Macleod, R (on the application of) v The Governors of the Peabody Trust [2016] EWHC 737 (Admin)

Case No CO/4886/2015[2016] EWHC 737 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 08/04/2016
Before
THE HON MR JUSTICE WILLIAM DAVIS
Between
The Queen on the Application of MacleodClaimantThe Governors of the Peabody TrustDefendant
Mr M Westgate QC and Mr D Cowan (instructed by TV Edwards) for ClaimantMr Jon Holbrook (instructed by Peabody) for DefendantHearing Hearing dates: 26 January 2016
Judgment

Introduction

[1]Iain Macleod occupies a one bedroomed flat in Bethnal Green as an assured tenant. When he took up his occupancy under an assured tenancy agreement commencing 1 June 2009 his landlords were the Crown Estate Commissioners (“CEC”). In about February 2011 CEC transferred a number of properties to the Defendant (“Peabody”). Mr Macleod’s tenancy was transferred to Peabody. In July 2015 Mr Macleod notified Peabody that he wished to exchange his tenancy with the tenant of a property in Edinburgh. Peabody declined to approve such an exchange.[2]Mr Macleod claims that Peabody is amenable to judicial review as a public body in relation to the decision it made in respect of the proposed exchange. It is said that Peabody failed to follow its own policy in relation to mutual exchange and that in any event it did not take account of its duty under Section 149 of the Equality Act 2010. By reason of those matters it is argued that Peabody unlawfully fettered its discretion and that its decision was irrational.[3]Peabody’s response to Mr Macleod’s claim is that he has to satisfy a three-fold test in order to bring a public law challenge to the decision of Peabody. First, it must be shown that Peabody was not required to make the decision it did by reason of contractual obligations. Second, it must be shown that Peabody was exercising a public function when it refused to approve the exchange of Mr Macleod’s tenancy. Third, it must be shown the decision itself was not a private law decision. Peabody argues that Mr Macleod cannot satisfy any one of the three limbs. Further, Peabody’s case is that, even if its decision were amenable to judicial review, the decision could not be categorised as irrational or unreasonable or unlawful in any other way.[4]In granting Mr Macleod permission to apply for judicial review of Peabody’s decision, the single judge noted that he had a number of hurdles to overcome in order to succeed. She commented that the question of whether the impugned decision was amenable to judicial review was a difficult one. The case as presented on each side has not changed in any material respect since the application for judicial review was first made. The claim made by Mr Macleod remains problematic.

