QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| GORDON PETERS
|- and -
|LONDON BOROUGH OF HARINGEY
|- and –
|LENDLEASE EUROPE HOLDINGS LTD
(instructed by LEIGH DAY) for the Claimant
MR NIGEL GIFFIN QC, MR RANJIT BHOSE QC AND MISS RUCHI PAREKH
(instructed by PINSENT MASONS LLP) for the Defendant
MR JAMES GOUDIE QC
(instructed by ASHURST LLP) for the Interested Party
Hearing dates: 25 & 26 October 2017
Crown Copyright ©
MR JUSTICE OUSELEY:
The statutory provisions
(1) The Localism Act 2011
"(1)A local authority has power to do anything that individuals generally may do."
(2) Subsection (1) applies to things that an individual may do even though they are in nature, extent or otherwise -
(a) unlike anything the authority may do apart from subsection (1), or
(c) unlike anything that other public bodies may do.
(4) Where subsection (1) confers power on the authority to do something, it confers power (subject to sections 2 to 4) to do it in any way whatever, including –
(a) power to do it anywhere in the United Kingdom or elsewhere,
(b) power to do it for a commercial purpose or otherwise for a charge, or without charge, and
(c) power to do it for, or otherwise than for, the benefit of the authority, its area or persons resident or present in its area.
(5) The generality of power conferred by subsection (1) ("the general power") is not limited by the existence of any other power of the authority which (to any extent) overlaps the general power.
(6) Any such power is not limited by the existence of the general power (but see section 5(2))."
"(1) The general power confers power on a local authority to do things for a commercial purpose only if they are things which the authority may, in the exercise of the general power, do otherwise than for a commercial purpose.
(2) Where, in the exercise of the general power, a local authority does things for a commercial purpose, the authority must do them through a company.
(2) A local authority may not, in exercise of the general power, do things for a commercial purpose in relation to a person if a statutory provision requires the authority to do those things in relation to a person"
(2) Local Government Act 1999
"(1) A best value authority must make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.
(2) For the purpose of deciding how to fulfil the duty arising under subsection (1) an authority must consult-
a) representatives of persons liable to pay any tax, precept or levy to or in respect of the authority,
b) representatives of persons liable to pay non-domestic rates in respect of any area within which the authority carries out functions,
c) representatives of persons who use or are likely to use services provided by the authority, and
d) representatives of persons appearing to the authority to have an interest in any area within which the authority carries out functions.
(3) For the purposes of subsection (2) "representatives" in relation to a group of persons means persons who appear to the authority to be representative of that group.
(4) In deciding –
e) how to fulfil the duty arising under subsection (1),
f) who to consult under subsection (2), or
g) the form, content and timing of consultations that under subsection
an authority must have regard to any guidance issued by the Secretary of State."
There was no dispute but that, like all local authorities, the Council is a "best value authority". It did not carry out a statutory consultation exercise under s3. It says that the decisions of 3 and 20 July were not decisions in fulfilment of the duty in s3(1), so as to require the statutory consultation in s3(2). In any event, there had been significant opportunities for the Claimant, his group and others, to make their views known directly and through the Council's Overview and Scrutiny Committee, OSC.
(3) Equality Act 2010
"(1) A public authority must, in the exercise of its functions, have due regard to the need to -
(a) eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under this Act:
(b) advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it;
(c) foster good relations between persons who share a relevant protected characteristic and persons who do not share it;
(3) Having due regard to the need to advance equality of opportunity between persons who share a relevant protected characteristic and person who do not share it involves having due regard, in particular, to the need to –
a) remove or minimise disadvantages suffered by persons who share a relevant characteristic;
b) take steps to meet the needs of persons who share a relevant protected characteristic that are different from the needs of persons who do not share it;
c) encourage persons who share a relevant protected characteristic to participate in public life or in any other activity in which participation by such persons is disproportionately low."
(4) Local Authorities (Functions and Responsibilities) Regulations 2000
"4. – Functions not to be the sole responsibility of an authority's executive
(1) In connection with the discharge of the function –
[…]b) of formulating a plan or strategy for the control of the authority's borrowing, investments or capital expenditure or for determining the authority's minimum revenue provision;[…]the actions designated by paragraph (3) ("the paragraph (3) actions") shall not be the responsibility of an executive of the authority.(2) Except to the extent of the paragraph (3) actions, any such function as is mentioned in paragraph (1) shall be responsibility of such an executive.(3) The actions designated by this paragraph are…a) the giving of instructions requiring the executive to reconsider any draft plan or strategy submitted by the executive for the authority's consideration;b) the amendment of any draft plan or strategy submitted by the executive for the authority's consideration;[…](d) the adoption (with or without modification) of the plan or strategy."
The Council's decision-making process
(1) 10 February 2015
"1.1 This report seeks Cabinet approval for the proposal to tender for a feasibility study and business case including engagement with Members, staff and stakeholders for a Haringey development vehicle, and - if such an approach is recommended – support for the procurement of partners for that vehicle.
