Court shows that the officers' judgment preferring the Airey Miller estimate was irrational. The mathematical sensitivity of the NPV calculation to numerical variations in this input is insufficient to demonstrate that officers acted irrationally by not seeking further information. Instead, officers were entitled to rely upon advice given to LLBC that the TPP estimates ignored the need to overcome the inadequate ceiling heights, and the consequential costs of excavation works, and that a conversion scheme of this kind would not be cheaper than new build. It is to be noted that TPP's figure for new build was £145,000 per home (see paragraph 6.2), considerably in excess of its conversion figure of £52,000 and much closer to LLBC's figure of £200,000.
In any event, paragraph 1.29 of Appendix B to the officers' report to Cabinet reiterated the key point that, irrespective of whether the NPV for the TPP option was positive or negative, funds were not available for the refurbishment options. Indeed, the TPP option was rejected by LLBC on other freestanding and perfectly lawful grounds which included the lack of funding for refurbishment, the Council's conclusions on "value for money", the understatement of the cost of refurbishment of existing dwellings on the CGE, flaws in the "Green Refurbishment" proposals in the TPP and flaws in the design for the conversion of the undercrofts.
For all these reasons ground 7 must be rejected.
Paragraph 1.29 of Appendix B to the officers' report to the Cabinet also advised members that the main difference between the financial appraisals by LLBC and the TPP of refurbishment was that the latter assumed that 80% of the rental income and service charges paid by tenants would be available for funding refurbishment costs, whereas LLBC's evidence was that only about 33% of that income would be available. The report stated that this evidence had been provided to residents and continued "this difference in net income is the reason why the "People's Plan" appraisals show positive NPVs, whereas the Council's appraisals of refurbishment show negative NPVs." The Claimant submits that the Cabinet was thereby significantly misled as to the true content of the TPP on this point. Mr. Wolfe QC says that this is an important point because one of LLBC's four criteria which had to be met by any option was the demonstration of a positive NPV.
I think that officers may be forgiven for believing when they drafted their report to Cabinet that the TPP had used the 80% assumption. This can begin to be seen by the way in which this point was raised in section A4 of the detailed request dated 4 April 2016 for a call-in before the OSC. It was asserted that the TPP had clearly showed that it used "45% (20% management costs plus repairs and maintenance based on historical data used by Lambeth)". In fact, the TPP did no such thing. The cross-reference given in footnote 1 of the call-in request is to paragraph 6.1 of the TPP which only referred to "management costs of 20% of total income" and did not mention any additional assumption as to repair costs. On one reading of that paragraph of the TPP, such costs might have been treated as part of the management expenses. (It should also be recalled that the full TPP was not submitted until 4 March 2016). Footnote 1 then goes on to state coyly that the percentage for ongoing repairs and maintenance "can be calculated from the 30 year cash flow models provided in the TPP appendices." In other word the document did not contain an explicit statement as to what percentage had been assumed or used for repair costs. Furthermore, the call-in letter leaves the reader to speculate as to whether the percentage of income available for financing refurbishment is 45% or 55%. The text of the document was not clear. Indeed, the response in the OSC report (paragraph 2.22) assumed in the TPP's favour that the net income figure used in its appraisals was only 45%.
Subsequently, the pre-action protocol letter sent on behalf of the Claimant accepted that the net income percentage used in the TPP's models had in fact been 55% (Paragraph 1(d) of the letter dated 27 May 2016, but still confusing matters by relying on paragraph 6.1 on page 41 of the TPP). LLBC responded that it had not used the TPP's 55% assumption because it considered that figure too high.
Paragraph 80(i) of the Claimant's skeleton admits that the 55% figure put forward in the pre-action protocol letter was incorrect in any event. Paragraph 24 of Ms. Gniewosz's first witness statement says that the TPP assumed that only 40% of the income from tenants would be available to fund the refurbishments, rather than 55%. She goes on to explain the series of calculations that LLBC's officers could have performed by analysing the 30 year cash flows appended to the TPP. It is somewhat harsh to criticise the officers' report for misunderstanding one paragraph of the TPP which was not clearly expressed and where the Claimant's team themselves have difficulty in ascertaining or providing the correct figure.
In any event, this ground of challenge overlooks the really important explanation given in paragraph 9 (d) of LLBC's response on 13 June 2016 to the pre-action protocol that the Council's consultants, Airey Miller, used the assumption that 33.12% of income from tenants would be available for refurbishment or capitalisation purposes when testing both the TPP's option and LLBC's options. This ensured a level playing field when the options were compared. Both in their skeleton argument (paragraph 46(a)(iii)) and in oral submissions LLBC demonstrated that its NPV estimates of -£493,000 to -£662,000 for the Council's options 1 to 4 and -£1.3m for the TPP option all assumed a percentage net income of 33.12%. Mr. Hart has also explained that LLBC stands by its 33% assumption (paragraphs 20 to 22 of his witness statement).
The difference of opinion between the TPP and LLBC as to whether the percentage net income figure is 33% or 40% is not a matter for judicial review. It is a matter for the judgment of the decision-maker, not the Court. It has not been demonstrated that the approach used by Airey Miller or LLBC was irrational. Furthermore, the Court does not have material which would enable it to prefer the TPP's figure to LLBC's. An application to cross-examine has not been suggested and, given the nature of the issue, would have been entirely inappropriate. There is no basis upon which the Court could be asked to go behind the assumption adopted by LLBC (see for example R v Camden LBC ex parte Cran  RTR 346, 353). Likewise, there is no basis for impugning the NPV assessment of -£1.3m for the TPP proposal.
The position we have reached is that the NPV figure for the TPP scheme calculated by Airey Miller and put before members of the Cabinet did not make the error of assuming that the TPP's proposal relied upon a percentage net income figure of 80%. All that can be said by the Claimant is that one part of the officers' report to the Cabinet (paragraph 1.29 of Appendix B) ascribed that percentage to the TPP proposal, contrasted it with the 33% assumption used by LLBC and suggested that the difference explained why the TPP's appraisal showed a positive NPV for its proposal and the Council's appraisal gave a negative result. Using the Council's estimate that the net income percentage is 33%, Airey Miller's analysis arrived at a negative NPV for the TPP scheme.
The real issue here is whether it can properly be said that the "overall effect" of the advice given to the Claimant on the merits of the TPP's proposal was "significantly misleading" (see paragraph 71 above). I have reached the firm conclusion that it was not.
