• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

Helen Randall: Court ruling over Haringey’s development vehicle offers clarity to councils

0
  • by Guest
  • in Blogs · Development
  • — 26 Feb, 2018

Photo (cropped): Sludge G., Flickr, CC

Politics killed the controversial Haringey Development Vehicle but a challenge through the courts failed. Helen Randall explains what the ruling means for councils hoping to use development vehicles for similar projects.

Rather surprisingly, despite the considerable political controversy surrounding Haringey’s decision to enter into a limited liability partnership (LLP) with Lendlease, the case does not change the law very much.

What it does do is helpfully confirm issues over which there had been some ambivalence, and which are very relevant to councils wanting to generate extra revenue to fund regeneration schemes, service delivery, or to invest in property.

Here are the big questions:

  • Do councils have the powers to participate in LLPs?
  • If they do, when can they do it?
  • If profit is a by-product of a transaction, does this mean a council is acting “for a commercial purpose”?
  • Is establishing a development vehicle like an LLP, a “best value arrangement” on which a council must consult and, if so, when and whom?
  • When is the most appropriate time to carry out an equalities impact assessment?
  • Do decisions on big investment projects have to be made by full council?
  • If a council makes several decisions about a transaction which decision can be legally challenged?

 

Haringey Council decided to procure a private sector partner to enter into a joint venture and reinvest the profits generated from higher value land to cross subsidise regeneration and housing estate renewal.

This was challenged by a local resident and former local government officer on the grounds that: Haringey did not have the power to enter into an LLP because it was acting for a “commercial purpose” and section 4 of the Localism Act 2011 requires councils to set up a company if acting for a commercial purpose; the council had breached its legal duty to consult because the scheme was a “best value” arrangement; the council had not complied properly with its public sector equality duty, under section 149 of the Equality Act 2010, because it had not carried out an equality impact assessment; and the full council, and not the cabinet, should have taken the decision because it involved matters of budget and borrowing limits.

LLP

The Judge, Mr Justice Ouseley, a former town planning barrister (fortunately very familiar with local authority regeneration) made a good, and nuanced, decision.

Local authorities do have the power to enter LLPs if they are not acting for a commercial purpose. The fact that the council’s private sector partner, Lendlease, had a commercial purpose was irrelevant.

The council had a strong paper trail in its reports demonstrating its primary motive was regeneration, not acting for a commercial purpose, which meant it was within its general competence power under section 1 of the Localism Act.

The legality that LLPs by definition are entered into “with a view to profit” did not undermine this.

Councils have a common law duty to obtain value for money, be financially prudent and a statutory duty, under section 123 of the Local Government Act 1972, to achieve the best consideration reasonably obtainable when disposing of land interests, but this is not a “commercial purpose”.

In Haringey’s case, their profit share was not the main purpose and, in any event, the profits were to be ploughed back into physical and social regeneration.

If, however, an authority wants to act as a commercial property investor and its primary motive is making profit (for example, buying a Marks & Spencer store, as Babergh and Mid Suffolk’s property investment company CIFCO has done), then this would be a commercial purpose and a company must be used as required under section 4. Using an LLP for a commercial purpose is outside a council’s powers.

When a council is at the early, formative stage of deciding strategically whether to establish an LLP, or a company, which it hopes will save money or generate revenue, then it can be regarded as a “best value arrangement” to achieve economy, efficiency and effectiveness. Because the authority is exercising a “function”, the authority should consult interested parties, including local residents. However, the best value consultation duty does not require an authority to consult when it is choosing to appoint its private sector investment partner.

Equality

With regard to the public sector equality duty, Haringey had referred at every stage of the decision-making process to the public sector equality duty, and the regeneration where it was anticipated to be beneficial for certain people with protected characteristics. The Judge held that it was perfectly reasonable for the council to wait until specific schemes were proposed before a full equalities impact assessment was carried out.

The regeneration scheme, although it involved financial plans and strategies for a major investment by the council, was not part of the authority’s budget setting process. Hence, it was appropriate that it had been decided by cabinet, not full council.

In the end, the court decided that the claimants had brought their challenge too late. Haringey’s decisions and proposals for the local development had been in the public domain and consulted upon for several months before the final decision to appoint Lendlease as the council’s regeneration partner was made, so the judicial review application was not allowed.

Haringey had a good idea with sound legal and financial means to implement it, but in the end politics got in the way.

The court decision is helpful both for local authorities who want to pursue social objectives, and those who want to pursue solely commercial objectives, but underlines the importance of getting the legal fundamentals right if you want to prevent a challenge succeeding.

Helen Randall

Helen Randall

Helen Randall is a partner, Trowers & Hamlins LLP.
Get the Room151 Newsletter

Share

You may also like...