Factual background

[5]CEC let the flat in Bethnal Green (at 69B Approach Road) to Mr Macleod at a rent per calendar month of £469. There was a term of the tenancy agreement relating to assignment, namely clause 4.15. By that term Mr Macleod agreed “not to assign sub-let or part with possession of the whole or any part of the premises nor otherwise grant any licence or carry out any dealing with the premises….” In the following year (2010) an addendum to the tenancy agreement was agreed. This was in anticipation of a sale of the freehold. It confirmed rights which Mr Macleod had and which he would be able to enforce against any future purchaser of the freehold. Thus, it specified that his rent could not exceed 60% of the market rent for a similar property in the area. Mr Macleod’s rent is defined as an intermediate rent i.e. below market rent but above a social housing rent level. Nothing was said in the addendum which affected the non-assignment clause.[6]No evidence was served which explained the precise nature and status of CEC. On behalf of Peabody it was submitted that it was not to be classified as a public body. This submission was met with disdain by counsel for Mr Macleod who argued that CEC by its essence was a public body. Without any evidence it is not easy for me to reach any concluded view on these competing submissions. I was referred to the judgment in CEC v Peabody [2011] EWHC 1467 (Charles Hollander QC sitting as a Deputy High Court Judge) as providing an explanation of the role of CEC in relation to the properties transferred to Peabody. It is to be noted that the issue there was wholly different to the one arising in this case. The decision of the Deputy Judge provides me with little assistance. Though it is not without significance the status of CEC is not critical to the outcome of this claim. The evidence does show that the flat occupied by Mr Macleod was one of some 1,200 dwellings spread over four London estates which were transferred by CEC to Peabody in February 2011. The market price for the transfer was £140 million after a competitive exercise to sell the properties. This price was far less than it would have been had the properties been transferred without encumbrance i.e. so that Peabody could have let them at a market rent. Unencumbered the total value of the properties would have been in excess of £250 million.[7]The transfer was subject to a detailed Nominations Agreement. This restricted Peabody to letting the properties to key workers as defined in the agreement at sub-market rents. Each property was to be let at no more than 80% of the current market rent. Key workers were defined at those in work with a total family income of less than £60,000 who could afford to pay 80% of market rent from their own resources i.e. without recourse to housing benefit. In addition, Peabody was required to give each tenant enhanced rights of succession and to accept nominations from CEC on any vacant property i.e. to provide accommodation for a key worker. The nomination requirement did not apply in respect of 10% of any properties becoming vacant as true voids in any 12 month period. A true void was defined as a property becoming vacant by reason of inter alia “a tenant…..moving to another landlord” but excluding “a vacant unit if a tenant of another unit moves to the vacant unit”.[8]The agreement between CEC and Peabody set out in an annex the nominating bodies i.e. the employers able to nominate tenants at the properties. These were principally NHS trusts and teachers’ employers but also Transport for London, the Metropolitan Police and the Houses of Parliament. As a footnote it appears that Mr Macleod’s tenancy arose from his erstwhile employment at the Houses of Parliament. There was a further annex entitled Transfer Policy. This concerned transfers within the housing stock let by Peabody which had been transferred from CEC.[9]Peabody insofar as is relevant to these proceedings is a housing association with charitable status. One of its charitable purposes – possibly its primary charitable purpose – is to assist the poor of London, in particular in respect of housing the poor. The terms of the nomination agreement were intended to ensure that those working in important occupations for the well-being of London were able to live reasonably close to where they had to work. Those terms were consistent with Peabody’s charitable aims. Peabody purchased the properties from CEC using funds raised from a bond issue rather than having recourse to any public funds though the bond over time will be repaid from Peabody’s general funds which include some grants from public funds.[10]Peabody lets many thousands of properties in London other than those which previously were owned by CEC. They have a mutual exchange policy in relation to those properties. At the time of the events concerning Mr Macleod the policy was advertised in headline terms on the Peabody website. The detail of the policy identified that the policy only covered “Peabody’s social housing tenants”.[11]In May 2014 Mr Macleod registered with an organisation called House Exchange, a website facilitating the mutual exchange of social housing tenancies. Before doing so he applied to Peabody for their approval of this registration. Such approval was given. After a considerable delay Mr Macleod received an expression of interest from a local authority tenant in Edinburgh. Mr Macleod travelled to Edinburgh to view the proposed exchange property. On deciding that it was suitable, he contacted Peabody and was provided with a Peabody mutual exchange application form. He returned the completed form which made it clear that the proposed exchange was with the tenant of council accommodation in Edinburgh. On the form Mr Macleod noted “I am disabled but that is not covered here”.[12]Mr Macleod submitted the form on 6 July 2015. Peabody responded almost by return on 9 July 2015. The response was terse and to the point. It was in these terms:
“We are unable to process your application because you are currently a non-social housing tenant. On this basis there is no right to a mutual exchange. This does not affect your rights to transfer within the former Crown Estate portfolio.”
Mr MacLean responded by e-mail. He pointed out that he had discussed the issue with Peabody Direct (which I take to be some kind of helpline operated by Peabody) prior to considering an exchange and at each stage of the process and that he had not at any point been told that he was not eligible for an exchange. In his e-mail he also stated that he suffered from acute mental illness though he did not give any specifics thereof.[13]Mr Macleod’s e-mail quickly prompted an e-mail in response. Peabody then explained that mistakes had been made in his dealings with Peabody up to the point at which his application for a transfer had been refused. Those dealing with him up to that point had not advised him properly. The author of the e-mail said “I can confirm that your application was declined due to your tenancy not being subject to rent standard, for example, social rent and therefore you would only be able to swap with a tenant with a similar tenancy, for example on the same or other London based Regency Estate (a reference to the CEC portfolio).” Mr Macleod was offered £200 by way of compensation to cover his expenses in travelling to Scotland and the like.

Mr Macleod was offered £200 by way of compensation to cover his expenses

[14]Mr Macleod consulted solicitors i.e. the solicitors who act for him in these proceedings. The solicitors wrote to Peabody on 7 August 2015. They argued that Peabody had unlawfully fettered the discretion that was open to them and said that there was nothing in the on-line exchange policy which prevented the exchange put forward by Mr Macleod. Peabody maintained their position. After a pre-action protocol letter dated 1 September 2015 and a response from Peabody, these proceedings followed. It is of note that, in the pre-action protocol letter, Mr Macleod’s solicitors referred to the argument which had been raised in correspondence by Peabody, namely that the flat in question was used by CEC as an intermediate rent tenancy and that the property was only to be used for such purposes. The solicitors offered the view that this was not the case. This was before disclosure of the terms of the transfer from CEC to Peabody.