It should be remembered that the passage in paragraph 6.1 of the TPP was ambiguous. It gave the impression that only 20% of total income was lost to management costs and hence 80% was available for financing. It made no reference to repair costs as an additional item which should be added to the 20% figure. All that the Claimant can say is that this could have been deduced by carrying out analysis of the spreadsheets included in the TPP. Even when the authors of the TPP sought to correct the position in the request for a call-in, the explanation given did not clearly identify the figure which had been used in their modelling. Then an incorrect net income percentage of 55% was put forward as the TPP's case (on 27 May 2016) before that figure was reduced to 40% (on 23 June 2016). On the specific issue of what net income percentage was used by the TPP, that document itself was misleading and it is understandable why the officers' report interpreted it in the way it did.
But the advice on the merits of the TPP proposal did not hinge on whether the residents' group had been correct to use a net income percentage of 80%. It would be wholly improper to read that part of paragraph 1.29 of Appendix B to the officers' report in isolation. The "overall effect" of the advice was that, using assumptions which LLBC was legally entitled to use (and not the 80% figure),
- the NPV of the TPP option was significantly negative (as with the other refurbishment options)
- LLBC lacked the financial resources to service debt for funding refurbishment options
- therefore, the refurbishment of properties on CGE would require funds to be diverted from other estates
- there was no adequate justification for taking that course having regard to LLBC's "value for money assessment" of refurbishment on CGE, and
- there were technical design flaws in the TPP proposal, some of which were "quite probably irresolvable."
Thus, LLBC's decision cannot be vitiated on the grounds that the officers' report was significantly misleading in relation to the TPP proposal.
Furthermore, and for the same reasons, even if the officers' report had not referred to the 80% point, the other reasons for rejecting refurbishment options, and the TPP proposal in particular, it is inevitable that the Cabinet would have reached the same decision to reject the TPP option (and to select option 5) (see Simplex GE (Holdings) Ltd v Secretary of State for the Environment (1989) 57 P&CR 306; Smith  1 WLR 3315 at paragraph 10) or alternatively it is high likely that the outcome would have been exactly the same, on the basis of the material before the Cabinet (section 31(2A) of the Senior Courts Act 1981).
For all these reasons ground 6 must be rejected.
This ground relates to the treatment of "weather-tight repairs" which LLBC was obliged to carry out in any event. The report to the OSC meeting on 11 August 2015 recorded that a question was raised as to whether £1.4m had already been committed to carrying out these repairs and that they would start in September 2015. Officers responded that that final estimate was likely to be significantly reduced (paragraph 2.14). Section G1 of the request dated 4 April 2016 for a call-in by the OSC complained that the £1.4m cost for "weather-tight repairs" had been included in the overall refurbishment costs in the financial modelling for LLBC's options 1 to 4, but had been excluded in the appraisal for the 100% redevelopment scheme, option 5. Residents contended that since the "weather-tight" costs were to be incurred in any event, they should be excluded from all options. I note from paragraph 6.1 of the TPP that these costs were excluded in the financial modelling carried out for the residents group, for example in relation to their own proposal.
Paragraph 2.101 of the officers' report for the OSC meeting on 9 May 2016 accepted that "weather-tight" repairs had been included in the Council's modelling of refurbishment options, but not in the redevelopment scenarios. Paragraph 2.102 also stated that the works had been reduced in scope to cover only items which were immediately essential and therefore were only expected to cost £430,000 instead of £1.4m.
Whereas in the request for the OSC to call-in the matter (and by inference in the TPP) residents were suggesting that the cost of "weather-tight" repairs should be excluded from the modelling of all options, including option 5, the Note prepared by the Claimant's counsel for their opening raised a single point, namely that LLBC failed to take into account as a material consideration the cost of these repairs in the modelling of option 5. Once again the Claimant's case raises an issue concerning an expert technical subject, financial modelling, which would generally be inappropriate in a claim for judicial review. Unless required by statute or policy to take a particular consideration into account, it is for the decision-maker to decide whether or not to do so and his decision can only be challenged on grounds of irrationality (see paragraphs 62 to 63 above). The Claimant's position changed during argument and, as a result, it was clarified that the Claimant is complaining in effect about an internal inconsistency in the report by officers to the Cabinet. Either the costs of "weather-tight" repairs should have been excluded for all options, or they should have been included for all options.
Given that the "weather-tight" repairs are being carried out in any event, not least because (as the Claimant puts it) LLBC is legally obliged as landlord to do so, the Claimant's final formulation of its argument, the inconsistency point, would appear to have some force at first sight. Indeed, I note that in paragraph 32 of his witness statement Mr. Hart did not seek to rely upon the distinction drawn in the officers' report to the OSC meeting on 9 May 2016 between the appraisal of options which include "refurbishment" and the appraisal of an option which entirely comprised "redevelopment."
However, at this point I am reminded of the submission by Mr. Wolfe QC in another part of his case that this claim is not concerned with any judicial review of the later decision by the OSC. It is solely concerned with the decision by the Cabinet on 21 March 2016 to select the redevelopment option. Thus, Mr. Wolfe QC accepted that the real question for the Court under ground 5 is whether the different treatment of the "weather-tight" repair costs in the financial modelling caused the "overall effect" of the officers' report to the meeting on 21 March 2016 when comparing the options to be significantly misleading.
As to this, I accept the response of Mr. Goudie QC, based upon paragraph 32 of Mr. Hart's witness statement. Adding the cost of £430,000 could not result in the positive NPV of £824,000 for option 5 becoming negative. So far as the refurbishment options are concerned, the deduction of the cost of "weather-tight" repairs (even taking the earlier estimate of £1.4m) would not significantly impact on the cost of the remedial work needing to be carried out. The figure of £9.4m for refurbishment of all properties on CGE, which was the base figure used in the modelling, was conservative. It was a minimum figure as paragraphs 1.19 to 1.20 of the report to the Cabinet meeting on 21 March 2016 made clear. It did not include the cost of all works needing to be carried out, such as window replacement. The report to the OSC in August 2015 had already stated that a worse case figure for refurbishment costs would be £13.9m, including 100% replacement of windows (if all of that work should prove necessary). It has not been demonstrated, therefore, that the report to the meeting on 21 March 2016 was "significantly misleading" in advising members that the NPV for refurbishment options would be negative and not positive.
In any event, it is necessary to recall that the judgment of LLBC was that the financial appraisals for the refurbishment options were all theoretical, in the sense that they assumed that funding could be provided from the HRA when that was not in fact possible. Given that that conclusion cannot be impugned, points taken about the inputs to the financial modelling and the resultant NPVs cannot found any proper legal basis for vitiating LLBC's decision or for asking the court to quash the decision. Furthermore, the Claimant's challenge overlooks the other freestanding and unimpeachable grounds upon which the Defendant's decision was taken, not least the important "value for money" factors dealt with in section 2 of the officers' report to the Cabinet.
