Clays Lane Housing Co-Operative Ltd, R (on the application of) v Housing Corporation [2004] EWHC 1084 (Admin)

Case No CO/4578/2003

[2004] EWHC 1084 (Admin)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMINISTRATIVE COURT

Venue Royal Courts of Justice

Date Friday 14 May 2004

Strand,

London, WC2A 2LL

Before

THE HONOURABLE MR JUSTICE KEITH

Between

R (on the application of Clays Lane HousingClaimant

Co-operative Limited)Claimant

The Housing CorporationDefendant

(Transcript of the Handed Down Judgment of

Smith Bernal Wordwave Limited, 190 Fleet Street

London EC4A 2AG

Tel No: 020 7421 4040, Fax No: 020 7831 8838

Official Shorthand Writers to the Court)

Mr David Wolfe (instructed by Bindmans) for Claimant

Mr Paul Stanley (instructed by Trowers & Hamlins) for Defendant

Judgment

Introduction

[1]This is a claim by a housing co-operative for judicial review of the decision of the Housing Corporation to transfer its housing stock to another housing association. Permission to proceed with the claim was refused by Ouseley J. without a hearing. The application for permission to proceed with the claim was renewed before Stanley Burnton J. He adjourned the question whether permission to proceed with the claim should be granted, and ordered that the application for permission, and the substantive hearing if permission was granted, be considered at one hearing. This is the court’s judgment following that hearing.

The background facts

[2]The claimant, Clays Lane Housing Co-operative (“the Co-operative”), is a housing co-operative whose members are the residents of premises in Clays Lane, Stratford, East London, which the Co-operative leases on long leases from the London Borough of Newham. The premises consist of 50 self-contained flats and 400 rooms in 57 houses, and are let to its members. The Co-operative is run by a management committee which is largely elected from amongst its members. Because it is a non-profit-making body established for the purpose of providing housing to its members, it is registered and incorporated under the Industrial and Provident Societies Act 1965 (“the 1965 Act”). The facts that the Co-operative(a) is registered under the 1965 Act,

(b) is non-profit-making, and

(c) was established for the purpose of providing and managing houses for occupation by its members, and that membership of the Co-operative is reserved for those entitled to occupy the Co-operative’s premises, mean that the Co-operative was eligible for registration as a social landlord under section 2(1) of the Housing Act 1996 (“the 1996 Act”). The Co-operative was duly registered as a social landlord under the 1996 Act.

[3]The affairs of registered social landlords are regulated by the Defendant, the Housing Corporation (“the Corporation”). Its powers include directing an inquiry into the management of a registered social landlord, and (subject to the consent of the Secretary of State) directing a registered social landlord to transfer its land to another registered social landlord. Those powers are contained in paras. 20 and 27 of Schedule 1 to the 1996 Act, which read (so far as is material):

“20(1) The Corporation may direct an inquiry into the affairs of a registered social landlord if it appears to the Corporation that there may have been ….. mismanagement …… 27(1) Where as a result of an inquiry under paragraph 20 ….. the Corporation is satisfied as regards a registered social landlord – (a) that there has been ….. mismanagement in its administration, or (b) that the management of its land would be improved if its land were transferred in accordance with the provisions of this paragraph, the Corporation may, with the consent of the Secretary of State, direct the registered social landlord to make such a transfer. 27(3) ….. the Corporation may direct a transfer to be made to the Corporation or to another registered social landlord. 27(4) The transfer shall be on such terms as the Corporation may direct on the basis of principles determined by it. The consent of the Secretary of State is required both for the terms of the transfer and for the determination of the principles on which it is based. 27(5) The price shall not be less than the amount certified by the district valuer to be the amount the property would command if sold by a willing seller to another registered social landlord. ”

Moreover, by section 9(1), the consent of the Corporation is required for any disposal of land by a registered social landlord. (a) that there has been ….. mismanagement in its administration, or (b) that the management of its land would be improved if its land were transferred in accordance with the provisions of this paragraph,

[4]An inquiry into the affairs of the Co-operative took place in 2000. A report was submitted to the Corporation in March 2001. The inquiry found that there had been mismanagement of the Co-operative’s affairs in a number of areas, including a complete lack of effectiveness in the work of the management committee, a lack of proper financial controls and a lack of proper day-to-day management and governance. The report concluded that the Co-operative was being mismanaged to such an extent that its assets and the welfare of its tenants were at risk, unless urgent action was taken to address the failings of management and to bring good order to such fundamental tasks as collecting rent and controlling expenditure.

[5]The Corporation accepted the inquiry’s finding that there had been mismanagement of the Co-operative’s affairs, and it proposed to direct the transfer of the Co-operative’s land, in effect its housing stock, to the Governors of the Peabody Trust (“Peabody”), another registered social landlord, but not a co-operative. The Secretary of State gave his consent to the proposal on 14 March 2002, and on 20 March 2002 the Corporation formally directed that the transfer take effect. The Co-operative issued a claim for judicial review of the Corporation’s transfer direction, and of the Secretary of State’s consent to it, alleging different legal errors on the part of each. The claim was settled when the Corporation agreed to reconsider the matter, and the transfer direction did not take effect. The Secretary of State’s consent to the transfer became academic.

[6]The Co-operative’s problems with the Corporation had been noticed by Tenants First Housing Co-operative (“Tenants First”), a large social landlord registered in Scotland, regulated by Communities Scotland, the Corporation’s counterpart in Scotland. Like the Co-operative, Tenants First is a housing co-operative. It was the largest fully mutual co-operative housing association in the UK (the Co-operative being the second largest). In March 2002, it began to explore the possibility of a merger between it and the Co-operative, and by April 2002 it had agreed with the Co-operative to consider amalgamating the two of them. It sought a meeting with representatives of the Co-operative, the Corporation and Communities Scotland to discuss the proposal. The Corporation did not think that a meeting would serve any useful purpose, no doubt because at that stage the Co-operative’s claim for judicial review of the transfer direction had not been launched. The Corporation was expecting the transfer direction to take effect according to its terms.

[7]Following the settlement of the Co-operative’s claim for judicial review, the Corporation reconsidered whether a transfer direction should be made. By then, the Co-operative had accepted that there was no basis on which the finding of mismanagement could be challenged, and the Co-operative’s aim was to ensure that its obligations to its members were taken over by another co-operative. It was against that background that at a Board meeting on 24 June 2002, the Corporation decided again that the Co-operative’s housing stock should be transferred because of the mismanagement identified by the inquiry and because of the need to deal effectively with the legacy of the Co-operative’s managements problems. However, at the Co-operative’s request, the Board deferred its decision on whether there should be a statutory direction of the transfer of the Co-operative’s housing stock to Peabody under para. 27, or whether the need to do so could be eliminated by the Corporation’s consent under section 9(1) for the transfer of the Co-operative’s engagements to Tenants First, which would in effect amount to the voluntary transfer of its housing stock to Tenants First. That decision was deferred(a) to enable the Corporation to assess with Communities Scotland the regulatory implications of a voluntary transfer to Tenants First, and

(b) to give the Co-operative and Tenants First more time to develop their proposal. However, the Board “emphasised that it was not prepared to allow this matter to drift, and required a strong commitment to rapid progress from all parties”.

[8]The issue was reconsidered again by the Corporation at a Board meeting on 24 September 2002. The Board decided to direct the transfer of the Co-operative’s housing stock to Peabody under para. 27, and that the transfer of its engagements to Tenants First would not be an acceptable alternative. It subsequently sought the consent of the Secretary of State for the transfer and the terms on which it proposed the transfer should take place. On 9 July 2003, the Minister of State for Housing and Planning wrote to the Corporation informing it that the Secretary of State consented to the transfer and the terms on which it would take place.

