Heald & Ors v London Borough of Brent

These appeals have been heard together because they all raise an issue of practical importance to local authorities in relation to the administration of the statutory homelessness scheme under Part VII of the Housing Act 1996 (“the Act”). A number of authorities, including the London Borough of Brent (“Brent”), have contracted out some or all of the reviews they are required to carry out under section 202 of the Act. We were told that there have been inconsistent decisions in the county court as to the lawfulness of such contracting out.

The appeals are:

By Michaela De-Winter Heald against the order dated 12 January 2008 of HH Judge McDowell sitting in Willesden County Court dismissing her appeal under section 204 of the Act.

By Salsam Al-Jarah, Nasrin Begum Ahmad and Yordanos Kidane against the orders dated 9 December 2009 of HH Judge Mitchell sitting in Central London County Court dismissing each of their appeals under section 204.

In all of the cases before us, the reviews were carried out by Mr Minos Perdios, who describes himself as a director and the controlling shareholder of Housing Reviews Ltd. In each case, he upheld Brent’s original decision.

The Appellants contend that it was unlawful for Brent to contract out the carrying out of its reviews, with the result that the reviews carried out in each of their cases were themselves ultra vires and unlawful. They also contend that there was an appearance of bias on the part of Mr Perdios which meant that their reviews were not fairly conducted and that their rights under Article 6 of the European Convention on Human Rights were infringed.

On 19 May 2006 Ms Heald approached Brent for housing assistance under Part VII of the Act, claiming to be homeless or threatened with homelessness. By letter dated 26 May 2006, pursuant to section 184 Brent informed her that she was found to be not in priority need, and she was therefore refused accommodation. She exercised her right under section 202 to request the review of that decision. That decision was reviewed on three occasions. The first review decision was withdrawn by Brent and the second was quashed by the county court. The third, which is the subject of this appeal, was notified to Ms Heald by letter dated 26 March 2008.

Each review was undertaken by Mr Perdios. Each decision letter was on Brent notepaper, and he signed each of them as “Minos Perdios Reviews Manager”. The letter dated 26 March 2008 complied with the formal requirements of the Act. It upheld the original decision that Ms Heald was not in priority need; it gave substantial reasons for that finding, and stated that the Council would provide only advice and assistance.

Ms Heald exercised her right of appeal to the county court under section 204. Her appeal came before HH Judge McDowell on 12 January 2009. She took as a preliminary point the question whether Brent had in fact carried out a lawful review of her claim. She contended that it had not done so, since it could not have lawfully delegated the review to someone who was an outsider, i.e., to someone who was not an officer or employee (or presumably a councillor) of the local authority.

Mr Perdios made a witness statement for the purposes of the appeal. In it he described himself as an independent reviews manager. His company, Housing Reviews Ltd (“HRL”), had carried out some 3,500 homelessness appeals: in fact, all were carried out by him. HRL was currently instructed by 13 local authorities to carry out reviews of their homelessness decisions. He exhibited a copy of the contract between his company and Brent dated 2 September 2005. The contract was for a period of one year. He said that a short term contract, on the same terms as the original contract, had been agreed between Brent and his company from the expiry of the original agreement until a new formal contract had been signed on 11 April 2008.

Mr Perdios accepted that his decision letter did not make it clear that he was not an officer or employee of Brent, but he said that the decision was that of Brent and her appeal would be against Brent and not him or HRL.

The contract between Brent and HRL consisted of Conditions of Contract, a Specification for Housing Decision Reviews and Appeals and Articles of Agreement. The Conditions of Contract run to 37 pages. The principal obligation of HRL is in condition 3.1:

I suspect that the Conditions of Contract were Brent’s standard terms adapted, to some extent at least, to the contract with HRL. It was certainly long on the obligations of HRL and the rights of Brent and short on Brent’s own obligations. The Service was defined as the Housing Reviews and Appeals Service to be provided by HRL under the contract. The Authorised Officer was Ernest Amoako, Brent’s Assessment Manager. The contract did not require Brent to instruct HRL to carry out all or any minimum number of reviews, but condition 25.4 conferred on Brent the power to terminate the contract on 1 month’s notice if it “should omit or require HRL to cease to provide a substantial part of the Service”. In addition, there was provision for termination of the contract for cause.

