East Midlands Property Owners Ltd, R (on the application of) v Nottingham City Council

This is a “rolled-up hearing” in which, by order of the court dated 7^th August 2014, I have to consider whether to grant the Claimant (“EMPO”) permission to seek a judicial review of a decision of the Defendant (“the Council”) dated 17 September 2013.

The Council’s executive board decided, in respect of a number of identified areas within its district designated on a plan attached to the decision, to exercise its powers, given by section 56 of the Housing Act 2004, to designate those areas as subject to “additional licensing” in relation to HMOs (houses of multiple occupation) specified in the designation. The designation was to come into force on 1^st January 2014 and run for up to 5 years. Applications for HMO licenses would be received from 1^st December 2013.

The claim for judicial review was instituted by a claim form dated 13^th December 2013.

The issues to be determined on the application for permission are as follows:

If permission is given then the following issues arise for decision:

Part 2 of the Housing Act 2004 concerns licensing of houses in multiple occupation. Section 55(1) provides:

“This part provides for HMOs to be licensed by local housing authorities where –

a)

they are HMOs to which this Part applies and

b)

they are required to be licensed under this Part.

2)

This part applies to the following HMOs in the case of each local housing authority –

a)

Any HMO in the authority’s district which falls within any prescribed description of HMO, and

b)

If an area is for the time being designated by the authority under section 56 as subject to additional licensing, any HMO in that area which falls within any description of HMO specified in the designation.”

For the purposes of this judgment, HMOs which fall within section 55(2)(a) are subject to mandatory licensing; any HMO which falls within section 55(2)(b) is subject to non-mandatory licensing. This case concerns a scheme adopted by the Council for non-mandatory licensing of HMOs within the designated areas.

Section 56 provides for designation of areas to be subject to additional licensing. Subsection (1) provides:

“A local housing authority may designate either –

a)

the area of their district, or

b)

an area in their district

as subject to additional licensing in relation to a description of HMOs specified in the designation, if the requirements of this section are met.

(2)

The authority must consider that a significant proportion of the HMOs of that description in the area are being managed sufficiently ineffectively as to give rise, or be likely to give rise, to one or more particular problems either for those occupying the HMOs or for members of the public.”

Section 56(3) provides for consultation before the authority makes such a designation. Subsection (6) provides that section 57 applies for the purposes of section 56.

Section 57 concerns further considerations:

“(2)

The authority must ensure that any exercise of the power is consistent with the authority’s overall housing strategy.

(3)

The authority must also seek to adopt a co-ordinated approach in connection with dealing with homelessness, empty properties and anti-social behaviour affecting the private rented sector, both –

(a)

as regards combining licensing under this Part with other courses of action available to them, and

(b)

as regards combining such licensing with measure taken by other persons.

(4)

The authority must not make a particular designation under section 56 unless –

(a)

they have considered whether there are any other courses of action available to them (of whatever nature) that might provide an effective method of dealing with the problem or problems in question, and

(b)

they consider that making the designation will significantly assist them to deal with the problem or problems (whether or not they take any other course of action as well).”

Section 60 concerns duration, review and revocation of designations. Subsection (1) provides that, unless previously revoked, a designation ceases to have effect at the time that is specified in the designation, but (subsection (2)) that time must be no later than 5 years after the date on which the designation comes into force. Subsection (3) provides that the local housing authority must, from time to time, review the operation of any designation made by them and (subsection (4)) if, following a review, they consider it appropriate to do so, the authority may revoke the designation. If they do so (subsection (5)) the designation ceases to have effect at the time is specified by the authority for that purpose.

By Regulations (the Licensing of Houses in Multiple Occupation Prescribed Descriptions) (England) Order 2006, the Secretary of State has identified a number of conditions as constituting the description of HMOs for the purpose of section 55(2)(a) of the 2004 Act, that is to say, where they are subject to mandatory licensing. The details of that description are not material for this judgment.