[9]The issue was finally considered by the Corporation at a Board meeting on 24 July 2003. The question which the Board addressed on that occasion was whether there had been any material change of circumstances which would cause the Board to alter its original decision to direct the transfer of the Co-operative’s housing stock to Peabody. The Board concluded, amongst other things, that the Co-operative “had not made a case for there having been a material improvement in the governance issues that had previously been identified”. It found that there had been no material change of circumstance since its decision of 24 September 2002, and it confirmed the decision to direct the transfer of the Co-operative’s housing stock to Peabody. That is the decision which is challenged on this claim for judicial review. The terms of the transfer included the assumption by Peabody of the Co-operative’s liability for the repayment of a loan, which was treated as part of the compensation payable to the Co-operative for the transfer of its housing stock to Peabody. The expenditure which Peabody would incur in carrying out remedial works on the Co-operative’s housing stock was also treated as part of the compensation, a survey obtained by Peabody in January 2002 having recommended that the possibility of “land contamination and settlement/instability” should be investigated.

[10]Two points should be made. First, the Co-operative claims that the persons who had been responsible for its management in the period scrutinised by the inquiry had ceased to be involved in it by 24 July 2003. A new management team is claimed to have made many changes by then in the way in which the Co-operative was being run, and to have made considerable progress in resolving many of the failings which had previously existed. However, the Co-operative does not suggest that these considerations so undermine the Corporation’s conclusions as to make them susceptible to challenge on that ground. As I have said, the Co-operative accepts that it cannot challenge by way of judicial review the Board’s conclusion on 24 June 2002 that the Co-operative’s housing stock should be transferred because of the Co-operative’s mismanagement of its affairs. And the Co-operative also accepts that it cannot challenge the Board’s conclusion on 24 July 2003 that there had not been a material change of circumstances on the issue of whether the Co-operative should continue to have stewardship of its housing stock. Thus, although the decision nominally being challenged is that of 24 July 2003, it is really the decision of 24 September 2002 which has to be scrutinised (subject to an argument relating to the financial strength of Peabody to which I shall return later).

[11]Secondly, the Co-operative does not on this occasion seek to challenge the decision of the Secretary of State to consent to the transfer. The reason for that is that on this occasion it is not suggested that the Secretary of State erred in ways which were different from the ways in which the Corporation is alleged to have erred. The Secretary of State is alleged merely to have repeated the Corporation’s errors. There is no benefit to be gained from challenging the Secretary of State’s decision to consent to the transfer, and doing so would only increase unnecessarily the costs of the litigation.

The decision of 24 September 2002

[12]At the Board meeting on 24 September 2002, the Co-operative had asked for the decision whether there should be a transfer of its housing stock to Peabody under para. 27 to be further deferred to enable(a) a site survey which it had commissioned on the need for remedial works to be completed and

(b) Tenants First to reach a final decision, in the light of that survey, whether to accept a transfer of the Co-operative’s engagements. The Board refused that request for two reasons. First, the survey had not been commissioned quickly enough, and there was no certainty that the survey would produce its results soon. Secondly, in the light of such information which the Board had received since the meeting in June, it was not thought that any additional information which the survey revealed would have altered the conclusion which it ultimately reached, which was that “a statutory transfer to Peabody” would be “in the public interest”.

[13]The Board’s approach was to compare the relative merits of a compulsory transfer of the Co-operative’s housing stock to Peabody with the voluntary transfer of the Co-operative’s engagements to Tenants First. Thus, it took into account its belief that(a) public funding would be more at risk if the Co-operative’s engagements were transferred to Tenants First because of the “relative financial strengths” of Tenants First and Peabody (minute 64/09/02),

(b) Peabody would be more likely than Tenants First to attract new public funding for the Co-operative’s housing stock from the London Borough of Newham (minute 65/09/02),

(c) tenants would have greater security as assured tenants of Peabody than as contractual tenants of a fully mutual co-operative (such as Tenants First) (minute 66/09/02), and

(d) Peabody provided the Board with the necessary level of certainty which the Board required that it would be able to discharge its regulatory responsibilities, in view of its “long history of working in inner London, its financial strength, and its commitment to tenant participation at Clays Lane”, whereas Tenants First’s proposals did not give the Board that level of certainty (minute 73/09/02). The Board recognised that a voluntary transfer of the Co-operative’s engagements to Tenants First “would ensure continuing mutuality”, but it noted that Peabody’s proposal “would also provide the opportunity for tenant involvement in the management and development of the housing stock” (minute 78/09/02).

[14]The Board was aware of problems about cross-border regulation which a transfer of the Co-operative’s engagements to Tenants First might raise, i.e. the transfer of housing stock in an area governed by one regulator (the Corporation) to a body regulated by a different regulator (Communities Scotland). It noted that Communities Scotland had raised a number of regulatory concerns, “in particular those relating to control, policy, planning, risk management and a complex governance framework, ….. [and] about the potential impact on [Tenants First] were its proposed transfer engagements to proceed” (minute 68/09/02). The Board also noted that the London Borough of Newham did not support the proposed transfer of engagements to Tenants First, but did support the transfer of the housing stock to Peabody (minute 69/09/02).

[15]Finally, the Board had permitted counsel for the Co-operative to address it. It noted that he had submitted that it would be wrong for the Corporation to consider the relative merits of the two proposals because the exercise was not a comparative one. The Board did not agree (minute 70/09/02). And to the extent that a compulsory transfer of its housing stock to Peabody amounted to an interference with its property rights and its rights of association (rights protected by the European Convention on Human Rights (“the Convention”)), the Board concluded that “the public interest concerns in favour of a statutory transfer were sufficient to justify” any such interference (minute 78/09/02).

The challenge to the Board’s decisions

[16]The Board’s decision of 24 September 2002 is challenged on two grounds. First, the compulsory transfer of the Co-operative’s housing stock to Peabody amounted to an interference with its property rights and its rights of association. It is said that such interference could only be justified if the transfer of the Co-operative’s housing stock was strictly necessary, or at the very least if there was a compelling case in the public interest for such a transfer. Instead, the comparative approach which the Board adopted amounted to no more than determining which of the two proposals it had to consider was the more preferable. Had it approached the issue properly, it could well have concluded that, although a transfer of the housing stock to Peabody was preferable, a compelling case in the public interest for such a transfer had not been made out, let alone that the transfer was strictly necessary.

[17]Secondly, the Board is criticised for its approach to the issue of cross-border regulation. The Board did not conclude that there were any legal impediments to such regulatory arrangements as would have to be formulated if the Co-operative’s engagements were transferred to Tenants First. What it took into account were some of the practical difficulties which might arise. It is said that the Board was wrong to take those practical difficulties into account(a) without engaging in the discussions which both the Co-operative and Tenants First had sought in order to allay the Corporation’s concerns about those difficulties,

(b) without considering whether adjustments could be made to the current cross-border regulation agreement to allow the agreement to cover Tenants First’s assumption of the Co-operative’s engagements, and

(c) without considering whether adjustments could be made to the Co-operative’s proposals to bring them in line with the agreement.

[18]The Board’s decision of 24 July 2003 is challenged on one particular ground. It is said that by then there were growing concerns about Peabody’s financial strength. Those concerns were known to officers of the Corporation, but were not drawn to the Board’s attention. They amounted to a material change of circumstances since the Board’s decision of 24 September 2002, in view of the reliance which the Board had then placed on the relative financial strengths of Tenants First and Peabody.

Interference with property

[19]A direction by the Corporation under para. 27 that the land of a registered social landlord be transferred to another registered social landlord is akin to the compulsory acquisition of property. Prior to the incorporation of the Convention into domestic law, there were no special rules beyond the ordinary rules relating to reasonableness for the court to apply when considering a challenge to the confirmation by the Secretary of State of a compulsory purchase order. But given the draconian nature of an order which deprived citizens of their property, there had to be sufficient reasons in the Secretary of State’s view to justify the order on its merits for the order not to be vulnerable to a successful challenge: see R v Secretary of State for Transport ex p.Rothschild

[1989] 1 All ER 933

at p. 938e-f. Since then, a more stringent standard of reasonableness has emerged where fundamental rights, such as property rights, are at stake. If a compulsory purchase order is to withstand challenge, it must be demonstrated that the Secretary of State had rational grounds to conclude that a substantial public interest existed which outweighed the landowner’s rights: see Chesterfield Properties Plc v Secretary of State for the Environment

(1997) 76 P&CR 117

at p. 131.

