National Community Homes CIC (formerly known as Larch Housing Association Ltd) v Regulator of Social Housing
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cavanagh |
| Judgment Date | 12 December 2022 |
| Neutral Citation | [2022] EWHC 3171 (Admin) |
| Docket Number | Case No: CO/212/2022 |
| Court | Queen's Bench Division (Administrative Court) |
[2022] EWHC 3171 (Admin)
Mr Justice Cavanagh
Case No: CO/212/2022
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Jay Gajjar (instructed by Thamina Solicitors) for the Appellant
Samantha Broadfoot KC (instructed by Mills & Reeve) for the Respondent
Hearing date: 26 October 2022
Approved Judgment
This judgment was handed down remotely at 10.30am on [date] by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Introduction
This is a statutory appeal, brought under section 121 of the Housing and Regeneration Act 2008 (“the 2008 Act”), against the decision of the Respondent (“the Regulator”) dated 17 December 2021 to remove the Appellant from the register of social housing providers (“the Register”). At the material time, the Appellant was known as Larch Housing Association Limited and, for convenience, will be referred to in this judgment as “Larch”.
In broad summary, the decision to de-register Larch was taken because of the Regulator's view that Larch did not meet the Regulator's registration criteria, as set out in section 112(3) of the 2008 Act. In particular, the Regulator took the view that Larch did not satisfy the requirement to demonstrate its financial viability on an ongoing basis.
This is the first occasion upon which an appeal under section 121 of the 2008 Act has been determined by the High Court. There has, however, been a judicial review challenge to a regulatory judgment of the Regulator, in which a social housing provider had been assessed as being “non-compliant” in respect of financial viability and governance: Inclusion Housing Community Interest Company v Regulator of Social Housing [2020] EWHC 346 (Admin) (“ Inclusion Housing”, Chamberlain J).
I will set out the facts in greater detail later in this judgment, but, in brief, about 95% of Larch's housing units were leased from two head landlords, known as “Henley” and “SLIL”. The units that were leased from Henley were located in Devon and were known as the “Devon Portfolio”. Larch had run into financial difficulties in relation to the Devon Portfolio, but contended that, at the time the decision to de-register was taken, Larch was on the cusp of solving the problems with the Devon Portfolio. This was to be achieved by handing the units back to the head landlord, Henley, in return for allocating to Henley the right to recover the debts currently owed to Larch in relation to these properties. Larch said that this would have the effect of cancelling out Larch's liabilities to Henley in respect of outstanding rent for the units. In addition, Larch said that it had reached agreement with SLIL to crystallise SLIL's forbearance toward Larch for failing to pay its debts to SLIL, by means of a loan agreement, and that it had negotiated Heads of Terms for three contracts to provide property management services for some 813 units, retaining £20 per unit as its service fee. Larch contended that the resolution of the problems with the Devon Portfolio, along with these other matters, was likely to mean that its short—to medium—term financial viability was secured.
Against that background, Larch appealed against the decision to de-regulate it on three grounds:
(1) The decision to de-register Larch on 17 December 2021 in the full knowledge that it was on the cusp of settling the problems with the Devon Portfolio was irrational, disproportionate, premature and improper;
(2) The Regulator was plainly wrong to find that no sufficient evidence had been put forward as to its loan agreement with its senior landlord and creditor, SLIL, or alternatively, it should have asked for further information, rather than proceeding to de-register Larch; and
(3) A series of factual findings made by the Regulator were incorrect and, therefore, flawed.
The Regulator submitted that its decision to de-regulate Larch should stand. The decision to de-regulate Larch, notified by letter dated 17 December 2021, had followed a long history of intensive engagement with Larch by the Regulator. A non-compliant Regulatory Notice had been published in November 2019, and, since then, the Regulator had worked closely with Larch in an attempt to resolve its compliance issues. The Regulator had accepted a Voluntary Undertaking that had been offered by Larch in July 2020, but Larch had failed to comply with its Undertaking. The Regulator said that it had ample grounds for de-registration in December 2021, and that, especially given the long history of engagement, it was under no obligation to delay its decision any further. An extra-statutory internal review of the decision to de-register was conducted at Larch's request, but the decision was upheld and this was notified to Larch on 2 February 2022. (This appeal is, however, against the decision to de-register in December 2021, rather than the against the outcome of the extra-statutory internal review.)