1.2 Subject to the more detailed work proposed here, it is considered that a development vehicle, established as a joint venture between the council and one or more private sector partners, is a leading option for removing what would be otherwise insuperable barriers to realising the council's ambitions for building new homes and securing its wider regeneration objectives, including in relation to the Tottenham regeneration programme; the emerging Wood Green Investment Framework; housing estate renewal and the council's own commercial portfolio. This is principally because, while the council has access to the land required, it cannot access sufficient capital funding and does not on its own have the commercial and development expertise required to achieve the best possible outcomes. The creation of a vehicle would marry the council's land assets with investment and expertise from one or more private partners while retaining a stake and a degree of influence over the pace and nature of development that would not be possible with more traditional land deals or development agreements. This proposal builds upon the initial scoping work already done for the council by Turnberry Real Estate, which is summarised later in this report."
" ... The council would hold a 50 % stake in the vehicle, with the remaining 50% stake held by its strategic investment partner or partners.
... The vehicle would be established for the long term, most likely for a period of up to 20 years with an option to further extend.
... The council's contribution – and equity stake – would comprise some or all of its investment portfolio and development sites. The strategic investment partner(s) would provide funding, as well as services including (but not limited to) asset management, development management and fund management.
... Receipts would be distributed pro rata between the councils and partner(s) based on their stake, or recycled to support the delivery of further projects."
Equality effects were mentioned: although the recommended decisions had no direct equality implications themselves, the services proposed were "in support of wider objectives which are aimed at improving the supply of housing – and particularly affordable housing- with the aim of improving access to all sorts of housing for everyone, and in particular vulnerable and protected groups." This was to be a common theme of the decision-making process.
(2) 10 November 2015
The Minutes record the reasons for the decision as follows:
"REASONS FOR DECISION
The Council has set out in its Corporate Plan and associated strategies, a set of challenging social, economic and regeneration objectives. It also has challenging economic and housing growth targets from the London plan, as well as a need to maintain its existing housing stock and carry out major estate renewal. It has neither the resources not the capacity to achieve these alone.
In the autumn of 2014, Turnberry examined the market on the Council's behalf to see if there was an appetite for partnership with the Council to deliver these social and economic objectives; deliver new housing and economic growth. On confirming that there was interest, the Council commissioned detailed work into the options for delivering the objectives, which is included in the Business Case at Appendix A1 and considered in detail below.
In summary, the site by site disposal of land will not deliver the required social and economic benefits or the renewal of estates as the level of upfront funding required by the private sector, particularly for estate renewal, will prevent them being developed, and where it is possible to move development forward will reduce returns and inhibit the delivery of social and economic benefits.
For the Council to establish a wholly owned company and carry out the work itself, would mean a commitment to a level of borrowing that is impossible for the Council to sustain, and a level of risk that would not be prudent.
Accordingly the option recommended is that the Council should seek through open procurement a private sector partnership with whom to deliver the objectives in partnership.
The Council accepts a degree of risk in that it will commit its commercial portfolio to the vehicle, and will, subject to the satisfaction of relevant pre-existing conditions, also commit land. It has also to bear the costs of the procurement and establishment of the vehicle, and some limited development risk. However, in return, the contribution to its Corporate Plan objectives, including high quality new jobs, new homes including affordable homes and economic and social benefits, will be at a scale and pace that would otherwise be unachievable. The Council also receives a financial return that it can reinvest in the fulfilment of its statutory functions, and particularly in measures to achieve such social-economic objectives (as more particularly described in paragraph 7 below and Appendix 7) or, as appropriate, such other strategic outcomes under the Corporate Plan.
The development partner, who continues to bear funding risk and the consequent development risk, enters a long term partnership with a non-commercial partner in a political environment, making it essential for them to maintain relationships. However, they obtain a long term pipeline of development work, in an area of London with rising land values, and with a stable partner.
It is not feasible for the Council to continue to operate as it has done previously and the approach outlined will help deliver wider social and economic benefits, as well as the housing and jobs outlined in the Council's plans. It should be noted, however, that this report does not recommend a decision to establish a vehicle, but simply to open a procurement process with a view to establishing one; the decision to establish will come back to Cabinet in due course."
"The increased council tax and business rate income will also help to put the Council's finances on a more sustainable long-term footing" as other revenues decreased, and it would allow "further cross-subsidy and investment into the stated socio-economic objectives in Corporate Plan outcomes".
"key role in driving this economic growth and providing new housing. Without use of surplus Council land such as unneeded offices in Wood Green, disused depots and under-used commercial property, the Council cannot achieve its targets. Similarly, estate renewal on the Council's large and medium sized estates provides a major opportunity not only to increase the number of homes, but also to improve the mix of tenures and sizes and address the condition of the housing stock".
"the Council did not have the financial resources to achieve its stated socio-economic aspirations and its Corporate Plan outcomes".
Recent studies had confirmed that its finances were "considerably short of being able to meet all the aspirations." Recent changes in Government finance had made that worse. There was not enough money to maintain the existing housing stock fully, still less to build new homes.
"demonstrable shortage of capacity and expertise to deliver the schemes required. On its own it cannot achieve its aims and it needs to bring in people and skills to make the developments happen. These skills would be difficult and expensive to acquire in competition with other boroughs and the private sector."
The report therefore said at 7.7:
"The value of seeking a private investment partner is that they will bring both capital resources, and skills and expertise to help achieve the Council's objectives. Financial returns will accrue on a phased basis giving the Council the option to spend these on further development – including affordable housing – on social and economic benefits or on other corporate plan objectives. During the Future of Housing Review, the member review group felt that in principle, some kind of development vehicle was needed as the Council had little choice of option to achieve its objectives".
The joint venture development vehicle model appeared to be the best solution to deliver the Council's ambitions. The report then turned to the concept of a development vehicle: the 50% Council owned/50% private sector owned joint venture development vehicle was already in use by local authorities in the UK to bring forward major development on their land where they lacked the investment capacity and skills to achieve the best possible regeneration outcomes in some other form. Such a joint venture development vehicle could combine Council land with private investment and expertise:
"while maintaining an appropriate degree of Council control over the pace and quality of development. It can also potentially give the Council a long-term income stream as well as capital returns, which may be re-invested in accordance with the Council's statutory functions on new housing, on social and economic benefits or on other Corporate Plan objectives."
Now was the appropriate time to consider such a vehicle. Planning, regeneration, housing and housing investment strategies were being developed. The review of the Future of Housing had "demonstrated forcibly that there is insufficient capital funding available to deliver all the Council's aspirations"; that meant that potential options for maintaining homes or delivering new ones and economic growth were extremely limited but a joint venture development vehicle might however be a potential solution.
"i. To deliver growth through new and improved housing; town centre development; and enhanced use of the Council's property portfolio.
ii. To achieve and retain a long term stake and control in development of the Council's land, maintaining a long term financial return which can be reinvested in accordance with the Council's statutory functions, on new housing, on social and economic benefits or on other Corporate Plan objectives.
iii. In partnership with the private sector, to catalyse delivery of financially unviable schemes.
iv. Achieve estate renewal by intensification of land use and establishment of a range of mixed tenures, together with tenure change across the Borough where appropriate.
v. To secure wider social and economic benefits in areas affected, including community facilities, skills and training, health improvement or crime reduction for the benefit of existing residents.
vi. Incorporate land belonging to other stakeholders, both public and private sector, into development."
"that Council will of course have competing priorities for the reinvestment of these resources in accordance with its statutory functions and Corporate Plan objectives, but the intention is to invest such resources in employment and training programmes; to subsidise more affordable housing and/lower rents; or to support other Corporate Plan objectives such as crime reduction measures, health improvement or community facilities."
The report then turned to the options for "potential delivery structures". The preferred option was the "overarching vehicle" which meant that assets could be taken forward by way of:
"different delivery mechanisms beneath the overarching level, through, for example, development agreements, joint ventures etc. Assets could be taken forward individually, as portfolios or through sub-portfolios of assets. The structure would also allow for the cross-funding of income from the commercial portfolio and quick-win projects (i.e. value release properties) to be used to fund projects such as the key estate renewal sites."
It could also provide an asset management role to enhance returns from the assets and could also act as a development manager, asset manager, fund manager and provide a strategic funding role in taking schemes forward. The model would also allow Council involvement in schemes where it had "limited land ownership". It referred to this as being the approach taken by London Borough of Hammersmith and Fulham. (That authority later changed its decision on the LLP structure of its development vehicle).
"(c) As can be seen from the financial appraisal, this approach is projected to achieve a considerable financial return which can be invested in accordance with the Council's statutory functions, in the further development of the stated socio-economic objectives or spent on the delivery of wider Corporate Plan objectives. This is significantly as a result of the bringing in of private sector resources to enable and make viable development. The other options project a significantly lower return in the event that they can be made to work at all."
"(e) Value can be extracted from the commercial portfolio and the town centre market led opportunities (at Wood Green) to be used to cross fund other projects, such as more financially challenging estate renewal sites. Money can also be retained within the vehicle and used to cross subsidise or fund other projects.
(f) While the Council will undertake a measure of development risk, it has in return the opportunity for reduced costs, and a share in very likely increased profits which may be reinvested in accordance with the Council's statutory functions, in the promotion of the stated socio-economic objectives. This level of risk, which is limited to the extent of land committed to the vehicle, and the commercial portfolio which is proposed to go in at day one, is significantly less than if the Council bears the whole burden of borrowing and cost to finance development. It is however, not a risk free situation and is the price paid for ongoing influence and control, together with financial returns."
The overarching vehicle would be able to adapt and respond to market changes in Council requirements.
"9.1 To undertake the transactions and participate in the proposed Development vehicle and proposed associated structure referred to in this report, the Council will be relying upon the General Power of Competence ("general power" contained in Section 1 of the Localism Act 2011 in conjunction with the powers set out below….
9.3 Section 4 Localism Act 2011 provides that if an authority is exercising the general power for a commercial purpose then the local authority must do it via a company. In this instance the local authority are proposing this project for the purposes set out in paragraphs 7.16 to 7.19 of the report and in Appendix 7 and the primary purposes of the project are non-commercial, although the Council would be acting on a commercial basis as a partner in a joint venture. In addition the objectives of the project are to comply with the objectives of Corporate Plan referred to in paragraph 6 of the report. These objectives are non-commercial socio-economic objectives. It is currently proposed to structure this project through a Limited Liability Partnership albeit this will be decided as part of the procurement process when further advice will be taken. Pinsent Masons LLP have advised on a number of similar projects and are satisfied in these circumstances that the Council may rely on the general power as legal authority for this project and for the proposed LLP structure. Leading Counsel has also been instructed to advise on this point and has confirmed that in his opinion the Council has the power to become a member of an LLP for the purposes of this project. This issue has never been challenged or litigated on in respect of previous LLP schemes involving local authorities and therefore there is no established case law on the point."
Equality issues were discussed as follows:
"10. Equalities and Community Cohesion Comments
10.1. An Equalities Impact Assessment for the procurement and creation of the vehicle is attached as Appendix 10. The company documentation will require the vehicle to comply in all respects with legislation and good practice in this area.
10.2. Asset business plans and proposals on a project by project basis will contain appropriate EqIA documentation, and it is open to the Council if it wishes to include this as a condition that must be fulfilled before land can transfer."
"An EqIA is being undertaken due to the potential for the vehicle's activities to impact on tenants, leaseholders, other residents, and those in housing need, as well as business owners, including (in all categories) those from the protected groups. A detailed site by site EqIA will be carried out as the vehicle carries out its work, if members agree to the setting up of the vehicle."
"The development vehicle proposal seeks to enable development to meet future housing need within the borough and should therefore have a positive impact across the protected characteristics, particularly where high levels of housing need have been identified as with younger age groups, lone female parents and black and minority ethnic households. Similarly, the provision of other benefits through jobs and training, community facilities, and new commercial and retail facilities should have a positive impact across the protected characteristics. The detail of specific schemes which would fall under the development vehicle is still to be worked out. The impact – positive or negative – of individual schemes will need to be assessed on a site by site basis. At present, the decision, if agreed by members, will be to procure the vehicle. It does not at this time establish the vehicle, nor does it allocate particular sites for development at present."
"overall, the development vehicle proposal is considered to have a positive impact for disadvantaged and excluded groups, including those with the protected characteristics. However, individual schemes will need to be assessed as they are brought forward for their specific impact on equalities."
(3) Tender Documents
(4) The Council Newsletter
(5) Related Strategies and Plans
(6) The Overview and Scrutiny Committee
(7) 14 February 2017
"In particular respect of the Council's aspirations to deliver the greatest possible amount of high quality affordable housing; this approach has two key strengths. First, it enables the Council – via its stake in the vehicle – to ensure that the vehicle's development proposals secure not only the greatest amount of affordable housing from this land, but that this housing meets the particular housing demand in Haringey as set out in the Council's Housing Strategy. This can always start with the presumption that sites delivered through the vehicle would meet council policy – for example to yield 40% affordable housing overall – with a strong governance position from which to secure those outcomes. Second, the Council will always have the option, on a case by case basis, to reinvest its financial returns from the vehicle in affordable housing, allowing future developments promoted by the vehicle to achieve better outcomes – whether larger overall amounts of affordable homes, a different tenure mix, or lower rents – than would be possible based on those developments' basic viability."
"As well as direct returns in the form of profit share and interest payments, the Council will also receive an indirect financial benefit from the Development Vehicle in the form of increased Council Tax and Business Rates received."
(8) The OSC's Subsequent Intervention
(9) 3 July 2017
"The potential impact of the individual business plans is likely to be greater than that of the decision to establish the HDV. Those business plans, and the final terms of the HDV's establishment, are still in development, so at this stage it will only be possible to talk about the Equalities Impact at a high level and on a provisional basis."
The 3 July 2017 report accepted a number of the OSC's recommendations but the Cabinet Member said there was no justification for delaying the Council's decision-making in respect of the HDV. It said this about EqIAs:
"All business plans – the mechanisms for committing sites to the HDV – are (and will continue to be) accompanied by equality impact assessments (EqIAs) which inform the content of the plans and which Cabinet will consider alongside the business plans themselves as part of the decision on whether to approve them. This is to ensure that Cabinet members discharge their Public Sector Equality Duty (PSED). The business plans' EqIAs contain actions to commit to undertaking further EqIAs for specific elements of the business plans.
However, it is not accepted that this should be undertaken by an external advisor. It is good practice for the individual or team to develop the EqIA alongside the development of a proposal as this allows equality issues to be embedded in proposals. It also allows the Council to document how it has shown due regard to the PSED throughout the development of the proposal as the duty does not just apply to decision makers but also people developing and implementing decisions. An external advisor would be detached from the process."
- An estimated 6,400 new homes, of high quality and meeting Council policy in terms of affordable housing, and potential for more than 20,000 jobs overall
- Estimated development returns to the Council of £275m, plus a share of enhanced rental returns from the commercial portfolio, plus estimated section 106 and Community Infrastructure Levy investment of £37.7m, plus council tax and business rate uplift rising to an estimated £13m per year.
- £8m HDV investment into its social and economic programme, plus £20m investment from Lendlease in a Social Impact Vehicle to drive long-term social outcomes.
- Firm guarantees for existing tenants in estates proposed for development by the HDV that they will have a right to return to the estate, and to be rehoused on similar terms and rent, plus a dedicated support package for resident leaseholders.
- Overall, an agreement that drives – through a co-ordinated programme across the whole borough – long –term improvements in the prosperity and wellbeing of the borough and its residents, at a scale and pace that the Council could never achieve alone.
"All material changes would be subject to the Council and Lendlease agreeing any necessary element of – or amendments to – the scheme business plans. Further, any additional Council property proposed for development by the HDV would be subject to a new business plan which would have to be approved by the Council (and Lendlease) before work could commence.
In addition to these controls over the work programme of the HDV through its status as 50% partner, the Council will retain its statutory functions in respect of the HDV work programme, including as local planning authority giving it further influence and assurance over the implementation of the HDV's programme of work."
"The Objectives of the HDV are enshrined in the Members' Agreement, and are the objectives to which the HDV Board must give consideration in setting and implementing the strategy and programme of the HDV. They are:
1. to deliver growth through new and improved housing; town centre development; and enhanced use of the Council's property portfolio;
2. to achieve and retain for the Council a long-term stake and control in development of the Council's land, maintaining a long-term financial return for the Council which can be reinvested, in accordance with the Council's statutory functions, on new housing, on social and economic benefits or on other Council Corporate Plan objectives;
3. in partnership with the private sector to catalyse delivery of financially challenging schemes;
4. to achieve estate renewal by intensification of land use and establishment of a range of mixed tenures, together with tenure exchange across the Borough where appropriate;
5. to secure wider social and economic benefits in areas affected, including community facilities, skills and training, health improvement and crime reduction for the benefit of existing residents;
6. to incorporate land belonging to other stakeholders, both public and private sector, into development; and
7. to achieve a commercially acceptable return."
"The main HDV and its development subsidiaries are proposed as limited liability partnerships (LLPs). This is proposed because LLPs are 'tax transparent' which means that their members are taxed on the proceeds of the LLP's business on the basis of their own tax status. As the Council is not liable for corporation tax, it will not be taxed on its share of profits from the LLPs."
"The financial model for the HDV states a number of high level financial benefits which can be described as:
- LBH's share of development profits is forecast at an estimated £275m.
- LBH will receive a Land Value transfer return of an estimated £18m.
- LBH will also expect to receive returns from the Investment Management portfolio (the transfer to the HDV of the Commercial Portfolio) and guaranteed income from the portfolio. This figure cannot easily be estimated, especially given the uncertainty over costs associated with the management of the commercial portfolio.
Decisions on how these profits will be spent is a matter for the Council to decide through its normal budget setting processes when the profits become attributable.
Further benefits will accrue to the Council as a result of the direct impact of the activities of the HDV.
- Increase in Council Tax estimated at circa £8m per annum by 2032
- Increase in Business Rates estimated at circa £5m per annum by 2032
- Increase in CIL (Community Infrastructure Levy) payments estimated at circa £18.8m in total over the programme of delivery
- Increase in S106 receipts estimated at circa £18.9m in total over the programme of delivery
In summary, whilst the financial mechanisms contained in the commercial arrangements for the HDV are complex, there are no items that fall outside of the budgetary framework for 2017/18. The financial implications arising from future business plans for each phase of the HDV will form part of the Medium Term Financial Strategy (MTFS) planning in future years, and will be approved as part of the Council's normal budget setting process."
"Section 4 of the Localism Act 2011 provides that where, in the exercise of the general power, if an authority does things for a commercial purpose then it must do them via a company. In this instance the Council is proposing creating the HDV for the purposes set out in the Cabinet report of 10 November 2015 and now contained in the Members Agreement to be entered into. The primary purposes of these are non-commercial. In addition the objectives of the HDV are non-commercial socio-economic objectives. The HDV would be a Limited Liability Partnership ("LLP"). Pinsent Masons LLP have advised that the Council may rely on the general power as legal authority for the Council in participating in the HDV as an LLP (such advice contemplating an HDV group structure). The HDV will be the main holding vehicle and various subsidiaries will be set up. The commercial portfolio will be held in a Limited Partnership vehicle."
"As set out in the Strategic Business Plan, the establishment of the HDV will allow the Council to tackle a range of inequalities which impact on the protected groups, including:
Better prospects in education, employment and training
Community pride and housing
It would not be possible to address these inequalities to the same extent if Council adopted an alternative option, as outlined in sections 4, 5 and 6 of this report.
Each project business plan that is submitted to Cabinet for the HDV will be accompanied by an EqIA. With this decision there are EqIAs for the following Business Plans:
Social and Economic
Within these, the Council has identified positive and negative impacts of individual Business Plans, and how negative impacts may be mitigated. To the extent, that it is not possible for negative impacts on the protected groups to be mitigated, members must weigh the negative impacts against the positive ones, and must weigh in the overall balance those impacts which are negative against the positive, countervailing factors, sought to be obtained from proceeding with the HDV. Subject to the decision being rational and lawful overall, it is for Cabinet members to decide what weight should be given to the countervailing factors.
Cabinet should note that every time the Council submits a Business Plan for the HDV, an EqIA will be undertaken, which will be used as a working document for any subsequent decision resulting from the Business Plan, or, when relevant, a further EqIA will be undertaken by the Council. The governance of the HDV will ensure that actions identified will be monitored and that due regard is paid to the Public Sector Equality Duty."
"Engagement processes for each business plan will make sure that all sections of the local community impacted by the business plan will be proactively engaged with through the consultation process. In addition, engagement processes will ensure that barriers to consultation for different protected groups are removed, including offering reasonable adjustments for disabled people and translation and interpretation services when appropriate.
In the operation of the HDV, consideration will be needed to take steps to prevent discrimination, harassment or victimisation based upon relative protected characteristics occurring through adopting appropriate equalities policies. In addition, any organisation commissioned by the HDV to deliver a service will be required to prevent discrimination, harassment and victimisation based upon the protected characteristics towards employees, service users or residents through appropriate mechanisms."
"The equalities comments were set out at section 8.49 to 8.57 of the report and outlined the equalities work completed thus far. The Cabinet Member emphasised that there will not be disposal of category 1B properties until there has been a full consultation. As and when further decisions on these sites come forward equalities impact assessments will be refined and improved in future as more information is available and as and when further decisions are made.
The current equalities impact assessments, contained in the agenda packs, as referred to by the Leader, were prepared by regeneration officers, in the areas in question, with Council in-house equalities policy expertise provided to support their completion. There had also been external legal advice sought to ensure the equalities impact assessments were consistent with the Council's public sector equality duties."
The five EqIAs appended are considerable documents, running in total to well over a hundred pages.
"potentially improve options for rehousing, social and economic enhancements and therefore provide opportunities to build on the longer-term vision and ambitions of HDV.
As part of the business planning process, opportunities will be identified and put forward to the Council where Category 3 Properties could benefit the Commercial Portfolio through enhancing the ability to cluster investments to amplify impact.
HDV may have opportunity and reasons to acquire additional assets over the life of the project to achieve longer-term strategic goals, such as creating HDV-branded clustering in the commercial portfolio, or wider town centre impact at Wood Green.
Further acquisitions may also be part of the process to speed up the current Category 1 phasing or future Category 2 Properties, by providing wider rehousing opportunities. All opportunities will be business case led and appropriate funding agreed between the HDV partners in accordance with the Members Agreement and the Finance and Commercial Business Plan."
"Delivery of affordable housing is recognised as being a key strategic aim of HDV to support the Council's wider ambitions for housing delivery and to create a balanced and varied community outcome. Affordable housing at this level is challenging to deliver commercially, particularly at the early stages of a large-scale regeneration project, when mobilisation and infrastructure costs are high and revenues have not yet benefitted from the place making and regeneration uplift. The HDV will work with the Council to continually balance the ambitions between delivering a level of affordable housing that exceeds many schemes in London and the Mayor's ambitions, whilst ensuring that development continues commercially viable, and maintains momentum."
"A strategy that will require jointly Lendlease and Council development is the potential for the HDV to form an entity that would be eligible to act as an RP [Registered Provider]. This would enable the HDV to take a long-term investment position in affordable housing across the borough, and potentially lead to a revenue-generating portfolio that could even expand farther than the borough to other Lendlease developments and beyond.
Any decision to pursue this Strategy would be taken by the HDV Board."
"The commercial portfolio will be a catalyst for regeneration; creating safe, vibrant places for people to shop, work and thrive.
HDV will increase the capital value and revenue streams of the portfolio to reinvest in new properties in the borough. New business and employment opportunities will deliver social and economic benefits to the people of Haringey."
"The commercial portfolio provides a critical platform for HDV to deliver immediate, short-term regeneration benefits and build a visible presence in the community. Given that many of the activities the HDV will undertake are long term and take time to establish, the commercial portfolio offers the HDV a presence on Day 1, giving reach and impact across the borough. This will be vital in enabling HDV to gain wider business momentum and public recognition."
It explained the purpose of taking the opportunity "to significantly increase the annual income and overall value of the portfolio, while also delivering social and economic improvements". Its short, medium and long-term strategies were:
"Short term: bring the properties up to statutory compliance, reposition the portfolio through the acquisition and disposal of assets, creating clusters around hubs in key target areas, such as near the HDV's other development sites to maximise impact.
Medium term: attract inward investment through the commercial portfolio to enable further regeneration.
Long term: redevelop the estates within the portfolio to implement change in other parts of the borough."
This plan then explained that general development opportunities for housing development had been identified in the commercial portfolio. The commercial portfolio would be critical to delivering inward business investment to Haringey, business support and growth in sectors and jobs, for existing business and to attract others to Haringey. It would support housing and employment opportunities, and healthier and safer communities.
"4.1.1 to deliver growth through new and improved housing; town centre development; and enhanced use of the Council's portfolio;
4.1.2 to achieve and retain for the Council long term stake and control in development of the Council's land, maintaining a long term financial return for the Council which can be reinvested, in accordance with the Council's statutory functions on new housing, on social and economic benefits or on after Council Corporate Plan objectives;
4.1.3 in partnership with the private sector to catalyse delivery of financially challenging schemes;
4.1.4 to achieve estate renewal by intensification of land use and establishment of a range of mixed tenures, together with tenure change across the Borough where appropriate;
4.1.5 to secure wider social and economic benefits in areas affected, including community facilities, skills and training, health improvement and crime reduction for the benefit of existing residents;
4.1.6 to incorporate land belonging to other stakeholders, both public and private sector, into development; and
4.1.7 to achieve a commercially acceptable return."
"4.2.1 to optimise financial returns for the benefit of HDV;
4.2.2 to increase the capital value of the Investment Portfolio held by InvLP;
4.2.3 to maintain long term revenue streams;
4.2.4 to use the Investment Portfolio to contribute to the wider socio-economic objectives of the HDV and the Council, and to the statutory functions of the Council where appropriate;
4.2.5 to deliver a high quality asset management service in relation to the Investment Portfolio including acquisition and disposal as appropriate; and
4.2.6 to contribute to the financial operation and viability of the HDV and HDV development schemes."
Additionally, the HDV and HDV Partners could seek additional "investment and development opportunities" proposed by the Private Sector Partner in accordance with the provisions of the agreement.
(10) 20 July 2017
(11) Origin of this litigation
Ground 1: The Localism Act and "Commercial Purpose"
"For the purposes of the provisions of the Local Government Act 2003 and the Localism Act 2011 just discussed, the concept of a commercial purpose is of some importance. It is not a defined term. But what is clear is that there must be a 'purpose' and it must be 'commercial'. The fact that a service is provided for a charge, even if that charge is set so as to make a surplus or profit, does not demonstrate that the purpose of providing the service is commercial. Indeed the fact, if it be a fact, that an LA is carrying out certain activities – including advertising and negotiating contracts with customers – in the same way as a private sector operator does not necessarily mean that the relevant service is being provided for a commercial purpose. An LA has wide social responsibilities which a private sector operator does not, responsibilities which include statutory duties. Its purposes in providing a particular service may be to fulfil those responsibilities. The service is not, in those circumstances a commercial purpose. It is not immediately obvious to me that, if the LA is empowered and chooses to provide those services in a way which is designed to make a profit, the purpose of the provision then becomes a commercial purpose. It is well-arguable that the LA's purpose in providing the service (i.e. to do something or 'do things', as envisaged in ss1 and 4 Localism Act 2011) is not a commercial purpose even though its objective in adopting the method which it does for effecting its purpose is to make a profit. In cases where there is no intention to make a profit but only to cover costs (as in the case of North Lincolnshire and Westminster in the present case), that will be a factor – and an important factor – in determining whether there is a commercial purpose. It is a question of fact, in any particular case, whether the LA is carrying out the relevant activities for a commercial purpose or otherwise than for a commercial purpose."
"In my judgment the authorities to which I have referred show that when a local authority enters into arrangements to obtain property, goods or services necessary for or incidental to the performance of its primary functions, the farther those arrangements depart from the simple acquisition of the benefits in question, the greater the likelihood that they will fall outside its powers. The reason is, perhaps obvious: if what is required (in this case insurance) can be obtained by a straightforward contract with a recognised kind of supplier, more elaborate arrangements are likely to involve elements which, although they may form an integral part of what may be regarded as a beneficial scheme, are not necessary for the achievement of the objective and can less easily be regarded as incidental to the performance of the authority's function."
"A further point was considered by the Divisional Court which was stated by Simon Brown LJ  QB 243, 250 – 251 in this way:
"What then is the touchstone by which to decide whether a section 93H application should be made by the prosecuting authority and, other conditions being satisfied, granted by court? I can find no better way of expressing it than to say that the question to be asked is this: what is the dominant purpose of the application? Is it for criminal investigation purposes – to determine whether an offence has been committed and, if so, to provide evidence of that offence – or is it to determine, in respect of criminal offending – although not necessarily a specific offence which the prosecution already has reasonable grounds for believing (rather than merely suspecting) has been committed – whether, and, if so, to what extent, someone has benefited from it, or the whereabouts of the proceeds."