[20]The incorporation of the Convention into domestic law brought a new component into the exercise. Art. 1 of the First Protocol to the Convention relates to protection of property. It reads:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

Two rights are therefore being protected: the right to the peaceful enjoyment of one’s possessions, and the right not to be deprived of them. It is the latter right which is engaged when action akin to the compulsory acquisition of property is taken. That right can only be interfered with in the public interest.

[21]Jurisprudence on the Convention shows that an interference with a fundamental right protected by the Convention must be proportionate to the legislative aim which the interference pursues. Such an interference with a Convention right will only satisfy the test of proportionality if a number of conditions are satisfied, one of which is that the means used to interfere with the right are no more than are necessary to accomplish the legislative objectives. So said Lord Clyde in de Freitas v Permanent Secretary ofMinistry of Agriculture, Fisheries, Land and Housing

[1999] 1 AC 69

at p. 80, and his analysis was cited with approval by Lord Steyn in R (Daly) v Secretaryof State for the Home Department

[2001] 2 AC 532

at [27]. This condition reflects the need for the interference with the fundamental right to be the “minimum” interference necessary to achieve the legislative objective, which was the language used in an essay by Prof. Jeffrey Jowell QC cited by Lord Hope in R v Shayler

[2003] 1 AC 247

at [77]. That is the source of the Co-operative’s formulation of the test which the Board had to apply.

[22]However, the cases in which these comments were made were not cases involving limitations on the right not to be deprived of one’s possessions, and there is a raft of jurisprudence addressing the issue of proportionality specifically in the context of the property rights protected by Art. 1 of the First Protocol. Thus, Art. 1 of the First Protocol was considered in a compulsory purchase case heard a few months before the incorporation of the Convention, Tesco Stores Ltd. v Secretary of State for the Environment,Transport and the Regions

(2000) 80 P&CR 427

. Sullivan J. said at p. 429:

“In very broad terms, the Convention requires that a fair balance must be struck between the public interest, in the present case in securing much needed redevelopment of the Western Sector of [High Wycombe], and an individual’s right to the peaceful enjoyment of his possessions. Any interference with that right must be necessary and proportionate. Although the Human Rights Act 1998 does not come into force until October 2, I am satisfied that for present purposes the Secretary of State’s policy, as set out in circular 14 of 94 that a Compulsory Purchase Order should not be made unless there is ‘a compelling case in the public interest’, fairly reflects that necessary element of balance.”

This approach was expressly approved in a case heard after the incorporation of the Convention, London Borough of Bexley v Secretary of State for the Environment, Transport and the Regions

[2001] EWHC (Admin) 323

at [46]. That is the test which the Corporation says the Board had to apply.

[23]The balancing exercise required by Art. 1 of the First Protocol has been considered in a number of European authorities. Three were cited to me. In James v The United Kingdom

(1986) 8 EHRR 123

, the European Court of Human Rights had to consider the impact of Art. 1 of the First Protocol on tenants’ rights under the Leasehold Reform Act 1967 to acquire the freehold of their properties at a price always below, and often far below, their market value, despite the landlords’ objections. Having identified the aim of the 1967 Act, i.e. to remedy the injustice caused to a long leaseholder who may have spent considerable sums improving and maintaining his property over many years but who is required to return the property to the lessor without compensation at the end of the lease, the Court had to consider the proportionality of the means adopted by the 1967 Act to remedy that injustice. At [50], it said that “there must ….. be a reasonable relationship of proportionality between the means employed and the aim sought to be realised”. Earlier jurisprudence of the court had expressed this requirement as requiring a “fair balance” to be struck “between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights”. The Court then summarised the landlords’ case at [51] as follows:

“According to the applicants, the security of tenure that tenants already had under the law in force ….. provided an adequate response and the draconian nature of the means devised to give effect to the alleged moral entitlement, namely deprivation of property, went too far. This was said to be confirmed by the absence of any true equivalent to the 1967 Act in the municipal legislation of the other Contracting States and, indeed, generally in democratic societies. It is, so the applicants argued, only if there was no other less drastic remedy for the perceived injustice that the extreme remedy of expropriation could satisfy the requirements of Art. 1.”

[24]The Court rejected this argument. It said at [51]:

“This amounts to reading a test of strict necessity into the Article, an interpretation which the Court does not find warranted. The availability of alternative solutions does not in itself render the leasehold reform legislation unjustified; it constitutes one factor, along with others, relevant for determining whether the means chosen could be regarded as reasonable and suited to achieving the legitimate aim being pursued, having regard to the need to strike a ‘fair balance’. Provided the legislature remained within these bounds, it is not for the Court to say whether the legislation represented the best solution for dealing with the problem or whether the legislative discretion should have been exercised in another way ….. The occupying leaseholder was considered by Parliament to have a ‘moral entitlement’ to ownership of the house, of which inadequate account was taken under the existing law ….. The concern of the legislature was not simply to regulate more fairly the relationship of landlord and tenant but to right a perceived injustice that went to the very issue of ownership. Allowing a mechanism for the compulsory transfer of the freehold interest in the house and the land to the tenant, with financial compensation to the landlord, cannot in itself be qualified in the circumstances as an inappropriate or disproportionate method for readjusting the law so as to meet that concern.” (Emphasis supplied)

[25]In Holy Monasteries v Greece

(1994) 20 EHRR 1

, properties owned by various monasteries were transferred to the state, and were to be managed ultimately by the Greek church. No compensation had been paid. The issue was whether the absence of such compensation rendered the transfer a disproportionate interference with the monasteries’ rights under Art. 1 of the First Protocol. Having recited the principles established in James, the European Court of Human Rights said at [71]:

“Compensation terms under the relevant legislation are material to the assessment whether the contested measure respects the requisite fair balance and, notably, whether it does not impose a disproportionate burden on the applicants. In this connection, the taking of property without payment of an amount reasonably related to its value will normally constitute a disproportionate interference and a total lack of compensation can be considered justifiable under Art. 1 only in exceptional circumstances. Art. 1 does not, however, guarantee a right to full compensation in all circumstances, since legitimate objectives of ‘public interest’ may call for less than reimbursement of the full market value.”

The Court concluded that the absence of compensation in that case meant that the “fair balance between the various interests in question as required by” Art. 1 of the First Protocol had not been achieved.

[26]In Chassagnou v France

(1999) 29 EHRR 615

, farmers opposed to hunting challenged a law which required them to permit others to come onto their land to hunt. At [85], the European Court of Human Rights said that the result of the law was “….. to place the applicants in a situation which upsets the fair balance to be struck between the protection of the rights of property and the requirements of the general interest. Compelling small landowners to transfer hunting rights over their land so that others can make use of them in a way which is totally incompatible with their beliefs imposes a disproportionate burden which is not justified under the second paragraph of Art. 1.”

[27]These latter cases add little in terms of principle to what was said in James. They are merely applications of the principles in James to their own particular facts. The same is true of the recent case of Fisher vEnglish Nature

[2003] EWHC 1599 (Admin)

, in which at [46] Lightman J cited James as authority for the proposition that “[t]he fact that there may be other even better methods of achieving the same ends does not necessarily mean that any particular measure is disproportionate under Art. 1”. Indeed, the focus in the HolyMonasteries case was on the absence of compensation, a feature which is not present in the Co-operative’s case. The crucial question is what is the true effect of James.

[28]Mr David Wolfe for the Co-operative contended that the Court in James rejected the test of strict necessity only because the Court accords to national authorities a wide margin of appreciation in determining whether a measure is in the public interest. That margin of appreciation does not arise where, as here, it is a domestic court which is reviewing the actions of a domestic public authority. I do not agree. It is true that the Court devoted the whole of para. 46 of its judgment to the wide margin of appreciation which national authorities enjoy. But the language of para. 51 of its judgment shows that the Court’s rejection of the test of strict necessity was not based on the Court’s wish to defer to national authorities’ assessment of what measures are warranted to deal with a particular domestic problem. The “fair balance” test of proportionality was preferred, the margin of appreciation to be enjoyed by national authorities being reflected in the deference which would be paid to the national authorities’ assessment of where the “fair balance” lies.