There is limited guidance provided to those exercising the licensing and management powers and duties under Part 2 of the 2004 Act. The Department for Communities and Local Government, in January 2010, issued draft guidance. It included guidance in respect of additional licensing. At paragraph 217:

“An LHA may not make an additional licensing scheme unless it has identified that a significant proportion of the HMOs of the description to which the scheme is intended to apply are being managed sufficiently ineffectively so that they are causing, or have potential to cause, particular problems either for the occupiers of the HMOs or members of the public (including anti-social behaviour). A ‘significant proportion’ does not mean the majority but means more than a small minority. LHAs should use management orders … to address significant problems caused by individual or small numbers of HMOs in a specific area. The particular problems have to be quantifiable, but not all HMOs must suffer or cause the same problems in a particular designated area.”

By a further DCLG publication dated February 2010, entitled “Approval Steps for Additional and Selective Licensing Designations in England”, some further guidance was provided under the heading “How to make a Designation for Additional or Selective Licensing” and, in particular, identifying the factors affecting an area. The document gave examples of properties being managed sufficiently ineffectively and, as a result, having a detrimental effect on a local area as including:

“

•

Those whose external condition and curtilage … adversely impact upon the general character and amenity of the area in which they are located.

•

Those whose internal condition, such as poor amenities, overcrowding etc, adversely impact upon the health, safety and welfare of the occupiers and the landlords of these properties are failing to take appropriate steps to address the issues.

•

Those where there is a significant and persistent problem of anti-social behaviour affecting other residents and/or the local community and the landlords of the HMOs are not taking reasonable and lawful steps to eliminate or reduce the problems.

•

Those where the lack of management or poor management skills or practices are otherwise adversely impacting on the welfare, health or safety of residents and/or impacting on the wider community.

The above examples are not exhaustive, nor are the categories mutually exclusive. An area may suffer from a mixture of the problems identified and individual properties may suffer from a combination of them.”

In May 2010, the Council approved a recommendation that work on the potential use of additional licensing powers for HMOs be carried out to determine whether it was necessary and appropriate to implement a scheme of additional licensing for all or part of Nottingham.

On 18 December 2012, the Council’s executive board received a report which summarised data collection and analysis and recommended pursuing a public consultation on proposals to designate certain identified areas within the city as subject to additional licensing. The Council so decided.

A 14 week statutory consultation exercise took place between February and June 2013. Included amongst the respondents to that consultation, which opposed the proposed additional licensing scheme, were the Residential Landlords Association (“RLA”), (20 May 2013), and the Claimant. Each of them suggested that the evidence sought to be relied upon in the consultation (which mirrored that in the December report) was questionable and lacked substance. The RLA response took issue with reliance upon “complaints” made to the Council’s Environmental Health Department as evidence, rather than relying on proven actions. EMPO contended that there was no relevant evidence put forward to support the proposal. EMPO stated that it believed due process had not been followed and that, if the scheme were adopted, they would seriously consider subjecting it to a legal challenge.

On 17 September 2013, the Council’s executive board took the decision now sought to be challenged.

On 10 October 2013, EMPO met with its barrister to discuss the possibility of challenging the September decision. A letter before claim was sent on 15^th October 2014.

On 31 October 2013, there was an open meeting at the EMPO offices of over 50 landlords who expressed an overwhelming consensus to proceed with a judicial review, but subject to raising a “fighting fund” of at least £40,000.

During the week commencing the 18 November 2013, it became clear that such a fund would be achieved and EMPO decided that the application should proceed. Written authorisation was provided to counsel on 22 November 2013.

The letter before claim had been sent to the Council on 15 October 2013. It was responded to on 7 November 2013. On 18 November, there was a supplemental notification of claim sent by EMPO to the Council and it was responded to on 4^th December 2013. The proceedings were issued on 13 December 2013, at which point an application was made for urgent consideration of the application for permission and abridgement of time for service of an acknowledgement of service.

In the letter of 18 November, EMPO asked the Council to suspend taking steps to implement the decision. By its letter, dated 4 December, the Council refused to do so on the basis that it did not accept the Claimant had any prospect of success should a challenge be made.

On 22 January 2014, Mr Justice Lewis refused the application for abridgment of time and for urgent consideration for a number of reasons, including the fact that the application for permission was not issued until 13 December 2013, despite the refusal by the Council on 5^th December 2013 to suspend implementation of its decision.

As a consequence, the scheme began as intended on 1 January 2014 and has been running ever since. A significant number of licences have been issued and a significant number of applications are in train. I need not go into any detail. There is a dispute whether evidence of how the scheme is progressing should be received by reason of its lateness. I am content to determine this case without reference to it.

EMPO is the largest landlords’ association in Nottingham, Derby and Leicester, representing professional landlords with residential property in Nottinghamshire, Derbyshire, Leicestershire and Lincolnshire. The decision to embark on these proceedings at the meeting of 31 October was at an open meeting, not confined to members of EMPO, and was taken on the basis that the decision of the Council was prejudicial to EMPO’s members and the wider Nottingham landlord community. The Defendant contends that professional landlords who have properties outside the Council’s area would have no standing, nor would landlords in Nottingham who rent homes outside the designation areas. The Defendant contends that there is no evidence that any of the landlords at the meeting were affected by the designation, nor are two of the three landlords who have submitted evidence in support of the claim, Mr Lancaster and Mr Ali. However, the Defendant accepts that Mr Teague, another witness, is directly affected by the designation scheme. The Defendant contends that, in all the circumstances, the Claimant has not demonstrated a sufficient interest to bring the claim.

In my judgment, there is no merit in this contention. Mr Teague is directly affected by the designation. In any event, it is not necessary for a Claimant for judicial review to demonstrate a direct interest, merely that the applicant has a sufficient interest. It is not suggested that, in any way, EMPO was an extraneous party to the consideration by the Council of its decision, nor that it acts as a busybody. On the contrary, EMPO was one of the parties specifically consulted by the Council following the December 2012 decision and it made a substantial and substantive contribution to that consultation. I am, therefore, satisfied that EMPO does have sufficient interest to seek permission to apply for judicial review of this decision.

A claim for judicial review must be issued “promptly and, in any event, no later than 3 months after the decision complained of” (CPR 54.5(1)). It is trite law that it is not necessarily sufficient for a claim to be brought within 3 months; it may, nonetheless, not have been brought promptly.

It is also trite law that whether or not proceedings have been commenced promptly is not concerned with the state of knowledge of the Claimant but simply with the passage of time (R v Cotswold District Council Ex Parte Barrington Parish Council [1997] 75 P & CR 515). A decision by a public body, in almost all cases, affects the rights of parties other than the decision maker and applicant, and it is important that those parties should be able to proceed on the basis that the decision is valid and can be relied on. Accordingly, promptitude is to be informed by such considerations (see Hardy v Pembrokeshire County Council [2006] EWCA Civ 240).

In my judgment, this application was not brought promptly. It was not brought until just 4 days before the expiration of 3 months. There had been delay in EMPO deciding to send a letter before claim of almost a month, a further month before they concluded that they were in funds so as to be able to make the claim, and a further four weeks before the claim was actually launched. This was in the context of EMPO knowing, since at least in or about May 2013, that such a decision was in contemplation. They had opposed it in the consultation and had indicated that they might seek to judicially review such a decision if taken. There was no good reason for them not to be in a position, once the decision was taken on 17 September 2013, to act promptly by deciding to proceed, by raising sufficient funds, and then to commence proceedings within a much shorter time than that which elapsed. Had that been the case, an application for urgent consideration and interim relief, if permission were given, might have been viable so as to prevent this scheme being launched with the consequence that it has now been operating for some 14 months.

A relevant factor in this issue is the merits, or otherwise, of the claim for judicial review.

Three grounds are relied on. I first consider grounds 2 and 3, as they can be disposed of speedily.

Ground 2 contends “the Defendant failed to consider properly or at all the requirements of section 57(4) of the 2004 Act and the conclusion it reached that section 57(4)(b) was satisfied is not available to it on the information before it and was based on a misunderstanding of the purpose of the designation”.