For all these reasons ground 5 must be rejected.
A summary of the complaint
The position reached so far in this judgment is that each of the legal challenges to LLBC's decision to reject refurbishment options, including the TPP proposal, have failed. The remaining two grounds, 1 and 3, are concerned with the Council's decision to adopt its option 5, the complete redevelopment of CGE.
Under ground 1 the Claimant points out that one of the four mandatory criteria used by LLBC, both in the consultation exercise and also to make decisions on the options, was a requirement that the scheme should have a positive NPV (see paragraphs 27 and 44 above). The NPV for option 5 was assessed as being +£840,000. The complaint is that LLBC wrongly took into account a positive NPV result for option 5 based upon discounted cash flow assessments carried out by its consultants Airey Miller, which improperly took into account a payment of £7.5m to the Council's SPV (Homes for Lambeth) to fund initial costs such as professional fees. Alternatively, it is said that if it was permissible to take into account that payment as a credit, then it was improper to exclude from the DCF modelling the repayment of that sum by the SPV to LLBC. The Claimant suggests that if the recoupment did need to be included in the DCF modelling, the NPV would become negative and so option 5 would fail LLBC's mandatory criterion. It was accepted by LLBC that as a matter of fact the DCF analysis carried out by its consultants did take into account the initial payment to the SPV of £7.5m but did not model as an outgoing cash flow in later years the repayment of that sum to LLBC. The Council's stance was that that approach to the financial modelling exercise was justified.
Accordingly, ground 1 involves a criticism of LLBC's reliance upon the modelling work of its independent consultants. In the ordinary way the legal question would be whether it was irrational for the authority to rely upon the advice it was given (see paragraph 73 above). It was not suggested that LLBC had not been entitled to select the consultants to carry out the tasks assigned to them or to rely upon the work they produced. Ultimately, it emerged during argument that the real complaint being made by the Claimant in these proceedings is that there was an internal inconsistency in the DCF modelling work carried out by Airey Miller between the inclusion of the £7.5m payment as revenue for the project and the non-inclusion of the repayment of that sum as an item of expenditure. But although this claim is one of internal inconsistency, it is being raised in the context of a highly specialised and technical financial assessment, and the issue remains whether the Claimant can show that LLBC was not entitled as a matter of law to rely upon the advice of its consultants.
Paragraph 2.73 of the TPP issued on 4 March 2016 contended that the information provided by LLBC in the consultation showed that the financial analysis for option 5 took into account a "grant" of £7.5m from LLBC which was to be repaid in due course, but without any indication as to when or how. At that stage it was said that this money should have been treated either as a loan or as equity funding to the SPV and therefore should not have been treated as income or revenue in the DCF analysis at all. It was claimed that if that amount had been excluded from the modelling, the NPV would have been negative rather than positive.
The officers' report to the Cabinet meeting on 21 March 2016 stated that option 5 was the only scheme with a positive NPV (page 3 and table 1 on page 13 of the report and page 5 of Appendix B). Appendix D to the officers' report contained a summary by Airey Miller of their analysis of option 5. That took into account grant levels of £9.15m which, it is agreed, included the amount of £7.5m with which ground 1 is concerned.
Appendices B and C to the officers' report dealt with the suggestion in the TPP that the £7.5m was a loan which should not have been included in the DCF analysis. It was confirmed that the sum was a grant. The officers added that "in due course" LLBC would recoup this amount from the carrying out of projects by its SPV. It was also pointed out that LLBC had already given this explanation in a "Q and A" document issued during the consultation exercise.
The issue was raised in the request to the OSC to call-in the decision (section G1(ii)). It was still being suggested by residents at that stage that the sum of £7.5m should be removed altogether from the DCF modelling. The officers' response in their report to the meeting on 9 May 2016 was that "in the model this is expressed as a grant coming in at the start and then being repaid during construction".
Paragraph 26 of LLBC's response dated 13 June 2016 to the pre-action protocol letter further clarified the position by stating that the grant of £7.5m had been included in each of the redevelopment options considered (i.e. all options except option 1) pro-rata to the scale of the redevelopment involved. It added that the sum paid to the SPV would be recouped by LLBC once the redevelopment had been completed.
LLBC provided its Detailed Grounds of Resistance on 29 September 2016. Paragraph 31 returned to the explanation given in Appendix C to the officers' report to the Cabinet (ie. recoupment through projects by Homes for Lambeth in due course). Paragraph 32 also relied upon the witness statement of Ms. Thompson dated 29 September 2016 to which I will shortly turn.
The issue now before the Court and the evidence in the witness statements
During the course of argument, it became clear that Mr. Wolfe QC accepted that the money provided by LLBC was not an equity investment and that the outcome of ground 1 did not turn on whether this sum should be described as a loan or as a grant which would be recouped at a later stage by the authority. The only issue raised under ground 1 is whether the Claimant can establish a public law error in relation to the treatment in the modelling of the recoupment of the sum of £7.5m. In other words, it is no longer suggested that there was a legal error in the DCF modelling by treating that money as income at the outset.
The treatment of the £7.5m amount in the DCF modelling is a technical issue for persons with the appropriate expertise, such as Airey Miller and LLBC's Director of Finance. It is not a subject which, in proceedings for judicial review, it would be appropriate for the Court to determine where the Claimant's assertions have been refuted in evidence from the Defendant and cross-examination has not been sought, let alone justified.
Mr. Wolfe QC took the Court to Mr. Hart's witness statement of 22 July 2016, in paragraphs 5 to 7 of which he explained that the money would be repaid by Homes for Lambeth over the course of the construction period. He said that because the workings of the computer model used by Airey Miller are even more complicated than the detailed spreadsheets produced to the Court, he relied upon an email response from the consultants which was also dated 22 July 2016 and which stated (inter alia):-
"When Homes for Lambeth has been established and when it takes over development of a project, then this sum of money would be repaid to the Council. Within the appraisal model, it is repaid to the Council during the construction period."
Ms Thompson responded to the criticisms of the financial modelling in paragraphs 16 to 21 of her witness statement. She explained that Airey Miller's computer modelling in February 2016 arrived at a "pre-financing NPV" which was calculated by "applying a discount rate to the pre-financing cash flows", which included the costs of master-planning, costs of construction and net operating income, but excluded finance costs (paragraph 17). LLBC used a discount rate of 6.09% to calculate the pre-financing NPV, a rate provided by the Treasury Green Book (paragraph 18). Using that discount rate the CGE redevelopment project (option 5) generated a positive pre-financing NPV and "modelled that sufficient surplus will be generated by the project to recoup this £7.5m to the Council" (paragraph 19). She added that LLBC had "always expected the project to deliver sufficient surpluses to recoup the upfront costs of this project" (paragraph 20 with emphasis added).