[29]For these reasons, I reject the Co-operative’s formulation of the test which the Board had to apply. What the Board had to determine was whether a compelling case in the public interest had been established for the transfer of the Co-operative’s housing stock to Peabody, having balanced the comparative benefits of a compulsory transfer of the housing stock to Peabody and a voluntary transfer of the housing stock to Tenants First, and the Co-operative’s wish for the latter so that its members could continue to enjoy the benefits of a co-operative. If a comparison of the benefits and disadvantages of two alternative options compellingly shows that the option which results in the deprivation of property is much to be preferred, a compelling case for adopting that option in the public interest will have been established.

[30]Having read the minutes of the Board’s deliberations on 24 September 2002, I am satisfied that that was the test which it applied. It had been addressed on what the proper test should be by counsel for the Co-operative, and no doubt the two alternative tests had been explained to it. Although the minutes do not refer to the Board being satisfied that a compelling case for the transfer to Peabody had been established, the minutes refer to the Board’s conclusion that such a transfer “was lawful, in the public interest and proportionate” (minute 78/09/02). The minutes show that the Board identified the benefits which a transfer to Peabody would bring and the reasons why a compulsory transfer to Peabody was far preferable to a voluntary transfer to Tenants First, and that the Board took into account the Co-operative’s wish for its members to continue to enjoy the benefits of mutuality. It has to be remembered that the Co-operative provided social housing, and had been provided with public funds for that purpose. It cannot be said that the Board made the wrong judgment as to where the “fair balance” lay, nor can it be said that the Board did not have rational grounds for concluding that the public interest in favour of a transfer to Peabody was such that it outweighed the Co-operative’s right (subject to the Corporation’s consent) to dispose of its housing stock as it wished.

Restrictions on association

[31]The rejection of the Co-operative’s wish to transfer its engagements to Tenants First meant that its members would no longer benefit from being members of a co-operative. That is said to amount to an interference with their right to freedom of association protected by

Art. 11 of the Convention

, which provides (so far as is material):

“(1) Everyone has the right ….. to freedom of association with others, including the right to form and to join trade unions for the protection of his interests. (2) No restrictions shall be placed on the exercise of these rights other than such as are prescribed by law and are necessary in a democratic society in the interests of national security or public safety, for the prevention of disorder or crime, for the protection of health or morals or for the protection of the rights and freedoms of others …..”

[32]The Board appeared to acknowledge (in minute 78/09/02) that membership of a co-operative amounted to “association with others” within the meaning of Art. 11(1). I am uncertain about that. It has been said that the concept of association presupposes a voluntary grouping for a common goal, but does not include the right merely to share the company of others: see Lester & Pannick, “Human Rights Law and Practice”, 2nd ed., para. 4.11.5. But how that is to be applied in practice is not altogether easy to see. The two cases which were cited to me are unhelpful on this topic. In Chassagnou, the farmers were required to be members of approved municipal hunters’ associations (even though they were opposed to hunting). Unsurprisingly, the Court found such associations to be within Art. 11(1) (and the right of freedom of association included the right not to be a member of an association). In Swedish Engine Drivers’ Union v Sweden

(1976) 1 EHRR 617

, the issue was whether the right to be a member of a trade union included the right for the union to engage in collective bargaining and to conclude collective agreements in the interests of its members.

[33]However, assuming (but without deciding) that membership of a co-operative amounts to “association with others”, the freedom of a member of a co-operative to associate with others lasts only for as long as he or she continues to be a member of the co-operative. If the co-operative ceases to exist, the right to freedom of association with one’s fellow members disappears, because there is no entity for that right to attach to. The true target of the challenge is, therefore, the decision which caused the entity to disappear. The loss of the right to associate with one’s fellow members is merely the consequence of that decision. It does not carry with it any additional or independent ground of challenge.

Cross-border regulation

[34]In 1998, the Corporation and Scottish Homes (the predecessor of Communities Scotland) concluded an agreement setting out “the details of a framework to ensure co-operation between the ….. Corporation and Scottish Homes in the context of parent and subsidiary organisations, where one is registered with the ….. Corporation and the other with Scottish Homes”. Subsidiaries could be registered with one regulatory authority, and parents with another. But the agreement was limited to parent and subsidiary organisations, and it did not permit dual regulation, i.e. both regulatory authorities being responsible for a single body. The Co-operative’s and Tenants First’s proposals were for an assumption by Tenants First of the Co-operative’s engagements so that there would be one body. Thus, the agreement would have to be adjusted to permit dual regulation of a single body whose housing stock straddled each of the regulatory authorities’ areas of responsibility.

[35]That is said to have posed both legal and practical problems. The legal problems related to the powers of a regulatory authority (in relation to the Corporation under the 1996 Act, and in relation to Communities Scotland under the Housing (Scotland) Act 2001) to regulate the activities of a body carried on outside its geographical jurisdiction. The practical problems related to the need to adjust the cross-border regulation agreement to accommodate the Co-operative’s and Tenants First’s proposals, and the difficulty in regulating activities carried on a considerable distance away. Those practical difficulties would be increased by the mutual nature of the merged body, and the difficulty of exercising managerial control over housing stock in London from Aberdeen where Tenants First was based.

[36]It is not possible to identify the extent to which these legal and practical problems were referred to, or discussed by, the Board on 24 September 2002. However, if the minutes are anything to go by, the Board did not put these considerations into the balance when it made its final decision. Minute 63/09/02 reads:

“Even if it were to be accepted that the Corporation had the legal power to approve such a transfer of engagements to [a registered social landlord] registered with Communities Scotland, very serious reservations would remain about the Corporation’s ability to discharge its statutory responsibilities as regulator effectively. That problem was particularly significant given the legacy of problems acknowledged by [the Co-operative], the lack of stable governance in the past, and the need for certainty that these problems would not recur in the future.”

The Board was therefore proceeding on the assumption that a transfer of the Co-operative’s engagements to Tenants First would not pose insuperable legal problems. Indeed, that was the position taken by the Corporation in correspondence prior to the meeting on 24 September 2002. On 13 September 2002, its solicitors had informed the Co-operative’s solicitors that the Board would “be requested to consider the position as to the transfer of engagements on the assumption that it does have the statutory power to accede to [the] proposals of [the Co-operative and Tenants First]”. It may be that the Board also proceeded on the assumption that a transfer of the Co-operative’s engagements to Tenants First would not pose insuperable practical problems either. As it is, I read the “very serious reservations” which the Board had about the Corporation’s ability to discharge its statutory functions as regulator as arising, not because of any cross-border problems which might arise as a result of Tenants First being based in Scotland, but because of the factors relating to the comparative merits of Peabody and Tenants First which the minutes then went on to refer to, and which are summarised in para. 13 above.

[37]Moreover, such cross-border problems as might arise as a result of Tenants First being based in Scotland were not referred to at all in those parts of the minutes which summarised the Board’s reasons for directing the transfer of the Co-operative’s housing stock to Peabody, namely minutes 78/09/02 and 79/09/02. And in the Corporation’s letter of 7 October 2002 to the Minister for Housing, Planning and Regeneration, in which the Corporation set out in summary form the reasons for its decision, what the Corporation said was that “….. the Board cannot be confident that the Co-operative’s proposed voluntary transfer of engagements to Tenants First Housing Co-operative, a fully mutual co-operative based in Aberdeen and regulated by Communities Scotland, will bring about fundamental change, or that the condition of the land and buildings as a residential environment could be improved under the Co-operative’s proposed management arrangements.” There was no reference there to the legal and practical problems in relation to cross-border regulation created by Tenants First’s presence in Scotland.

