Walters, R (on the application of) v Secretary Of State For Environment [1997] EWHC Admin 266

Thursday March 13th, 1997


Royal Courts of Justice
London WC2 2LL
Thursday 13 March 1997
B e f o r e
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MR J HOWELL QC and MR N GIFFIN (Instructed by Brent Community Law Centre, London, NW10 2JR) appeared on behalf of the Applicant.
MR J SULLIVAN QC and MR I BURNETT and MR A GLASSBROOK (Instructed by the Treasury Solicitor, London, SW1H 9JS) appeared on behalf of the Respondent.
MISS P BAXENDALE QC and MR M FORDHAM (Instructed by The Solicitor for the London Borough of Brent) appeared on behalf of the London Borough of Brent as an interested party.
MR G STEPHENSON and MR A HUNTER (Instructed by Trowers & Hamlins, London, WC2A 3RP) appeared on behalf of the Metropolitan Housing Trust Limited and New Horizons (Brent) Limited as interested
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(As approved by the Judge)
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©Crown Copyright
Royal Courts of Justice
London WC2 2LL
Thursday 13 March 1997
B e f o r e
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(Transcript of the handed-down Judgment of
Smith Bernal Reporting Limited
180 Fleet Street, London
Tel: 0171-831 3183
Official Shorthand Writers to the Court)
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MR J HOWELL QC and MR N GIFFIN (Instructed by Brent Community Law Centre, London, NW10 2JR) appeared on behalf of the Applicant.
MISS P BAXENDALE QC and MR M FORDHAM (Instructed by The Solicitor for the London Borough of Brent) appeared on behalf of the Respondent.
MR G STEPHENSON and MR A HUNTER (Instructed by Trowers & Hamlins, London, WC2A 3RP) appeared on behalf of the Metropolitan Housing Trust Limited and New Horizons (Brent) Limited as interested parties. – – - – - -

1. LORD JUSTICE SCHIEMANN: There are before the Court two applications for Judicial Review. Their factual background is to some degree common and it is convenient to look at them together. They are applications by tenants of the Chalkhill Estate in the area of Brent Council. The Council wishes to redevelop the Estate in a particular way. In order to do so it requires various consents from the Secretary of State for the Environment. The Applicants have this in common: they are council tenants and are opposed to the Council’s proposals. The Secretary of State has given his consent to those proposals. In very broad terms the O’Malley application asks the Court to quash various decisions made by the Council which will enable the proposals to proceed. The Walters application asks the Court to quash the consent of the Secretary of State to those proposals. Each of the Respondents submit that there is no illegality involved in what they have done and, in the alternative, any illegality is of such a minor nature that it would be inappropriate for the Court to use its discretion to quash the administrative actions under attack. Before turning to the separate challenges it is convenient to set out the background.


2. The Chalkhill Estate falls into two parts known as the Bison and Scientist Estates. The Bison Estate is the larger of the two, being a development of 30 blocks, each of 6 to 8 storeys, constructed from pre-cast concrete panels and linked by corridors and comprising some 1276 flats. The Scientist Estate by contrast is a low-rise development comprising 39 flats and 150 houses.

3. The Bison Estate has suffered from numerous problems since its construction in the nineteen sixties. Despite extensive efforts and very substantial expenditure the Council has been unable to remedy its fundamental faults. The mitigation of what are perceived as the effects of these faults requires a very substantial annual expenditure and results in a situation which is still thoroughly unsatisfactory for the tenants. The Council decided upon a comprehensive redevelopment scheme for the demolition and redevelopment of the Bison Estate and for the refurbishment of the Scientist Estate. The scheme is set out in a framework agreement made between the Council and New Horizons (Brent) Ltd.. It involves three legal persons apart from the Council and the tenants – New Horizons (Brent) Ltd, Metropolitan Housing Trust Ltd and Wimpey Construction (UK) Ltd to which entities I shall respectively refer as New Horizons, MHT and Wimpey.

4. New Horizons is a company owned by MHT and Wimpey. It only has such assets as the scheme endows it with and its obligations under the scheme were only to be enforced to the extent that it had available assets from the scheme. One sees from the framework agreement that in addition to the disposal of their land in various parts, the scheme committed the Council to substantial expenditure on clearing the site, to paying a commuted sum to MHT for the leaseback of parts of the Scientist Estate, to a subsidy payable to New Horizons and various other matters.

5. The framework agreement sets out in its first schedule the development objectives of the parties. They are:-

“The demolition of all of the dwellings on the Bison estate;
The improvement of the Scientist estate properties and the transfer of the freehold to MHT subject to those tenants not wishing to become MHT tenants remaining as tenants of the Council;
The reprovision of the maximum amount of affordable housing on the Chalkhill estate ……;
The improvement of the quality of life of those now living on the Chalkhill estate;
The provision of the community benefits referred to in this agreement;
The provision of social housing elsewhere in the L.B.of Brent and the replacement of land lost to non-residential use;
The stimulation of the local economy”

6. The main elements of the scheme which was approved by the Council’s Policy and Resources Committee on June 24 1996 were as follows:-

1. The Council would transfer their freehold interest in various parts of the Bison Estate to New Horizons for at most nominal monetary consideration provided that New Horizons had satisfied certain preconditions.
2. Before any part of the Bison Estate was to be transferred to New Horizons the Council would clear it of the dwellings it currently contains and would rehouse the occupants of the 1276 dwellings affected. After clearance, what is now the Bison Estate was to be dealt with in three ways:
(a) An area of not more than 9 acres was to be disposed of for the development of a retail supermarket;
(b) Part of the site was to be developed by Wimpey for private owner occupation; and
(c) The remaining part of the site was to be developed with the intention of providing principally up to 450 new units of social housing and a public park.
3. In relation to the Scientist Estate:-
(a) The Council was to transfer it to New Horizons on July 15 1996; completion was conditional on New Horizons having a binding and unconditional contract with MHT under which MHT was to acquire the freehold in consideration of an initial payment by MHT of £2m and an obligation on MHT to make a substantial further payment later. (The purpose of this was to put New Horizons in sufficient funds to enable New Horizons to build the social housing);
(b) It was envisaged that MHT would charge the estate as security for a loan;
(c) It was envisaged that MHT would then lease back to the Council those dwellings on the Scientist Estate whose tenants had not indicated that they wished to become tenants of MHT and that the Council would pay MHT a commuted sum of £2.5m for those leases; and
(d) The fabric of the whole of the Scientist Estate would be refurbished by MHT.
4. New Horizons was to undertake to secure the development and the works on site, to secure the provision of the community benefits and the community works identified in the framework agreement and to procure the construction of housing off-site by MHT of an area of not less than 9 acres.
5. The fundamental assumption was that MHT would be the sole developer of all social housing on and off the site and Wimpey would be appointed its sole contractor;
6. New Horizons was also to undertake to procure that MHT would grant the Council certain nomination rights on completion of affordable housing. In respect of the new units the Council was to have rights to nominate to all initial lettings; 75% of subsequent lettings of units of two or more bedrooms and 50% of the subsequent lettings of other units.
7. The Council was to undertake to pay a subsidy to New Horizons up to a maximum of £7.68m in support of its activities. To the extent that the receipt from the supermarket development was in excess of £4.5m it was anticipated that this subsidy would be reduced.

7. So far Mr Walters’challenge is concerned, the most important conveyancing steps envisaged are

1. Disposal of the freehold of the whole of the Chalkhill estate to a private landlord (“the original disposal”)
2. The lease-back from MHT to the Council on so called scientist leases (“the subsequent disposal”) of those properties occupied by council tenants who wished to remain council tenants.

8. Each of these steps requires the consent of the Secretary of State. Mr Howell submits on Mr Walter’s behalf that the consents which were given should be quashed by this court. I deal with the original disposal first.

9. The original Disposal by the Council to a private Sector Landlord

10. There has been argument as to whether the Secretary of State ever consented to any disposal by the Council to MHT, as opposed to by the Council to New Horizons for onward disposal to MHT. There has been argument as to whether the court should look at a disposal by the Council to New Horizons or at a disposal by the Council to MHT. I do not find it necessary to resolve this conflict. It seems to me that the Secretary of State assented to the proposals in the framework agreement. Either way there was an original disposal to which the submissions which follow relate.

11. The relevant statutory provisions are as follows:-

Section 32
“(1) Without prejudice to the provisions of Part V (The Right to Buy) and Part IV of the Housing Act 1988 (Change of Landlord: Secure Tenants), a local authority have power by this Section, and not otherwise, to dispose of land held by them for the purposes of this part.
(2) A disposal under this Section may be effected in any manner but … shall not be made without the consent of the Secretary of State.
(4) For the purposes of this Section the grant ………….. of …….. any interest in land is a disposal ……………….”
Section 34(4A):-
“The matters to which the Secretary of State may have regard in determining whether to give consent …………………. shall include -
(a) the extent (if any) to which ………… the intending purchaser is, or is likely to be, dependent upon, controlled by or subject to influence from the local authority making the disposal ………. ;
(b) ………………..
(c) The terms of the proposed disposal; and
(d) any other matters whatsoever which he considers relevant”

12. Section 106A Housing Act of 1985 :-

“(1) The provisions of Schedule 3A have effect with respect to the duties of -
(a) a local authority proposing to dispose of dwelling houses subject to secure tenancies, and
(b) the Secretary of State in considering whether to give his consent to such a disposal
to have regard to the views of tenants liable as a result of the disposal to cease to be secure tenants.”

13. Schedule 3A indicates in the first paragraph that the Schedule applies to a disposal by a local authority of an interest in land as a result of which a secure tenant of the Authority will become the tenant of a private sector landlord. Paragraph 2, sub paragraph (1) provides that the Secretary of State shall not entertain an application for his consent to a disposal to which the Schedule applies unless the authority certify that the requirements of paragraph 3 as to consultation have been complied with. Paragraph 3 of the Schedule reads as follows:-

“(1) The requirements as to consultation referred to above are as follows:
(2) The Authority shall serve notice in writing on the tenant informing him of -
(a) Such details of their proposal as the Authority consider appropriate ………….
(b) The likely consequences of the disposal for the tenant and
(c) The effect of the provisions of this Schedule and of Sections 171A to 171H (Preservation of Right to Buy on Disposal to Private Sector Landlord),
and informing him that he may, within such reasonable period as may be specified in the notice, make representations to the Authority.
(3) The Authority shall consider any representations made to them within that period and shall serve a further written notice on the tenant informing him -
(a) of any significant changes in their proposal, and
(b) that he may within such period as is specified ………….. communicate to the Secretary of State his objection to the proposal,
and informing him of the effect of paragraph 5 (Consent to be withheld if Majority of Tenants are Opposed).”

14. Paragraph 5 provides -

“(i) The Secretary of State shall not give his consent if it appears to him that a majority of the tenants of the dwelling houses to which the Application relates do not wish the disposal to proceed ………….”

15. Paragraph 6 provides -

“The Secretary of State’s consent to a disposal is not invalidated by a failure on his part or that of the local authority to comply with the requirements of this Schedule”.

16. It is common ground that the result of the sale and lease back will be to extinguish the right to buy which the committed council tenant had (see s.171D (1)(a) of the Housing Act 1985).

17. Deficiencies in the consultation excercise

18. The problem facing anyone conducting a consultation exercise in relation to a plan of this complexity are enormous. If he tries to explain every detail it will for most ordinary people be incomprehensible. If he tries to set out what he sees as the basics then he is vulnerable to the charge that he has misrepresented the situation. The problem is exacerbated by the fact that consultation is required for various purposes in respect of various interlocking transactions.

19. In essence what happened was that the council endeavoured to find out which of its tenants were content to become tenants of MHT and which wished to remain council tenants (“committed council tenants”). The council, although it was potentially empowered under the legislation to force committed council tenants to become tenants of MHT, provided that they were in a minority, decided that it did not wish to attempt to do that. Instead it provided a mechanism designed to enable the scheme to go ahead while meeting the wishes of committed council tenants to be tenants of the Council. It was to meet their position that we find in the framework agreement the provisions relating to the leaseback to the council on scientist leases of those dwellings which are occupied by committed council tenants.