I have read, carefully, the reports of December 2012 and September 2013. They address specifically the requirement of the Council to consider the matters identified in section 57(4)(a) and (b). Furthermore, they give an account of the relevant facts pertinent to those considerations. The recommendation which was made to the Council based on the reasoning set out in the reports meant that the Council did have due regard to the requirements of section 57 (4)(a) and (b). If the decision was otherwise open to the Council, it is not in my judgment arguable that the Council failed to have due regard to these provisions. Mr Lane, in his oral submissions for the Claimant, scarcely touched on this ground. In my judgment, rightly so. It is, in my judgment, an unarguable ground and I would refuse permission to seek judicial review on this ground.

This ground alleges that the calculation of the licence fee is unlawful as it includes and allows for expenditure other than for the processing and monitoring of the additional licensing scheme. Reliance is placed on the case of R (on the Application of Timothy Martin Hemming and 6 others) v Westminster City Council [2013] EWCA Civ 591 [2013] LGR 593.

Although at first blush the report to the Council in September 2013, dealing with the licence fee, was not happily expressed and might, upon a fair reading, including reference to Appendix IV to the report, have been thought to involve a decision contrary to the guidance given in Hemming, it is accepted now by Mr Lane, as a result of further evidence by way of explanation put in by the Defendant, that in fact the licence fee does not reflect Council expenditure which it is impermissible in the light of Hemming to include in the calculation. Accordingly, in my judgment, ground 3 also is unarguable and I would refuse leave on ground 3 as well.

This is, in effect, the heart of the claim for judicial review and focuses on section 56(2). This subsection provides that one of the requirements before designating an area to be subject to additional licensing is that the authority “considers” that a number of things have arisen. As this is a subjective matter the focus of any challenge has to be on Wednesbury grounds.

The matters in respect of which the authority must form a view are as follows:

Ground 1 of the claim has, at its heart, the assertion that the Council erred in law by using, in order to form its view for the purpose of satisfying section 56(2), an “inappropriate formula”. By doing so it is said that the Council took into account irrelevant considerations; failed to provide consultees with accurate and clear information to enable them to respond in an informed manner; and reached a decision to proceed with additional licensing in the designated areas that was irrational and was made without any, or any proper, basis.

The report of 18 December 2012 identified sources of data for the purpose of seeking to identify areas which satisfied the section 56(2) requirement. That information enabled the Council, amongst other things, to:

In identifying the “complaints”, the following categories of complaints were considered:

The primary source from which those complaints were gathered was the Environmental Health Department’s “flare” database. The secondary source was police records.

Applying the information accumulated, from those sources, about complaints about those subjects, the authors of the report suggested that the Council should adopt the approach to the section 56(2) requirement that it would be met for an output area which contained:

It is this which is said by the Claimant to constitute the “inappropriate formula” the adoption of which was: wrong in law; constituted an irrelevant consideration; resulted in a failure sufficiently to inform consultees; and gave rise to an irrational decision made on no proper basis.

The configuration of the “output areas” was subject to tweaking, so as to coincide with natural or physical boundaries.

This formulation was replicated in the report to the Council’s executive board on 17 September 2013 and was the basis for identifying the areas which the Council decided to designate pursuant to section 56(1).

The Claimant contends that a strict application of this formula means that an area would fall to be designated which had only ten non-mandatory HMOs within it, in respect of two of which, one complaint each concerning the matters identified had been received by the Environmental Health Department or the police during the period of 4 years and 9 months. It contends that it would be irrational to conclude, on the basis of such figures, that “a significant proportion of the HMOs of that description in the area are being managed sufficiently ineffectively as to give rise, or to be likely to give rise, to one or more particular problems either for those occupying the HMOs or for members of the public”.

The Claimant also contends that it and the RLA criticised this as an evidence base for the section 56 decision. In consultation the RLA had asserted that the complaints data was questionable and lacked substance and was tenuous, not least because incidents recorded as complaints are not actual “crimes” and no evidence was provided to state the outcome of the complaints. The Claimant contended that there was no relevant evidence put forward to support the proposal; the statistics quoted in the consultation were irrelevant, spurious, and misleading.