[38]Since the legal and practical problems said to have been posed by Tenants First’s presence in Scotland, though referred to at the meeting on 24 September 2002, did not play, on my reading of the minutes, any part in the Board’s ultimate decision to direct the transfer of the Co-operative’s housing stock to Peabody, the challenge to the Board’s decision on this topic must fail.

Peabody’s financial standing

[39]On 27 February 2002, the Corporation published a Performance Assessment and Investment Summary for Peabody. The Summary contained the following comments:

“Peabody demonstrates sufficient financial performance. It operates a viable and solvent business and financial projections give every indication that Peabody will continue to maintain stable financial health and will continue to be able to service its current debts, perform within lenders covenants and raise funds as required …..[W]e have no concerns regarding its financial health …..”

That remained the position on 24 September 2002 when the Board directed the transfer of the Co-operative’s housing stock to Peabody. The question is whether that remained, or ought to have remained, the Corporation’s view on 24 July 2003 when the Board concluded that there had not been a material change of circumstances which would cause the Board to alter its original decision.

[40]The facts relied upon by the Co-operative to show that there had by then been a change in Peabody’s financial standing which should have been brought to the attention of the Board are these. The Corporation assesses the performance of registered social landlords in a number of categories: viability, governance, management and development. It classifies performance by traffic light indicators – green, amber and red. Each indicator is sub-divided into sub-indicators, so that when it comes to viability, there are four green indicators, two amber indicators and two red indicators. On 1 September 2003, the Corporation published on its website an assessment of Peabody. It placed Peabody’s viability in the lowest of the four green indicators, which meant that its “financial condition is presently acceptable but exposures exist which make it vulnerable to deterioration”. The Corporation’s detailed assessment of Peabody’s viability was as follows:

“Whilst the financial position is acceptable, there are areas of potential vulnerability. However, the group operates in areas where demand for housing is likely to remain high, and it has a strong asset base. It will also benefit financially from the impact of rent restructuring. A key challenge facing the Trust is the condition of its stock and the costs involved in meeting the Decent Home Standard, with the age of the stock being a major factor. An updated asset management strategy is being prepared and the associated costs will feed into the next business planning round. Any significant increase in costs could affect the financial position adversely. Another challenge is the Trust’s need to make continuing efficiency savings in operational costs year on year.”

[41]An updated asset management strategy was subsequently prepared, and the costs associated with it were appraised. The issues were discussed at meetings between officers of the Corporation and Peabody on 18 November 2003 and 29 January 2004. As a result, a fresh assessment by the Corporation of Peabody (and of one of its constituent housing associations, Waltham Forest Community Based Housing Association which would be managing the Co-operative’s housing stock following the transfer) was published on 5 February 2004. It placed Peabody’s viability on the higher of the two amber indicators, which meant that its “financial condition is presently of concern. However, measures are being undertaken which should, over time, address the areas of financial weakness”. The Corporation’s detailed assessment of Peabody’s viability was as follows:

“The group has until very recently expanded vigorously through its parent and non-registered joint ventures for core social and non-social housing. At the same time the parent, Peabody, has been carrying out a thorough assessment of the financial obligations to bring its stock up to the Decent Homes Standard. The required expenditure was always expected to be large but when the results of the assessment became available in autumn 2003 they revealed a larger liability than previously estimated. In the absence of grant funding the Trust has therefore accepted the need for a substantial change in its business strategy in order to focus the necessary resources on improving its existing stock. It has already taken some measures, and started to implement others, to save costs in order to make the necessary finance available. These measures include reducing and reprofiling the development programme, implementing efficiency savings, and increasing income from site and stock disposals. However some of the existing projects that the Trust is engaged in are financially marginal and there is little scope for error if the assumptions do not hold true. The governors and management team recognise that some assumptions underpinning the Trust’s new financial plans may be challenging to deliver. We have no doubt of their commitment to ensuring delivery, but our assessment of Peabody’s viability will continue to be amber until the Trust is demonstrating delivery of the planned savings in 2004/05 and progress is being made in delivering the new asset management strategy.”

[42]What had alerted the Co-operative to concerns about Peabody was what the housing press was saying about Peabody. The 19 December 2003 issue of Housing Today reported that Peabody had “been forced to make ….. 51 redundancies in development, design and support staff because of the investment it must make to meet the decent homes standard”, and was “being forced to sell land in London worth £5m” which already had planning consent. The Chief Executive of a large registered social landlord was reported as saying that Peabody was “not a very healthy patient. It hasn’t invested enough in its housing stock”. And the Managing Director of a housing consultancy was reported as saying:

“Peabody is in a unique position with the bulk of its stock being turn-of-the-century houses, which are very expensive to refurbish. However there must be issues around why it has only just realised this.”

The 9 January 2004 issue of Housing Today reported that Peabody was involved in talks with the Corporation with a view to being permitted to levy higher rents on properties in which it had invested to meet the Decent Homes Standard. Peabody was reported as saying that otherwise the target rent levels for 2012 which it had agreed with the Corporation in 2000 would not be achieved.

[43]On the face of it, these concerns about Peabody’s financial standing only became known after 24 July 2003. Indeed, five weeks after then, the Corporation’s assessment of Peabody still justified a green indicator. On what basis is it said that, despite that, these concerns were known (or should have been known) to the Corporation’s officers, who should have brought them to the attention of the Board on 24 July 2003? It may well be that the concern expressed in the 1 September 2003 assessment of Peabody about “the condition of its stock and the costs involved in meeting the Decent Home Standard” was based on material which had been gathered before 24 July 2003, but the critical question was whether the materials which gave rise to that concern led (or should have led) the Corporation’s officers to be concerned about Peabody’s financial standing.

[44]The fact of the matter is that there is no rational basis for saying that the Corporation’s officers should have realised prior to 24 July 2003 that the expenditure which would be incurred in refurbishing Peabody’s housing stock so as to bring it up to the Decent Homes Standard would have a significant impact on Peabody’s financial standing. The passage quoted in para. 40 above shows that it was only if the expenditure would be significantly greater than would otherwise be expected, and that that expenditure could not be met by savings in operational costs, that Peabody’s financial position might be adversely affected. It is true that the report in the 9 January 2004 issue of Housing Today referred to the “rent restructuring process” as having begun in April 2003, but I read that as identifying when Peabody began to address the question of restructuring its rents rather than when it began to discuss the matter with the Corporation’s officers. In short, I have not seen any basis for saying that such concerns as the Corporation’s officers may have had about Peabody’s future expenditure on refurbishing its housing stock led (or should have led) them to be concerned about Peabody’s financial standing prior to 24 July 2003. They were not concerned about it even at the beginning of September 2003. Their concern only crystallised as a result of the September and November 2003 meetings and the updated asset management strategy.

[45]It may be that, as a result of the decision of the Court of Appeal in E vSecretary of State for the Home Department

[2004] EWCA Civ 49

, there are circumstances in which a decision by a public body taken in ignorance of relevant facts amounts to an independent ground for review. But there were no relevant facts of which the Board on 24 July 2003 was ignorant. If concern about Peabody’s financial strength could be said to have arisen as a result of the materials which gave rise to the 5 February 2004 report on Peabody, that concern arose long after any of the decisions challenged in the present case.

Conclusion

[46]Having considered the claim for judicial review on its merits as if this had been the substantive hearing, it would be inappropriate not to grant the Co-operative permission to proceed with its claim. I therefore grant the Co-operative permission to proceed, but for the reasons I have given the claim must be dismissed. There are concurrent proceedings in the Chancery Division which were transferred to the Administrative Court, in which the Corporation sought to enforce its direction that the Co-operative should transfer its housing stock to Peabody. Now that the claim for judicial review has been dismissed, it will be necessary for directions to be given in those proceedings, and I propose to do so when this judgment is handed down. - - - - - - - - - - - - - - - - - - - - - MR JUSTICE KEITH: For the reasons given in the judgment handed down today, I grant the claimant permission to proceed with its claim for judicial review, but its claim for judicial review must be dismissed. MR STANLEY: My Lord, that raises the question of how we deal, first of all, with the judicial review proceedings and, secondly, with the enforcement proceedings. I think it might be most convenient to deal with the judicial review proceedings first because I think the position there is quite straightforward. That there should be an order granting permission and dismissing the claim. I would obviously ask for my costs. I understand my friend has an application for permission to appeal. Perhaps if I can be treated as having made the application for my costs. MR JUSTICE KEITH: Very well. What do you wish to say about costs? MR WOLFE: My Lord, I can't say anything about costs other than that they should be assessed if not agreed. MR JUSTICE KEITH: Other than? MR WOLFE: That they should be assessed if not agreed. MR JUSTICE KEITH: Subject to a detailed assessment if not agreed. I am afraid I cannot think of an intelligent reason why costs should not follow the event, so the costs order which I make is that the defendant should pay to the claimant its costs of the claim to be the subject of a detailed assessment if not agreed. Permission to appeal? MR WOLFE: My Lord, as Mr Stanley rightly contemplates I do apply for permission to appeal. I think my Lord knows that the test is a two limbed one: either a real prospect of success and/or compelling public interest. My Lord, in my submission, we score on both of those. I don't know the extent to which my Lord wants me to develop that in relation to any of the particular points in question. MR JUSTICE KEITH: Let's deal with the first limb. Are you asking for permission to appeal on all grounds? MR WOLFE: My Lord, in effect, yes. MR JUSTICE KEITH: When you say "in effect" what does that mean? MR WOLFE: It does not necessarily follow that we will pursue all in due course, but certainly before my Lord we do seek permission on all grounds. MR JUSTICE KEITH: Yes. It seems to me that if you could be said to have any ground which is worthy of consideration by the Court of Appeal it is the extent to which Daly and Shayler could be said to undermine the European jurisprudence which I relied upon for the test which I thought was the correct test and which I found the Corporation to have applied. It does not really seem to me to be at all arguable that any of the other grounds should be considered by the Court of Appeal, although I should tell you I am not at the moment persuaded that even the Daly/Shayler ground is one that I should grant leave on. Rather I would be inclined to let the Court of Appeal decide whether or not it is arguable that those cases do undermine the European jurisprudence to such an extent that you should have permission to appeal. MR WOLFE: My Lord, can I just deal briefly with the Daly/Shayler point? I don't say that those cases undermine the European jurisprudence. What they are, in my submission, is an application of those principles across the Convention rights when one comes to look at them in the domestic courts. My Lord is right in saying that, of course, Shayler and Daly weren't directly concerned with Article and Protocol 1, but they did not limit their consideration to that and the observations that I made to the court to -- in relation to the approach of the court domestically were not expressed to be anything other than in general terms. MR JUSTICE KEITH: No, I understand. MR WOLFE: My Lord, I don't say that they contradict James, or Greek Monasteries, or any of those cases at all. They simply explain how one comes to deal with those points when one looks at an alleged violation in domestic courts rather than at Strasbourg level. So there is no inconsistency there. And that is where my Lord has rightly focused on the question margin of appreciation at the James level, the international court level, which is its rightful place, and not at the domestic level. What there is therefore, my Lord, is a novel point, which gets me into the compelling public interest territory, which is how one applies Shayler and Daly to Article 1 Protocol 1 violations, precisely the relationship between James, if you like domesticated, which is what my Lord has had to wrestle with, and my Lord has fallen back on the approach by Harrison and Sullivan JJ in the Tesco and Bexley cases, compelling need. MR JUSTICE KEITH: A compelling case in the public interest. MR WOLFE: But, my Lord, those were pre Daly and Shayler. So the question then is, to what extent has Shayler and Daly changed the approach that those two members of the Court applied at the point where the domestic understanding was the Smith andGravey approach, the anxious scrutiny approach, rather than the Shayler and Daly approach. So, my Lord, there is a real point there of wider importance. It very much bites on this case, because my Lord has seen very much that if the test -- on my Lord's analysis if the test is the public -- neither the public interest then on my Lord's analysis we lose. If it is more than that, then I think it is conceded on the side that we win. MR JUSTICE KEITH: That was conceded on the other side. MR WOLFE: So, my Lord, in my submission that is plainly arguable. I plainly have a real prospect of success on that point, and there is also a compelling public interest for the point to be ventilated, because plainly it goes to the very way in which this regulator operates and other regulators operate where they exercise powers such as these. So my submission on that point is very clear on both limbs. Similarly in relation to the Article 11 point. My Lord, that has both an application to this case and a wider application. What my Lord has, in effect, said is if your -- the association to which you want to belong has been abolished then there is nothing to be associated with. My Lord, in our submission that is wrong, or at least arguably wrong, and we have a real prospect in the Court above, because that makes the position of somebody whose association is abolished worse than the position of somebody who has constraints put on their membership. So let's say a trade union or a political party, if constraint is put on your membership Article 11 in play, Article 11 in potential violation. However if your trade union or political party were abolished Article 11 not in play, and we say that can't be right just to illustrate the point, that right. So, my Lord, again that bites on the facts of this case, but is also of wider public importance. My Lord has seen that there is very little juris prudence on Article 11 both in the European Court and domestically, but as my Lord has seen the point bites very much and not just bites for us as a member of this Co-operative, but also my Lord has seen for the Co-operative movement generally it is something that interests that -- it also has effect across a wider range of organisations and bodies. So, my Lord again both, limbs of the test. My Lord, in terms of the things which I accept are more factual, the two issues, one of regulatory concerns. My Lord has approached it and concluded that regulatory concerns did not, in fact, play a part in the final decision. In my submission I have a very real prospect of persuading the Court above that that is not the case. In fact if I can simply illustrate it, and I do no more than take my Lord to the way that the Secretary of State looked at the matter, where he plainly though that regulatory concerns had played a part. MR JUSTICE KEITH: I know that is what the Secretary of State thought. I disagree with the Secretary of State's view. MR WOLFE: I understand my Lord disagrees, but that, at the very least, means I have a real prospect of success. MR JUSTICE KEITH: Why? MR WOLFE: Because, well, in my submission the Secretary of State is unlikely to be 100 per cent wrong. My Lord, of course, disagrees. MR JUSTICE KEITH: I don't know whether he subjected the minutes to the scrutiny which I did. MR WOLFE: Even if I go back, even if I were to go back to the Housing Corporation's own analysis of it, if my Lord goes back to the point where my Lord says -- encapsulates the decision, and I plainly agree, page 17. The two paragraphs my Lords says summarise the decision, page 17-paragraphs 78 and 79. MR JUSTICE KEITH: Yes. MR WOLFE: The real meat of the decision, as my Lord has seen, is the first sentence of paragraph 78:

"In this instance, bearing in mind that already referred to and taking into account the possibility of transfer ... "