20. Mr Howell submitted that the Council, while it undoubtedly carried out a vast consultation excercise, carried out no consultation with the secure tenants on the Scientist Estate in respect of the transfer of the freehold of the Scientist Estate by the Council to New Horizons nor by the Council directly to MHT. The only consultation in relation to the transfer of interests in the Scientist Estate as such which was carried out with secure tenants on it by the Council was on the basis that the only property whose ownership would be transferred would be those dwellings the tenants of which voted to have their tenancies transferred to MHT. Furthermore no consultation took place on any transfer of any interest to New Horizons.

21. In substance I consider that Mr Howell has made good that submission and I did not understand Mr Sullivan to dispute it as such. Mr Sullivan sought to meet it however by the following submissions:-

1. Section 106A has no application to the committed council tenants.
2. If it applies then the consultation process has been properly carried out
3. If s.106A applies but the consultation process has not been properly complied with, nevertheless any failure to comply does not invalidate the consent.
4. the Court should not quash the consent for discretionary reasons.

22. Discretion I leave to the end of this judgment, but it is convenient to look at the first three matters now.

23. Section 106A has no application.

24. Mr Sullivan submitted that commited council tenants were not

“liable as a result of the disposal to cease to be secure tenants”
and therefore section 106A and the third Schedule of the Housing Act 1985 had no application to the disposal of the freeholds of their council houses. He submitted that it was clear from the framework Agreement that any ceasing to be secure tenants would only not be secure tenants for a minimal period and that the reality of the position was that the committed council tenant would not cease to be a secure tenant. Committed council tenants were in substance going to be left in much the same position after the sale and lease back as they were before it. The only difference in their position would be that their immediate landlord was not going to be the freeholder but rather a leaseholder possessed of a 150 year lease and that the tenant’s right to buy would be of a 125 year lease rather than a freehold.

25. Mr Howell replies that the ultimate difference is not insignificant and that in any event even on the assumption that there was no ultimate difference there would still be a moment in time when the committed council tenants would cease to be council tenants. For his part, Mr Sullivan accepts that the immediate result of the disposal by the council of its interest is that the tenant is not a secure tenant for that period of time between the Council’s disposal of its interest and the Council’s acquisition of the leasehold interest. However Mr Sullivan submits that the court is entitled to follow the approach in Furniss v Dawson [1984] AC 474 and look at the substance of what is taking place rather than at each step in the process.

26. Assuming, without deciding, that this type of approach is admissible in the context of the present legislation, I do not consider that it would help Mr Sullivan in the present case. The end position in which Mr Walters finds himself is from both a legal and practical point of view different from the one which appertained at the beginning of the process envisaged by the framework agreement. In particular his right to buy the freehold is transformed from a right to buy the freehold to the right to buy a 125 year lease. Although, as is clear from paragraphs 43,44 and 45 of the affidavit sworn on behalf of the Secretary of State by Mr Webber, the Secretary of State took the view that this transformation was of no significance, that view rested on a misunderstanding of the law (as is now conceded by Mr Sullivan) and is in my judgment unsustainable.

27. In those circumstances Mr Walters and all the other council tenants should have been served with notices in writing such as are required by paragraph 3 of Schedule 3A and consulted not merely as to whether they wished to remain council tenants.The whole purpose of the consultation requirement is to enable a tenant to have his say about the likely consequences of the disposal on him before he is placed in a position which he might regard as being worse off than his present one.

28. I reject Mr Sullivan’s submission that s.106A has no application.

29. There has been compliance with the Consultation provisions.

30. If one rejects, as I do, the Furniss v Dawson approach to this case, then it is clear that the Secretary of State did not receive the certificate required by paragraph 2 of Schedule 3A. He received a certificate dated 8.2.1996 but this certificate did not relate to all of the scientist estate inhabited by secure tenants but only to those properties which were not occupied by committed council tenants.

31. Mr Sullivan took me through a large amount of consultation material in an attempt to show

a) that the scientist council tenants had been adequately consulted;
b) that Mr Walters was himself aware of the proposals;
c) that any points which the committed council tenants such as Mr Walters might have wished to place before the S/S had in fact been placed before him.

32. The position adopted by the Council in the consultations was that what was proposed would be advantageous for all concerned but that if any tenant did not want to become a tenant of MHT that was up to him : he could opt to stay with the council and would in substance be unaffected. In consequence he was asked whether or no he wished to remain with the council and that was all. It is clear that the notice envisaged by paragraph 2 of Schedule 3A was not served on any of the tenants and nothing was done which can fairly be described as being its equivalent. I do not consider that this was an adequate compliance with the consultation provisions.

33. There is material which shows that there was extensive discussion of the broad proposals and that Mr Walters knew that sale and leaseback was involved. I am however not persuaded that he and the other committed council tenants had had explained to them that which Parliament clearly required the Council to explain to them namely the likely consequences of the disposal upon them.

34. Nor am I persuaded that any points which the committed council tenants might have wished to place before the Secretary of State had in fact been placed before him. In particular, had the effect on their rights to buy been explained to them they might well have wished to place this before the Secretary of State as a material consideration.

35. Any non-compliance does not invalidate the consent

36. The statutory background to this submission is paragraphs 5 and 6 of Schedule 3A.

37. Paragraph 5 provides -

“1)The Secretary of State shall not give his consent if it appears to him that a majority of the tenants of the dwelling houses to which the Application relates do not wish the disposal to proceed ………….”

38. Paragraph 6 provides -

“The Secretary of State’s consent to a disposal is not invalidated by a failure on his part or that of the local authority to comply with the requirements of this Schedule”.

39. Mr Howell firstly relied on what he submits is a distinction between the Statutory requirement in s.106A to have regard to the views of tenants and the requirements of the Schedule. I reject this submission. The section itself imposes no duty to have regard to the views of tenants. One must look at the schedule to discover any duty. It seems to me clear that paragraph 6 of the schedule provides that the consent is not invalidated by a failure on the part of the Secretary of State to comply with, inter alia, the requirement in paragraph 5 that he should not give consent if it appears to him that the majority of the tenants do not wish the disposal to proceed.

40. Mr Howell then submitted that no reasonable Secretary of State would consider giving his consent to a disposal without having regard to the views of the secure tenants. I am not persuaded that one can impose a common law duty to consult alongside the statutory duty. Even if there were such a duty it seems to me that Parliament has in effect enacted that a consent is not to be invalidated by a failure by the Council or the Seretary of State to have regard to the views of tenants.

41. However, I do consider that it is open to this court to quash the Secretary of State’s decision if he has made it on the basis of a misunderstanding of the law. He said in paragraph 37 of the Decison Letter:-

“The Secretary of State is satisfied that consultation on the basis of inviting tenants to decide individually whether to transfer is consistent with the requirements of Schedule 3(A) to the Housing Act 1985. Therefore, as all the tenants of the dwellings to which the transfer relates wish to transfer, he is not precluded by paragraph 5 of the Schedule from giving consent. He is satisfied that the tenants were supplied with the information specified by paragraph 3 of the Schedule and that the consultation was fair and full. He is also satisfied that the conditions and covenants contained in the framework agreement reflect the promises made to tenants and leaseholders.”

42. This, if one rejects as I do the Dawson v Furniss approach, betrays a misunderstanding of what the Act requires in a situation such as the present. The transfer related to the whole of the Scientist estate (ignoring for the moment those houses in respect of which tenants had already exercised their right to buy). It is clear that the Secretary of State was proceeding on the basis that the freehold of that part of the scientist estate upon which stood the houses of the Committed Council Tenants was not being transferred (or was to be regarded as not being transferred) and that therefore their views on the transfer of that freehold were irrelevant. This constitutes an error of law entitling the court to quash the consent. I do not regard paragraph 6 of the Schedule as having any direct relevance to that error.

43. The subsequent disposals by a private sector landlord

44. We are here clearly concerned with disposal by MHT to the Council by way of leaseback and arguably with a disposal by New Horizons to MHT.

45. Section 133 of the Housing Act 1988 provides that:-

“(1) Where consent is required for a disposal (in this Section referred to as “The Original Disposal”) by virtue of Section 32 …………. of the Housing Act 1985 and that consent does not provide otherwise, the person who acquires the land or house on the disposal shall not dispose of it, except with the consent of the Secretary of State; but nothing in this Section shall apply in relation to an exempt disposal as defined in Section 81(7) above.”

46. Accordingly, it was submitted by Mr Howell, the scheme as proposed required the consent of the Secretary of State under Section 133 to the disposal by New Horizons to MHT and by MHT to anyone else, including the Council, other than by way of an exempt disposal. One such exempt disposal is the disposal of an interest by way of security for a loan.

47. Sub-Section 3 of the Section provides that if Section 34 of the Housing Act 1985 applies to the consent given to the original disposal, then sub Section 4A of that Section shall also apply to any consent required by virtue of Section 133 of the Housing Act 1988.