The Specification incorporated in the contract set out in its Introduction the background to the contract:

The “external contractor” referred to was in fact none other than HRL. The last paragraph of the Introduction was a useful summary equally applicable to the service provided under this contract. The Role of HRL was set out under paragraph 4:

Paragraph 6 included the following:

Mr Amoako also made a witness statement, but it adds little.

We have before us a copy of Brent’s report, produced in 2005, that led to the decision to contract out reviews of its housing decisions. The report was not before the County Court judge, and is of interest only by way of background. It stated:

Having heard argument, the judge gave a short judgment in which he said that he preferred the arguments of counsel for Brent, on the basis of which a review had been carried out which could be the subject of the appeal. He gave no further reasons for his conclusion.

The judge proceeded to hear argument on the substance of the appeal. Having done so, he held that the review decision was not marred by any legal error, and he dismissed the appeal.

Ms Al-Jarah had requested a review of the suitability of temporary accommodation provided by Brent. The decision on the review was contained in a letter dated 7 August 2008 on Brent notepaper signed “Minos Perdios Reviews Manager”. It rejected her contention that the accommodation was unsuitable. She duly appealed to the county court. Her case was heard together with those of Ms Ahmad and Ms Kidane, and the evidence of Brent and Mr Perdios was common to all three cases.

Ms Ahmad had requested review of Brent’s decision that she was not homeless. Mr Perdios’ decision letter was dated 7 August 2008; he upheld the earlier decision. The letter was on Brent notepaper signed in the same way as that of Ms Al-Jarah.

Ms Kidane had requested a review of the temporary accommodation provided by Brent on the basis that it was unsuitable. The decision letter, on Brent notepaper signed by Mr Perdios in the same way as that to Ms Al-Jarah, was dated 2 October 2008. The letter set out the information Mr Perdios had obtained, including the medical information. He rejected her contention that the accommodation was unsuitable, and gave reasons for doing so.

The grounds of their appeals before HH Judge Mitchell were:

Someone who was not directly employed by a local authority is not an appropriate person to deal with a review.

The review decisions were misleading and untrue because Mr Perdios held himself out as an employee or officer of Brent promulgating a decision of Brent.

His role was tainted by apparent bias because:

His website boasted a success rate that could only be achieved by making decisions adverse to applicants.

“Seeking freelance employment infringes Article 6 of the European Convention on Human Rights because Mr Perdios justifies the continuance of his precarious employment on a success rate helpful to his employer.”

“It is not obvious to a fair and impartial observer whether or how the terms of regulation 2 of the Allocation of Housing and Homelessness (Review Procedures) Regulations 1999 have been met, if, contrary to his website, Mr Perdios is properly identified as the respondent’s review manager.”

Ms Al-Jarah, Ms Ahmad and Ms Kidane also contended that the substantive decisions made by Mr Perdios were the subject of legal errors.

The evidence before HH Judge Mitchell included a print-out of the HRL website. The home page states:

The website lists 16 local authority clients. The service is described as follows:

The training page of the website is as follows:

As in the case of Ms Heald, Mr Perdios made a witness statement. It was broadly similar to that in the case of Ms Heald, but there were differences. He said that his decisions in the cases of Ms Al-Jarah and Ms Kidane had been approved and adopted by an officer of Brent, Kevin Coleman. In relation to the figures on the website, he said:

Mr Perdios referred to the allegation that his letters did not make it clear that he was not an employee or officer of Brent. He denied that any deception was involved. He said that HRL was instructed by a number of local authorities, particularly in the London area, was well-known amongst members of the legal profession concerned with homelessness appeals. When instructed to do the review, he wrote a letter to the applicant or his or her solicitors to invite representations which gave his Company’s address, telephone and fax numbers and gave his e-mail address as mperdios@housingreviews.co.uk. He asserted that it was clear from such letters that he did not work for the local authority.