  • Community investment bond ‘builds engagement’ with residents 6 May, 2020
  • Terry Crossley: Is LGPS pooling sustainable? Terry Crossley: Is LGPS pooling sustainable? 28 Oct, 2018
  • Croydon seeks rates deal to fund £300m TIF development Croydon seeks rates deal to fund £300m TIF development 24 Sep, 2015
  • Agent151: Nuclear chickens and the cost of caring for the elderly Agent151: Nuclear chickens and the cost of caring for the elderly 8 Feb, 2017

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 1 day ago

    All three days of #LATIF & FDs' Summit are available on our webcast channel gotostage.com/channel/room151

    Room151 4 days ago

    FDs’ Summit experts defend councils as MPs label property investment ‘risky’: As Room151’s FDs’ Summit conference explores local government’s investment in commercial property MPs once again lable it a “significant risk to government”. Once again MPs… dlvr.it/Rr7lZx pic.twitter.com/jPvcZjDAS4

    Room151 4 days ago

    Global macro outlook: Virus versus vaccine: Sponsored article: Salman Ahmed argues monetary policy, a global vaccine rollout and fiscal stimulus are likely to put “upward pressure” on bond yields. Much like the latter half of 2020,[...] dlvr.it/Rr60nt pic.twitter.com/qsymBWmKmV

    Room151 5 days ago

    ‘Chasing yield’ not the best strategy as negative rates loom: Recent speculation that the UK may be heading toward negative interest rates prompts questions for treasury officers managing local authority funds at LATIF. Speculation is rife that the UK… dlvr.it/Rr3Mrj pic.twitter.com/wtxYAB20PO

    Room151 1 week ago

    Will new public procurement rules offer the best commercial results?: The government has issued a green paper on reforming procurement rules. Helen Randall and Rebecca Rees examine the proposals and argue they may not go far enough. The Cabinet… dlvr.it/Rqtw6T pic.twitter.com/9GiVTkL08U

    Room151 2 weeks ago

    The vaccine may help settle cash flows but inflation remains a risk: Sponsored article: Lauren Sewell examines the prospects for long-term borrowing as Brexit settles and vaccines are deployed against Covid-19. On the 9th October 2019 Whitehall sent… dlvr.it/RqZXCr pic.twitter.com/PzgOZOGQ0k

    Room151 2 weeks ago

    ESG in liquidity: Sponsored article: Gavin Haywood looks at the integration of ESG in Federated Hermes’ money market funds. Federated Hermes has over 300 public sector clients invested in our AAA rated money[...] dlvr.it/RqZX5f pic.twitter.com/E87sBXsay8

    Room151 2 weeks ago

    New realities of investing cash and liquidity: “What to do now?”: Sponsored article: Brian Buck looks at the “unique challenge” for cash management strategies. As investors assess the ongoing impact of the pandemic on their business, levels of cash and… dlvr.it/RqVbk9 pic.twitter.com/ZElVASmEUV

    Room151 2 weeks ago

    Extra finance promised by the government receives a broad welcome: Sponsored article: The financial pressures facing local authorities this year continue to pose challenges for council treasurers. While the launch of the UK’s Covid-19 vaccination… dlvr.it/RqTzTF pic.twitter.com/HCjH0pyHR5

    Room151 2 weeks ago

    A savvy approach to managing your cash: Sponsored article: Caroline Hedges examines the need for active cash management to achieve a higher than average return. Last year saw the already mountainous pile of negative-yielding debt around the[...] dlvr.it/RqTzMK pic.twitter.com/uP0RQYTJLt

    Room151 2 weeks ago

    Putting alternatives at the heart of multi-asset portfolios: Sponsored article: Nick Edwardson looks at the assets that provide the “most attractive opportunities”. We believe that asset allocation is the primary driver of investment returns and that the… dlvr.it/RqQ2Qt pic.twitter.com/WLBzvRRRUQ

    Room151 2 weeks ago

    Thriving in the pandemic: Avoiding the stragglers: Sponsored article: George Crowdy looks at the sectors providing opportunities for sustainable investment. Throughout much of 2020, we talked about why sustainable investing has thrived in the pandemic,… dlvr.it/RqQ2NQ pic.twitter.com/dxiPWKFsPl

    Room151 2 weeks ago

    The development of CCLA’s mental health benchmark: Sponsored article: Amy Browne examines the importance of investing in mental health in the workplace. We are living through a public health emergency in more ways than one. Physical health[...] dlvr.it/RqQ2Jx pic.twitter.com/o6yRSCX3oF

    Room151 2 weeks ago

    Brexit: What the EU trade deal means for the UK economy: Sponsored article: Hetal Mehta looks at the impact of Brexit on economic prospects. Four and a half years after voting to leave the EU, on Christmas Eve the UK finally[...] dlvr.it/RqLBDt pic.twitter.com/No62srfE8h

    Room151 2 weeks ago

    Cash dethroned: The quest for liquid yield: Sponsored article: Peter Hunt and George Carne ask how treasury departments can balance the need for yield and liquidity. The massive stimulus and waves of liquidity provided by central banks[...] dlvr.it/RqLBDj pic.twitter.com/05g6Zhu1kU

    Room151 2 weeks ago

    Richard Harbord: Delayed “capital determinations” make section 25 opinions a new crunch point: The severe pressure on local government budgets now means section 151 officers confront a tricky call on  whether they can make a judgement on the robustness… dlvr.it/RqLBDV pic.twitter.com/vTAbDKFzkI

    Room151 1 month ago

    PWLB Consultation: Analysis straight from Dickens: Helen Radall and Paul McDermott present a legal examination of the new PWLB borrowing rules as Charles Dickens might have imagined it. Free and easy PWLB (“Marley” to his friends)[...] dlvr.it/RnmwLq pic.twitter.com/yFxcPrQqEG

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story Scotland investigates potential for LGPS infrastructure pool
  • Next story Chris Buss: Is fair funding mission impossible?

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK