Commentary on governance issues
The Administrative Court's ruling on Haringey Council's controversial decision to enter into a corporate joint venture development vehicle not only provides much needed advice on the interpretation of s.1 of the Localism Act 2011 and "commercial purpose" - it also gives very useful guidance on how to apply the best value duty under s.3 and on which is the correct decision making body for such decisions.
The case of Peters v Haringey LBC; Lendlease Europe Holdings Ltd (Interested Party)  EWHC 192 (Admin) concerned an application for judicial review brought by a coalition of residents who were opposed to the Haringey Development Vehicle (HDV), a joint venture between the Council and the private sector, where the partner would bring finance, experience and expertise to the task of developing the Council's land for its better use, and thereby achieve the Council's strategic aims in housing, affordable housing and employment.
The residents applied to quash the Council's decision in July 2017 to confirm Lendlease as the successful bidder to become the Council's partner in the HDV. The decision also approved the structure of the HDV, the 50/50 split between LEH and the Council, as well as the related legal documents.
The main ground of challenge was that the Council could not use an LLP for these purposes since the Council was acting for a commercial purpose under s.1 Localism Act 2011, and so had to use a limited company – for a discussion on this point, see our Alert Lawfulness of using LLPs for local authority joint ventures.
The applicants also argued that the Council:
The court refused permission on all grounds.
Section 3 LGA 1999 requires an authority "to 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" ("the best value duty"). It also obliges the authority to consult certain groups of persons "for the purpose of deciding how to fulfil the duty" (s.3(2)).
The judge, Ouseley J, dismissed this ground on the basis that the application was out of time. He then gave guidance on application of the duty, setting out two steps:
The judge ruled that the language of s.3 made it clear that the level of decision-making, about which consultation was required, was the point where an authority was selecting the option in principle and establishing its approach, before significant expenditure on implementing the established approach was to be incurred, and before the third parties were approached, who would in their turn have to incur significant expenditure before any particular arrangement was agreed and entered into. It did not matter that the Council thereafter remained able to change its approach, whether through a change of heart or because the preferred approach proved unsatisfactory.
The court applied the Court of Appeal's decision in R (Nash) v Barnet LBC  EWCA Civ 1004 that where a public law decision was made at the end of a process which involved one or more previous decisions, the earlier and later decisions are distinct, each addressing what are substantially different stages in a process. It was necessary to decide which decision was actually being challenged; if it was the earlier, then the making of the second decision did not set time running afresh. On that basis, the s.3 duty arose by November 2015, or February 2017 at the latest, and so the application was out of time.
The judge agreed that s.9D LGA 2000 placed decision-making in the hands of the Cabinet, unless a specific provision made them decisions for full Council, and so the decision was properly taken by Cabinet.
He ruled that the fact that the arrangements had financial consequences did not bring them within the exceptions to Cabinet decisions under reg.4 of the Functions and Responsibilities Regulations or the Council's Constitution.
The decision to enter into such arrangements might properly be described as a plan or strategy, but that did not make it a plan or strategy "for the control of the authority's borrowing, investments or capital expenditure". Nor did it come within the Council's Constitution's definition of "budget". The fact that within the HDV arrangements there might be scope for borrowing and expenditure might mean that future decisions on such matters would be for full Council, but that did not make the July decisions, which permitted future decisions to be made through entry into the arrangements, decisions for full Council.
The court also dismissed the PSED challenge, finding that this ground lacked arguable merit in relation to whichever decision it was addressed; it was also a long way out of time.
The s.149 duty was not a duty to produce Equality Impact Assessments - it was to have "due regard" to the issues. The regularity with which the PSED had been considered during the decision making sequence was striking. If there was a stage in the decision-making process which required compliance with s.149, where it was not complied with, then this was in 2015 where the Council decided to proceed with an overarching single development vehicle in a 50/50 partnership with the private sector, as opposed to pursuing some other option.