In a much-anticipated judgment, the High Court has today ruled that Haringey Council's decision to set up the Haringey Development Vehicle ("HDV") was lawful.
The HDV is a proposed 50-50 limited liability partnership ("LLP") between the Council and its private sector partner, Lendlease. It is aimed at securing Haringey's housing regeneration, employment and growth objectives for many years to come.
The ruling will be welcomed by local authorities across the country as providing valuable guidance upon, and insight into, the question of when authorities may be said to be acting for 'a commercial purpose' in the context of their general power of competence ("GEPOC") under section 1 Localism Act 2011.
At an expedited 'rolled-up' hearing of a claim for judicial review last October, the Claimant challenged the legality of the Council's decision on four discrete grounds. In his Judgment, Mr Justice Ouseley has now rejected each of these grounds.
First, the Claimant argued that the Council was acting for 'a commercial purpose' in entering into the HDV and could therefore only act through a company, not an LLP (as required by the 2011 Act). The Judge rejected this ground, ruling that the focus must be on the overall purpose for doing the thing in question – not some minor or incidental purpose – and drew on the analogy with the 'dominant purpose' test used in other contexts. He held, in any event, that there was nothing in any of the evidence that showed a commercial purpose, "even as a minor component", on the part of the Council.
The Judge went on to say that the fact that a commercial return is hoped for through the HDV, to be reinvested for entirely proper local government objectives, does not amount to a commercial purpose. To the contrary, it is consistent with a local authority's obligations of financial prudence. He also dismissed any notion that the objectives of Lendlease or indeed the HDV itself could be relevant to the question of the Council's purposes in entering the LLP.
Second, the Judge rejected the Claimant's reliance on the duty to undertake 'best value' consultation under section 3 Local Government Act 1999. Following the approach of the Court of Appeal in R(Nash) v Barnet LBC  EWCA Civ 1004, the Judge held that the statutory duty to consult is a duty to consult only on "high level" decisions or policies and not on decisions to award, let alone enter into, particular contracts. In this case, the Claimant was heavily out of time to maintain any claim against the Council under section 3.
The third ground was the almost inevitable challenge that the Council had failed to comply with its public sector equality duty under s149 Equality Act 2010. This was given short shrift. Accepting the Council's argument that the Claimant's complaints were entirely speculative, the Judge cautioned against "how remote from reality equalities arguments can become forensically" and held that it is not sufficient simply to find an isolated point which an equality impact assessment might have considered.
Finally, the Court also rejected another increasingly common argument ranged against local authority executive decision-makers, being that Full Council, not Cabinet, should have taken the impugned decision. As the Judge noted, whether a decision is "important" or "politically controversial" is irrelevant, the question being solely governed by the Local Authorities (Functions and Responsibilities) (England) Regulations 2000. There was nothing in this case that required decision-making to be taken out of the hands of Haringey's Cabinet.
There is much in this judgment to provide reassurance, assistance and guidance to all local authorities as they look for innovative ways to tackle their housing needs by embracing public-private partnership development.
A copy of the judgment can be downloaded here.
Ranjit Bhose QC and Ruchi Parekh were instructed by Pinsent Masons LLP for Haringey Council.