48. Section 33(5) provides:-

“Before giving any consent required by virtue of this Section, the Secretary of State -
(a) shall satisfy himself that the person who is seeking the consent has taken appropriate steps to consult every tenant of any land or house proposed to be disposed of; and
(b) shall have regard to the responses of any such tenants to that consultation.
I do not consider that the person seeking the consent to the lease-back arrangements namely MHT needed itself to take the appropriate steps; putting it another way, if the Council had taken the appropriate steps, then MHT need do no more. However, for reasons which I have given earlier in this judgment, appropriate steps were not taken by anyone to consult those tenants whose rights to buy were being detrimentally affected by the proposed disposal by MHT to the Council. Nor did the Secretary of State have regard to responses from such tenants. He regarded them as irrelevant.
It is clear that the Secretary of State did have regard to much that was said on behalf of the Committed Council Tenants. However we do not know what additional comments they would have made had they understood the position fully nor do we know how he would have reacted to those comments. Therefore, the consent to the leaseback arrangements also is liable to be quashed.
The interrelation of the consents.
Mr Howell submitted, and I accept, that the interrelationship of the three consents which are under challenge in these proceedings is such that if one falls to be quashed then all ought to be quashed. I did not understand Mr Sullivan to dispute this. It follows that any error in my reasoning in relation to one of these consents will not save that consent from liability to be quashed unless it is accompanied by an error in reasoning in relation to another consent which I have held liable to be quashed. This applies in particular, to any error in my assessment of the effect of paragraph 6 of Schedule 3A since it is noticeable that, as regards the subsequent disposal, there is in the relevant statutory provisions no equivalent to that paragraph. So far as the consent given under s.171D of the Housing Act 1985 is concerned, it is only attacked on the basis that the other consents should be quashed and it should fall with them. No independent illegality is alleged.
Developments subsequent to the decisions impugned
Mr Sullivan pointed to the fact that the application for leave was not made till exactly 3 months after the decisions sought to be quashed. That is true. However, clear warning of legal proceedings had been given long before that time and before the relevant conveyances were executed.
There has been a number of subsequent developments designed to lessen the effect of the proposals on the committed council tenants. They have not yet reached final legal form. Clearly they can not cure any illegality in the past. However, they, coupled with the fact that the applicant is alone amongst those on the Scientist estate to bring proceedings for quashing, can be a factor leading the court to refuse relief. Mr Howell accepted that there was nothing in the voluminous papers before the court including evidence filed just before and during the hearing to suggest that any other tenant currently shares his desire that the consents be quashed followed by, at best a substantial further delay.
The subsequent developments relate to two factors:-
1. On 30.9.1996 the Council purported to transfer the scientist estate to MHT at the request of New Horizons. Mr Howell made some criticism of the failure of the instrument of transfer to comply with Schedule 9A of the Housing Act 1985 which deals with preserving the right to buy of those whose tenancies are being transferred. It is accepted by the Council and MHT and New Horizons that there is some force in that criticism. An instrument of rectification is in the course of being drafted to put the failure right. There has been no request for any order of the court in relation to that instrument of transfer. I can not see that Mr Walters is himself affected by the point which only affects those who are no longer Council tenants. Had this been the only point raised by Mr Walters in his form 86A he would not have got leave to move for judicial review because of lack of a sufficient interst. I regard this point as irrelevant to the exercise of my discretion.
2. The Council, New Horizons and MHT accept that persons in Mr Walter’s position should not, as a result of the redevelopment scheme be in a worse position as regards the exercise of their right to buy than they would have been in had there not been any sale of the Council’s freehold of their house. The Secretary of State’s actions so far seem to indicate that he also had no intention of leaving the committed council tenants in a worse position in this regard. They have not yet managed to draft documents which achieve this aim although they have tried. It is not an easy conveyancing exercise. The freehold has been charged, consent may be necessary under s.32 of the Housing Act 1985 for the Council to dispose of their leasehold interest and may also be necessary under s.133 of the Housing Act 1988 for MHT to transfer their freehold. I suspect that there has not been any urgency in doing the drafting because there is no sign that any one of these tenants, let alone Mr Walters, would currently wish to exercise such a right if he had it. Walters has had the right to buy for the last ten years and has not chosen to exercise it.
Mr Walter’s substantive complaints
1. He complains about the effect of the scheme on his right to buy the freehold. I have sympathy with this but it seems to me that it is highly probable that the substance of this complaint will be met by the parties. I invite the parties to draft an undertaking to be given to the court which reflects their position as broadly set out in the preceding paragraph.
2. He complains about potential problems as a result of having the Estate managed by two landlords – the Council and MHT. I see some theoretical force in this. However, it has to be seen against the fact that the estate is already fragmented because of the exercise by some tenants of their right to buy. It will presumably become more fragmented by reason of further exercising of that right by others including Mr Walters.
Mr Sullivan submitted that both in relation to the original and the subsequent disposal by s34(4A)(d) the Secretary of State is given the widest discretion. That is clearly right. However, the Secretary of State is supposed to exercise that discretion in the light of information gained on the consultation exercise and without committing any error of law. Since he did commit an error of law of a material kind and the consultation excercise was imperfect the width of the Secretary of State’s discretion is not legally to the point.
However, the court undoubtedly has a discretion as to whether or no to quash. Mr Sullivan submitted that since the majority of the tenants on the estate were in favour of the scheme which had manifest benefits this court should be slow to quash any consent whose existence is essential in order for the scheme to progress. The difficulty with that submission is that one does not know what the attitude of the majority of tenants would have been had matters been fully explained to them. Not everyone is motivated purely by selfish reasons. This court can not easily judge whether, for example, had the disadvantages flowing to the committed council tenants from their loss of the chance to buy the freehold been explained to the other secure tenants some of those might have voted the other way. If enough had done so paragraph 5 of Schedule 3A might have prevented the Secretary of State from giving his consent whatever he thought of the merits of the scheme.
Mr Sullivan pointed out that the defects in the consultation process could have been spotted a year before the final decision was taken. He pointed out that the applicant’s solicitor had, in a letter to the Department dated 11.9.1995, taken many of the points now taken which I have held to be good points. The Secretary of State wrote back to say they were bad points. Mr Sullivan submitted that if the applicant disagreed with that assessment by the Secretary of State the applicant should have started judicial review proceedings then and there. I accept that he might have done, at the risk of being refused leave on the ground of prematurity. However, I reject this submission as a basis for refusing relief. If an administrative authority indicates a possible intention to act illegally and has the illegality drawn to its attention but does not acknowledge it as an illegality it would be wrong to refuse relief to an applicant on the basis that he did not rush to court. He is entitled to wait and see whether in truth the authority persists in its intention notwithstanding the warning shot which it has received. If the authority is concerned about its position then it can apply to the court for a declaration.
At the end of the day, the position is that a scheme of which Mr Walters disapproves has obtained the approval of the Secretary of State which in turn was obtained after consulting with Mr Walters but without properly consulting him and the other committed council tenants as the statute requires. Other tenants were consulted, but again not properly as the statute requires, and either did not respond or signified their approval. Mr Howell submits that it is not for this court to guess what the responses of tenants would have been had the consultation been proper and not for this court to guess what the Secretary of State’s response would have been to the notional response by the tenants.
There is undoubted force in those submissions. The court will not lightly condone the bypassing of consultation requirements imposed by statute. However, as I indicated at the end of submissions, I am conscious that both the Secretary of State and the locally elected council and apparently the vast majority of the electors and tenants are in favour of the scheme progressing.
In his first affidavit explaining his delay in making the application for leave, Mr Walters states in paragraph 21 “It was very difficult to discuss taking this action with others because of the summer break. Some who I am sure would have wished to join me in making this challenge are away now”. I note that none of the other Committed Council tenants have joined in this application although the grounds have been amended.
Although it is common ground that Mr Walters has sufficient standing to make this application I can, in exercising my discretion whether or no to quash the consents, legitimately take into account that he is the only tenant on the Scientist estate to have made this application and that he waited 3 months before doing so and that the effect on his legal rights, subject to the undertaking, is minimal or non-existent. Others are clearly anxious for this scheme to go ahead for reasons which are obvious : the conditions in which they live are highly unsatisfactory. In those circumstances, subject to receiving appropriate undertakings designed to secure that Mr Walters is not disadvantaged in relation to the purchase of his freehold, I would refuse to quash the consents unless I were persuaded that the other challenge made in the O’Malley proceedings had force. It is to this which I now turn.
This challenge, in relation to the Bison Estate, is made by 8 persons who are local electors,taxpayers and council tenants. They challenge the legality of the Council’s decision to go ahead with the redevelopment scheme.
The challenge is to a major extent concerned with the financing of the scheme and involves having some understanding of local government finance. Mr Howell submits that the Council and its officers did not properly think through the implications of the adoption of the scheme on other projects which the council either was obliged or wished to implement.
One must start by appreciating that all Councils have capital programmes which look ahead to the future. They contain forecasts of capital inflows and outflows. As to inflows, there are four sources of capital for such programmes
1. Credit approvals awarded by central government;
2. Certain grants for specific expenditure;
3. The usable part of the capital receipts of the authority, namely such part as the authority is allowed to use as opposed to the part which the Council is obliged to “set aside” against for future liabilities;
4. Contributions from Revenue.
As to outflows, any capital programme for a number of years will have in it provision for a number of proposals. Some of them will be ones to which the council is contractually committed; others will be ones regarded as desirable but are ones to which the council is not yet contractually committed. So far as those proposals to which a council is committed are concerned there tends not to be much room for cancellation by reason of a reordering of priorities although there may be room for rescheduling. So far as proposals which have not yet reached the stage of contractual commitment are concerned, since there is never any prospect of financing everything which is regarded as desirable, choices have to be made as to priorities.
The May Report
The Council’s director of core accountancy and Mr Queen, Executive Director, Housing Services, prepared a report (“the May report”) for a meeting of the Policy and Resources Committee which was held on 20.5.1996. That report provided an update of the Capital Programme for the year 96/97 with a forecast of the position in later years. In May members were told that capital resources now needed to be allocated to the Chalkhill scheme which had been approved in principle earlier. The Secretary of State’s consent was anticipated and once that was to hand it would be possible to enter into the framework agreement. The amounts required for the Chalkhill scheme over the next few years were set out as being:-
1996-97 1997-98 1998-99 1999-2000 2000-2001
£2.3M £4.0M £7.7M £6.6M £4.6M
Members were told that the structure of the proposed framework agreement was such that any value which the retail site had above £4.5M would result in a pound for pound reduction in the Council’s contribution to the scheme which was referred to as “deficit funding”. They were told that that the requirement of £4M for 1997/98 set out in the table assumed a receipt of £8M for the retail site. They were told that if this was not achieved the Chalkhill programme would need to be rephased and there might be a need for a contribution of the shortfall from Revenue.
The report also dealt with the Council’s capital spending plans as a whole.
Members attention was drawn to a deferred purchase agreement amounting to £7.260M which fell due for payment this year. It was hoped to refinance this but it was pointed out that until refinancing was agreed £7.260M had to be kept aside. Members were told that accordingly only £2.3M was immediately available for the Chalkhill scheme this year. It was on that basis that it had been agreed between the proposed parties to the framework agreement that the Chalkhill scheme would be rephased so as not to require more than that sum this year.
The information given at the meeting of the Committee on May 20th 1996 suggested that, on the basis of these contributions and assuming both a receipt of £8m and that the deferred purchase scheme was refinanced, the Council’s total capital programme would look as follows:-
+ £2.269m
- £3.383m
- £5.05m
- £2.09m
It can be seen that the cumulative estimated deficit on the capital programme over this period was accordingly £8.929m. These estimates excluded any specific provision for the upkeep of the Council’s infrastructure, housing and other building assets. If the capital receipt for the supermarket site was only £4.5m, rather than the £8m assumed, the deficit on the capital programme would be £12.429m.
The Officers recommended that
“Members note the current financial position on the Chalkhill redevelopment and agree the allocation of £2.3M in 96/97 and to meet the capital requirement in future years, subject to a further report on residual legal issues and the consent of the Secretary of State for the Environment.”

49. In their resolution, the Committee did indeed agree the allocation of £2.3M in 96/97 to the scheme but, while confirming their commitment to the development of the Chalkhill estate, they did not agree to meet the capital requirement in future years. Instead, officers were instructed to bring forward proposals for a capital programme to the July Meeting of the Committee. A renegotiation of the deferred purchase agreement was foreseen and it was envisaged that this might release some monies in the earlier years (at the price, of course, of increasing the estimated outflow correspondingly in later years).

The June Report

50. In the event, it was decided not to wait for the July meeting of the Committee but to arrange a special meeting of the Committee on the 24th June. Mr Queen prepared another report for it. He asked for authority to conclude the framework agreement.He pointed out that only £2.3M had been approved at the last meeting and that once the agreement was signed the Council would be committed to capital expenditure on the Scheme not only for 96/97 but also for future years.

51. It was made clear that so far as the capital requirements of the Chalkhill estate were concerned, nothing had changed since the May meeting. The figures were as as set out above and were set out again. So far as the capital programme generally was concerned, nothing much had happened since the last meeting. The negotiations in relation to the deferred purchase agreement had still not been completed.

52. At their meeting on June 24th 1996 the Council’s Policy and Resources Committee noted and approved the capital contributions required not only in 1996-97 but also in future years and resolved to authorise officers to enter the Framework Agreement which committed the Council to the scheme.

53. The paragraph 5.3.2 Submission

54. Mr Howell submitted that this paragraph in the June report was misleading. It reads as follows:-

“”However, in committing itself to the framework agreement Brent will be obliged to meet the capital costs of the scheme, ie re-housing costs, demolition costs and the “commuted sum” to MHT. In addition there is the so-called “deficit funding” whereby Brent will make a potential further contribution to the scheme; the level of contribution is £7.68M (assuming a “supermarket” receipt of £4.5M). Any capital receipt over and above £4.5M would result in the capital contribution reducing pound for pound. Members are reminded that the Chalkhill scheme requires commitments from the capital programme in this and future years. The level of potential commitments is as follows:-
1996-97 1997-98 1998-99 1999-2000 2000-2001
£2.3M £4.0M £7.7M £6.6M £4.6M

55. Accordingly members need formally to approve the need for, and commitment to, providing capital contributions to the scheme not only for 96/97 but also for 97/98 to 2000/01 inclusive.”

56. Mr Howell submitted that, since there was no paragraph break after “pound for pound”, this paragraph would lead members to conclude that if indeed the receipts for the retail site were to exceed £4.5M as the officers thought likely, then the figures in the table would be lower. This would be to confuse the capital contributions made by the council to its partners in the Chalkhill scheme (the “deficit funding”) with the amount of the capital requirements of the council for its total capital programme. Manifestly, the report would have been clearer had there been a paragraph break after “pound for pound”. However, while the outside reader who had not lived with the evolution of the scheme for months, indeed years, might have confused the deficit funding provided by the Council to its partners with the total capital requirements of the Council to carry out all its functions, I am not persuaded that the members of the Policy and Resources Committee would jump to the erroneous conclusion suggested by Mr Howell.