The legal framework

[15]The leading authority in relation to providers of social housing and their status as public bodies and as being amenable to judicial review is R (Weaver) v London and Quadrant Housing Trust [2010] 1 WLR 363. In that case it was conceded that the housing trust was a hybrid authority i.e. some of its functions were those of a public body whilst others were private in nature. The case was unusual in that it was in effect an academic exercise. Mrs Weaver was a tenant of the housing trust who faced eviction for rent arrears. She claimed judicial review of the decision to evict her. Her claim was based on breach of a legitimate expectation arising from Housing Corporation guidance and a consequent interference with her Article 8 rights. The housing trust argued that its decision was not amenable to judicial review and that, in any event, its decision was lawful in public law terms. The Divisional Court found that the housing trust’s decision was amenable to judicial review but that the decision itself was lawful since there had been no breach of any legitimate expectation. The housing trust was given permission to appeal against the Divisional Court’s finding that the decision to evict was amenable to judicial review even though it had succeeded on the facts.[16]The Court of Appeal concluded that the termination of the tenancy was not a private act so as to remove it from public law scrutiny. In the leading judgment Lord Justice Elias identified various features which brought the act of terminating a social tenancy within the purview of the Human Rights Act 1998. They were as follows: significant reliance on public finance enabling the housing trust to achieve its objectives; the trust’s operation in close harmony with the local authority assisting the latter to meet its statutory duties and objectives; the trust’s freedom to allocate properties being circumscribed by the allocation agreements with the local authority and by the trust’s statutory duty to co-operate; the provision of subsidised housing; the charitable objectives of the trust. Lord Justice Elias made it clear that none of these features in isolation would have been sufficient to make the trust’s provision of housing a public function. He concluded that the cumulative effect established “sufficient public flavour to bring the provision of social housing by this particular RSL (registered social landlord) within that concept”.[17]Lord Justice Elias went on to conclude that the act of termination of the tenancy was so bound up with the provision of social housing that, in the context of the housing trust with which he was concerned, it was a public act amenable to judicial review. He also determined that, where a housing trust is fulfilling a public function, the protection afforded by the Human Rights Act will extend to all tenants of the trust in social housing, not just those in properties acquired as a result of state grants. However, he made it clear that public law principles would not apply to tenants of the trust not housed in social housing.[18]It is not necessary to go beyond the decision in Weaver for any issues of principle. Both parties cited R (McIntyre) v Gentoo Group Limited [2010] EWHC 5 (Admin), a decision of John Howell QC sitting as a Deputy High Court Judge. He had to consider a decision by a registered social landlord to attach a condition to its consent to an exchange of homes between two of its assured tenants, the condition being that one of the tenants first paid what he owed under a court order relating to rent long overdue in relation to another property. The tenant owing the rent sought judicial review of that decision. The circumstances of that case bore an obvious similarity to Mr MacLean’s position in that the decision related to a proposed mutual exchange. He relies on Gentoo to support the proposition that a decision relating to mutual exchange is amenable to judicial review just as much as a decision to terminate a tenancy. The Deputy Judge held that whether a mutual exchange should be permitted involved a decision taken in the discharge of the public function of allocating social housing. Peabody accepts that this was part of the ratio in Gentoo but argues that the factual background was very different. The proposed exchange was between two tenants of the same RSL; the tenancy agreement provided for assignment of the property with the permission of the RSL; the tenancy agreement gave each tenant the right to exchange with another tenant. Peabody further notes that the precise ratio concerned the mutual exchange of social tenancies.[19]Gentoo also includes a useful discussion of the relationship between private and public law: see paragraphs 28 to 36 of the judgment. However, the discussion was in respect of the exercise of a contractual right. The discussion opened with this proposition:
“The fact that a right may have been exercised in accordance with the terms of a contract that confers it does not necessarily mean that the decision to exercise that right is one that may not be invalid as a matter of public law.”
Peabody argues that it does not immediately inform the circumstances of this case. Peabody was not exercising a right. Rather it was declining to take a step because the step was not permitted under the terms of the relevant contracts.