Secondly, in my opinion the nature of the dominant purpose test is well stated in Wade & Forsyth on Administrative Law, 7th ed. (1994), p.436:
"Sometimes an act may serve two or more purposes, some authorised and some not, and it may be a question whether the public authority may kill two birds with one stone. The general rule is that its action will be lawful provided that the permitted purpose is the true and dominant purpose behind the act even though some secondary or incidental advantage may be gained for some purpose which is outside the authority's powers. There is a clear distinction between this situation and its opposite, where the permitted purpose is a mere pretext and a dominant purpose is ultra vires."
In those cases where consideration may have to be given to the distinction between the two purposes, or where it may appear that the two purposes may coexist (an example being where the police wish to investigate a case of living on the earnings of a prostitute), I think that there will be little practical difference between applying the test adopted by Simon Brown LJ and applying the test propounded by Mr Temple, but if a difference were to result, I consider it to be clear that the dominant purpose test is the appropriate one to apply.
Accordingly, I consider that if the true and dominant purpose of an application under section 93H is to enable an investigation to be made into the proceeds of criminal conduct, the application should be granted even if an incidental consequence may be that the police will obtain evidence relating to the commission of an offence. But if the true and dominant purpose of the application is to carry out an investigation whether a criminal offence has been committed and to obtain evidence to bring a prosecution, the application should be refused."
Conclusions on Ground 1
Ground 2. Consultation under s3 Local Government Act 1999
"(1) The core subject matter is 'the way in which' the authority's functions are exercised. That is very general language. It could in a different context cover almost any choice about anything that the authority does. But in this context it seems to me clear that it connotes high-level choices about how, as a matter of principle and approach, an authority goes about performing its functions. I do not say that the choice of whether, or to what extent, to outsource is the only such choice; but in the light of the legislative background outlined above the 'ways' in which functions can be performed must include whether they are performed directly by the authority itself or in partnership with others: indeed that would seem to be a paradigm of the kinds of choices with which s3(1) is concerned.
(2) The duty is aimed at securing 'improvements' in the way in which the authority's functions are exercised. That inevitably means change, where the authority judges that change would be for the better having regard to the specified criteria…
But, whatever the explanation, the important point for present purposes is what the arrangements are aimed at, namely securing improvements in the way in which authorities perform their functions."
"(1) I fully accept that it cannot have been the statutory intention that every time that an authority makes a particular operational decision, by way of outsourcing or otherwise, it is required by s3 to consult about that decision simply because that could be said to be part of 'the way in which' it performs its functions. As I have said above, in this context that phrase connotes high-level issues concerning the approach to the performance of an authority's functions, and it is about those and not about particular implementation that consultation is required."
Underhill LJ's approach was approved by the Court of Appeal.
"50. This has to be assessed by reference to the terms of section 3 of the 1999 Act. In my view that section is framed in notably broad terms. The duty is to "make arrangements" to secure continuous improvement in "the way" in which a relevant authority's functions are exercised: section 3(1). The obligation to consult, under section 3(2) then arises for the purposes of deciding "how" to fulfil that duty.
51. That being so it seems to me an impossibly narrow application of the section to link it to the decision of 6 December 2012. The section is not designed to require consultation about the terms of particular contracts which an authority may be minded to make: indeed considerations of commercial confidentiality would in any event often make that an impossibility. Moreover it seems at first sight most surprising to align the duty to consult with the date of resolving to enter into a particular contract. Rather one might expect – given the width of section 3 – that the duty should be geared to consultation at a much earlier stage, well before the stage at which consideration is given as to whether the relevant officer is to be authorised to sign a particular contract. Those considerations justify the judge's finding (at paragraph 34 of his judgment) that the duty to consult is concerned with "questions of policy and approach", not specific operational matters. That indeed accords with the wide language, and underlying purpose, of section of the 1999 Act."
Thus, the decision to award contracts as the outcome of the process was not a decision to which the consultation duty applied.
"Mr Giffin developed those points clearly and cogently, but I do not accept them. I do not believe that Burkett is authority for the proposition that in every situation in which a public-law decision is made at the end of a process which involves one or more previous decisions – what I will refer to as "staged decision-making" – time will run from the date of the latest decision, notwithstanding that a challenge on identical grounds could have been made to an earlier decision in the series. In my judgment it is necessary in such a case to analyse carefully the nature of the latest decision and its relationship to the earlier decision(s). I believe the true position to be as follows. If the earlier decision is no more than a preliminary, or provisional, foreshadowing of the later decision, Burkett does indeed apply so that the later, "final", decision falls to be treated as a new decision, the grounds for challenging which "first arise" only when it is made. But if the earlier and later decisions are distinct, each addressing what are substantially different stages in a process, then it is necessary to decide which decision is in truth being challenged; if it is the earlier, then the making of the second decision does not set time running afresh. I accept that the distinction may in particular cases be subtle, but it is in my view nonetheless real and important."
Conclusion on Ground 2
Ground 3: the public sector equality duty
Conclusion on Ground 3
Ground 4: should the decision have been taken by full Council?
Conclusion on Ground 4