In a second witness statement, dated 24 November 2008, Mr Perdios added to the statistics:

Mr Amoako also made a statement. He referred to the applicable legislative provisions and exhibited with the contractual documentation between Brent and HRL. He said that under the contract Mr Perdios made recommendations, so that:

Mr Coleman made a witness statement. He said:

In his judgment, the judge referred to the statutory provisions, which I shall so far as necessary set out below, and to the judgments in Starrs v Ruxton [2002] HRLR 191, Runa Begum v Tower Hamlets LBC [2003] AC 430, Porter v McGill [2002] 2 AC 357 and Feld v Barnet [2005] HRLR 9. He held that the legislation permitted contracting out, and that Mr Perdios was not apparently biased. He then considered the individual cases before him and held that none of the review decisions was the legally defective. Accordingly, he dismissed all three of the appeals. As in the case of Ms Heald, there is no appeal against his findings on the substantive issues before him.

Part VII of the Act is a comprehensive code setting out the obligations of local housing authorities such as Brent to persons who are homeless or threatened with homelessness. Section 184 of the Act imposes a duty on a local housing authority that has reason to believe that an applicant may be homeless or threatened with homelessness to make such inquiries as are necessary to satisfy itself whether he is eligible for assistance and, if so, whether any, and if so what, duty is owed to him under Part VII. In the instant cases, no question arose as to eligibility. The duty owed by a local housing authority to an applicant depends on whether he or she became homeless intentionally (as to which see sections 190 and 191) and whether he or she is in priority need for accommodation, as to which see section 189. If the authority is satisfied that an applicant is in priority need and is not homeless intentionally, it is under a duty (unless it refers the application to another local housing authority) to secure that accommodation is available for occupation by him or her: section 193. The authority is under a duty to inform the applicant of its decision.

Sections 202 and 203 of the Act are as follows:

The Secretary of State has exercised the powers conferred by section 203 by making the Allocation of Housing and Homelessness (Review Procedures) Regulations 1999 (“the 1999 Regulations). Regulation 2 is as follows:

Section 70 of the Deregulation and Contracting Out Act 1994 provides, so far as is relevant:

Section 79 of that Act defines “function”, in relation to a local authority, as including “any power to do any thing which is calculated to facilitate, or is conducive or incidental to, the exercise of a function”.

Pursuant to the powers conferred by sections 70 and 77 of the 1994 Act, the Secretary of State made the Local Authorities (Contracting Out of Allocation of Housing and Homelessness Functions) Order 1996 (“the 1996 Order”). Regulation 3 is as follows:

Schedule 2 is headed “Homelessness functions of a local housing authority excluded from contracting out” and is as follows:

On behalf of the Appellants it is submitted that the carrying out of a review is not a “function” that can be contracted out. Article 6 requires that expression to be read down, so that statutory reviews comply with its requirements. The contracting out of any part of the review process is unlawful, whether the reviewer makes the review decision for the authority or whether he merely carries out an investigation of the facts and makes a recommendation to the authority (which is what Mr Amoako said happens in the case of Brent). Someone such as Mr Perdios, who is not an employee or officer of a local housing authority, is not democratically accountable in the way such an employee or officer is. Furthermore, he does not have the independence required for the lawful carrying out of a quasi-judicial function. In this particular case, although it is not suggested that Mr Perdios is personally biased against applicants, his company’s website implies, if it does not expressly state, that he sees his function as rejecting applicants’ review applications whenever possible in a manner that cannot be challenged in the courts. Thus there is an appearance of bias and lack of independence. Moreover, his company’s contract with Brent confers no security on the company or him, so that he lacks the independence and appearance of independence required for the lawful performance of the review function. In addition, his decision letters are misleading and render his decisions unlawful.

In addition, Mr Carter on behalf of Ms Heald submitted that HH Judge McDowall’s reasons for rejecting the submission that Brent could not lawfully contract out their review function were inadequate.

On behalf of Brent, Mr Broatch submitted that contracting out of reviews are expressly authorised by the statutory provisions referred to above, that it did not involve a breach of Article 6, and that Mr Perdios’ decisions were not affected by any relevant apparent bias or lack of independence.