Paragraph 21 reiterates that the payment of £7.5m is not a loan, but goes on to suggest that it is not a grant because LLBC expected to recoup the sum (as the sole shareholder of the SPV). I need not be concerned by any confusion resulting from the labels or terms used, because Mr. Wolfe QC accepts that ground 1 does not turn on that aspect. The narrow issue is whether a public law error occurred because of the way in which the recoupment has been treated in the financial analysis. Ms. Thompson explains that it was appropriate not to show the recoupment in the calculation of the NPV because "the scheme is expected to generate a surplus" (i.e. the same "sufficient surplus" referred to in paragraphs 19 and 20).
The Claimant has produced no evidence to contradict Ms. Thompson's explanation. The only evidence touching on ground 1 comes from Ms. Gniewosz. Paragraph 23 of her first witness statement and paragraph 15 of her second witness statement simply rely upon extracts from corporate finance textbooks for the proposition that the £7.5m should have been treated as a loan and therefore excluded altogether in the calculation of an NPV, but as I have explained, during the hearing Mr. Wolfe QC abandoned that point. He chose to concentrate the Claimant's fire upon the non-inclusion of the recoupment as a cash flow in the modelling. But that has been explained by Ms. Thompson on the basis that the DCF modelling for option 5 shows that surpluses are generated sufficient to repay £7.5m. By definition these surpluses must be greater than the positive "pre-finance" NPV figure of £840,000. No evidence has been produced on the Claimant's side to contradict that explanation. Even if an attempt had been made to do so, the Court may well have found it difficult to treat it as negating the technical explanation supplied by Ms. Thompson (see paragraph 138 above and eg. ex parte Cran).
On the second day of the hearing Mr. Goudie QC identified on the spreadsheets a surplus in excess of £7.5m (namely a figure of about £25m). Mr. Wolfe QC told me that he had access during the course of the hearing to assistance from a financial expert. He did not contest this particular point in reply.
In the circumstances, there is no basis for the Court not to accept the technical explanation by Ms. Thompson that (a) the £7.5m will be repaid from additional surpluses generated by option 5 as modelled (ie. in addition to the NPV of +£840,000) and (b) there was no need for that recoupment to be shown as a cash flow item (or items) in the particular DCF modelling carried out by the expert consultants. The Claimant has not shown that it was irrational or unlawful for LLBC to rely upon the advice of its expert consultants or upon the way in which they carried out their analysis. Accordingly, there is no basis for impugning the authority's reliance upon computations produced by Airey Miller showing a positive NPV for option 5.
The discrepancies in the documents as to the timing of the recoupment does not alter or affect the explanation given by Ms. Thompson. Nothing in the Claimant's evidence, or in submissions made by Mr. Wolfe QC, suggested otherwise. Given that the recoupment is to be paid from surpluses which are additional to the positive NPV for option 5 generated by the DCF modelling of revenue and expenditure cash flows, it was not suggested that differences in the documentation as to the timing of the recoupment affected the calculation of that NPV. Consistent with that understanding, it was not suggested that these discrepancies affect the issue with which ground 1 is really concerned, namely whether the advice given to LLBC was so flawed that it was irrational for the authority to rely upon it as satisfying the criterion that the NPV for an option should be positive if it were to be selected.
I should add, that even if I had found that LLBC had erred in law by not including the recoupment of the sum of £7.5m as a cash flow expense in the DCF modelling, I would still have refused to quash the decision of the Cabinet made on 21 March 2016, taking into account the reasons set out in paragraph 204 below when dealing with ground 3. In this particular context there is an additional consideration, namely that the sum of £7.5m will be recouped from surpluses that will be generated in addition to the NPV figure (paragraphs 165-169 above). It is important not to be distracted from the substance of the evidence on this position by focusing simply on the form of the DCF modelling. Accordingly, I am satisfied that any such error on the part of LLBC could not possibly have affected the decision of its Cabinet on 21 March 2016 which the Claimant seeks to impugn. It is inevitable that the Cabinet would have reached the same decision to reject the refurbishment options and adopt option 5 (applying Simplex GE (Holdings) Ltd v Secretary of State for the Environment (1988) 57 P&CR 306; R (Smith) v North Eastern Derbyshire PCT  1 WLR 3315). Alternatively, it is highly likely that that outcome would have been the same, or at least "not substantially different" (applying section 31(2A) of the Senior Courts Act 1981). There are no reasons of exceptional public interest to justify taking a different course under section 31(2B) (see also paragraph 12(iv) above).
For all these reasons ground 1 must be rejected.
This ground concerns the impact of LLBC's decision to proceed with the redevelopment scheme (option 5) upon the statutory right to buy which is potentially exercisable by those who currently hold secure tenancies from the Council. Option 5 cannot be carried out by LLBC because it lacks the funds to do so. Consequently, it will be carried out by the authority's subsidiary, Homes for Lambeth, an SPV. That entity would be unable to grant secure tenancies in respect of the new homes created on the CGE. It would only be able to grant assured tenancies, to which no statutory right to buy attaches. In the consultation exercise and decision-making process, the only method suggested by LLBC by which an existing secure tenant may continue to have a right to buy would be to obtain a secure tenancy from the Council on another property, but not on the CGE.
The Claimant raises three arguments. First, it is said that the Cabinet's decision involved a breach of A1P1 by interfering with the ability of secure tenants to rely at some stage in the future upon a statutory right to buy. Second, the Claimant submits that the Cabinet was misled or misdirected as to the options open to the authority. Third, the consultation failed to provide consultees with adequate information about the effect of option 5 on the right to buy and the options for maintaining such a right.
During the consultation LLBC issued a "Key Guarantees" document for existing secure tenants on the CGE. A tenant who has to move from his or her home under option 5 will have the choice to take an assured lifetime tenancy in a new home on the CGE or will be given "high priority (Band A) to bid for a new home elsewhere in the Borough". In the latter case, the new home will be let on a secure tenancy and in that way a statutory right to buy will be maintained. The effect would be that a tenant would not have the ability to exercise the right to buy on their existing home but would be able to obtain such a right if they are prepared to move to another estate altogether. A "flyer" document explaining the Key Guarantees to tenants stated that only assured tenancies could be granted for the new homes on the CGE and continued "you should note that the right to buy is not available under assured tenancies" (emphasis added). Strictly speaking, and as far as it went that was a correct summary of the statutory position, but the document did not address the possibility of including a contractual right to buy in the terms of an assured tenancy of a new home on the CGE.
