Council cleared of misuse of public funds when contesting judicial review

A local authority has been cleared by the District Auditor of acting unlawfully and misusing public funds when it chose to contest a judicial review of a planning decision despite an initial legal opinion advising against that course of action.

But the report from Karen Murray said there were lessons to be learned by Carlisle City Council and made a series of recommendations in relation to the management of future major planning applications.

Murray’s investigation followed an objection submitted to the Audit Commission over the £250,000 incurred by the council in preparing for and unsuccessfully contesting a judicial review brought by a local farmer over a planning decision taken in December 2008.

The decision by the council’s development control committee (DCC) had given Stobart Air permission to redevelop Carlisle Airport, subject to completion of a s. 106 agreement on future airside works. It was Stobart Air’s second application, the first having been withdrawn after the Secretary of State called it in.

The s. 106 agreement was signed and the council granted planning permission on 12 March 2009. Solicitors for the farmer, Mr Brown, issued proceedings the following month in a bid to overturn the planning approval.

The DCC decided to contest the judicial review. Its defence was successful twice in the High Court in June and October 2009. However, in May 2010 the Court of Appeal quashed the planning permission.

Carlisle was then ordered to pay Mr Brown’s costs, which were agreed at £105,000. The council incurred its own external legal costs, which came to £80,460, and in-house costs, such as the costs of legal and other officers’ time.

At the end of her investigation, the District Auditor concluded that there was no unlawful item of account. “A decision as to whether I should exercise my discretion to apply to the court for a declaration under section 17 of the Audit Commission Act does not therefore arise,” she said.

Murray also decided to exercise her discretion and not issue a section 8 report. This followed the council’s agreement to publish the audit report, consider it at a full council meeting and publish its response to her findings and recommendations in the form of an action plan.

Her overall conclusion was as follows: “The Court of Appeal determined that the council made a wrong planning decision. This is not a matter for my audit, unless the council did so wilfully or reached a decision that was so unreasonable that no reasonable body could have made it. I do not believe that is the case based on the evidence I have seen – both in relation to the planning decision itself and to the decision to contest the subsequent judicial review.

“However, I do believe mistakes were made when the two applications relating to the airport redevelopment were received and that there are lessons to be learned for the management of future major planning applications.”

Murray accepted there was evidence that relations between the developer – a major employer and investor in the area – and the council were at times adversarial “and not indicative of a cosy relationship”.

However, she also found evidence that, at times, officers and members did not demonstrate the distinction between the dual roles of economic development and development control. “This contributed to the perceptions in some quarters, illustrated in a formal complaint from a member of the public, that the council was compromising its regulatory planning role.”

The District Auditor gave as examples:

• During the first application, some members of the DCC “seemingly felt” that the chief executive had been “pushing” the developer’s case
• The Council Leader was pictured in local papers shaking hands with the developer’s chief executive after a meeting to negotiate planning conditions
• The chief executive “exerted pressure on planning officers which she has stressed to me was intended only to accelerate the planning process, in respect of timing of the reports and to encourage officers to be more effective, but which was interpreted by them as her seeking to influence the outcome”.

Murray criticised the council for failing to put special arrangements in place to ensure such a complex application could be handled within a reasonable timeframe or to demonstrate that its economic development interests would not affect its planning responsibilities for what was described as a “once in a lifetime” opportunity.

The District Auditor made a series of comments on the council’s obtaining of legal advice in respect of the planning application, and its subsequent decision to contest the judicial review.

Carlisle first obtained counsel’s opinion in September 2008 in relation to whether an environmental impact assessment was necessary and whether it had to include the future airside works. Counsel said the authority needed to give this issue proper consideration.

But it failed to act fully upon that opinion. In addition the rationale for a two-stage approach to the EIA – under which the assessment of the airside works was deferred – was not documented at the time. The officer’s report and the DCC meeting did not address the issue, despite a challenge from Mr Brown’s solicitor and another member of the public. “These failures were critical to the outcome of the judicial review,” the District Auditor explained.

A second opinion was obtained in November 2008 in relation to whether a s. 106 agreement was a suitable mechanism for ensuring the airside works – which the council was in favour of – came to fruition. Counsel said it could be in principle, but he was not satisfied – on the evidence he had seen – that all the tests were met.