It is, I think, important to bear in mind that there are two issues that require consideration. The first is whether a local housing authority may lawfully delegate the performance of its reviews or any part of a review to a person who is not an officer or employee. The second is whether a review carried out by that person satisfies the requirements of Article 6, assuming it to be applicable. If delegation is impermissible as such, even delegation to an unquestionably independent and impartial tribunal would be unlawful. If delegation is permissible, there is an issue as to whether the delegation results in a procedure that as a whole complies with Article 6. The two issues are inter-related, because it is submitted that the fact that contracting out leads to a procedure which does not comply with Article 6, requires the court to read down the 1996 Order so as to exclude reviews from the scope of “functions”.

On the first issue, whether apart from Article 6, delegation is permissible, subject to the authorities to which I refer below, I should have thought that the legislative provisions to which I have referred are quite clear. The carrying out of reviews under sections 202 and 203 of the Act is a function of a local housing authority under Part VII; regulation 3 of the 1996 Order authorises such functions to be carried out by an employee, such as Mr Perdios, of a person (which includes a company: see Schedule 1 to the Interpretation Act 1978) authorised in that behalf by the local housing authority concerned. The word “functions” in this context “embraces all the duties and powers of a local authority; the sum total of the activities Parliament has entrusted to it. Those activities are its functions.” (Hazell v Hammersmith and Fulham LBC [1992] 2 AC 1, 29, per Lord Templeman, with whom the other members of the Appellate Committee agreed.) The extension of “functions” to incidental powers by section 79 of the 1994 Act is not presently relevant. It is significant that the functions expressly excepted by the 1996 Order from the contracting-out power do not include the review function; and it follows that the review function may be contracted out. It is not disputed that Brent has authorised HRL to carry out wholly or in part its review functions in relation to the reviews it has referred to it; and it is not disputed that Mr Perdios is its employee. It follows that, reviews could be lawfully contracted out to be carried out by him, unless he does not have the necessary independence and impartiality or the appearance of those qualities.

However, there have been conflicting judicial statements on the desirability or undesirability and the lawfulness or unlawfulness of local housing authorities contracting out the review function. None of these statements are binding on this Court, but they are of weighty authority and must be considered.

In Adan v Newham LBC [2001] EWCA Civ 1916 [2002] 1 WLR 2120 the Court of Appeal held that the county court has no power to direct a local housing authority how to carry out a review. Thus any statement as to the lawfulness of delegation or contracting out was obiter. Brooke LJ at paragraph 44 considered that the 1996 Order authorised the contracting out of reviews, as did Hale LJ at paragraph 76 and David Steel J at paragraph 94. Their observations on the requirements of Article 6 have been overtaken by the decision of the House of Lords in Runa Begum v Tower Hamlets LBC [2003] UKHL 5 [2003] 2 AC 430.

In Runa Begum, the applicant challenged the review decision of the local authority as to the suitability of the accommodation it had offered her under Part VII on the basis that, because issues of fact had arisen, it did not comply with Article 6; and she contended that (as had been envisaged by Hale LJ in Adan) the authority should have delegated the review to an independent tribunal. The House of Lords held that the procedure for determining the suitability of the applicant’s accommodation, viewed as a whole, including the right of appeal to the county court, complied with Article 6, assuming (but not deciding) that it applied. Lord Bingham said:

The principal opinion was that of Lord Hoffman. He said:

Lord Millett did, however. He said:

Before us, it has not been argued that a decision made by Mr Perdios, if considered and adopted by an officer of Brent, as stated by Mr Amoako and as reflected in the last sentence of paragraph 4 of the contractual Specification, does not result in Brent being, or not being, “satisfied” for the purposes of Part VII, for example section 193(1) and (7) and section 195(1). As I read Lord Bingham’s opinion, the basis of his expressed doubt as to the lawfulness of contracting out is the statutory requirement that the authority should be “satisfied” or not, as the case may be. Lord Hoffman’s concerns were in part with the practicalities and possible inefficiencies of contracting out, matters which have been convincingly addressed in Brent’s evidence. With the greatest of respect to Lord Millett’s opinion, given that the 1996 Order specifically excludes certain statutory functions from contracting out, it is difficult to say that it is “concerned in very general terms with deregulation and the subcontracting of ordinary local authority functions”. Despite the very great respect that I pay to any statement of Lord Bingham, Lord Hoffman or of Lord Millett, it seems to me that the 1996 Order is indeed clear and permits contracting out of reviews.