In consultation responses residents raised the loss of the "right to buy" by virtue of LLBC's proposal that only assured tenancies would be granted for new homes on the CGE. It was said, for example, that the LLBC's proposal was inconsistent with its stated "principles of regeneration" that no tenant should be any worse off under the new scheme. Similarly, paragraph 2.2 of the TPP relied upon a Government policy statement in March 2015 in order to oppose the loss of right to buy rights.
This issue was not dealt with in the body of the officers' report to the Cabinet on 21 March 2016. It was only dealt with in the authority's EqIA dated 30 June 2015, which was attached to the report as Appendix G. The relevant passage reads:-
"If the Council pursues building new houses through a Special Purpose Vehicle these homes will be rented at Council rent levels, but with a lifetime assured tenancy, rather than a secure tenancy. A key difference between the two forms of tenancy is that the Right to Buy is not available with a lifetime assured tenancy" (emphasis added).
In response to the question raised in section E2 of the request for a call-in by the OSC, the officers' report to the meeting of that Committee on 9 May 2016 stated at paragraph 2.85:-
"The Council is proposing to provide assured tenancies with protected rights, but not any preserved right to buy. The Council will consult with tenants on the proposed assured tenancy in due course."
It is not clear whether the expression "any preserved right to buy" is referring to a statutory or contractual right to buy. But given that this passage only refers to a proposal, on either view it is consistent with the decisions taken thus far by the authority on the future of the CGE. The only decision by LLBC to adopt option 5 was that taken by the Cabinet on 21 March 2016 and the resolutions passed on that date did not involve any decision by the authority as to whether a contractual right to buy should be included in the new assured tenancies. The authority has not formally considered that issue. LLBC has not suggested otherwise to the court. I also note that the OSC was not asked to consider the issue of a contractual right to buy at its meeting on 9 May 2016. Instead, the Cabinet having already said that there would be further consultation on the terms of the assured tenancies, that promise was repeated in the officer's report to the OSC.
It does not appear that between January and March 2016 consultees were told that there would be further consultation on the terms of new assured tenancies after the Cabinet had decided which option to select and pursue. In paragraph 31 of his first witness statement, the Claimant says that consultation on the terms of the assured tenancies should have happened before LLBC made the decision to commit to option 5 or takes any steps which would result in the loss of existing secure tenancies. He adds that he does not understand why LLBC is not offering such tenants an assured tenancy with a contractual term containing a "right to buy" the new dwelling, nor why the Council did not consult with residents on this option before the decision to select option 5 was taken. As I have said, the resolutions passed by the OSC on 9 May 2016 do not address this aspect further. The witness statements filed by LLBC do not deal with these points.
Article 1 of the First Protocol to the ECHR
Article 1 provides:
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interested and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest to secure the payment of taxes or other contributions or penalties."
The first and critical question in this part of the argument is whether A1P1 is engaged. Does the decision of 21 March 2016 involve an interference with the peaceful enjoyment of a "possession" or a deprivation of a "possession", the possession here being the right to exercise the statutory right to buy whilst the tenant's secure tenancy continues to subsist. Paragraph 50 of the Defendant's Detailed Grounds of Defence accepted that A1P1 was engaged. Consequently, this aspect was not dealt with in any detail in the Claimant's skeleton. However, the skeleton for LLBC took a different position by arguing strongly that A1P1 did not apply to the decision taken by the Cabinet.
Section 118 of the Housing Act 1985 confers on a secure tenant a right to buy in respect of the property to which his or her tenancy relates.
Section 84(1) of the 1985 Act prevents a Court from making an order for possession of a dwelling-home let on a secure tenancy unless one or more of the grounds set out in schedule 2 are satisfied. Subsection (2) contains additional requirements for certain of the grounds. Ground 10 applies where the landlord intends, within a reasonable time of obtaining possession of the dwelling house, (inter alia) to demolish or reconstruct the dwelling. In that event, section 84(2) prevents an order for possession being made unless the Court is satisfied that suitable accommodation (in accordance with Part IV of Schedule 2) will be available when the order takes effect. Paragraph 1 of part IV deems accommodation to be suitable in certain circumstances, which include a letting on a secure tenancy of accommodation which is "reasonably suitable to the needs of the tenant and his family". But paragraph 1, and hence "suitable accommodation", is not restricted to lettings by way of secure tenancies. It also includes certain assured tenancies (see limb (c)).
Accordingly, I agree with the submission of Mr. Goudie QC that it is an intrinsic feature of a secure tenancy that it is granted subject to statutory termination on a number of grounds (and not merely redevelopment) which, by definition, will cause the secure tenant to lose the potentiality of choosing to rely upon a right to buy his home at some point in the future. Indeed, if that should happen, the suitable accommodation which must be available to him may, or may not, carry with it a statutory right to buy.
It follows that the "possession" which is held by a secure tenant does not include an absolute right to exercise a right to buy, irrespective of whether he or she continues to have a secure tenancy of that dwelling. Instead, the potential exercise of that statutory right to buy is conditional upon the tenant continuing to hold the secure tenancy of his or her property. That tenancy may be brought to an end by the operation of the 1985 Act, which includes the redevelopment ground. This limitation which is placed upon the continued existence, and exercise, of the right to buy is imposed upon the tenancy with its bundle of rights and obligations (the "possession") by the legislation which created the legal notions of a "secure tenancy" and a "right to buy". This analysis applies irrespective of whichever of the statutory grounds in Schedule 2 is relied upon in order to bring the tenancy to an end. The limitation placed by the 1985 Act upon the exercise of the right to buy, namely that the secure tenancy continues to subsist, is important because the argument raised under ground 3 relates to persons who have not yet exercised the right to buy but may do so in the future. It was not suggested that the decision taken by the Cabinet on 21 March 2016 would affect any tenant who has already exercised the right to buy.
In Wilson v First County Trust Ltd (No. 2)  1 AC 816, Lord Hope stated at paragraph 106:-
"… Article I of the First Protocol has a similar character [to Article 6(1)]. It does not confer a right of property as such nor does it guarantee the content of any rights in property. What it does instead is to guarantee the peaceful enjoyment of the possessions that a person already owns, of which a person cannot be deprived except in the public interest and subject to the conditions provided for by law: Marckx v Belgium (1979) 2 EHRR 330, 350 para 50. Here too it is a matter for domestic law to define the nature and extent of any rights which a party acquires from time to time as a result of the transactions which he or she enters into. One must, of course, distinguish carefully between cases where the effect of the relevant law is to deprive a person of something that he already owns and those where its effect is to subject his right from the outset to the reservation or qualification which is now being enforced against him. The making of a compulsory order or of an order for the division of property on divorce are examples of the former category. In those cases it is the making of the order, not the existence of the law under which the order is made, that interrupts the peaceful enjoyment by the owner of his property. The fact that the relevant law was already in force when the right of property was acquired is immaterial, if it did not have the effect of qualifying the right from the moment when it was acquired."
