High Court rejects challenge to lawfulness of Haringey development vehicle

A High Court judge has today dismissed a judicial review challenge to the lawfulness of the procedures adopted by the London Borough of Haringey for the establishment of a controversial development vehicle.

The Haringey Development Vehicle (HDV) is intended to create a partnership between the council and the private sector, and is said to be the largest local authority development vehicle of its kind. Up to £2bn worth of currently publicly owned land could eventually be transferred to the vehicle.

On 20 July 2017 the council’s Cabinet confirmed Lendlease Europe as the successful bidder to become its 50:50 partner in the HDV. The Cabinet also approved the structure of the HDV, the split between the council, and related legal documents.

Gordon Peters, a Haringey resident and former senior local government official, brought a judicial review challenge over this decision. He had previously described the project as “the biggest ever sell-off of public assets in local authority history”.

The claimant’s grounds of challenge were that Haringey:

1. could not use a Limited Liability Partnership (“LLP”) for these purposes since the council was acting for a commercial purpose under s1 Localism Act 2011, and so had to use a limited company;
2. had failed in its statutory duty of consultation under s3 Local Government Act 1999;
3. had failed in its public sector equality duty under s149 Equality Act 2010; and
4. could only take this decision in full council and not by Cabinet alone, by virtue of rule 4(1)(b) Local Authorities (Functions and Responsibilities) (England) Regulations 2000 SI No.2853.

These grounds were all contested by the council and Lendlease, who both also said that all grounds, save the question of whether the decision should have been taken in full council, were affected by undue delay: grounds for the challenges first arose on 10 November 2015 or at the latest on 14 February 2017, when earlier decisions in the long process of decision-making were taken, they said.

The High Court judge, Mr Justice Ouseley, stressed that he was not concerned with the wisdom or merits of the decision, but he was instead concerned with the issues of law about the powers of the council and the lawfulness of the procedures it adopted.

He went on to reject the claim, refusing permission on all grounds. The judgment can be viewed here.

On the LLP issue, Mr Justice Ouseley said: “To my mind, there is no doubt but that the Council’s purpose in entering into the arrangements setting up the HDV and governing its operation, including the relationship between the two partners, cannot be characterised as 'a commercial purpose' within the scope of the Localism Act. Even more clearly is its dominant purpose not commercial. Any commercial component is merely incidental or ancillary, and not a separate purpose…..

“The purpose is to develop and manage the Council’s land so as to achieve its aims for housing, especially affordable housing, and employment growth, which it considered it could not achieve without bringing in private sector funds, expertise and experience.”

The judge said: “[The] mere fact that a profit might be made which could be used in either of those ways does not of itself show that the activities had any commercial purpose at all, because of the obligations of financial prudence.”

Later he added: “I do not consider it right to characterise the Council as having a commercial purpose at all; the fact that a return is hoped for, to be reinvested for the same policy objectives does not turn them into commercial purposes at all. It may be acting in a commercial manner, as Mr Goudie suggested, but it is not acting for a commercial purpose.”

Mr Justice Ouseley did find that the council had failed in its statutory duty of consultation under s3 Local Government Act 1999 in relation to setting up the HDV. He could not conclude, for the purposes of s31(3C) and (3D) Senior Courts Act 1981, that it was highly likely that, had there been s3 consultation in November 2015, the decision would still have been the same. But the judge refused permission to argue this ground because it was out of time.

In a statement Haringey Council said: “We welcome the court’s findings which very clearly states that permission to proceed with the claim for judicial review is refused on all grounds.

“We’ve been clear that we are committed to delivering the new homes, jobs and community facilities that local people have told us they want to see. The partnership will enable us to build 6,400 new homes and create thousands of new jobs, as well as delivering a wide-ranging programme of community projects - such as re-built state-of-the-art schools; new parks and open spaces; training and apprenticeships, and health and wellbeing projects - that will enable everyone in Haringey to take advantage of all the opportunities this could bring.

“Following the decision taken by Cabinet in July 2017, establishing the HDV remains the Council’s agreed approach to providing much needed homes and jobs on its own land and Lendlease remains the Council’s preferred partner.

“Last week, the Leader of the Council, Cllr Claire Kober, explained that she does not intend to take the final decisions required for the setup of the HDV prior to the start of the pre-election period which begins on 26 March. Whilst we are very pleased that the court has supported the Council’s position, we are still working on the basis that the final decision to establish the HDV will be taken by a future administration.”

Nigel Giffin QC of 11KBW, Ranjit Bhose QC and Ruchi Parekh of Cornerstone Barristers appeared for the council, instructed by Pinsent Masons.

James Goudie QC of 11KBW appeared for Lendlease, instructed by Ashurst.

David Wolfe QC of Matrix Chambers, Sarah Sackman and Katherine Barnes of Francis Taylor Building appeared for the claimant, instructed by Leigh Day.