57. The Set Aside Submission

58. Part IV of the Local Government and Housing Act 1989 imposes a regime requiring a local authority (inter alia) to set aside a certain proportion of its capital receipts as a provision to meet credit liabilities falling due in the future. Mr Howell submits that

1. the framework agreement envisaged receipts by the Council in the future;
2. the set aside regime would apply to those receipts;
3. the Council’s officers in their reports to the Council did not warn the Council of the applicability of the set aside regime to those receipts;
4. in consequence the Council’s capital programme for the next 5 years did not include any provision for set aside and were therefore misleading;
5. therefore the Council failed to take into account a relevant factor.

59. Miss Baxendale submits that

1. the set aside regime does not apply to the receipts in question;
2. if it does the Secretary of State has power to grant an exemption from any need to comply with the set aside requirements;
3. the council did indeed consider the question whether provision for set aside ought to be made and concluded that it need not;
4. therefore even if, contrary to her primary submission, the set aside regime would apply, the Council’s error of law, if such it was, should not lead to the quashing of the decision not to make allowance for set aside.

60. Whether or no the set-aside provisions will apply to any transactions is a question of law. Whether the Secretary of State will grant an exemption from compliance is a matter of speculation.

61. The Construction Question

62. Initially, it is worth noting that Part IV of the Local Government and Housing Act 1989 is primarily concerned with establishing a regime whereunder a proportion of certain capital receipts by an authority can not be immediately spent by an authority but must be reserved against capital liabilities of that authority falling due in the future. It will be remembered that the last decade was characterised by authorities coming to central government with pleas that they had inadequate resources to meet existing commitments let alone future ones. That situation arguably arose from not enough money being put aside in past years. This part of the Act is designed to militate against that situation arising in the future.

63. There has long been a legislative regime which is concerned with disposals by authorities of their assets at undervalue – see s.123(2) of the Local Government Act 1972. Such a disposal needs the consent of the Secretary of State. The 1989 Act is not concerned with this problem. If a disposal at undervalue is made in return for cash the provisions with which we are concerned simply do not bite. That is common ground.

64. The 1989 provisions are primarily concerned with receipts by a local authority and with ensuring that a part of such receipts is set aside as against future liabilities. An obvious way of sidestepping the requirement to set aside would be for the authority not itself to receive any money as consideration for any disposal, either because it had arranged for the money to be paid to someone else or because it had arranged to receive something else other than money as consideration, for instance land, goods or services. It is to such situations that s.61 applies. It reads as follows:-

65. Section 61 – Capital Receipts not wholly in money paid to the Authority

(1) This Section applies where -
(a) The whole or part of the consideration received by a Local Authority ……………for a disposal ….. either is not in money or consists of money which, at the request or with the agreement of the Local Authority concerned, is paid otherwise than to the Authority ……………
(2) Where this section applies in relation to any consideration, there shall be determined the amount which would have been the capital receipt if the consideration had been wholly in money paid to the local authority; and subject to subsection (3) below, the amount so determined is in this section referred to as “the notional capital receipt”.
(3) From the amount which, apart from this subsection, would be the notional capital receipt in relation to a disposal…there shall be deducted any amount of money that was paid or is payable to the local authority in respect of that disposal….and in respect of which section 59 applies or will actually apply when the payment is received.
(4) Where consideration to which this section applies is received in respect of a disposal.., the local authority shall set aside, at the time of the disposal…and as a provision to meet credit liabilities, an amount which, except insofar as regulations made or directions given by the Secretary of State otherwise provide, shall be equal to that which, under section 59 above, would be the reserved part of the notional capital receipt.”

66. Mr Howell submits that when any part of the Chalkhill Estate is disposed of by the Council the “notional capital receipt” is the amount which would have been the capital receipt – the sum received by the authority in respect of the relevant disposal (see s.58(1)) had the consideration been wholly in money and had New Horizons not entered into any of the obligations which it has done.

67. I reject this submission. I see no reason wholly to ignore, as Mr Howell asks me to, the promises made by the disponee. That was precisely the consideration which the Council obtained from the deal. In order to calculate the notional capital receipt what has to be valued is the total contribution made by or on behalf of the disponee whether in cash or kind or in promises.

68. That valuation exercise is, however, subject to various rules contained in the Local Authorities (Capital Finance) Regulations 1990 as amended. In the present context I need to draw Attention to two particular matters.

69. One of these concerns the valuation of nomination rights such as those which constitute part of the consideration in the present case. The other concerns subtracting from the consideration the amount by which it has been increased as a result of the cost of demolition done at the expense of the disponor.

70. Nomination Rights

71. The relevant provisions are contained in Regulation 20

72. Capital Receipts not Wholly in Money Paid to the Authority

20(1) In this Regulation …………. “the notional capital receipt” means -
(a) in relation to any consideration to which Section 61 applies, the amount of the notional capital receipt determined in accordance with sub Section (2) of that Section; ………………….
(2) Where a local authority received consideration to which Section 61 applies …………. (referred to in this Regulation as “non-monetary consideration”) the Authority shall set aside an amount which, subject to paragraph ……..(4) ………….. below, is equal to the amount which, under Section 59, would be the reserved part of the notional capital receipt.
(4) In the case of non-monetary consideration which is received by a local authority in respect of the disposal of an area of land and which consists of -
(a) the grant of a right to nominate persons either to acquire the freehold of or a leasehold interest in dwellings on land within that area or to occupy such dwellings; or
(b) an obligation to restrict the acquisition of the freehold of or a leasehold interest in dwellings on land within that area or the occupation of such dwellings to persons of a particular description;
the reserved part of the notional capital receipt shall be nil.

73. Mr Howell submits that Regulation 20(4) has no application to the present case because it only applies where the whole of the consideration consists of nomination rights. I reject this submission. It will be remembered that s.61 applies “where the whole or part of the consideration …”. In my judgment the reference in Regulation 20(1)(a) to “any consideration” includes a reference to situations where only part of the consideration for the disposal is non monetary. Regulation 20(4), should be construed so as to mean that the reserved part of the notional capital receipt attributable to nomination rights shall be nil. Thus any requirement to set aside does not apply to whatever part of the consideration consists of the giving of nomination rights.

74. The Demolition costs.

75. The relevant provisions are contained in Regulation 19C

(19C) Capital receipts to be treated as reduced: disposal of land whose value is increased by expenditure incurred by Authority.
(1) Capital receipts of a description specified in paragraph (2) below shall be treated for the purposes only of Section 59 as reduced by an amount determined in accordance with paragraph (3) ………….
(2) For the purposes of paragraph (1) above, capital receipts derived from a disposal by a Local Authority of an interest in land are specified where -
(a) before making the disposal, the Authority incurred expenditure on -
(i) obtaining planning permission for the carrying out of development of the land; or
(ii) preparing the land for, or otherwise facilitating, the carrying out of any such development;
(iii)……………………….; and
(b) the total of the capital receipts derived from the disposal is greater, by an amount which is not less than the amount of the expenditure, than it would have been if the Authority had not incurred the expenditure.
(3) For the purposes of paragraph (1) above, the amount of the reduction is the aggregate of -
(a) the amount of any costs incurred by the Authority in connection with the disposal; and
(b) ……………………

76. In the context of the present case the effect of 19C(2)(b) is that those provisions only bite if the cost of demolition and clearance of the Bison estate is less than the increase in value attributable to that demolition and clearance. The cost of demolition is £6M. The Valuation of the tenanted Bison Properties given on 6.2.95 by a letter from Savills to Mr Queen is £8.9M. The post-demolition valuation of the Bison estate is given as £19M. On those figures the threshhold is passed. In January 1996 Savills suggested a post-demolition value of between £9.6 and £13.5 (with a top of the range figure for the retail land of £4.75M) but make it clear that the valuation is upon a whole variety of assumptions and is not one for which they take any responsibility. Mr Howell submitted that this showed that the threshold would not be passed and that therefore Regulation 19C had no application.

77. I disagree. At the highest it shows that Regulation 19C might have no application. Inevitably, since we are dealing with transactions in part in the future, there are uncertainties in addition to all the usual uncertainties attendant upon a valuation of a scheme of this size. The fact that the retail site might not make £8m was drawn to the attention of the Committee on 20th May.

78. From the material examined during the hearing I see no reason to conclude any need to make a setaside will in the event arise short of a change in the relevant regulations and the climate of opinion in the Department. It seems reasonable to assume that, should any need to set aside technically arise under the regulations, the Secretary of State will give a sufficient direction to enable the Council to proceed with the plans without undue difficulty. It is clear that the Council considered the question and came to the view that there was no likely problem arising from any need to set aside. From the material I have seen they were amply entitled to come to that view which apparently is shared in the Department.

79. The Ultra Vires Submission

80. The Council is obliged to pay New Horizons £720,000 on entering into the Framework agreement and up to £6.96m (depending on the amount of the supermarket receipt) thereafter: in total £7.68m. The purpose of the payment is expressed to be “to assist New Horizons in achieving the Development Objectives and discharging its obligations hereunder”: clause 9.1.1. The Development Objectives were set out at the beginning of this judgment and are listed in the First Schedule [see clause 1.1.18].

81. The Council contend that the powers to make the payments in question are to be found in section 24 of the Local Government Act 1988 which authorises a local housing authority to provide any person with financial assistance for the purposes of or in connection with the acquisition, construction, conversion, rehabilitation, improvement, maintenance or management of any property which is or is intended to be privately let as housing accommodation subject to certain conditions. Privately let housing accommodation comprises property occupied as housing accommodation in pursuance of a lease, licence or statutory tenancy where the immediate landlord of the occupier is not a local authority: section 24(3).

82. Mr Howell submits that the payments referred to are not limited, as they should be, to payments in connection with the provision of privately let housing accommodation. He submits that the obligations which the grant may be used to defray include carrying out or procuring the carrying out of the construction of the supermarket on the Bison site [clause] repair of the Scientist Estate properties which will be let by the Council [clause 5.3.1] the stimulation of the local economy (eg by the small loans guarantee scheme and the provision of school improvements and of a public park. He submits that accordingly the undertaking to pay the grants is ultra vires the authority.

83. So far as the supermarket site is concerned, the reality of the situation is that it was envisaged that it would not need any of the payments in question. There is no reason to doubt that at the worst it will be self funding. So far as the Scientist Estate properties are concerned the repair obligation is on MHT not New Horizons who is the recipient of the monies in question.

84. The point has more force in relation to the other three matters raised. Its resolution is essentially concerned with the question : how wide a meaning can be given to the phrase “in connection with the acquisition, construction [etc] of any property which …is intended to be privately let as housing accommodation”, in this case the social housing envisaged on the Bison estate. In my judgment the provision of a park or school improvements falls comfortably within the wording of s.24. Closer to the borderline is the agreement to make available in years 2,3 and 4 of the scheme guarantees (to a maximum respectively of £25,000,£50,000 and £75,000) of 75% of loans to small businesses in the borough (with priority given to businesses set up under the Chalkhill SRB programmes) made by others but approved by New Horizons. The problem arises because of the possibility that such a guarantee may be given in respect of a small business which has nothing to do with Chalkhill; those within Chalkhill may I think be regarded as being in connection with the construction of the social housing. I recognise the problem but I am not persuaded that such a guarantee will in practice be asked for, or that if it is it will be given by New Horizons or that if it is given by New Horizons it will be called up or that if it is New Horizons obligation will be honoured out of s.24 monies. Still less am I persuaded that I should strike down the framework agreement on that account.

85. The public procurement submission

86. Mr Howell submits that, in entering into the framework agreement without first going through a tendering process

1. the Council was in breach of its obligations under the Public Works Contracts Regulations 1991;
2. The Council was acting unreasonably.