Does a third party review necessarily infringe Article 6, assuming it to apply? In my judgment, the starting point for consideration of this issue must be that, on the authority of Runa Begum, a review carried out by an employee of a local housing authority does not infringe Article 6, even though that employee is not independent. It is therefore necessary to compare the independence and impartiality of a person to whom the review function is contracted out with those of an employee.

I do not see that a third party should necessarily be any less impartial than an employee. Whether he can be regarded as less independent may depend on the particular facts, and in particular the terms of the contract between the authority and the third party. It is possible to build into a contract a high degree of independence on the part of the third party, for example by prescribing a long contractual term that is terminable only for serious breach. To do so would, however, bring into play another of the Appellants’ objections to contracting out, namely that the third party is not democratically accountable. Democratic accountability was stated to be a feature relevant to compliance with Article 6 by Lord Hoffman (with whom all the members of the Appellate Committee agreed) in Runa Begum at paragraphs 35 and 43 and in Alconbury [2001] UKHL 23 [2003] 2 AC 295 at paragraph 110.

The difficulty with this part of the argument of the Appellants is that the decision on review is, on any basis, that of the authority. Brent accepted the decisions made by Mr Perdios as its own. It is democratically accountable for the efficiency and fairness of its review procedures. It is therefore irrelevant that someone like Mr Perdios to whom a review is contracted is not democratically elected or directly democratically accountable. Indeed, on one view the fact that he is not democratically accountable will tend to make him more independent than someone who is democratically accountable. It follows that I do not see that contracting out is necessarily precluded by the lack of independence of a third party reviewer.

I am fortified in my view that in principle reviews may be contracted out by the terms of regulation 2 of the 1999 Regulations, set out above, to which Lord Bingham referred in his opinion in Runa Begum at paragraph 9(3). It assumes that both the authority’s original decision and the review decision may be made by someone who is not an officer of the authority. The Appellants’ suggestion that the person other than an officer whom the Regulations envisage could be a councillor is, I think, unrealistic. Moreover, a decision by an elected councillor, whose tenure depends on his re-election (and/or on his re-selection by his political party), would be even less independent than that of an employee, and a councillor may be even more influenced by the financial implications of an acceptance of a duty to accommodate (or of the electoral implications of a refusal), and therefore be more likely to be said to be biased.

In addition, the conclusion that contracting out is permissible is consistent with the Homelessness Code of Guidance for Local Authorities issued by the Secretaries of State for Communities and Local Government and of Health under section 182 of the 1996 Act. Paragraph 21.3 states:

…

carrying out reviews of decisions;

I turn to consider whether provisions of HRL’s contract demonstrate a lack of sufficient independence. The contract is short term, and can be determined at any time by Brent under clause 25.4. The company has no real security of tenure. It cannot be said to have anything like the qualities of independence expected of a tribunal or court. Against this, the fact that the company carries out reviews for a significant number of authorities confers a certain independence in relation to each of them. Moreover, an employee during the initial period of his employment may have no security of tenure, and if his work is not to the liking of his superiors or political masters he may be moved sideways and his role as reviewer terminated. His promotion will depend on his superiors’ or political masters’ contentment with his work. I do not think that the differences between the position of HRL and Mr Perdios on the one hand, and that of an employee or officer of an authority on the other, are such as materially to affect overall fairness of the review process.

