Haringey High Court judgment sets precedent for council commercialism

A High Court ruling on a London council’s proposal to create a joint venture company with developer Lendlease has clarified rules surrounding the legal structure of commercial vehicles set up under the Localism Act.
Protestors against the Haringey Development Vehicle had argued that Haringey Council had contravened the Localism Act 2011 by proposing a limited liability partnership for the HDV, and called for a judicial review.
Local protestor Gordon Peters claimed that using an LLP structure was illegal because the council was acting for a commercial purpose under the Act.
However, Judge Ouseley rejected the application for judicial review, saying that because the vehicle had been set up to deliver new housing and other regeneration, its purposes were not commercially-driven.
The judgement said: “Developing and managing its assets for a commercially acceptable return so that the development, management and return could contribute to the strategic aims of the council did not mean those activities were undertaken for a commercial purpose within s4(2) [of the Localism Act]. The council’s purposes were not commercial at all in that sense.”
It also said that the “council’s purpose in entering into the arrangements setting up the HDV and governing its operation, including the relationship between the two partners, cannot be characterised as ‘a commercial purpose’ within the scope of the Localism Act.
“Even more clearly its dominant purpose (which the court held to be what mattered) was not commercial”.
Any commercial component was merely incidental or ancillary, and not a separate purpose, he ruled.
A statement by law firm Francis Taylor Building, which represented the claimant, Gordon Peters, said: “The judgment considers for the first time the scope of powers of local authorities to engage in commercial activities under the Localism Act 2011.”
The claim also failed on three other grounds relating to the consultation process, the council’s equality duties, and the role of full council in making decisions on the HDV.
Local government barrister James Goudie QC, who recently wrote for Room151 on council investments, represented Lendlease as an interested party in the case.
A statement from protest group StopHDV on Twitter said that it would lodge an appeal against the decision.