87. In relation to some matters arising under the framework agreement such as the demolition contract and the refurbishment of the Scientist Estate everything required by the regulations has been carried out and no complaint is made in relation to that. The only relevant part of the Framework Agreement is New Horizons’ obligation to procure MHT to develop social housing. The question is whether in this respect the Framework Agreement is a “public works ontract”, so that the regulations apply by virtue of regulation 5.

88. That I think is common ground. Before moving on to consider the regulations I pause to reject the submission that it was Wednesbury unreasonable for the council not to put out to tender the whole framework agreement. This was a large, complicated and interlocking package which the Council were anxious to see implemented. The uncertainties attendant upon the tender process are such as not to make it unreasonable not to go out to tender. Councils, just like individuals, can come to the conclusion that it may not be sensible to require tenders for a specific project and that it is preferable to choose one’s contractor by other methods.

89. So I pass to the regulations. Miss Baxendale helpfully reduced her submissions to writing and since I largely accept them it is useful to reproduce them here.

” Regulation 2 explains what a public works contract is. Such contract must be either:
(a) A contract which is “for the carrying out of a work or works for the contracting authority”; or
(b) A contract under which the authority “engages a person to procure by any means the carrying out for the contracting authority of a work corresponding to specified requirements”.

90. Note that “works” is defined as the activities in Schedule 1 (i.e building etc) and “work” is defined as the “outcome” of works.

91. In this case, the Framework Agreement is clearly not within (a) because on no view does New Horizons itself undertake to carry out any building etc work for the Council, nor does it undertake itself to develop houses (the outcome of work) . One must therefore concentrate on (b).

92. In this case, it is clear that New Horizons does procure something i.e. the development by MHT of social housing. This will come within Regulation 2(b) if:

(1) The development by MHT of social housing is “a work corresponding to specified requirements”; AND
(2) The development of the social housing is “carried out for the Council”.

93. Question (1) raises a difficult and unresolved point of construction of the Regulations: i.e do the “specified requirements” have to be specified by the contracting authority or not ? This point is recognised by the latest text-book (see Arrowsmith, the Law of Public and Utilities Procurement, pp. 128-130; 156-157), and may only be resolvable by a reference to the ECJ. However, the Respondent submits that the Court does not need to take a position on this, because the answer to the second question is much clearer.

94. For present purposes therefore, it will be assumed (without conceding) that the social housing to be developed by MHT is “a work corresponding to specified requirements”. Question (2) is whether MHT is carrying out this work “for the Council”.

95. Here it is helpful to distinguish between 2 different cases:

(1) Where a local authority pays a developer to develop social housing, which will be owned by the Council (and leased and managed by it).
(2) Where a local authority provides financial assistance to a Housing Association to develop houses which the Housing Association will own lease and manage.

96. In the first case, the local authority commissions the development and is the main beneficiary of the resulting housing – the developer acts merely as the local authority’s agent to arrange the development. This is undoubtedly a case of a work “carried out for the local authority”

97. In the second case, however, it is the Housing Association who commissions the development and who becomes the main beneficiary of the developed housing. There is no sense in which the Housing Association develops the houses “for” the local authority – it acts on its own behalf and for its own purposes. The Respondent submits that this is undoubtedly not a case of a work “carried out for the local authority”.

98. Turning to this case. This is a case where the Council provides funding (through New Horizons) to MHT, a Housing Association, so that MHT can develop houses which it, MHT, will own and manage. This is the second case identified above (i.e Council funding a Housing Association development). The development of social houses in this case is not “carried out for” the local authority, but is carried out by MHT as principal, with (indirect) local authority funding.

99. Mr Howell draws attention to the Public Works Directive 93/37/EEC and submits that the Regulations ought to be construed in the light of the Directive and in particular the wide definition of public works contracts in Article 1 (a) as

“contracts … which have as their object … the execution … of works related to [building works]..”

100. I am prepared to accept that it is right to use the Directive as an aid to construction of the Regulations. Doing so however, does not lead me to attribute to the Regulations in the present context a meaning other than that which i would give them if they stood on their own.

101. I agree with Miss Baxendale that the building of the social housing in question is not work done for the authority.

102. In those circumstance I do not need to decide on the correctness of Miss Baxendale’s fall-back argument. I record it because it seems to me to have some merit.

“…. one must consider the effect of a breach of a Regulations. The Respondents submit that such a breach does not automatically vitiate either the Framework Agreement or the decision to enter the Framework Agreement (as a matter of private law or public law):
(1) The consequences of breach are set out in the Regulations themselves. Regulation 31 deals with remedies, and provides both a damages remedy and a power to suspend a procedure, or to set aside Council decisions on the prompt complaint of a disaffected contractor. Regulation 31(7), however, provides that once the contract has been entered into only the damages remedy is available. In effect, the Regulations specifically contemplate that contracts procured in breach of the procedures should be allowed to continue once entered.
(2) This is therefore a case where one cannot apply the analysis that a decision taken without first complying with all the relevant legal requirements is void. It is fundamental assumption in the Regulations that a Council could fail to comply with the legal requirements and yet enter a valid contract. There would be no point in Regulation 31(7) if it really were the case that any breach of the Regulations made the contract (or the decision to contract) incurably illegal, and hence void.
(3) The true analysis (and the one consistent with the Regulations) is that a failure to comply with the Regulations does not make the contract itself void and once the contract is entered, the Council’s decision to enter the contract is no longer voidable.
(4) The Respondent is not saying here that Regulation 31 excludes any form of judicial review (plainly it does not). The Respondent’s case is merely that if there is a judicial review after the contract is entered into, then it is not enough just to show a breach of the Regulations – the proper construction of the Regulations is that a breach does not automatically mean that the relevant decision was void (as a matter of private law, still less as a matter of public law). Rather the Court must be persuaded on some other ground to exercise its discretion to avoid the decision.
The way in which the Applicants seek to do this is to allege a failure to consider the Regulations or the possibility of compensation claims (Para 96A of the Form 86A). On any view, this is wrong. The Respondent did consider the Regulations and the risk of claims. It spoke to the DOE and it took legal advice. Furthermore, the risk of claims has not materialised.”

103. The planning submissions

104. The first decision impugned is that taken by the Council’s Area Head of Planning on June 25th 1996 to issue a planning permission in respect of Chalkhill. The Council’s Environment Committee had resolved on 27.9.1995 to approve the application subject inter alia to New Horizons entering into a contract with the Council providing for certain matters and to a section 278 highways agreement. On June 25th neither agreement had been concluded. Accordingly, it is submitted, on June 25th 1996 the Area Head of Planning had no authority to issue any permission.

105. It is clear from the evidence that the matters for which it was sought to provide were those ultimately in the framework agreement and that by June 24 the framework agreement and the s.278 agreement were in their final form but had not been signed pending the Secretary of State’s consent. When this was given on June 24th and the Council had resolved to enter into the framework agreement the planning officer correctly assumed that the appending of the signatures to the two agreements was a certainty. As it turned out they were signed on 1.July 1996. In those circumstances I refuse to quash the planning permission and do not stay to consider the question of what the effect of any lack of authority was during the week before the signatures. Quashing would serve no purpose whatever.

106. The second planning decision impugned is that of the Council’s Development Control Subcommittee on August 7th 1996 who voted to approve an application made on June 18th 1996 to vary conditions 6 and 8 of the permission issued subsequently on June 25th and to construct a temporary vehicular access pursuant to conditions 3, 5 and 7 of that permission.

107. Mr Howell submitted that the decision to approve the Framework Agreement as satisfying the condition 3 was invalid. That condition provided that

“No demolition of residential buildings shall take place until there is in being either a signed building contract for works for which planning permission has been granted and issued to commence rebuilding on the site or other legal contract approved by the local planning authority pursuant to which rebuilding shall commence within 12 months of the completion of demolition.”

108. He submitted that, although the Framework Agreement is one under which rebuilding may commence within 12 months of completion of demolition, it is not a legal contract at this stage under which it shall do so. I accept that there is no obligation under the framework agreement for rebuilding to start within 12 months of the completion of demolition but the reality of the matter was that there was every incentive under the agreement to do just that. I refuse to give any relief in respect of this complaint.

109. The Unreasonable Capital Programme Submission

110. Most of the previous parts of this judgment are concerned with matters of statutory interpretation. Now however I move to a variety of submissions essentially concerned with the proposition that the Council acted unreasonably in the way it approached its financial responsibilities. In this context I bear in mind the words of Sir Thomas Bingham MR in R v Ministry of Defence, ex p. Smith [1996]QB 1996 QB 517 at 556:-

“The greater the policy content of a decision, and the more remote the subject matter of a decision from ordinary judicial experience, the more hesitant the court must necessarily be in holding a decision to be irrational.”

111. Mr Howell submitted that no reasonable authority acting prudently and having proper regard to the interests of their local taxpayers and other potential service recipients could have committed themselves to a scheme producing a deficit on the authority’s capital programme of £8.929m, even assuming a receipt for the supermarket site of £8m without any assurance that such a deficit and other essential works could be financed and by specifically identified means. The Committee had previously declined to do so on May 20th when they instructed officers to bring forward proposals for a capital programme to the July meeting of their committee. Without waiting for the report they had themselves required, they did unreasonably what reasonably they had previously declined to do.

112. I am satisfied having been taken at length through the voluminous material that the Council was made aware that the effect of going ahead with the Chalkhill scheme would be that other desirable projects might very well have to be postponed or financed from sources not currently “in the bag”. The Council decided nevertheless to proceed with the scheme. They were entitled so to do in June, notwithstanding that not much had changed since May when they were hesitant. I note that the Secretary of State has given the Scheme his blessing. The court will be very slow to come to the conclusion in circumstances such as this that the Council’s decision to go ahead was one to which no reasonable council could come. The more so when most if not all of the points which have been ventilated before me have already been given an airing before the Secretary of State and the Council manifestly still wishes to go ahead with the Scheme.

113. The wrongful assumption of an £8M receipt Submission

114. This relates to the 9 acres set aside for retail in the Bison site. The broad position is that planning permission exists for a retail superstore; the council were advised by New Horizon’s advisers that the value of this site as a food superstore was under £5M; they were also advised that if the site were available for non-food it could be worth over £8M. Whether use for non-food retail was permitted under the extant planning permission was open to doubt. The committee were warned that there were risks associated with this valuation. As it turns out the New Horizons has received several bids from bidders cognisant of the planning position and has shortlisted two from major food retailers each in excess of £12M. One envisages a single store selling mainly food; the other proposes a principal building to be used as a food store but also includes a further building for the retailing of household goods and two individual small retail units. The authority is currently examining whether it should give such further planning permissions or approvals of details as may be necessary.

115. Mr Howell submitted that it was wrong in principle for the Council to proceed on this basis until it was clear that planning permission was available for the successful tenderer. He relied on a decision of Farquharson J decided on 28.4.89 R v L.B.Barnet,ex p. Pardes House School Ltd. (Transcript CO/1425/88). That case turned on its own facts and does not provide authority for the proposition that this authority were not entitled to take into account the possibility that the retail site might be used for a retail use or buildings for which there was no curent permission or approval.

116. Mr Howell submitted that no reasonable authority could rely on advice given by New Horizon’s advisers rather than their own advisers. In my judgment the Council were entitled to proceed on the basis on which they were advised to proceed, namely, that it was reasonable to assume that £8M might well be raised although there was a risk that it would not be.

117. Other matters relating to the reasonableness of the Council’s decision

118. Mr Howell made further submissions which he grouped under 4 heads:-

1. The best option on June 25th 1996
2. Value for money
3. Risks
4. Claims against the Council

119. I look at them in turn.

1. Mr Howell made the fair point that the initial choice of Wimpey to be the developer had been made on a basis which was other than that finally adopted. In particular it involved no possibility of deficit funding whereas the current scheme does contain that possibility which may well become a reality if the retail site fetches less than expected. He submitted, correctly, that the framework agreement was not the only way the Chalkhill estate could be developed. He submitted that the Council, while it had repeatedly considered the Wimpey Scheme as it evolved, had never sat back and compared that final scheme against other possibilities.