I turn to the question of apparent bias. The test for apparent bias is well established: “Would a fair-minded and informed observer conclude that there was a real possibility, or a real danger, the two being the same, that the tribunal was biased?” See Lord Hope in Porter v Magill [2001] UKHL 67 [2002] 2 AC 357 at paragraph 102, citing Lord Phillips MR in Re Medicaments [2000] EWCA Civ 350 [2001] 1 WLR 700 at paragraph 85. The Appellants rely on the statements on the HRL website. They say that the reference to 3500 reviews having been carried out with unparalleled success is to successful rejection of applications, rather than successful fair completion of reviews. I do not accept this interpretation. I do not see why Mr Perdios should be more concerned to reject an application than the local authority that instructs him. I do see that local authorities are interested in avoiding appeals to county courts, with the legal costs and work involved, and even more interested in any appeal failing, so that they do not incur in addition to their own costs of the appeal to the county court a liability to pay the costs of the successful applicant and the costs of carrying out the review again. Success, in this context, should be judged by the acceptance by the parties, or, if there is an appeal, by the judge, that a review has been lawfully and fairly carried out. I note that the training page of the website states: “Knowing what to ask and what enquiries to make is crucial to arriving to a reasonable and correct decision.” The italics are mine. I do not think that an objective and well-informed observer would think that there was a real danger of bias on the part of Mr Perdios, and I would therefore reject the contention that the review decisions in these cases were marred by his apparent bias.

I would also reject the submission that the sheer numbers of reviews carried out by Mr Perdios show that he does not adequately consider each review. Whether he does so or not will appear from his decision letter; those in the present cases were considered by the county court judges to give adequate reasons for the authority’s decisions, and there has been no appeal from those findings.

The decision letters in the present cases did give the impression that Mr Perdios is an officer of Brent. I agree that they were misleading. They should not be. If they were materially misleading, that might give rise to a ground for judicial review. But if, as I consider, Brent were entitled to have the review carried out by Mr Perdios, the false impression given by the letter was immaterial: if the letter had fully set out his status, there would have been no cause for complaint. So I think there is nothing in this point.

Lastly, there is the submission that His Honour Judge McDowall failed to give sufficient reasons for his decision on the contracting-out issue. I agree that he did not. It is not sufficient for a judge to state that he prefers the submissions of one side as against those of the other without giving reasons for that preference. However, we have reviewed all the evidence and the arguments before him. In my judgment, he came to the correct conclusion, albeit insufficiently reasoned. The complaint as to the inadequacy of the judge’s reasons has become academic.

For the above reasons, I would dismiss these appeals. I do so without regret. Brent, who accept and adopt the results of Mr Perdios’ inquiries and his recommendations, evidently consider that he provides an efficient service that deals with reviews expeditiously and at a reasonable cost. If his decisions are accepted by Brent and upheld by the county court, it is because his decision letters address the issues raised by applicants and the information put before him and which he obtains and reach sensible conclusions. It has not been suggested that he is guilty of actual bias, which would in any event be a ground for appeal before the county court judge. Ultimately, I do not see that the decisions in the present cases were made by someone who was materially less independent than an officer of the authority itself. I do not think that the Court should be astute to strike down an arrangement that seems to work well in practice.

I agree.

For the reasons given by Lord Justice Stanley Burnton I agree that these appeals fail. I add a few words because of the concern expressed obiter in Runa Begum by Lord Bingham and Lord Millett, and to some extent by Lord Hoffmann, as to whether the legislation authorises the contracting out of what is on any view a quasi-judicial function.

Local government has long since been divested of most of its adjudicative powers. The modern forum for the exercise of such powers is an independent tribunal. But by virtue of primary legislation important decisions which can make the difference between a home and the street for thousands of people every year have been consciously placed and kept within the administrative framework of local government, with recourse to the courts on process only and not on merits.

It is into this framework that the power to contract out has been introduced. Certain functions are exempted from the power, but the review of homelessness decisions is not one of them. One understands very well why members of the Appellate Committee were dubious, even so, about the contracting out of an adjudicative function as if it were the town hall catering contract. But the fact is that it is difficult to envisage a process less compatible with Article 6 than the in-house review by one official of another official’s decision on an issue on which the local authority, through both of them, sits as judge in its own cause. Starting from such a low base, delegation of the review function to a competent outsider on the kind of terms we have seen in this case, whatever its weaknesses, probably offers more in the way of independence and impartiality than the in-house system.

Like Lord Justice Stanley Burnton I think Brent needs to sort out whether it has devolved the entire review decision to HRL, in which case Mr Perdios’ description of himself is probably correct, or whether his determinations have some provisional status which leaves the final decision in Brent’s hands. But the issue does not go to the legality of contracting out the review function.