No time limit for an appeal against de-registration is provided for in section 121. In those circumstances, the default time limit for bringing an appeal in CPR 52.12(2)(b) applies. This means that an appeal must be brought within 21 days after the date of the decision under challenge. In fact, the appeal was filed out of time, on 20 January 2022. Larch has applied for an extension of time for appealing, and this is not opposed by the Regulator. I grant the extension of time.
Pursuant to section 121(2) of the 2008 Act (see below), Larch has remained on the Register, pending the outcome of this appeal.
In this appeal, Larch has been represented by Mr Jay Gajjar of counsel, and the Regulator by Ms Samantha Broadfoot KC. I am grateful to both counsel for their helpful submissions, both orally and in writing.
The evidence
I have been provided with a large bundle of documentation for this appeal, running to over 1000 pages. The notice of appeal was accompanied by a witness statement from Mr Wayne Feltham, the then Chief Executive Officer (and sole shareholder) of Larch, dated 20 January 2022, plus exhibits. On behalf of the Regulator, I have been provided with two statements from Harold Brown, Senior Assistant Director of Investigation and Enforcement, dated 23 May and 22 June 2022. Further statements on behalf of Larch have been provided, consisting of a statement of Sarah Ferdinand, a director of Larch, dated 22 May 2022, enclosing further documentation, and a statement dated 7 July 2022 from Joy Malyon, the Chair of Larch since March 2022, and, previously Chair and Director of the company during the period from 19 May 2020 to 21 September 2021. The statement of Ms Malyon responded to points made in the second statement of Mr Brown.
On 19 October 2022, about a week before the hearing, Larch applied for leave to rely upon a further witness statement from Ms Malyon. The purpose of the statement, which is dated 7 October 2022, is stated, at paragraph 1, to be “to update [the Court] on the Appellant's progress on many matters through the new board of directors (“the Board”) since March 2022.” The Regulator opposed the admission of this statement on three grounds, namely irrelevance, service so late as to be prejudicial, and an abuse of process in light of the procedural history.
I have read the second statement of Ms Malyon de bene esse. The statement essentially simply exhibits, without elaboration or explanation, a number of documents relating to Larch's financial and governance position in the period from March 2022 onwards. I agree that it should not be admitted on the first ground put forward by the Regulator, namely relevance. This is because the statement deals solely with developments since March 2022, whereas the appeal is against a decision which was communicated to Larch on 17 December 2021. Evidence about subsequent events cannot retrospectively affect the question whether the decision to de-register Larch in December 2021 was one which the Regulator was entitled to take, and so cannot affect the outcome of the appeal. It is open to Larch to apply for re-registration under section 112 of the 2008 Act, and events since December 2021 are potentially relevant to such an application, but that is not a matter with which this Court is presently concerned. I also accept the Regulator's submission that this material was filed so late that the Regulator was not given a fair opportunity to deal with it, but the principal reason why I have declined to admit this statement is that it contains nothing of relevance to the appeal. I should add that, if I had been otherwise minded to admit the statement, I would not have declined to admit it solely because of points made by the Regulator about the somewhat chequered procedural history of this appeal.
The statutory framework, the Standards, and relevant provisions in the Code of Practice
The relevant legislative regime was very helpfully summarised by Chamberlain J in Inclusion Housing at paragraphs 3–20. I cannot improve on this summary and so I will gratefully set it out in this judgment:
“3. Part 2 of the Housing and Regeneration Act 2008 (‘the 2008 Act’) establishes a regulatory regime for social housing. When the 2008 Act came into force, the functions of the regulator were discharged by the Office for Tenants and Social Landlords, also known as the Tenant Services Authority. Later, they passed to the Regulation Committee of the Homes and Communities Agency (‘HCA’), which is now known as Homes England, and then from 1 October 2018 to the Defendant. I shall use the statutory term ‘regulator’ to refer to these different entities without distinction.”
4. Section 111 of the 2008...
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