In its report of 17 September 2013, the Council officers gave a detailed account of the consultation recording that EMPO and the RLA were opposed and that one of the main grounds of opposition was that the evidence of the need for additional licensing was weak. Appendix 1 to the 17^th September report contained a detailed analysis of the responses to the consultation which repeated the contentions that the data was flawed, could not be trusted and the evidence was weak. Appendix 2 gave the officer’s responses to the various grounds of objection including that concerning the data and the evidence. The officers stated that they were satisfied with the integrity of the complaints data used from the flare database system, rejected the claim that the data was flawed and believed that the methodology or data analysis was consistent with the requirements of the Act and the guidance.

In preparation for this application, the Claimant has obtained an independent report analysing the complaints data, from which a number of propositions are drawn. First, although there are said to be some problems with the quality of data consistency and duplications, those are not said to be of any great statistical significance and no substantive criticism is made of the Council acting on the basis of the statistics which it had. Second, the analysis of the data shows that the number of complaints in total rose from 2008 to 2010 but, thereafter, were reducing in number so that the 2012 figure (for 9 months only) was approximately half the number in 2010. Third, the number of complaints varied significantly across the different areas and, in some areas, seemed quite low, though it is not suggested that in any of the areas it failed to reach the proportion identified in the formula. Fourth, the vast majority of complaints referred to refuse, disrepair, noise and amenity/duty of care. Fifth, in the vast majority of cases, there were only one or two complaints about each property over the 4 year 9 month period. For only 2.6% of the properties was there at least one complaint a year. The Claimant contends that these factors individually and together demonstrate that the use of this data, as applied to the formula, was not a rational or lawful basis for the Council to conclude that the section 56(2) requirement was satisfied.

The Claimant also contends that the use of data concerning complaints made to the Environmental Health Department effectively equated complaints (without identifying their outcome) with the existence or likelihood of their giving rise to problems for those occupying the HMOs or for members of the public.

The Council submitted a witness statement from Mr De Max, who is the Housing Strategy and Partnership Manager in the Council’s Development Department. He has worked for the Council for 24.5 years, for the vast majority of that time in housing. He holds a post-graduate diploma in housing, awarded by the LSE and is a corporate member of the Chartered Institute of Housing. He has given a detailed account of how the Council developed the step-by-step approach identified in the December 2012 report and summarised above.

He points out that, in gathering data of complaints made to the Environmental Health Department and, to a limited extent, from the police (by reason of the inadequacy of the Environmental Health Records for that area) the focus on particular areas of complaint was designed to reflect the examples of properties being managed “sufficiently ineffectively”, contained in the guidance referred to above. He describes how the individual areas were identified by reference to each of them containing a minimum of 10 non-mandatory HMOs within their area and the approach to identifying what would be “a significant proportion” of such non-mandatory HMOs which were not being managed effectively and why the Council thought that 20% satisfied the statutory requirement for a significant proportion.

On relying upon complaints as being evidence of the likelihood of problems, he says as follows:

“Complaints regarding HMO properties equate to problems because issues such as: noise complaints, complaints about housing safety and disrepair, overcrowding, and refuse accumulations are an indicator of ineffective and poor management and have a detrimental effective on the quality of life within an area. There is no set procedure for notifying an HMO landlord about a complaint about their property. It will depend on the individual circumstances around the complaint … it is not unreasonable to assume that an individual making a complaint believes it to be a serious issue. Tenant complaints about housing standards are often a last resort. The tenant has often tried to resolve issues with the landlord and been unsuccessful and therefore consider submitting a complaint as the final straw in resolving their perceived inefficient management of the property.”

He concludes:

“… due to the absence of a prescribed test to judge a “significant proportion”, I am satisfied that the Defendant’s methodology regarding complaint analysis, combined with feedback from local elected councillors who receive many of the complaints (from their surgeries and observations during regular ward walks) and support for additional HMO licensing from the consultation responses in the designated area, is reasonable and fair and I stand by the belief that the approach used is consistent and within the statutory test.”

The section 56(2) requirement requires the Council to form a view on a number of issues. The first is to identify areas. In my judgment, there was nothing irrational or unlawful in the Council identifying areas for this purpose using the ONS “output areas” used for census purposes but tweaked by reference to the individual councillors’ knowledge and experience so as to form coherent areas by reference to natural or physical boundaries. The Claimant hasn’t sought to argue that this was an irrational approach on this issue.