120. There is a certain force in these points but one must appreciate the difficulties inherent in the situation. Inevitably, with the passing of time, valuations of various different segments of a huge scheme like this will vary – the retail site provides an example; costs will vary; government policy in relation to capital grants and receipts will vary. All these and other matters tend to change with the passage of time. Going out to tender takes time and costs money. The Council could have arranged a new competition in 1995 once it had become clear that the original financing proposals could not proceed. The council could, on receiving the Secretary of State’s consent in 1996, have once more gone out to tender and seen what that produced. However all this would inevitably have produced delay and might have resulted in no-one producing an acceptable scheme, either because potential developers were put off by what might be perceived as the Council’s dithering or for some other reason.

121. What is clear from the documentation is that the scheme was placed before the Council and its uncertainties and costs were discussed. I see no illegality in the Council’s decision to go ahead with that scheme rather than start again by considering whether there might not be possible alternatives.

2. Value for Money

122. Mr Howell submitted that the Council had acted perversely if they concluded that the scheme represented value for money and had failed to take into acount a material consideration if they did not apply their minds to the question whether the proposals represented value for money.

123. Value for money calculations adopted by the Council’s officers attempted to compare the cost to Brent of securing the provision of housing units by two possible methods:-

1. By making Local Authority Housing Association Grants (“LAHAG”) to a housing association and asking such a housing association to build the houses, and
2. By entering into the proposed scheme.

124. A third theoretical possibility, namely Brent building all the houses by itself without involving either a Housing Association or private developers was ruled out as being impossible to achieve given statutory and other constraints on the authority. No-one suggests that this was a live possibility.

125. The LAHAG was calculated on the basis that the grant would be 65% of the cost to the Housing Association of building the houses. On that basis the officers in April 1995 worked out that the LAHAG benchmark at that time was £57,200 per housing unit. There is no criticism of that as a working figure.

126. In consequence the debate centred on whether the cost to the authority per housing unit under the scheme was or was not likely to be less than £57,200. If it was then it represented value for money (“VFM”).

127. Attached to the April 1995 Report to the relevant committee was an appendix 4 prepared by Mr Chase, a Council Officer which purported to show that, on the basis of 480 units to be provided on the Bison site, the average cost to Brent was £52,080. This was calculated as follows. The cost to Brent of the whole scheme Mr Chase put for the purposes of the exercise in Appendix 4 at £32.1M. In order to arrive at that figure various matters were valued none of which need concern us save two – the cost of not receiving any money from the sale of the Scientist estate and the cost of not receiving any money from the sale of the Bison estate. These, so called opportunity costs were described as “capital receipts foregone”. The figure in respect of the Scientist estate was £5.8; that in respect of the Bison estate was £11M. I heard no argument in relation to the figure for the Scientist estate and, although initially there was a dispute in relation to the figure for the Bison estate at the end of the day this evaporated in relation to April 1995. Mr Howell conceded that the figure of £32.1M was proper in April 1995.

128. For the purpose of calculating the cost per unit of housing, Mr Chase divided that figure by the number of houses anticipated in April 1995, namely 615 (including 480 on the Bison site). This threw up a figure just in excess of £52,000. Since this was less than the LAHAG benchmark the appendix showed VFM for Brent at the time. As I understood him, Mr Howell conceded this in argument.

129. It is important to know how the Bison estate figure of £11M was arrived at. In February 1995 the tenanted value of the Bison Estate was put by Savills at £8.9M. If it was demolished the value was put at £19M. The cost of demolition would be £6M. Therefore the valuation of the Council’s opportunity cost of divesting itself of the Bison estate would have been £13M. Subtracting £2M from the £19M for reasons of prudence in the valuation of the cleared site Mr Chase indicated that the opportunity costs of to the Council was £11M. In those circumstances it was proper to take the opportunity cost at the higher figure of £11M rather than the tenanted value of £8.9M. On the other hand the figure of £19M or more prudently, £17M for the cleared site could not be obtained unless £6M was spent on demolition and therefore it would have been wrong to take either £19M or £17M as the opportunity cost figure. So the figure of £11M was taken in 1995. At the end of the day, Mr Howell conceded that this was a proper exercise.

130. However, he submitted, rightly, that things had changed by June of the following year. He pointed to the undoubted fact that the number of houses to be built on the Bison site had declined from 480 to 450 and that in consequence the cost to Brent of the whole scheme had to be divided, not by 615 but by 585. However, he accepted that even dividing £32,100.000 by 585 still showed VFM. This was on the assumption (which we did not explore in argument) that the Benchmark LAHAG figure had not changed by then.

131. He therefore had to attack the £32M figure. In order to do this he relied on a new valuation by Savills which had been summarised in a document sent to the Secretary of State. It dealt with both the Scientist and Bison Estates. I have not seen the valuation but what purports to be a summary is in the document sent to the Secretary of State which is in the papers before me.

132. So far as the Scientist estate was concerned, its valuation was put at £7.3M. This contrasted with the lower figure of £5.8M adopted in the previous year. Thus the capital receipt foregone in respect of the Scientist Estate was higher.

133. So far as the Bison estate was concerned, the valuation placed the cleared site value at between £9.6M and £11.75M. If this is the equivalent of the £11M in the preceding year then the change is of no use to Mr Howell. He however submits, if I understood him aright, that it was the equivalent of the £17M adopted for the purposes of appendix 4 which had been reduced to £11M because of the need to deduct £6M for the cost of demolition.

134. It followed, he submitted, that if one deducted £6.M from, say £11M one arrived at a figure of £5M as the cleared site value after paying for demolition. He submitted that in those circumstances one should not take as the opportunity cost of parting with the Bison estate for nothing either £11M or £5M. To take £11M would be to take the end value without having made the allowance for demolition which was made in Appendix 4; to take £5M would be to take less than the tenanted value of the Bison estate in its existing state. Therefore, he submitted, £8.9M should have been taken.

135. Allowing then for those matters and redoing the sort of calculation which was done in appendix 4 one no longer arrived at a figure per housing unit below the LAHAG benchmark but rather at one above it.

136. These were arguments not clearly forshadowed in any of the 55 pages of the Form 86A or in the affidavits on each side. There was no crossexamination of any affidavit. We endeavoured to follow the figures through in argument but ran across innumerable difficulties. The arguments and figures changed from those used in opening to those used in reply. Although both the 1995 and the 1996 valuations came from Savills no one was able to explain on the spur of the moment why the acreages mentioned in them differed from one another; no one could explain why the value of housing land should have apparently dipped so sharply on the Bison estate in 95/96 while apparently the Scientist estate rose in value; figures used for one exercise were being transposed and used for another exercise; we had no up to date LAHAG figures for the average cost of building the lesser number but differently sized (I think) units; the figure for the retail site used in February 1996 seemed low by June 1996 and so on and so on.

137. As it seems to me it is not appropriate, save in the most obvious cases of mistake, for the Court in a judicial review application to embark on a value for money calculation. I am not persuaded that in the present case any such obvious mistake was made. It was for Mr Howell to demonstrate irrationality and he has failed to do so in relation to the VFM calculations. He took me through various other calculations which the Council had made for various purposes and endeavoured to show that the Council’s value for money calculations were misguided. I am not persuaded that they were misguided and I do not think it appropriate to delay matters further by taking more time to setting out his arguments, the counter arguments and my reasons for coming to my conclusion.

3. Risks

138. Mr Howell submitted that the Council’s Committee was not made sufficiently aware of the risk of the retail site not achieving £4.5M and of various other risks. I disagree. The view was taken that the risks were small. That view was a reasonable one. The council were made aware of a risk that this view could turn out to be erroneous. There is every reason to believe that the risk will not eventuate if the parties are allowed to get with this scheme.

4. Claims against the Council

139. Mr Howell submitted that the Council unreasonably took into account the risk of a possible claim by the consortium if the council did not sign the framework agreement. I accept what is set out in Mr Queen’s second affidavit paragraph 68 namely that the council did not take such a risk into account. In any event, Mr Howell has not shown that it did.


140. No illegality has been demonstrated in relation to the matters referred to in the O’Malley application. An illegality has been shown in relation to the Walters application but in my discretion subject to receiving appropriate undertakings designed to secure that Mr Walters is not disadvantaged in relation to the purchase of his freehold I refuse to quash the Secretary of State’s consents. The disbenefits attendant upon so doing are out of all proportion to any possible benefits to Mr Walters.

141. I will hear Counsel on the form of the undertakings.

142. MISS BAXENDALE: Can I deal with the question of costs. In the case of Walters, on behalf of Brent, I would not be seeking any order as to costs. In the O’Malley case, could I ask for an order for costs, although I appreciate that the applicants are legally aided and it would be highly unlikely there would be any attempts to seek to enforce an order for costs. The Council must bear in mind the interests of other residents of Brent so I would ask for an order, although it would be unlikely that it would be attempted to be an enforced order.

143. LORD JUSTICE SCHIEMANN: You represent Brent?

144. MISS BAXENDALE: Yes, I am for Brent. Not the Walters and the Secretary of State case, the O’Malley one. I would submit that we won in the case.

145. LORD JUSTICE SCHIEMANN: You want an order in what used to be known as the football pools form but it now has a different format which I do not have, but I expect the Associate can help me.

146. MISS BAXENDALE: I think it is along the lines of “not to be enforced subject to the examination of the means of the applicant”.

147. LORD JUSTICE SCHIEMANN: As far as that costs application is concerned, in so far as the Secretary of State…. Sorry, you are involved in that as well, are you?

148. MR STEPHENSON: If your Lordship recollects, I am for Metropolitan Housing Trust and New Horizons (Brent) Limited. I ask for an order for costs in the same terms as my learned friend, Miss Baxendale. I am quite aware of the general rule against two orders for costs. So far as O’Malley is concerned, we filed substantive affidavits as interested persons. Secondly, we were clearly interested, not only in the outcome but also in the way the case was conducted. We were represented throughout and even though in O’Malley it is true that I simply adopted — apart from one or two small points — all the observations of my learned friend, Miss Baxendale, but I considered that our presence was necessary.

149. LORD JUSTICE SCHIEMANN: I can see that you are directly affected. You are both for MHT and New Horizons, is that right?

150. MR STEPHENSON: Yes. So far as the Walters case is concerned, we did make independent submissions ourselves and the involvement was substantial, though again compared to my learned friends Miss Baxendale and Mr Sullivan, not substantial in terms of time. The same principle applies that we were there in order to protect our interests were which were vital in this case.

151. MR BURNETT: So far as Secretary of State is concerned, whom I represented before you with Mr Sullivan, given the terms of your Lordship’s judgment which, if I summarise it, is that we lost on some of the law but won on discretion, we do not seek an order for costs against Mr Walters.

152. LORD JUSTICE SCHIEMANN: What do you want to say about costs?

153. MR HOWELL: Would it be convenient to deal with O’Malley and Walters separately? So far as O’Malley is concerned, I accept that I could not resist an order for one set of costs in whatever the current football pools or fund form is, but I would resist an order in respect of two sets of costs. Obviously, in my respectful submission, if there is to be an order which, subject to any argument which my learned friends put up amongst themselves which would be in favour of the Council rather than in favour of New Horizons and MHT, so far as New Horizons and MHT are concerned, whilst I accept that in O’Malley the application directly affected them, that is not a reason why they required separate representation at this hearing. Your Lordship knows that, so far as that case is concerned, Mr Stephenson and his learned junior did not add anything to what Miss Baxendale said in that case. I should also say that although affidavits were filed, you will see the extent to which they may have assisted your Lordship in that case which, in my submission, is a most generous margin. Your Lordships did not refer to them in the judgment.

154. So far as the need to have representation even with an affidavit, affidavits were sworn on behalf of behalf of MHT in respect of the leave application when Lord Lester was representing Brent to employ any arguments which might have been available. In my submission, whilst I have no objection to my learned friend Mr Stephenson and his learned junior appearing with his team of solicitors at this hearing, there can be no conceivable justification in the light of your Lordship’s decision in the Bolton case for two sets of costs.

