In Peters v London Borough of Haringey, the Claimant, a resident of the London Borough of Haringey (the “Council”) and a member of the campaign group “STOP HDV”, sought a judicial review of the Council’s decision in July 2017 to create the Haringey Development Vehicle (“HDV”). The HDV was a 50/50 Joint Venture ("JV") limited liability partnership ("LLP") formed by the Council (the Defendant) and Lendlease (an Interested Party). Through the HDV, the Council planned to transfer Council land to Lendlease for development.

The grounds of challenge brought by the Claimant were:

i. Illegality: the HDV had a commercial purpose under section 1 of the Localism Act 2011 and as such the Council could not structure it as a LLP and should use a limited company instead;

ii. Failure to consult: the Council had breached its statutory duty to consult as required under section 3 of the Local Government Act 1999;

iii. Discrimination: the Council had failed in its public sector equality duty (“PSED”) under section 149 of the Equality Act 2010; and

iv. Procedural irregularity: the Council could take this decision only in full council and not by cabinet alone in accordance with rule 4(1)(b) Local Authorities (Functions and Responsibilities) (England) Regulations 2000 SI No. 2853.

Following a rolled up hearing, on 8 February 2018 the Administrative Court found in favour of the Council and Lendlease.

Judgment

Ouseley J rejected all four grounds of challenge, concluding that they generally ran counter to the legislative intention to afford councils more flexibility. A significant factor in the judgment was the timing of the challenge and that they were deemed to be outside the short time-limit for bringing a judicial review challenge (which must be brought promptly and in any event within 3 months of the decision under challenge). The judge set out the following reasoning:

The Council’s role in the LLP was not a commercial one.

Although the LLP had been formed with a view to profit and reinvestment and may act in a "commercial manner", the Council’s (dominant) purpose was to develop and manage its land to achieve its housing and employment growth aims. In any event, this ground of challenge was brought too late as the Council had decided that the HDV should be an LLP on 14 February 2017 but the Claimant did not issue proceedings until 14 August 2017, three months out of time.

The Claimant was out of time to challenge the Council’s failure to consult.

Although the Council had failed to consult in relation to setting up the HDV, in breach of its statutory duty to do so, the Claimant had not submitted its challenge on this ground in time, since the duty had arisen at the formative stage of the decision-making process when the high-level decision on approach was being made. The duty in fact arose before the decision to start the procurement process for outsourcing in November 2015, and not before the final decision in July 2017 to create the HDV.

The Council had not failed to comply with the PSED.

The Court held that the Council's PSED was regularly considered in the decision-making process. In any event, this challenge was also late and even if there had been a breach, it was possible for the PSED to be complied with going forwards.

The Council did not need to make a decision in full council.

The structure of local government requires decisions to be taken by cabinet, except where a local authority exercises a function in connection with formulating a plan or strategy for the control of the authority's borrowing, investments or capital expenditure. It was held that the Council’s decision in July 2017 did not have a bearing on the Council's function requiring a decision in full council.

Comment

While much of the reasoning in this case was confined to its own facts and to the specific legal provisions engaged, the case also highlights a growing trend in public body decision-making that presents a potential challenger with some crucial strategic considerations around the timing of any challenge.

The Claimant's delay in commencing proceedings played a significant part in its failure in this challenge. The simpler point arising from the case, is that when considering whether to bring a challenge in respect of a failure to consult, potential claimants should bear the timeframes for bringing a challenge in mind. This case shows that the Court will ordinarily impose these time limits stringently, even where the ground of challenge arises from inaction, such as a failure to consult (and as such may be more difficult for potential claimants to discover), rather than from any act of the public authority. Prospective challengers will need to be alive to the ramifications of any announcements or actions of a public body that may indicate that the body must have made a decision without consultation in order to be taking the action or making the announcement it is.

The more complicated point, of which this case forms a cautionary example, is that, increasingly, significant public body decisions are being taken incrementally as a collection of smaller elements and decisions within a wider scheme of decisions, which cumulatively result in an outcome (or “final decision”) that a claimant may wish to challenge. However, the particular issue that forms the real basis of challenge – and for which the claimant may have the greatest prospects of success – may be one of the incremental decisions taken along the way, perhaps months or years before the final decision. This is becoming particularly commonplace in complex decision-making processes by regulators in regulatory schemes and delivery and pricing mechanisms, which can sometimes take years to conclude. Indeed, this may to some extent be a strategy by public bodies to limit the likelihood of a challenge being brought or prospects of a challenge being successful.

As a result, increasingly, potential judicial review claimants must reach a strategic decision as to whether to challenge at a potentially very early stage in the decision-making process. Even though it is often only at the final stage of the process that the effect of a "final decision" impacts on those who may wish to challenge, if potential challengers do not keep close watch of the process and identify when a decision during the process may be one that opens up the right of challenge, they risk losing what may otherwise be a good claim by way of delay. The courts will normally not easily grant extensions of time for bringing judicial review challenges because of the need for certainty in public decision-making.

Separately, this decision also illustrates that, when assessing the “commercial purpose” of a public/private sector JV, the courts will place more importance on the Council’s dominant purpose in setting up the JV vehicle than that of the JV itself, even if the JV may have been created for ostensibly commercial purposes.

The full judgment can be found here.