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You are entitled to argue it but you will lose… section 204 appeals, contracting-out, and ratification

02.04.2020

Housing authorities are empowered by s.70 Deregulation and Contracting Out Act 1994 to contract out their ss.202-203 Housing Act 1996 homelessness review function to a third party. Whether issues arising from contracting out are susceptible to challenge by way of s.204 appeal has been the subject of substantial litigation, including:

  • In Tachie v Welwyn Hatfield BC [2013] EWHC 3972 (QB); [2014] PTSR 662 it was held that there was jurisdiction to consider such questions in the context of a s.204 appeal.
  • In Nzolameso v Westminster CC [2015] UKSC 22; [2015] PTSR 549 it was suggested obiter that policy challenges may be brought by s.204 appeal.
  • In Panayiotou v Waltham Forest LBC [2017] EWCA Civ 1624; [2018] QB 1232 it was held obiter that the ability to raise challenges to contracting out by s.204 appeal was not to be regarded "as by any means settled".
  • In Adesotu v Lewisham LBC [2019] EWCA Civ 1405; [2019] 1 WLR 5637 it was said that the obiter remarks in Nzolameso and Panayiotou were difficult to reconcile.

The Court of Appeal has now confirmed in James v Hertsmere BC [2020] EWCA Civ 489 that the jurisdiction under s.204 is wide enough to encompass challenges to contracting out: the County Court has "jurisdiction to hear appeals from s.202 review decisions that is not limited to points of law that might broadly but imprecisely be described as 'points of housing law' but extends to the full range of issues that would otherwise be the subject of an application to the High Court for judicial review", at [31].

Hertsmere BC contracted out its review function to a company for a term from 18 September 2017 to 11 April 2018 ("the Contract"). On 22 February 2018 Hertsmere instructed the company to carry out the Appellant's section 202 review. The decision on the review was made on 24 August 2018.

In his s.204 appeal the Appellant argued that Hertsmere had not lawfully contracted out the review function, because the Contract had not been validly extended beyond 11 April 2018. In response Hertsmere's Chief Executive, the person who had at the time been responsible under its Constitution for such matters, confirmed his approval of the extension; shortly thereafter its Leader ratified the extension. The Recorder held that the Leader's ratification cured any defect.

On appeal to the Court of Appeal it was argued that the Recorder was wrong to conclude that the Leader's ratification was effective. It was said that he had no power to ratify, that an ultra vires act is not susceptible to ratification, that the particular ratification was "too late", and that the Appellant had suffered unfair prejudice by the Respondent's ratification.

None of these arguments found favour with the Court of Appeal (which additionally found that the contract did not in fact require any extension for the s.202 review decision to be made with authority). Whilst accepting that there is jurisdiction to raise contracting out challenges on a s.204 appeal, the Court recognised that such challenges will not stand up to scrutiny: the Leader was of course entitled to ratify; there was "nothing" in the argument that it was impossible to ratify an ultra vires act; and the Appellant was unable to "show that the interests of justice would be served by preventing the remedy of a defect that had nothing to do with the merits of the matter".

James will reassure authorities that where there has been an error of form rather than substance in their decision-making and/or contracting out, they will be able to remedy that error by ratification, and any arguments to the contrary will be given short shrift.

Ranjit Bhose QC and Riccardo Calzavara, instructed by Aminata Roberts of Hertsmere BC, represented the successful local authority.