Discussion

[20]It is important to note that the general principles enunciated by Lord Justice Elias in Weaver have to be applied to the facts of each particular case. Weaver did not decide that all RSLs are public bodies. On the facts of this case I am not satisfied that Peabody was exercising a public function in relation to the tenancy of Mr Macleod. I take into account the following factors.• Peabody purchased the properties from CEC using funds raised on the open market, not via any public subsidy or grant.• Although the properties were not let a full market rent, it is not clear that they were pure social housing. The key workers for whom the property was reserved included those with a family income of up to £60,000 per annum. The commercial housing market in London adequately serves the needs of those workers. Very many workers in occupations not covered by the nomination agreement relating to the CEC properties are served by the open market. The provision of below market rent properties for such workers does not fall within the definition of social housing in the Housing and Regeneration Act 2008: see Section 69.• Unlike the RSL in Weaver Peabody had no allocation relationship with any local authority. It was not acting in close harmony with a local authority to assist the local authority to fulfil its statutory duty.• Rents for the properties transferred from CEC are not subject to the same level of statutory regulation as social housing in general.[21]True it is that some public function was fulfilled by the provision of homes for key workers in London. However, in my judgment the cumulative effect of the various factors in the circumstances of this case does not have the sufficiency of public flavour which Lord Justice Elias found in Weaver. In Weaver Lord Justice Elias noted that it will not follow that all tenants of an RSL will be able to claim the benefit of a public law remedy just because the RSL is exercising a public function in relation to some or even most of its tenants.[22]The arguments raised on behalf of Mr Macleod which run contrary to my conclusion - and the reasons I reject them - are as follows:• Because CEC was and is a public body, Peabody was in the same position as any RSL which takes a large-scale transfer of public housing stock. This proposition depends upon a conclusion that CEC was a public body and that the properties of which Mr Macleod’s was one consisted of public housing stock. For the reasons already given I am not satisfied that those factors are made out on the evidence before me.• Peabody is regulated as a private registered provider of social housing and has statutory powers over and above the powers available to private landlords. This proposition would carry significant weight in relation to Peabody’s general stock. The properties transferred from CEC fall into a different category.• Peabody receives state subsidy by way of grants and to separate the properties transferred from CEC is to ignore the realities of the situation. Such separation is not unrealistic for the reasons already given. Lord Justice Elias in Weaver did not reject the notion of different considerations applying to different parts of the housing stock let by a provider.• Peabody has charitable status. This is a matter to take into account but it does not of itself signify that Peabody is a public body in relation to the properties transferred from CEC.[23]I must go on to consider the position if my conclusion on the status of Peabody in relation to the decision under challenge is wrong. First, did Peabody fail to follow its own policy in relation to mutual exchange? Peabody undoubtedly had a published policy in relation to mutual exchange. However, it must be considered in conjunction with all of the policies of Peabody and in the light of any contractual obligations which it may have and any contractual obligations to which Mr Macleod was subject. The following factors are significant:• The non-assignment clause to which Mr Macleod was subject simply does not permit a mutual exchange. It is to be compared with the clause under consideration in Gentoo.• The nominations agreement between CEC and Peabody limited Peabody’s power to let a property to someone other than a tenant nominated in accordance with the agreement. Peabody could do so only in relation to what was defined as a true void. Whether a true void would have been created by a mutual exchange at best is doubtful. It would have been “a tenant of another unit” moving to the property.[24]Those matters were sufficient to justify Peabody’s departure from its stated policy. It cannot sensibly be suggested that, even if the policy relied on applied to Mr Macleod, it was not proportionate to depart from it in his case.[25]Second, can the decision be impugned on the ground that Peabody failed to discharge the public sector equality duty imposed by Section 149 of the Equality Act 2010? The only indication which Peabody had in relation to Mr Macleod’s disability was his handwritten comment on his mutual exchange application form. That comment was made only because the form referred to disability but gave no space for any detail. It is telling that there was no reference to the public sector equality duty in the pre-action protocol letter. The pleaded case gave little detail of the nature of the disability or of how due regard to the disability would have affected the decision. Very shortly before the hearing a statement made by Mr Macleod was served in part concerning his mental health problems. Even if one were to take account of that evidence, it consists largely of assertions unsupported by medical or other evidence. Given the nature of the material even now available to Peabody, I am not satisfied that Mr Macleod can demonstrate that an exercise of the public sector equality duty would have made any difference to the decision. As a matter of discretion I would decline to grant judicial review of the decision on this ground.[26]Third, can it be said that Peabody fettered its discretion and/or acted irrationally? One criticism of Peabody is obvious. It must have been clear to Peabody from the outset that the opportunity for Mr Macleod to engage in a mutual transfer would be limited. Yet nothing was said to point out the problems to him until he had expended much time, energy and expense in finding a potential exchange. That was poor administration on the part of Peabody. That has been recognised by the offer of the payment of £200 to compensate Mr Macleod. However, that does not mean that the decision eventually made was irrational or otherwise amenable to judicial review. For all of the reasons given above, I am satisfied that it was a decision open to a reasonable decision maker in the position of Peabody. Insofar as there was any fettering of discretion, this arose from contractual and other barriers.[27]It follows that this application for judicial review must be dismissed.