On 16 October 2020 the Supreme Court delivered judgment in the case of R (on the application of Z and another) v Hackney London Borough Council and another  UKSC 40. Lord Sales gave the lead judgment, with whom Lords Reed, Kerr and Kitchin agreed. Lady Arden gave a short concurring judgment.
This case concerned the allocation policy of Agudas Israel Housing Association (“AIHA”). AIHA lets its properties solely to members of the Orthodox Jewish community. As a result, the Appellants were excluded from an AIHA allocation.
It was common ground that AIHA’s policy directly discriminated on the ground of religion. The Supreme Court rejected the argument that the policy also directly discriminated on the ground of race: see at para 92.
The London Borough of Hackney has nomination rights to AIHA’s properties, and regards AIHA as making an important contribution towards improving the housing conditions of a particularly disadvantaged minority within its area.
If AIHA’s policy had been declared to be unlawful, Hackney accepted that it could not continue to nominate housing applicants to AIHA (unless and until the policy was changed). If it had done so, it would have been guilty of aiding a contravention contrary to s.112 of the Equality Act 2010.
Defences to direct discrimination
Since AIHA’s allocation policy discriminated directly on the ground of religion, it was prima facie unlawful, pursuant to ss.13(1) and 29(1) of the Equality Act 2010.
AIHA had two potential defences: positive action under s.158 and the charities exception under s.193 of the Equality Act 2010. The Supreme Court had not previously considered either of these provisions.
The Divisional Court held ( PTSR 985) that the Orthodox Jewish community in Hackney suffered housing disadvantages and had different housing needs related to their religion, that AIHA’s allocation policy enabled that community to overcome or minimise those disadvantages and/or meet those needs and that the policy was a proportionate means of doing so. Therefore, they held, the requirements for lawful positive action under s.158(1)-(2) were met. See Lord Sales' judgment at paras 39-42.
The Court of Appeal dismissed an appeal ( PTSR 2272). On their further appeal to the Supreme Court, the Appellants argued that:
(a) A line of CJEU caselaw restricted the scope of permissible positive action to promoting equality of opportunity and did not permit the pursuit of equality of outcomes (see Lord Sales' judgment at paras 60-61); and
(b) The Divisional Court had erred in its assessment of proportionality.
The Supreme Court decisively rejected the argument based on the above line of CJEU caselaw: see Lord Sales' judgment at paras 62-65. They accepted Hackney’s submission that this line of caselaw was limited to recruitment and promotion decisions in an employment context. The Supreme Court held that positive action is not limited to promoting equality of opportunity, and may pursue equality of outcomes, by overcoming or minimising disadvantages connected to a protected characteristic. Further, they accepted the submission that an ordinary proportionality assessment was required under s.158(2). See Lord Sales' judgment at paras 66-72.
The Appellants’ submission that the Divisional Court had erred in its assessment of proportionality was given short shrift by the Supreme Court. They emphasised that a proportionality assessment would only be set aside on appeal if there was a legal misdirection, or the assessment was “wrong” in the sense that there had been a significant error of principle or some other identifiable flaw in the reasoning: see Lord Sales' judgment at paras 56 and 74. Lady Arden delivered a concurring judgment dedicated to emphasising that the role of an appeal court was limited to a review of the proportionality assessment.
Lord Sales made two points specific to the proportionality assessment in this case: (1) AIHA’s allocation policy operated as a direct counter to discrimination suffered by the Orthodox Jewish community in the private housing sector; and (2) in practice, AIHA could not allocate enough properties to the Orthodox Jewish community to eliminate entirely the disadvantages they suffered and in such circumstances having a “blanket policy” was not disproportionate (see at paras 76-77).
In addition, Lord Sales made two general points: (1) proportionality was to be judged by reference to the positive and negative effects on groups; and the assessment would be distorted by focusing on a comparison between the worst affected individual and the individual most advantaged by the policy; and (2) in the context of state provision of social welfare benefits, it was generally a legitimate approach to use bright line criteria, which minimised the cost of administrating the scheme; and this was equally applicable to charitable provision (paras 80-82 and 85-86).
As a result of upholding the Divisional Court’s decision on proportionality, the appeal was dismissed. However, the Supreme Court went on to consider the charities exception in s.193, which the Divisional Court had held was also applicable.
The charities exception
S.193(1)-(2) authorises charities to restrict benefits to persons who share a protected characteristic (i.e. what would otherwise be unlawful direct discrimination), where:
(1) this is pursuant to their charitable instrument; and
(2) it is either (a) a proportionate means of achieving a legitimate aim or (b) for the purpose of preventing or compensating for a disadvantage linked to the protected characteristic.
The second route to justifying discrimination, under s.193(2)(b), is notable because it does not include any express proportionality requirement. The Supreme Court held that this was a deliberate decision by Parliament and that no proportionality requirement was to be read in under EU law or s.3, Human Rights Act 1998 (the latter on the assumption that article 14 of the ECHR applied) (see paras 110-112). On this further basis also, AIHA’s policy was lawful.
The appeal was dismissed both against Hackney and against AIHA, with costs.
The Supreme Court’s judgment provides a welcome clarification of the law relating to positive action. A number of the leading textbooks on discrimination law suggest that quotas for disadvantaged minorities and other similar measures aimed at securing substantive equality go beyond what is permissible under s.158 of the Equality Act 2010. These doubts have now been dispelled and the textbooks will require revision.
The following is an example of potential positive action within the sphere of local authority housing. In R(Ward) v Hillingdon LBC  PTSR 1738 it was submitted on behalf of Hillingdon that, although Irish travellers and refugees might find it harder than others to fulfil the residence criteria under its allocation scheme, it was not possible to include exceptions to the residence criteria for such groups, since this would amount to unlawful direct discrimination. The judgment in R(Z) v Hackney LBC shows that this was unduly pessimistic, since exceptions for these groups could amount to lawful positive action aimed at achieving substantive equality.
The Supreme Court’s conclusion that the s.193(2)(b) limb of the charities exception does not include a proportionality requirement, upholding the decision of the Court of Appeal, will provide a welcome boost to charities such as AIHA, who are dedicated to providing benefits to certain disadvantaged groups within society.
Matt Hutchings QC acted successfully for the London Borough of Hackney before the Divisional Court ( PTSR 985) and the Court of Appeal ( PTSR 2272), and led Andrew Lane before the Supreme Court, instructed by Omur Izzet of London Borough of Hackney Legal Services.
A copy of the judgement can be found HERE.