The District Auditor said: “In my view, in both instances it would have been advisable to consult counsel again as the application progressed and the s. 106 agreement was fleshed out.

“It would also have been appropriate to brief DCC members more fully on counsel’s observations and how officers had addressed them. It is not clear to me that officers ensured that, in making their decision on the second application, members were able to take all relevant factors into account.”

In relation to the judicial review, Carlisle received clear advice from counsel not to contest its alleged failure to assess the environmental impact of the airside development properly. This advice was to prove correct in the Court of Appeal.

The District Auditor’s report revealed that a combination of pressure from the developer, whose two legal advisers contradicted the council’s one, and the intervention of the chief executive and the Council Leader, who discussed their concerns with the Head of Legal Services, then led Carlisle to seek a second opinion at a late stage.

“I accept that was a reasonable action to take,” Murray said. The second opinion suggested that Carlisle had grounds to resist the judicial review.

The District Auditor criticised the DCC – saying that when members met to decide whether to contest the judicial review, they took too little time to read legal documents that were tabled.

“However, a barrister and the Head of Legal Services explained the council’s two legal opinions and the associated risks of each in a balanced way – if anything, they erred towards not defending the claim,” she said.

Murray therefore concluded that members were properly appraised of the issues and the risks of the two courses of action open to them (to contest or concede the judicial review). But she said members “afforded too much weight to the developer’s reduced prospects of defending the judicial review without the council standing alongside”.

The District Auditor pointed to the fact that the council successfully defended its case twice in the High Court as evidence it was a finely balanced case. She therefore concluded there was no misuse of public funds and – on the balance of the evidence – it was not unreasonable to contest the judicial review.

But she added: “It is true that had the council:

• Accepted the clear advice of its first counsel, rather than seeking a second opinion at a late stage under pressure from the developer; and
• Examined the arguments put to it by Mr Brown’s solicitors and a member of the public before granting planning permission on 19 December 2008

It could have avoided incurring its own and Mr Brown’s legal costs in contesting his application for judicial review.”

The District Auditor said there was no evidence that the outcome of the December 2008 meeting was predetermined, but she was “surprised” that members: asked just two questions of officers on the second application despite its complexity and high profile; failed to pick up on the EIA issue despite the representations made; and did not query the non-committal wording in the officer’s report which deliberately stopped short of a clear recommendation.

She repeated her criticism that members took insufficient time to read documents tabled at the meeting on 1 May 2009 and took into account factors that were not directly relevant to the decision they needed to make.

The District Auditor recommended that the council should:

• Strengthen arrangements for safeguarding and demonstrating the integrity and transparency of the regulatory planning process and ensuring it is not unduly influenced by economic development aspirations
• Ensure that planning applications do not proceed to committee stage until supported by the information that planning officers require to properly report the matter to members
• Ensure that where legal advice identifies issues requiring resolution, such issues are demonstrably resolved. “This may involve seeking further legal advice to confirm the adequacy of actions taken”
• Ensure that reports to committee are clear on the nature of legal advice obtained and actions taken as a result
• Review the existing Members Planning Code of Good Practice to ensure it adequately covers the requirements on officers. “This will ensure that Planning Officer Reports include a clear recommendation or, exceptionally, clarify why no recommendation has been possible”
• Ensure important professional planning judgements receive sufficient attention and are adequately documented on a timely basis
• Review the provision of specialised training for members of the council’s development control committee and other committees that fulfil specific statutory roles
• Ensure that where independent legal advice is required it is obtained on a timely basis, including any requirement for a second opinion
• Avoid tabling important documents in committee meetings. “If, exceptionally, documents cannot be circulated in advance members must take sufficient time to properly read and consider all new information”
• Ensure that decisions only take into account relevant considerations and do not, for example, afford undue weight to the interests of third parties.

The District Auditor pointed out that Stobart Air had made another application for development at the airport. “The aim of this report is to draw attention to defects in the council’s arrangements that I believe contributed to the situation and to seek to ensure that lessons are learned for major planning applications in future,” she said.

A Carlisle City Council spokeswoman said: “We’re pleased that the Audit Commission has concluded that we have acted lawfully and that they feel that there has not been any misuse of public funds. However, we recognise that we need to take steps to act on their ‘lessons to be learnt’.”

She added that this process was already underway and an action plan had been drawn up for members’ approval.

Philip Hoult