155. So far as Walters is concerned, I understand that neither the Secretary of State nor Brent seek an order for costs. It appears that Mr Stephenson is seeking an order for costs in the Walters case. Far from there being any case for an award of costs against my client in Walters, I would accept that there is a case for him to be awarded his costs. What your Lordship has found is that the Secretary of State’s decision was flawed. Your Lordship, I appreciate, is not as at present minded to grant any relief in the form of a court order to quash the decision. Nonetheless, what my client has achieved is an undertaking which he would not have otherwise have achieved—–

156. LORD JUSTICE SCHIEMANN: That is what I rather doubt. My recollection is that amongst the whole battery of points which were fired by you at the authority, this one which has impressed me undoubtedly features, but as far as that was concerned, I got the impression, which may be wrong, that in broad terms they were completely sympathetic in meeting them in one way or another, albeit they have done it in a rather ham-fisted way.

157. MR HOWELL: May I say that your Lordship has not seen the personal undertakings.


158. MR HOWELL: You have, then I can refer to them. I will be saying something about them in a moment, if I may, but what is now being offered by MHT is an option which was never previously on offer. What was being offered was a contractual right of a rather deficient description. In substance my client has obtained an offer which has not appeared to have been available to him. I do say that to that extent he has been successful, but whatever else is said there can be no question of awarding costs against him in the circumstances, particularly in regard to MHT and New Horizons.

159. So far as costs are concerned, the only other thing I would add is that my clients are legally aided and I would seek the normal order about legal aid taxation in both cases.

160. MR STEPHENSON: Might I just reply on this question of what was on offer. MHT filed an affidavit — I cannot remember precisely — in January, indicating that in view of what was said by my learned friend about his client’s’ position, we were prepared, and indeed it was our intention, that the tenant should have the right to buy the freehold. It is perfectly true that the form by which that was to be achieved may have been open to criticism, but it is quite clear from my submissions to your Lordship on the last day of this hearing, that MHT were prepared to do whatever was necessary to give efficacy to their wishes that the tenants should have the right to buy the freehold. The form of it is neither here nor there, but I do mildly resent my learned friend’s suggestion that this was not on offer beforehand, simply because of the form it was in. It is simply a question, as I made clear at the hearing, of making sure that it was in a form which would have complete efficacy.

161. LORD JUSTICE SCHIEMANN: I propose to make no order as to costs in Walters either way. As far as O’Malley is concerned, I shall make an order in the usual form for the unsuccessful applicant in legal aid cases, that the costs of Brent and of MHT and New Horizon be paid. I shall order legal aid taxation. That disposes of costs.

162. MR STEPHENSON: It has been agreed between Miss Baxendale and myself on the question of their undertakings since they are primarily by MHT. I have passed to you a draft. There are one or two alterations of which my learned friend, Mr Howell is aware. They are, “To submit instructions to conveyancing counsel within 21 days to draft an option in favour of the Council to permit him to purchase the freehold of his house at….” His address must go in there. I am sorry, I was not aware of it last night when I was typing that. “….upon the same terms in so far as possible as he would have been able to purchase the freehold had the London Borough of Brent remained the freeholder.” The only reason I put in “so far as possible” is in case it is not possible precisely to put him in the position he would be had he remained a straight forward tenant of Brent as freeholder. I know not of any particular disadvantage as to that.

163. Secondly, “To ensure in so far as possible the option is drafted so as to be exercisable for as long a period as may be possible in law”. As far as that is concerned, I am concerned that the rule against perpetuities may prevent the options being granted for a period of more than 21 years. I know not precisely how old Mr Walters is, but we know he is a pensioner so, presumably, he is in excess of 65 years, assuming by that that he is a state pensioner — my learned friend can help you on that — which would mean in all practical terms that the option would be perfectly acceptable in respect of him. If your Lordship accepts that, then I need go no further. If you did not accept that and wished Mr Walters to have an option for a longer period, then what I would offer is an undertaking to the court, which we would have to add to this, that before the expiry of this option set out in this undertaking, we would undertake to the court to offer a further option in identical terms so that he gets a further 21 years after that. By any stretch of the imagination that would mean that he would be satisfactorily—–

164. LORD JUSTICE SCHIEMANN: I cannot say that I am good on the Statute of Limitation, but I would have thought that if public policy prevents it from being included in the original option, it could be equally objectionable to have it done with the sanction of the court. However, we will consider that later.

165. MR STEPHENSON: “To insure the option binds all successors in title [to] Metropolitan Housing Trust Limited to send the option to the applicant for his acceptance within three months of receipt by him”. The purpose of that, my Lord, is to put at least some onus on him to return it to us within a certain time.

166. LORD JUSTICE SCHIEMANN: That is merely the option, he does not need to exercise the option?

167. MR STEPHENSON: Quite so. It is just returning the option accepted by him within three months. “To execute the option in the form then drafted and then not to seek any payment for the option”. There is then a drafting error. As it stands, that reads: “Not to seek any payment from the applicant for the option….”

168. LORD JUSTICE SCHIEMANN: Or the costs of preparing it?

169. MR STEPHENSON: That is inevitable.

170. LORD JUSTICE SCHIEMANN: He is not paying for the conveyancing.

171. MR STEPHENSON: That is right, but obviously there will be a payment when he comes to exercise the option. It may be that needs a little treating to make sure that it is absolutely right on that. Those are the terms of the undertaking which I hope are acceptable to the court.

172. LORD JUSTICE SCHIEMANN: What do you want to say about that, Miss Baxendale?

173. MISS BAXENDALE: We have a short undertaking which is, in effect, taking all reasonable steps to assist.

174. LORD JUSTICE SCHIEMANN: What I have not thought through, and I do not know whether anyone else has, is whether this requires the consent of the Secretary of State.

175. MISS BAXENDALE: We have been discussing that. We have not thought it through entirely, we have discussed this point. I know my learned friend, Mr Burnett, has been considering that point, not necessarily having come to any concluded view because it would depend on the terms of the option, but I will let my learned friend deal with that.

176. I have written in to reflect the wording of the option “upon the same terms in so far as possible”, for the same reasons as my learned friend, but it is a very simple undertaking.


177. MR BURNETT: So far as the involvement of the Secretary of State is concerned, it may or may not be necessary for a consent to be given for the conveyance of the freehold from MHT or their successor in title.

178. LORD JUSTICE SCHIEMANN: Unaided by counsel I got as far as “it may or may not be”. Can you take it further?

179. MR BURNETT: You will remember there was some argument about the need for consents for subsequent disposals and the Secretary of State’s view, which is not a matter that need trouble your Lordship, is that he only has to consent to the subsequent disposal. It may well depend precisely upon the terms in which the agreement is reached between the other parties and, for example, if MHT are still the freehold owners at the time the option is exercised as to whether consents will be necessary. The Secretary of State’s position is that he would of course consider any application made to him for consents, but it seems to him that it would be wrong to undertake to grant a consent without having seen precisely what he is being asked to consent to.

180. LORD JUSTICE SCHIEMANN: I follow that entirely. What I do not remember from the mass of legislation is whether prior to giving such a consent, the Secretary of State has to hold a public inquiry or something of that order.

181. MR BURNETT: No, my Lord. You will remember that the Secretary of State’s intention, as set out in the affidavit evidence, was to achieve this result so far as was possible in any event, so no difficulty is anticipated.

182. LORD JUSTICE SCHIEMANN: What do you want to say about that, Mr Howell? What is the reality of the matter, can you help me about that? Does your client have a present desire to purchase the reversion?

183. MR HOWELL: I have not had an opportunity to speak to him before coming into court today in the light of the undertakings which are being offered. I have not had an opportunity to speak to him.

184. LORD JUSTICE SCHIEMANN: You must have mentioned this matter to him during the course of the last week?

185. MR HOWELL: You will see what he says in his affidavit.

186. LORD JUSTICE SCHIEMANN: I remember reading it. It was rather vague on the point. At that stage he did not have a present intention to do it, but he wanted to keep his options open.

187. MR HOWELL: He thought it was increasingly likely that he would do so. Can I just go back to where you started from in terms of refusing leave. As I understand your Lordship’s judgment, you were only prepared to deny Mr Walter’s relief if an undertaking was given secured to persons in his position that they were not in any worse position in terms of any right to buy than they would have been—–

188. LORD JUSTICE SCHIEMANN: I am only dealing with him. Nobody else has associated themselves with his challenges.

189. MR HOWELL: I misunderstood what you said on pages 12 – 13 of the judgment, but that is my misunderstanding. Looking at it simply to be confined to Mr Walters, the present undertakings do not secure what your Lordship wanted. The Council’s undertaking—–

190. LORD JUSTICE SCHIEMANN: What are you asking me to do? I do not want to spend all day on this.

191. MR HOWELL: If the position is that the undertakings do not get security and it is said that an option can be secured with everyone’s cooperation, I say that you should adjourn the matter for the option to be produced. If it satisfies what you require so be it, if not you will need to think again.

192. LORD JUSTICE SCHIEMANN: I see the force in that submission.

193. MR HOWELL: I do not know how my learned friends would react to that.

194. MR STEPHENSON: If your Lordship considers that the undertakings that we have given do not fully secure satisfactorily the objective of your Lordship, then that is the only course. I was hoping that the undertakings given would be an end of this matter and that the undertakings themselves would be enforceable in the usual way if they were not acted upon.

195. LORD JUSTICE SCHIEMANN: I can see that. The difficulty is that to a degree it is a blank cheque to whatever conveyancing counsel may agree. I would have thought sensible parties would have been able to agree this. The difficulty is that Mr Walters is concerned with scuppering your scheme and, therefore, the maximum delay he can secure the happier he will be. I have to sail in between those two desiderata. His position ought to be secured.

196. MR STEPHENSON: That is precisely why, in view of the way the case has progressed and the ammunition has been lodged against us, that is precisely why the formal undertakings, I hope in full and satisfactory terms, would enable you to say this is all your Lordship requires. If it is not, the only course is the one Mr Howell suggests. I had hoped that this would be an end of the matter on the basis of those undertakings.

197. LORD JUSTICE SCHIEMANN: There is no reason why, so far as the drafting of the option is concerned — I can see there may be a problem about the Secretary of State — why should this present a great delay problem?

198. MR STEPHENSON: It should not, my Lord.

199. LORD JUSTICE SCHIEMANN: Why can you not come back in 14 days with the thing in pukkah form?

200. MR STEPHENSON: The only answer I can give to that is that 14 days is rather short to submit—–

201. LORD JUSTICE SCHIEMANN: It is entirely up to you. Mr Walters would be perfectly content to take five years over it. It is not a matter for the court.

202. MR STEPHENSON: Would your Lordship allow me to take instructions. ( Pause) Could we have 21 days. My instructing solicitors have more experience of these matters and I think that would be satisfactory.

203. LORD JUSTICE SCHIEMANN: That takes us to the beginning of next term which is slightly more than 21 days in that case.

204. I think that is the neatest way of doing it and then you can tidy this up.

205. MISS BAXENDALE: We have the concerns which your Lordship was indicating. We wondered if it might be helpful if my learned friend, Mr Howell, could indicate whether he is submitting that it cannot be done or if he is just wanting to have an opportunity of looking at the document. It would be helpful to know at this stage what the position being adopted by Mr Walters is.

206. MR HOWELL: I made it plain in my submissions and I submitted it could not be done. I drew attention in my submissions to a number of reasons why that is so. If the position is that it is said against me that it can be done, then—–

207. LORD JUSTICE SCHIEMANN: The substance of Mr Walters’ position is that he is living in this house, he is a secure tenant. What he wants to be able to do is to pass his house down to his successors, or alternatively, to maximise the advantages which the legislation gives him to purchase the reversion cheaply. That is the substance of his position, is it not? My guess is that, so far as the financial advantage which a sitting council tenant has, that could be dealt with by a cash payment which would satisfactorily deal with his desires, as far as any cash is concerned, but would not deal with any situation in relation to passing it on to the next generation. So far as passing it on to the next generation is concerned, I would have thought that must be capable of being dealt with in an appropriate draft in form. Which is it that he is actually after?