The matters already referred to include on a previous page, page 16, in paragraph 72, the summary of the regulatory concerns. So, my Lord, in my submission I have a very real prospect of success. MR JUSTICE KEITH: I think that's an extraordinarily slender basis upon which to say that this was an issue which was part of their decision making process. I really do. But I hear what you say. I hear what you say. You say that those words, "bearing in mind the matters already referred to", and since the matters already referred to included the practical and legal problems that would arise with cross border regulation, therefore that was a factor taken into account by the Corporation, at least it is arguable that it was, so as to undermine my factual finding that it didn't play any part in their decision. MR WOLFE: My recollection is that the Corporation did not put the case that the way my Lord has finally analysed it. I don't recall them saying this wasn't a factor. They defended the manner in which -- they took into account the factor and the legitimacy of doing so, but I don't understand or recall them arguing that it wasn't a factor. Certainly the Secretary of State proceeded on that basis and positively asserted that it was a legitimate factor to take into account. So, my Lord, in terms of that gateway question on was it a factor which has brought my Lord's analysis to an end in my submission I have a very real prospect. I ask there is no wider interest because the point is very much on the case. MR JUSTICE KEITH: Of course. MR WOLFE: The final broad limb, which is the question of the Peabody position, in my submission the way my Lord has approached it is to say was there, as at July 2003, should the Corporation's officers have reached a different view on the financial viability or otherwise of Peabody. In my submission that puts our case higher than it needs to be and sets a test against which we indeed fail, as my Lord has seen, but in my submission my Lord has set the test too high because this was a case, as my Lord knows, where the regulator balanced, rightly or wrongly, but on one view rightly, balanced the positions of the two potential housing bodies and reached a decision on balance. One of the factors was financial security. So it is not the case where one would have to say Peabody suddenly flipped from being viable to unviable. It is much more a question of balance. Then the real question is, was there material not which would show they were unviable, but which would potentially tip that balance. And there was that material in my submission. There was material, which, as my Lord has seen, led up to the September assessment, available prior to July, which, as my Lord knows, we say we should at least have seen, and indeed the Board should have seen. We could then have made submissions as to its effect and the extent to which it tipped the balance, which, in my submission, might have tipped the balance. We don't need to prove, nor did we need to show at that the stage, that Peabody had suddenly become unviable, because the whole thing was a much more balanced judgment by the Housing Corporation. So the question is not was there material which showed Peabody way unviable, but a much lower test of was there material which might, if submissions were made on it, tip the balance the other way. My Lord, to that extent I say that my Lord has approached the matter in the wrong way, or at least I have a real prospect that I could persuade the Court of Appeal that that is so. Again, largely that is on the facts of the case, although it is one of the early applications of the newish judicial review jurisdiction. So to that extent there is a wider importance in the point because that juris prudence is still developing. So, my Lord, unless I can assist you further I do say that my Lord should grant permission on all grounds and we should take it from there. MR JUSTICE KEITH: Thank you very much, Mr Wolfe. Mr Stanley? MR STANLEY: My Lord, an argument about what is arguable is never particularly helpful. The only thing I would say on the Daly point is that your Lordship may find it helpful to take a step back from the abstract position and look at the cases. They speak, so far as they deal with Article 1 of the First Protocol, pretty uniformally, as your Lordship has found. You may find it also helpful if you step back and ask the question, can there be a strict test of necessity in relation to interfering with property rights? One thinks of all the circumstances in which property rights are in fact interfered with, planning regulations and so forth, whether it is really realistic for the Convention that embodies that strict test of necessity, your Lordship may not think it is realistic and that the position your Lordship has taken is one which is quite consistent with the case law, which is itself internally consistent, and also does not give one any doubt that that is likely to be the right result at the end of the day. But, of course, that is strictly a matter for your Lordship. MR JUSTICE KEITH: Of course it is a matter for me, but are you opposing the application for leave and, if so -- permission and, if so, on what grounds? MR STANLEY: I do oppose the application for permission so far as the factual grounds are concerned because they are factual grounds. It is not a matter, in my submission, for leave. So far as the one legal point is concerned, which is really the Daly/Shayler, because your Lordship has reached a conclusion which is not actually, when one steps back and looks at it, in any way inconsistent with the -- with what one would expect the approach to be, or with what the approach would be. It doesn't actually when one unravels the argument, in my submission, pose the difficulties that my learned friend suggests it does. MR JUSTICE KEITH: What do you say to his point on the cross border regulation argument, that the finding which I made that that was not an issue that formed part of the decision making process is arguably incorrect? MR STANLEY: My Lord, it is a factual point essentially. It is a matter of reading the minutes. Your Lordship has reached a view as to what part, if any, that issue played in the ultimate decision. My Lord, in my submission, that is not the sort of thing which is appropriate to give permission to appeal on. If my learned friend wants to go to the Court of Appeal and try and persuade them there is another reading of minutes that should be preferred -- MR JUSTICE KEITH: Are you seeking to assert that his challenge to my finding of fact is not arguable? MR STANLEY: Not sufficiently arguable to justify the grant of permission. I cannot say that the minutes cannot be read in the way my learned friend says that they can be read. To that extent the position is arguable. But to that extent at the end of many cases one cannot say that there are positions which have been rejected which are arguable in that abstract sense. The question, in my submission, for a judge deciding whether to give permission to appeal is whether the appeal is one which as a appeal stands a reasonable prospect of success, and in the context of that your Lordship has reached a view, having very carefully considered the minutes and the way that the whole matter developed, and your Lordship's view, in my submission, is clear and in those circumstances it is not a matter on which permission should be granted. MR JUSTICE KEITH: Thank you. Yes, Mr Wolfe. MR WOLFE: My Lord, can I deal with that last point? My Lord, it may be worth reminding you of the test, that the real prospect of success test is actually realistic as opposed to fanciful. Does my Lord have the White Book? MR JUSTICE KEITH: I don't have the White Book. This is a court usually used by the Criminal Division. MR STANLEY: I will pass one up. MR WOLFE: If my Lord looks at the bottom of page 1432. (_Handed) MR JUSTICE KEITH: 1432. Yes. MR WOLFE: It is the last two lines running to the top of 1433. (Pause) MR JUSTICE KEITH: Yes. I am aware of that. MR WOLFE: It is realistic as opposed to fanciful. It is very interesting to listen to my learned friend. He was studious not to say that my Lord's finding was right, and that is consistent with -- his submission was based on recognising that my Lord's finding was one in a sense he was entitled to make, as opposed to saying it was the correct finding. That is of significance, because, as I say, the case wasn't put below, and I don't think is put now, on the basis that regulatory concerns were no an issue. My Lord, the case was put on a different basis. So, in my submission, there is a real, in a sense of not being fanciful, prospect of success on overturning my Lord's, I accept, factual findings on that point. My Lord, I don't think I need to go back to the other points. I have dealt with those already. (Pause) MR JUSTICE KEITH: Yes, thank you very much indeed, Mr Wolfe. RULING RE APPLICATION FOR PERMISSION TO APPEAL I do not think that this is a case in which I should lumber the Court of Appeal with hearing the appeal without the Court of Appeal having themselves decided whether or not it is an appropriate case for them to hear. In terms of the rules, I do not think that the appeal has a real prospect of success, nor do I think that there is some other compelling reason why the appeal should be heard. So you will have to go to Court of Appeal I am afraid. MR STANLEY: That, my Lord, takes one to the enforcement proceedings. Your Lordship should have a bundle which deals with the enforcement proceedings. A separate bundle. May be my Lord has not brought it with you. It is a slim one. MR JUSTICE KEITH: From last time, rather than a bundle prepared for today? MR STANLEY: From last time. It is a slim bundle. MR JUSTICE KEITH: Yes, I have it. Is there any issue between you and Mr Wolfe as to the order that should be made today? MR STANLEY: I think there may be, but I don't know because my friend was taking instructions this morning. It may be helpful if he tells your Lordship what the position is. My position is that we would ask your Lordship to make the enforcement order since my Lord has held that the direction is lawful, but we would be perfectly willing for that order to be -- execution of that order to be stayed, so that my friend can exhaust his avenues of appeal by making an application for permission to appeal. MR JUSTICE KEITH: I understand. MR STANLEY: And that, therefore, the Court of Appeal would have before it, in the same way your Lordship has before him, the enforcement proceedings. But if my Lord's judgment is right, and permission -- and the decision is lawful and the direction is lawful, then it ought to be compiled with and if necessary the court ought to direct that. MR JUSTICE KEITH: Yes, I follow. MR WOLFE: My Lord, I have placed on my Lord's desk two documents which are