R (Clays Lane Housing Cooperative) v The Housing Corporation

JurisdictionEngland & Wales
CourtQueen's Bench Division (Administrative Court)
JudgeMr Justice Keith,MR JUSTICE KEITH
Judgment Date14 May 2004
Neutral Citation[2004] EWHC 1084 (Admin)
Docket NumberCase No: CO/4578/2003

[2004] EWHC 1084 (Admin)




Royal Courts of Justice

Strand, London, WC2A 2LL


The Honourable Mr Justice Keith

Case No: CO/4578/2003

R (on The Application Of Clays Lane Housing
Co-operative Limited)
The Housing Corporation

Mr David Wolfe (instructed by Bindmans) for the Claimant

Mr Paul Stanley (instructed by Trowers & Hamlins) for the Defendant

Mr Justice Keith



This is a claim by a housing co-operative for judicial review of the decision of the Housing Corporation to transfer its housing stock to another housing association. Permission to proceed with the claim was refused by Ouseley J. without a hearing. The application for permission to proceed with the claim was renewed before Stanley Burnton J. He adjourned the question whether permission to proceed with the claim should be granted, and ordered that the application for permission, and the substantive hearing if permission was granted, be considered at one hearing. This is the court's judgment following that hearing.

The background facts


The claimant, Clays Lane Housing Co-operative ("the Co-operative"), is a housing co-operative whose members are the residents of premises in Clays Lane, Stratford, East London, which the Co-operative leases on long leases from the London Borough of Newham. The premises consist of 50 self-contained flats and 400 rooms in 57 houses, and are let to its members. The Co-operative is run by a management committee which is largely elected from amongst its members. Because it is a non-profit-making body established for the purpose of providing housing to its members, it is registered and incorporated under the Industrial and Provident Societies Act 1965 ("the 1965 Act"). The facts that the Co-operative (a) is registered under the 1965 Act, (b) is non-profit-making, and (c) was established for the purpose of providing and managing houses for occupation by its members, and that membership of the Co-operative is reserved for those entitled to occupy the Co-operative's premises, mean that the Co-operative was eligible for registration as a social landlord under section 2(1) of the Housing Act 1996 ("the 1996 Act"). The Co-operative was duly registered as a social landlord under the 1996 Act.


The affairs of registered social landlords are regulated by the Defendant, the Housing Corporation ("the Corporation"). Its powers include directing an inquiry into the management of a registered social landlord, and (subject to the consent of the Secretary of State) directing a registered social landlord to transfer its land to another registered social landlord. Those powers are contained in paras. 20 and 27 of Schedule 1 to the 1996 Act, which read (so far as is material):

"20(1) The Corporation may direct an inquiry into the affairs of a registered social landlord if it appears to the Corporation that there may have been �.. mismanagement ��

27(1) Where as a result of an inquiry under paragraph 20 �.. the Corporation is satisfied as regards a registered social landlord �

(a) that there has been �.. mismanagement in its administration, or

(b) that the management of its land would be improved if its land were transferred in accordance with the provisions of this paragraph,

the Corporation may, with the consent of the Secretary of State, direct the registered social landlord to make such a transfer.

27(3) �.. the Corporation may direct a transfer to be made to the Corporation or to another registered social landlord.

27(4) The transfer shall be on such terms as the Corporation may direct on the basis of principles determined by it. The consent of the Secretary of State is required both for the terms of the transfer and for the determination of the principles on which it is based.

27(5) The price shall not be less than the amount certified by the district valuer to be the amount the property would command if sold by a willing seller to another registered social landlord. "

Moreover, by section 9(1), the consent of the Corporation is required for any disposal of land by a registered social landlord.


An inquiry into the affairs of the Co-operative took place in 2000. A report was submitted to the Corporation in March 2001. The inquiry found that there had been mismanagement of the Co-operative's affairs in a number of areas, including a complete lack of effectiveness in the work of the management committee, a lack of proper financial controls and a lack of proper day-to-day management and governance. The report concluded that the Co-operative was being mismanaged to such an extent that its assets and the welfare of its tenants were at risk, unless urgent action was taken to address the failings of management and to bring good order to such fundamental tasks as collecting rent and controlling expenditure.