(See also Stretch v United Kingdom  38 EHRR 12 at paragraph 32).
The order for possession made under ground 10 is not analogous to either a compulsory purchase order or an order for division of property in divorce proceedings. There the property rights in question already exist. Here the secure tenants have not yet exercised the statutory provisions which enable them to own their properties. These statutory provisions, which insist upon the continuing subsistence of the secure tenancy if they are to be relied upon, subjected the tenant's rights from the outset of the secure tenancy to restrictions or qualifications which might subsequently be enforced against him. Accordingly, A1P1 is not engaged. For these reasons the present case is indistinguishable from authorities such as Kay v Lambeth LBC  QB 352 at paragraphs 107-8 and Austin v Southwark LBC  HLR 1.
For the same reasons, I do not need to deal in any detail with LLBC's alternative submission in paragraphs 63 to 66 of its skeleton that A1P1, if engaged, need only be considered in relation to the statutory right to buy in the event of the authority commencing County Court proceedings to obtain an order for possession of a particular home. Mr. Goudie QC did not pursue that point and, for my part, I was wholly unpersuaded by it.
If, contrary to the clear view I have reached, I had concluded that A1P1 was engaged in LLBC's decision reached on 21 March 2016, it is common ground that the issue of whether it was breached would have been a matter for the Court to determine (Belfast City Council v Miss Behavin' Ltd  1 WLR 1420 at paragraphs 13 to 15).
On the application of A1P1, Mr. Wolfe QC relied upon the approach set out in Bank Mellat v HM Treasury (No. 2)  AC 700 at paragraph 20, cross-referring also to paragraph 74. If I had had to apply those tests I would have had no difficulty in deciding that (a) LLBC's objectives in promoting the redevelopment of CGE are so important and well-founded as to justify the limitation of A1P1 rights in respect of the right to buy and (b) that limitation is rationally connected to that objective.
But in relation to the third test of proportionality, I would have had difficulty in accepting, on the evidence provided to the court, that a less intrusive measure could not have been used at all. Option 5 would result in secure tenants being provided with new secure tenancies if they decide to move elsewhere, but not if they wish to be rehoused in a new home on the CGE, in which case they would only be granted an assured tenancy. I acknowledge that this accords with the statutory scheme and the definition of "suitable accommodation" (see paragraph 67(a) of the Defendant's Skeleton). However, evidence produced by the Claimant indicates that in some cases local authorities arrange for assured tenancies to be granted with contractual terms providing for an equivalent (or near equivalent) right to buy. LLBC has not reacted to this part of the resident's objections. The Defendant has not provided any evidence that it would be impossible for such terms to be provided in the present case on that there are sufficiently good reasons why that should not be done. There has been complete silence on these matters.
In these circumstances, I consider that, if I had concluded that A1P1 was engaged, I would have been unable to accept LLBC's submission that the third test of proportionality given in Mellat is satisfied. I would have no basis for concluding that the adoption of contractual terms for a right to buy in an assured tenancy would unacceptably compromise LLBC's objectives. Nonetheless, that would not have led me to quash LLBC's decision on this ground, given the conclusions I have reached on the remaining parts of ground 3 and, in particular, the point that LLBC has not yet decided whether to accept or reject the inclusion of a contractual right to buy in the new assured tenancies and has promised further consultation on the terms of those tenancies leading to a decision which will have to address this issue.
Whether the Cabinet was misled or misdirected as to the options open to it
The only information supplied to the Cabinet for its decision on 21 March 2016 in relation to the "right to buy" issue was that contained in the EqIA to which I have already referred. The members were told that a key difference between a secure tenancy and an assured tenancy is that in the latter case the right to buy is not available. The advice given to the Cabinet was in similar terms to the statements by LLBC in the consultation exercise (see the references in paragraph 17 of Mr. Hart's witness statement). The advice was accurate as far as it went, but it did not address the further option of including a contractual right to buy in an assured tenancy. It is unclear whether officers had considered this subject by the time they prepared their report to the Cabinet meeting on 21 March 2016. It is not suggested that the absence of any such reference was deliberate or that any bad faith was involved. No evidence has been produced by LLBC to show that the matter was considered more fully in earlier Cabinet meetings (for example dealing with regeneration proposals for other estates) and reasons given as to why contractual terms for a right to buy should not be offered. The Court has not been shown anything in the minutes to indicate that the advice in the EqIA was altered at the meeting.
In paragraph 17 of his witness statement Mr. Hart on behalf of LLBC recognises that the Claimant's central allegation in respect of "rights to buy" is that the Cabinet did not properly understand that existing secure tenants could have been offered a third option, namely to stay on the redeveloped estate with an assured tenancy and a contractual right to buy. He does not give any evidence that that option could not or should not be pursued by LLBC or why that might be so. Instead, he said that the issue would be addressed in the witness statement of the Cabinet Member for Housing, Councillor Bennett. The Councillor does deal with the right to buy in paragraphs 36 to 38 of his statement, but not the "central allegation" identified by Mr. Hart.
It was a matter of judgment for officers to decide whether to include advice in their report to Cabinet on the topic of offering a contractual right to buy for residents moving into new homes on the CGE. Normally such a judgment cannot be impugned unless irrational (see paragraphs 62 – 63 and 72 above). That raises the question as to whether this topic was "obviously material" to the decision being taken by the Cabinet. This raises similar issues to the question posed in the Oxton Farms case, namely, whether viewed objectively, the omission of any reference to the possibility of creating a contractual right to buy rendered the overall effect of the officers' report "significantly misleading" in the context of the decision to be taken by LLBC. I have reached the firm conclusion that the omission was not "significantly misleading" and that LLBC did not fail to take into account an "obviously material" consideration for reasons set out below when I consider the legal effect of this and the remaining aspects of ground 3 together. They raise very similar issues.
Mr. Wolfe QC also submitted that the Cabinet's attention was not drawn to, and they did not take into account, central government policy contained in a Written Ministerial Statement delivered in the House of Commons on 20 March 2015. It is not suggested that this policy had ceased to be effective at the date of the decision under challenge.
The policy states that it is important that new council tenants should have access to the right to buy and therefore that new homes should not be built by councils which are excluded from the right to buy. All forms of secure tenancy are subject to the right to buy (including "new flexible tenancies"), whether they are accounted for in the HRA or the Council's General Fund. The Minister then turned to deal with the establishment of local housing companies by local housing authorities:-
"However, it is not acceptable for local authorities to establish new wholly owned or controlled housing companies deliberately to avoid the government's reinvigorated Right to Buy Policy … Specifically, the government will not support the establishment of such companies where they are developing or acquiring and retaining new social or affordable units for rental purposes…"
This was the policy upon which the TPP relied in its critique of option 5 (see paragraph 2.2) and which was not addressed in the officers' report.