extremely recent. One is a single sheet, a copy from Housing Today, which my Lord has seen before. That is in fact, as my Lord sees over the page, 14th May. It is today. It has come out this morning. It is describing a report, and I have given my Lord half a dozen pages from the report. The actual report is about 60 or 70-pages long. MR JUSTICE KEITH: Yes. MR WOLFE: The report -- the Audit Commission Report is dated 11th May, so a couple of days ago, referred to Peabody-- in the Housing Today document. My Lord can simply look at the Housing Today report. Take a moment to read that perhaps. (Pause) MR JUSTICE KEITH: Yes. MR WOLFE: My Lord, we have only been able to download the Audit Commission document this morning, so plainly haven't had a chance to digest it, as I say it is some 70 pages long. We say that the single consequence of all that is that rather than making an order today and then staying, as my learned friend suggests, the appropriate response is not to -- is to leave the enforcement proceedings adjourned, as they effectively are at the moment, until we have concluded our avenues of appeal, sought permission and whatever. Then we if we are unsuccessful in that process -- we remain unsuccessful in that process, then the enforcement proceedings can be dealt with in the light of the position as it then prevails and submissions can be made in the light of the position as it then prevails and the point where there is the opportunity to catch one up with whatever the latest position is, because, as my Lord sees, this is a changing picture. The simple position is that the court has its own obligations under section 6 of the Human Rights Act to give effect to our Convention rights and it should do so in the light of the position as prevailing at the relevant time and now is not the relevant time because we haven't yet exhausted all our avenues. So, my Lord, what I say is -- MR JUSTICE KEITH: Let us assume that once you have exhausted all your avenues the decision remains, the transfer direction remains lawful and valid, on what basis could you then say that the enforcement proceedings should not result in an order of the court requiring you to effect the transfer which the Corporation has directed? MR WOLFE: My Lord, it is a discretionary remedy if proceedings were -- have been transferred to the Administrative Court in effect to be heard alongside the judicial review. In a sense that was done by consent. They started off in the Chancery Division. MR JUSTICE KEITH: Presumably because it was thought that the decision on the judicial review would decide what the decision on the enforcement proceedings would be. MR WOLFE: My Lord, that might have been the case if there had been no change in the circumstances in the intervening period. But as one sees the factual position is very much changing, so when the court comes to decide what is in the end a discretionary remedy, namely the grant of -- making an order, a transfer order, the court has to do so on a proper bays, that includes give effect to our Convention rights and taking into account material available at the relevant time. MR JUSTICE KEITH: So what you are saying is that, even if the direction may have been -- may be found -- may be concluded by the courts to have been a proper direction at the time that it was made, nevertheless it would still be open to the courts not to enforce that direction if in the meantime since 24th July 2003 it was apparent that there were grounds now existing for the Corporation to reconsider the matter? MR WOLFE: My Lord, has the point precisely. MR JUSTICE KEITH: I understand. MR WOLFE: So, my Lord, two ways, either you grab the order and stay it, which is a helpful starting point but not far enough, or you simply adjourn the proceedings, or continue adjournment. It is the latter course I invite my Lord to take. MR JUSTICE KEITH: Yes, but only because the outcome -- you say the outcome of the judicial review does not dispose of the enforcement proceedings if there is an arguable case for saying that, although the decision may have been correct at the time, subsequent events have proved that it might have been undermined. MR WOLFE: Precisely. My Lord's analysis of the Peabody materials is part of that process, because my Lord has said that as at the July date the picture hadn't changed. MR JUSTICE KEITH: Absolutely. MR WOLFE: But we have seen it changing since then and, perhaps importantly, still changing even as at today. MR JUSTICE KEITH: Absolutely. Yes, I understand. Thank you, Mr Wolfe. Yes, Mr Stanley. MR STANLEY: My Lord, in my submission that misses the point entirely, and indeed one must ask what is the purpose of these proceedings is if the outcome of these proceedings is that at the end of the Co-operative can say we are not proposing to comply with the lawful direction that was made in July, more than a year ago. Because circumstances have changed, you won't be able to make us comply because the courts should -- as a matter of discretion the court should decide not to enforce the transfer. The statute vests the discretion to order transfer in the housing corporation and not in the court. The court will have decided ex hypothesi that that direction was a lawful direction which should have been compiled with in July 2003 and which hasn't been complied with because of these proceedings. The statute requires that direction to be complied with and these are proceedings to be enforced as statute. It is not for the court to decide as a matter of its own discretion whether that is a discretion which should or shouldn't be complied with at the time of the enforcement. As a matter simply of the -- not that the court doesn't have a discretion to the grant of remedy, but the court exercises its discretion according to principle. The principle in this case is if there is a lawful direction made pursuant to statute by the person, whom statute vests that discretion in, then there simply would be no reason why that direction should not be complied with and therefore no reason why the court should not order compliance with that direction. MR JUSTICE KEITH: But in the judicial review proceedings the court was addressing the material that was before the Corporation at the time that it made its decision, including the material which should have been before the Corporation -- MR STANLEY: Yes. MR JUSTICE KEITH: -- when it made its decision. Supposing since then things have occurred which undermine the basis upon which the Corporation made its decision, is that not a factor to be taken into account by the court when it decides whether or not to enforce the lawful order which the Corporation had then made on the material then before it or should have been before it? MR STANLEY: My Lord, not in my submission if the direction was a lawful direction. If it undermines the lawfulness of the direction, if it were events subsequent to the direction indicating that the direction was unlawful, then the court would obviously quash the direction. But one can't end up with a situation where there is a direction which is ex hypothesi lawful which produces obligations under the statute which should be complied with, and yet which becomes as a result of circumstances thereafter not an unlawful direction, that would be another matter altogether, but remains a lawful direction, which is and has at all times been biting on the Co-operative which is and has at all times been obliged to comply with it and has failed to comply with it in breach of the provisions of the statute because of the delay which occurred as a result of the judicial review proceedings, the court, as it were, takes it upon itself to reconsider the -- as a matter of its own discretion -- MR JUSTICE KEITH: It doesn't take it upon itself, it is invited to do so by the claimant. MR STANLEY: No. It is effectively rendering nugatory a lawful direction which should have been complied with. Now, if there is a something which undermines the lawfulness of the direction that would be one thing, that would be a matter which will, in any event, be addressed in the judicial review proceedings. But if one is simply saying, because of the delay in the judicial review proceedings one can put -- potentially put off forever compliance with a lawful direction, although the Housing Corporation has not withdrawn, in those circumstances, in my submission, it is an unprincipled position to take. One can't see why the court, which as much as anybody else has got to look at the statute to see what the consequences of this direction are, faced with a lawful direction, which produces obligations, say, well, we are not going to enforce those obligation. I say that would not be a principled position to take. MR JUSTICE KEITH: I understand. Yes, thank you, Mr Stanley. RULING RE ENFORCEMENT PROCEEDINGS I do think it is arguable that the enforcement proceedings might be affected by a change of circumstance which will have occurred after any lawful direction made by the Corporation for the transfer of the Co-operative's housing stock to Peabody. I do not feel I am capable of deciding the extent to which that is a factor to be taken into account in enforcement proceedings, but it seems to me it is plainly arguable. Therefore, the right course for me to take is simply to adjourn the enforcement proceedings until the claimant has applied successful to the Court of Appeal for permission to appeal from my judgment today, or until the claimant's time for doing so has expired. MR WOLFE: My Lord, I am grateful for that. Presumably on the first limb, successfully apply, the adjournment will continue until any Court of Appeal proceedings have themselves been concluded. MR JUSTICE KEITH: Then you will have to ask the Court of Appeal to continue the stay on the enforcement proceedings. MR WOLFE: I am very happy to do that. I am only slightly concerned to this extent, that they may say they're not seized of them, because they are adjourned in the first instance court. MR JUSTICE KEITH: True. MR WOLFE: I was wondering whether the extension should be if we get permission it is until the appeal that follows is exhausted or abandoned. MR JUSTICE KEITH: Sorry, we are not talking about an extension we are talking about an adjournment. That is the whole point. MR WOLFE: This court remains seized of them until the Court of Appeal makes -- MR JUSTICE KEITH: I think that is right. Once the Court of Appeal has granted -- if the Court of Appeal grants your application for permission to appeal, then the enforcement proceedings will be adjourned until after the conclusion of the appeal to the Court of Appeal. MR WOLFE: My Lord, I am grateful. MR JUSTICE KEITH: Yes. thank you. Is there anything else with which I can help? MR WOLFE: My Lord, I think that deals with everything. MR JUSTICE KEITH: Thank you both for your help.