208. MR HOWELL: The position is that, just looking at what your Lordship has indicated, that he should be in no worse position which includes his family. The position there is that we say that the offer cannot be ( inaudible). There are a number of reasons for that. I mentioned the consent which involve not simply the Secretary of State but also the Housing Corporation. There is also a question of the perpetuity period in respect of his family in particular, which again we can see no way round. There is also the problem about the charge. We will wait to see what can be done about that.

209. LORD JUSTICE SCHIEMANN: They could be released from the appropriate charge. We will have to see.

210. MR HOWELL: There are also other things he loses if he does not have the statutory right, for example the potential assistance from the Secretary of State, both financial and otherwise, for those who exercise the right to buy, which I mentioned to your Lordship in my submissions. I do not go through all of them. What I suggest is that if it is suggested that an option can be produced which satisfies what you indicate is required, my client is not intending to delay the matter. There is no reason why that cannot be drafted, if need be drafted reasonably quickly. If my learned friend says he needs 21 days to draft an option, let him come back and one can have a sensible discussion on the basis of what is actually being proposed about whether it achieves which your Lordship wishes it to achieve. If your Lordship takes the view that it does, so be it, if your Lordship takes the view otherwise, so be it.

211. LORD JUSTICE SCHIEMANN: What I am interested in is that in substance this man’s position is protected. It may be protected by payment in lieu, it may be protected by a conveyancing arrangement. I would have thought the parties could come through. I am not concerned to scupper this scheme. That is my basic approach to that. You may want to have time for further talks about it, but that is the result that I expect the parties to achieve, whether it be in terms of conveyancing or in terms of cash. I will adjourn the matter for you to give further thought to it and to negotiate a sensible answer to the situation. Any further applications?

212. MR HOWELL: So far as leave to appeal is concerned, I am not quite sure where I stand in Walters if you adjourn for 14 days, whether I ought to address your Lordship.

213. LORD JUSTICE SCHIEMANN: I have not heard the other side, I am not unsympathetic to granting you leave to appeal in relation to some matters. What are the matters you actually would want to have leave to appeal against? You raised about 60 points, of which I dealt with about 40 in the course of this judgment. Which are the ones which you actually submit are suitable for the Court of Appeal?

214. MR HOWELL: Could I deal with O’Malley first. The capital receipt point involves a point of law of general application affecting at least 450 local authorities in England and Wales and the way in which they conduct their financial affairs.

215. LORD JUSTICE SCHIEMANN: Can you remind me where that is in my judgment?

216. MR HOWELL: Certainly. It begins at page 39 – 47.

217. LORD JUSTICE SCHIEMANN: That is one point.

218. MR HOWELL: There are a number of points within that which I will indicate if you wish me.

219. LORD JUSTICE SCHIEMANN: What I call the set aside submissions.

220. MR HOWELL: So far as the ultra vires submission is concerned, which is the next one, I would focus in particular on what you have said on page 49 about the repair of the Scientist Estate properties which are to be leased back to the Council. You will recall that is the point about whether it is a payment in connection with provision of private sector conversion. The lease back properties are not private sector accommodation because they will be let eventually by the Council. What you have said is that the repair obligation is on MHT not New Horizons which is the recipient of the monies in question. Apart from the fact that New Horizons is, in my submission, under an obligation to carry out the development which includes the repair work under the framework agreement, even if they were not that would be irrelevant because the grant is in connection with the provision of public let accommodation. I will focus on that quite short point so far as the legal aspects of it is concerned, and it is certainly not de minimis in terms of finance.

221. So far as procurement is concerned, which begins at page 26, your Lordship has, I understand, found that the framework agreement is not a public works contract in effect, or one to which the directive does not apply. That is a point of some considerable significance in both domestic and European law because your Lordship, I understand, has found that it was not, inter alia, a contract for works for the Council.

222. In my respectful submission that raises an important point. The way in which your Lordship also deals with that matter in terms of Wednesbury on page 51, which is important about whether or not it would be quashed, is your Lordship said, “was not such as not to make it unreasonable not to go out to tender”. That is in respect of the whole framework agreement. There are two points: firstly, even assuming that your Lordship is right about the procurement regulations, there was no requirement necessary to put the framework of the agreement out to tender to secure competition in procurement. One could have insured in the framework agreement that all the contracts for building works which were to be let were the subject of competition, so in my respectful submission that does not deal with the point so far as reasonableness is concerned. That is procurement.

223. So far as the general points, there is what I call “whether it was still the best option point” which your Lordship may recall, which was dealt with at page 61. This is the point about whether, having decided to go for the scheme when it was on a particular basis, it is rational to go ahead without looking at it again when circumstances have changed. I would respectfully submit that what your Lordship has again, with respect, failed to deal with is the point I made, not as you seem to assume that the Council should go out to tender, but what it needed to do was to consider the figures which, inter alia, were put to the Secretary of State which the Council did not, about the respective costs of rehabilitation and redevelopment. You will recall the figures were £100m odd for redevelopment and £45m odd for rehabilitation that they should have considered. That is a fairly short point.

224. Another point of general importance arises in your Lordship’s rejection of my submission in considering whether to dispose of land an authority is obliged to have regard to its own policies. You will recall that comes up about the £8m. When your Lordship dealt with that at page 60, where you say that my submission “that it was wrong in principle for the council to proceed on the basis until it was clear that planning permission was available for the successful tenderer”, my submission was that it was wrong to proceed without having considered whether planning permission was likely to be obtained and that in that connection is was not simply a matter of financial prudence but also in considering whether it was consistent with their own planning policies relying on Pardes. That is an important point, in my submission, which applies to the disposal of powers of local authorities generally. I appreciate what you say about demolition costs and matters of that character. What I would suggest is that there are a number of discrete points, some of which raise points for general public importance upon which my client at least has an arguable case sufficient for leave to be granted.

225. I emphasise, in particular, the capital receipts point where your Lordship has not actually decided an order to set aside. You have made a speculation about that. The position there, with respect, is that your Lordship has decided on the construction of Section 61. I will not repeat those submissions, but when you come to apply, for example regulation 19(c), you do not proceed on the basis which you have been applying it on the basis you have said that Section 61 should be applied, on the basis which I submitted. It is totally unclear how that regulation could apply on the basis of what you have actually said. It is, in my submission, an important case in that respect because it will affect all the local authorities. That is O’Malley.

226. So far as Walters is concerned, I am not sure whether your Lordship should be dealing with it now or when we come back, but I probably can deal with it either way.

227. LORD JUSTICE SCHIEMANN: I will do it now because I sincerely hope that you can sort the remaining matter out.

228. MR HOWELL: I appreciate that the basis which your Lordship has decided against my client in Walters is a matter of discretion, but I would submit that, having seen the basis on which you have put it, that the exercise of discretion is flawed. Could I identify briefly a number of respects. It is not for me to argue, but simply show you that they were arguable.

229. I would say that your Lordship has failed to take into account, in allowing the consent to stand, the failure to keep the promises made to tenants in seeking that consent which your Lordship recalls was the first ground. You have not actually ruled on that ground in the judgment. That means that the question which you are considering is not simply a failure of consultation but a breach, effectively, of public good faith which ought to be taken into account in exercising the discretion if you are right on that point.

230. Secondly, your Lordship has exercised the discretion on the basis that the only relevant fault in effect is to consider the views of the tenants. That, in my submission, is not the right way to look at it because Parliament has in fact provided that there should be no disposal of a tenanted estate, such as the Scientist Estate, unless the majority of tenants are in favour. It cannot be right for the court to override that requirement as a matter of discretion, given Parliament’s clear instruction on that matter.

231. LORD JUSTICE SCHIEMANN: I follow the way, broadly speaking, you put it. I do not want this to go on too long, I have other cases in the list today.

232. MR HOWELL: You also raise a point about applicants generally and what we need to show. Your Lordship has taken against my client the fact that he is the only applicant for judicial review. I submit that is completely irrelevant to the exercise of discretion. The public has been discouraged from making further applications for judicial review, once one applicant has made one, by the former Master of the Rolls, Lord Donaldson, in the case of Regina v Norwich County Council ex p Shtun . It would be have been wrong in one sense for there to be any applications on the same ground. It has never hitherto been suggested that an applicant for judicial review has to produce, effectively, evidence for opinion poll of other people who support him. It is quite wrong to give emphasis to that matter.

233. LORD JUSTICE SCHIEMANN: I have your point, thank you. I am minded, as things stand at the moment to give leave in both cases. So far as O’Malley is concerned, to give leave on the basis of the submissions in relation to the set aside, the ultra vires and the procurement points. I would not be minded to give leave in relation to the remainder of the matters. On the other hand, I think I would direct that any application to the Court of Appeal in relation to leave, for the remainder of the matters be dealt with at the hearing of the substantive appeal. That is the most convenient way of dealing with it.

234. So far as Walter is concerned, I quite see that there are arguments in relation to my exercise of discretion which are worthy of further consideration by the full court. There may then be a cross-appeal in relation to my findings on the law in relation to Walters. That is my current feeling about this. Does anyone want to say anything about it?

235. MISS BAXENDALE: I do not know how “crisp” I can be. From your Lordship’s indication, I suspect even in my very short words, this is a very thorough judgment. You found both in our favour on our main points and in the alternative, and I would have submitted that this was a suitable case that ought to go to the Court of Appeal to decide whether there should be leave. Your Lordship has a point, but I do not think I can make it more than that.

236. LORD JUSTICE SCHIEMANN: I have considered it very carefully and my feeling is that if it went to the single Lord Justice he would say this is all very difficult and, at the end of the day, you would lose more time by my not giving leave than by my giving leave, and I imagine that time is of the essence.

237. MISS BAXENDALE: Is your Lordship able to make an indication about expedition because I am concerned about the effect on the scheme of any further delay.

238. LORD JUSTICE SCHIEMANN: I am very conscious of that. The answer is that I think I can put on the file that this is a matter of some urgency.

239. MISS BAXENDALE: Perhaps with your Lordship’s indication of that we can use it.

240. LORD JUSTICE SCHIEMANN: It is clear that a lot of people are being held up by this.

241. MISS BAXENDALE: Can I raise one other point. I noticed from what your Lordship was saying to my learned friend, Mr Howell, if it was possible to achieve by agreement something about the option, it would obviously be far better than coming back to the court again. Although you have said that it should be adjourned for three weeks, if it could be achieved in writing so it was not necessary to come back, it would obviously be much cheaper and easier for everybody.

242. LORD JUSTICE SCHIEMANN: That is clearly right.

243. MR HOWELL: Can I make my position clear. I thought had I done so in the hearing. As far as my client’s interests are concerned, I am concerned to secure that he gets the best of whatever is available, in the best formula available. Whether that achieves at the end of the day what is intent is another question, but it has always been my client’s intention, and what has happened before the hearing, that we should corporate to put in the best form possible what is offered. We are not wishing to take technical drafting points or anything of that character. We are quite happy to discuss the matter and put it in the best form. Whether that results in being acceptable is another matter, but we will certainly cooperate.

244. LORD JUSTICE SCHIEMANN: Your client is, in financial terms, manifestly in a strong position viz a viz the others. On the other hand he may prefer to create delay. The delay point, now that I have given leave, is perhaps a slightly less force, but there it is. I will give you to the beginning of next term, the first available date next term. If you make progress in the meanwhile, then I do not doubt it can be submitted to me in writing.

245. Thank you for an exhausting but interesting case. Forgive me, Mr Howell, if I have failed to do justice to some of your arguments. If and when you go to the Court of Appeal, that court would, I think, find it helpful if you could concentrate your fire on a few targets rather than the scatter gun approach which tends to get the judge’s eye off the ball. You may say you have achieved that, although not meaning to, which will give you success in the next court.

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