The Corporation accepted the inquiry's finding that there had been mismanagement of the Co-operative's affairs, and it proposed to direct the transfer of the Co-operative's land, in effect its housing stock, to the Governors of the Peabody Trust ("Peabody"), another registered social landlord, but not a co-operative. The Secretary of State gave his consent to the proposal on 14 March 2002, and on 20 March 2002 the Corporation formally directed that the transfer take effect. The Co-operative issued a claim for judicial review of the Corporation's transfer direction, and of the Secretary of State's consent to it, alleging different legal errors on the part of each. The claim was settled when the Corporation agreed to reconsider the matter, and the transfer direction did not take effect. The Secretary of State's consent to the transfer became academic.


The Co-operative's problems with the Corporation had been noticed by Tenants First Housing Co-operative ("Tenants First"), a large social landlord registered in Scotland, regulated by Communities Scotland, the Corporation's counterpart in Scotland. Like the Co-operative, Tenants First is a housing co-operative. It was the largest fully mutual co-operative housing association in the UK (the Co-operative being the second largest). In March 2002, it began to explore the possibility of a merger between it and the Co-operative, and by April 2002 it had agreed with the Co-operative to consider amalgamating the two of them. It sought a meeting with representatives of the Co-operative, the Corporation and Communities Scotland to discuss the proposal. The Corporation did not think that a meeting would serve any useful purpose, no doubt because at that stage the Co-operative's claim for judicial review of the transfer direction had not been launched. The Corporation was expecting the transfer direction to take effect according to its terms.


Following the settlement of the Co-operative's claim for judicial review, the Corporation reconsidered whether a transfer direction should be made. By then, the Co-operative had accepted that there was no basis on which the finding of mismanagement could be challenged, and the Co-operative's aim was to ensure that its obligations to its members were taken over by another co-operative. It was against that background that at a Board meeting on 24 June 2002, the Corporation decided again that the Co-operative's housing stock should be transferred because of the mismanagement identified by the inquiry and because of the need to deal effectively with the legacy of the Co-operative's managements problems. However, at the Co-operative's request, the Board deferred its decision on whether there should be a statutory direction of the transfer of the Co-operative's housing stock to Peabody under para. 27, or whether the need to do so could be eliminated by the Corporation's consent under section 9(1) for the transfer of the Co-operative's engagements to Tenants First, which would in effect amount to the voluntary transfer of its housing stock to Tenants First. That decision was deferred (a) to enable the Corporation to assess with Communities Scotland the regulatory implications of a voluntary transfer to Tenants First, and (b) to give the Co-operative and Tenants First more time to develop their proposal. However, the Board "emphasised that it was not prepared to allow this matter to drift, and required a strong commitment to rapid progress from all parties".


The issue was reconsidered again by the Corporation at a Board meeting on 24 September 2002. The Board decided to direct the transfer of the Co-operative's housing stock to Peabody under para. 27, and that the transfer of its engagements to Tenants First would not be an acceptable alternative. It subsequently sought the consent of the Secretary of State for the transfer and the terms on which it proposed the transfer should take place. On 9 July 2003, the Minister of State for Housing and Planning wrote to the Corporation informing it that the Secretary of State consented to the transfer and the terms on which it would take place.


The issue was finally considered by the Corporation at a Board meeting on 24 July 2003. The question which the Board addressed on that occasion was whether there had been any material change of circumstances which would cause the Board to alter its original decision to direct the transfer of the Co-operative's housing stock to Peabody. The Board concluded, amongst other things, that the Co-operative "had not made a case for there having been a material improvement in the governance issues that had previously been identified". It found that there had been no material change of circumstance since its decision of 24 September 2002, and it confirmed the decision to direct the transfer of the...

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