The sole basis upon which the Defendant's skeleton suggests that this policy was irrelevant is that in setting up the SPV, it was not seeking "deliberately" to avoid the Government's right to buy policy. Instead, it was setting up Homes for Lambeth as the only means by which private capital could be raised and invested in the estate. As a matter of interpretation, I very much doubt that the word "deliberately" was used so as to confine the objective of the policy to arrangements involving something akin to "specific intent", to borrow an analogy from the criminal law (e.g. section 18 of the Offences Against the Person Act 1861). Bearing in mind that this is a policy document rather than a statute, I consider LLBC's interpretation of the policy to be legalistic and too restrictive. A local authority's use of an SPV to build housing which replaces homes held on secure tenancies whilst being aware that, unless a contractual right to buy is offered as part of an assured tenancy, existing secure tenants will lose their existing statutory right to buy, could be said to be a scheme adopted and implemented in full knowledge of the consequences, and to that extent "deliberate". The effect may be intended or deliberate even if not desired. In any event the policy needs to be read as a whole, including the text which follows the sentence upon which LLBC's submission focuses. Accordingly, on the submissions which I have read and heard I am not persuaded that the policy is irrelevant.
I note that it has not been suggested that the Cabinet had regard to the Written Ministerial Statement when it reached its decision on 21 March 2016. The question is whether that was a material error. I have reached the firm conclusion that it was not for reasons set out below.
Whether the consultation was unlawful
I have already referred to the language used in the consultation documents which was similar in effect to the content of the EqIA supplied to the Cabinet meeting on 21 March 2016. Plainly, residents on the CGE were informed that they would not have a statutory right to buy if they were to move into new homes on the CGE. They had a proper opportunity to put forward any consultation responses they wished to make in relation to that proposal. In paragraph 17 of his witness statement Mr. Hart claims that existing secure tenants were not misled or misinformed. No specific evidence was filed on behalf of the Claimant, whether from him or other residents, saying that the consultation documents were misleading in this respect and if so why (see eg. paragraphs 30 and 34 of Robson). The complaint is simply that the consultation exercise failed to deal with the possibility of a contractual right to buy being included as a term of the new assured tenancies for the new homes on the CGE.
As I have said, no evidence was put before the Court as to why this possibility was not covered in the consultation exercise. It is at this point that an analogy with the circumstances of the Moseley case may be drawn (see paragraphs 78 and 81 above). Viewed objectively, and read fairly, the consultation documents gave consultees the impression that no other option was available for dealing with the loss of the statutory right to buy. They did not consult secure tenants on the possibility of including a contractual right to buy in new assured tenancies, whether or not that option had been identified by officers at that stage. If that option had been identified by then, but officers were not proposing to take it further, the consultation documents did not explain why that was so, in order for residents to be able to respond. Furthermore, the technical nature of this subject and the typical level of understanding of consultees would mean that any discussion of this topic would need to be in straight forward, clear terms for their benefit (see paragraph 82(iii) above), even if, as I have held, A1P1 is not engaged.
But it is necessary to consider whether the failure to consult residents on a contractual option for a right to buy renders the consultation exercise carried out by LLBC unfair and unlawful so as to vitiate the decision taken by the Cabinet on 21 March 2016. In this context, it is relevant that at the time when the Cabinet made its decision to adopt option 5, LLBC promised further consultation with residents on the terms of the assured tenancies. That promise was repeated at the time of the OSC meeting and at that stage, even before these proceedings were commenced, it is plain that that the further round of consultation was being relied upon by LLBC in order to deal with (inter alia) the "right to buy" issue (see paragraph 177 above). Unless there is a good legal reason for requiring this issue to have been the subject of consultation before the decision to adopt option 5, I do not see why the further consultation promised by LLBC does not overcome the complaint. It is therefore essential to consider how the "right to buy" issue stands with the basis for the decision to adopt option 5 and the circumstances in which it has been taken.
The same issues arise on the question whether the consultation process has caused substantial prejudice to the Claimant, or to residents on the CGE, with respect to the decision made on 21 March 2016. It is that decision which these proceedings seek to impugn. It is in that sense that I address the question whether something has gone "clearly and radically wrong" in the consultation process as it affects that decision. Effectively the same issues affect the question whether under section 105 of the 1985 Act secure tenants have been prevented from participating in the decision-making process on 21 March 2016 (see paragraph 77 above).
Conclusions on ground 3
In my judgment, the court must take in account and respect the following highly important circumstances in determining whether, for the purposes of ground 3, the officers' report to cabinet was "significantly misleading" in relation to the contractual right to buy issue (or whether that issue was "obviously material" to the decision), or whether the failure to take into account the Written Ministerial Statement was a material legal error, or whether the consultation exercise was legally flawed, so as to vitiate the decision made on 21 March 2016 on all or any of those grounds:-
(i) The judgments made by LLBC to reject all of the refurbishment options are legally unimpeachable;
(ii) LLBC's decision on 21 March 2016 followed extensive consultation with residents of the CGE over a number of years. At this stage of the proceedings the only arguable criticism of the consultation process was the absence of any reference to the possibility of contractual rights to buy being granted;
(iii) According to LLBC, funding to pay for refurbishment of properties on CGE is not available. No one has suggested that funding should be diverted from the refurbishment of any of LLBC's other estates in order to meet the costs of refurbishment on the CGE. LLBC has decided that that would not be justifiable, partly because the greater cost of refurbishment on CGE would represent poor value for money and also because the CGE would continue to suffer from inherent design faults and overcrowding;
(iv) No one has suggested that doing nothing to the CGE would be acceptable, or that there is some other alternative to option 5;
(v) LLBC position is that it is facing a severe housing crisis, not only because of the number of substandard council homes, but also the large number of homeless persons in the Borough and persons on the housing waiting list. LLBC has decided to secure the building of 1000 additional "council rent" homes by 2018-19;
(vi) LLBC has decided that the density of the existing development on the CGE is low and there is the opportunity to substantially increase the number of homes provided there in order to help address the need for more housing in the Borough;
(vii) In reaching its decisions on 21 March 2016 the Cabinet took into account the loss of a statutory right to buy for secure tenants who wish to move into new homes built on the CGE. That loss did not deter them from deciding to reject the refurbishment options and to adopt option 5. If the Cabinet had been aware of the possibility of providing a contractual right to buy in assured tenancies granted under option 5, that could not logically have altered their rejection of all of the refurbishment options. That would still have been the case if the Cabinet had been told about that possibility but had gone on to reject it. The refurbishment options would still not have provided value for money or been fundable. Given the circumstances, there is no basis for thinking that the Cabinet might have taken a different view about the one remaining option, namely to demolish and rebuild the estate. On the conclusions reached by LLBC the possibility of including a contractual right to buy could only affect the manner in which option 5 is implemented and not the decision whether to adopt option 5 as the way forward. The Claimant did not suggest otherwise;
In the light of those circumstances I have no hesitation in concluding that:-
(viii) No decision has been taken formally by LLBC on whether or not to include a contractual right to buy in the assured tenancies to be granted under option 5. The decision taken on 21 March 2016 does not preclude a future decision by LLBC to include such rights. LLBC has promised consultation on the terms of the assured tenancy, which is to include the contractual right to buy issue. It has created a legitimate expectation to that effect. No doubt it will have to deal with that issue and, on the basis of the materials presently before the court, no step should be taken by LLBC in the meantime which might impede or frustrate (a) the lawful carrying out of that consultation and a subsequent decision by LLBC on that issue or (b) the implementation of a decision to provide for a contractual right to buy if that should be the outcome. In that exercise LLBC will take into account not only the views of consultees but also any relevant central government or other policy.