In the absence of any statutory provision or guidance, in my judgment, there was nothing irrational or unlawful in the Council limiting its consideration of designation to those areas, thus defined, in which there was a minimum cluster of 10 non-mandatory HMOs. Once again, no serious complaint has been made of this aspect of the Council’s approach, although it is said that the formula’s minimum requirements, if applied strictly, can result in a very small number of HMOs being subject to a very small number of complaints over a long period of time giving rise to the designation of the area in which they are situated.

On the assumption that there was nothing unlawful in the Council regarding evidence of complaints to the Environmental Health Department as evidencing “sufficient ineffective management giving rise to, or likely to give rise to, one or more problems”, in my judgment, there was nothing irrational or unlawful in the Council adopting the formula that 20% of the HMOs in that area, over a period of 4 years 9 months, making such a complaint, constituted a “significant proportion”. There has been no suggestion that the figure of 20% amounted to anything other than a significant proportion having regard to the guidance, nor was it suggested that the Council was wrong to look at the statistics over a number of years rather than take an instant snapshot by reference to a much shorter period. Whilst a different council might take a shorter period than 4 years 9 months, I do not regard it as arguable that this council acted irrationally in fixing on the period that it did. Over a period of years it is inevitable that there will be variation in the number of complaints in a given year, that is a consequence of adopting such an approach and, in my judgment, cannot be said to be unlawful or irrational.

Nor, in my judgment, was there anything irrational or unlawful in the Council using the making of a complaint to the Environmental Health Department (or, as a supplement in certain areas at certain times, to the police) about the matters used in the gathering of data for this purpose. Those areas of complaint reflect the guidance when giving examples of properties being managed sufficiently ineffectively so as to give rise to or be likely to give rise to problems.

In my judgment, Mr De Max’s explanation for why it is that he considers the making of a complaint by a person to the Council on those issues does constitute evidence of sufficient ineffective management giving rise to, or likely to give rise to, such problems, is a rational one. In my judgment, he, as an experienced housing officer, was entitled to form the view which he did, that complaints about these matters do reflect upon the ineffectiveness of the management of the properties and that such complaints are not made lightly to the Council’s Environmental Health Department, reflect a real problem existing at the time and, given the type of issues, reflect the likelihood of problems arising for occupiers and others.

Finally, the Claimant’s contention that a strict application of the minimum requirements of the formula could not rationally form the basis of a conclusion that the section 56(2) requirement is satisfied is, in my judgment, flawed. Although the decision of the Council is to designate an area, the focus of the requirement is individual HMOs within that area and whether there are, or are likely to be, problems for those occupying the HMOs or members of the public in respect of a significant proportion of the non-mandatory HMOs within the area. It necessarily follows that, if the number of HMOs in an area is small (and there is no reason why it should not be) then a significant proportion of that small number is going to be smaller still. But the point of designation is to impose obligations upon individual landlords of the types of property covered by the scheme for the benefit of their occupiers and those likely to be affected. In my judgment, therefore, provided the area is identified in a rational way by reference to a minimum number of HMOs being sited within it and provided the proportion identified is a significant one (which in this case it is), then the use of data recording complaints about such properties to the Environmental Health Department over a period of time, sufficiently long to avoid giving a misleading snapshot, can rationally be used as a method of satisfying the Council of the requirements of section 56(2) of the 2004 Act.

Furthermore, in my judgment, there was nothing flawed about the consultation. It made clear what the formula was, how the data was accumulated, sufficient to enable the Claimant and the RLA to voice their opposition and to call into question the sufficiency or validity of the evidence. The outcome of that consultation was faithfully recorded for the benefit of the Council when taking its decision in September 2013 and the observations of the Council officers in response to those particular grounds of opposition was an honest and rational one. In my judgment, therefore, ground 1 of the claim is not made out.

In those circumstances, I am not prepared to extend time to enable the judicial review to proceed beyond the permission stage where, as I have already decided, the claim was not made promptly. Accordingly, I refuse permission for the Claimant to seek judicial review of the Council’s decision of 17 September 2013.