(i) There was no legal requirement for the Cabinet to have regard to the contractual right to buy issue when reaching its decision on 21 March 2016. It was not an "obviously material" consideration for the purposes of that particular decision;
(ii) The officers' report to the meeting on 21 March 2016 is not to be treated as "significantly misleading" in relation to the right to buy issue;
(iii) Any failure to have regard to the Written Ministerial Statement was not a material legal error;
(iv) There was no requirement for the consultation which has since been promised on the contractual right to buy issue to take place before the Cabinet's decision on 21 March 2016;
(v) The consultation process carried out prior to the decision on 21 March 2016 did not cause any substantial prejudice to residents of the CGE, it was not unfair or unlawful, the overall process did not go "clearly or radically wrong", and there was no breach of any statutory obligation to enable secure tenants to participate in the decision-making process on 21 March 2016.
For all these reasons I reject ground 3.
(vi) Alternatively, if I am wrong in any of the above respects, I am satisfied that any such legal error on the part of LLBC could not possibly have affected the decision of its Cabinet on 21 March 2016 which the Claimant seeks to impugn. It is inevitable that the Cabinet would have reached the same decision to reject the refurbishment options and adopt option 5 (applying Simplex GE (Holdings) Ltd v Secretary of State for the Environment (1988) 57 P&CR 306; R (Smith) v North Eastern Derbyshire PCT  1 WLR 3315). Alternatively, it is highly likely that that outcome would have been the same, or at least "not substantially different" (applying section 31(2A) of the Senior Courts Act 1981). There are no reasons of exceptional public interest to justify taking a different course under section 31(2B) (see also paragraph 12(iv) above).
It follows that there is no need for me to decide the issues raised by LLBC on delay. I do not think that this judgment ought to be prolonged in order to deal with them. It is sufficient for me to say that I found the arguments generally unattractive and I would not have been prepared to refuse the Claimant relief if I had found that all or any of his grounds had been made out.
For all of the reasons set out above the claim for judicial review is dismissed.
The Claimant asks for declaratory relief in respect of the consultation exercise which remains to be carried out with secure tenants on whether a contractual right to buy should be included in assured tenancies to be granted for new properties on the redeveloped CGE. LLBC resists this request on the basis that it is not a subject covered by the present claim for judicial review and the Cabinet's decision of 21 March 2016 has been found to be lawful. It is also said that there has been no evidence or argument on the point. I agree with the Claimant on this issue and wholly reject the Council's surprising submissions. Ground 3 raised the lawfulness of the consultation exercise in respect of the right to buy. The earlier part of this judgment dealing with that ground has identified the evidence on the subject. It is plainly a matter falling within the scope of LLBC's obligations under section 105 of the Housing Act 1985 and LLBC has made promises creating a legitimate expectation of consultation on the terms of the new assured tenancies. The Court's decision to uphold the Cabinet's decision on 21 March 2016 notwithstanding the criticisms identified under ground 3 (see paragraphs 195, 199 and 201-3) is dependent upon the conclusions in paragraphs 204-5), an integral part of which is the promise or legitimate expectation referred to in paragraph 204(viii). LLBC has made no suggestion to the Court that that expectation has in some lawful way been brought to an end at any stage. The Court is entitled to rely upon the evidence placed before it and to make the declaration set out in the order today.
I should record that the Claimant has made it plain that in seeking declaratory relief under ground 3, it is not asking that the agreed position on costs should be altered. The Defendant remains entitled to an order for costs against the Claimant.
The Claimant's application for permission to appeal
The Claimant asks for permission to appeal restricted solely to ground 1. I refuse the application because this ground does not have a realistic prospect of success and there is no other compelling reason for allowing it to be argued further. The Claimant's application selectively relies upon the email from Airey Miller of 22 July 2016 (see paragraph 164 above). Airey Miller did not accept that the recoupment should be included as an expenditure cash flow in the DCF, which is the precise issue here. Their statement is consistent with the unchallenged evidence of Ms. Thompson that the recoupment is dealt with from the "surpluses" generated within the model. It is baldly asserted that Ms. Thompson, and therefore the Court, has wrongly conflated two issues, namely whether option 5 will generate a surplus and whether the recoupment should be treated as a cash flow in the model and that this is simply a matter of logic. But self-evidently this was a specialist, technical issue, the evidence on which the Claimant did not challenge. I also note that the Claimant takes no issue with regard to paragraph 170 of the judgment. In any event, it is unarguable that the Defendant's decisions to reject the refurbishment options or to adopt option 5 might not have been made if the recoupment had been treated as a cash flow expense in the DCF modelling (see paragraph 171 above).
The Claimant's application for a continuing injunction
Taking into account the refusal of permission to appeal, there is no sufficient justification for the Court to grant any continuing injunction restraining LLBC, exercising its statutory functions as a public authority, in the terms of the order made by Cranston J on 26 September 2016. I have in mind the principles laid down in authorities such as Sierbein v Westminster City Council (1988) 86 LGR 431.
Note 1 The Chartered Institute of Public Finance and Accountancy [Back]
Note 2 The challenge to that aspect of the authority’s decision is rejected under ground 4 below (and also under ground 7).
Note 3 Apparently based upon drawings and an outline specification the authorship of which is unclear (see Mr. Plant’s first witness statement at paragraph 44 and footnote 1 of the report) [Back]
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