Lambeth Council “shut down” a consultation on the proposed demolition of 300 homes without carrying out proper financial analysis of the alternatives, the High Court heard.
Had the local authority carried out a lawful consultation, the allegedly unlawful decision may not have been made to bulldoze and redevelop the estate against the wishes of a majority of residents, it is claimed.
Leigh Day, solicitors for the residents of Cressingham Gardens estate in Tulse Hill, claim funding options for refurbishment were still being hotly debated by the community when the town hall brought “down the guillotine”. Lambeth is accused of declaring an upgrade to the legally required Decent Homes Standard “unaffordable”, without properly taking residents’ views into account, the court heard.
And despite numerous requests over at least seven months, senior council officers failed to produce a “show-stopping” document purporting to conclusively prove that the council could not afford to do up the estate, built in the 1960’s and 1970’s. Lambeth Council regeneration boss Neil Vokes only offered to make the internal missive available on the first day of the hearing at the Royal Courts of Justice.
Eva Bokrosova, a tenant of the estate, is challenging Lambeth Cabinet’s “unlawful” decision on March 9 this year, to pull the plug on options one to three – the “refurbishment options” – before the consultation had properly concluded.
The council accepts cutting short the consultation, but claims as the decision-maker it was entitled to take a view on affordability after allegedly realising what cash was available. The local authority denies that action was unfair or unlawful and further denies failing to “conscientiously take into account consultation responses”.
Lawyers for the claimant are asking the judge, Mrs Justice Elisabeth Laing, to quash the decision, ordering the consultation to be run again.
David Wolfe QC, for Ms Bokrosova, told the court: “It [the council] was consulting on five possible options for the regeneration of the estate, leading to a decision on one of those. What it didn’t explain it would do, but did do, was to half way through that process, remove three of the options.
“When it comes to make the decision, it has to take into account the views of the consulted residents. The March narrowing of the options – that was a decision which needed to comply with the regulations as much as any other.
“The decision-maker tells these consultees how they are going to approach the process and the basis on which they are going to make the decision and then needs to act in accordance with the framework it set out. We say that’s informative here because just as the local authority had identified the arrangements set out for the purposes of the section [s105, Housing Act 1985] we say their failure to follow that process was demonstrably unfair.
“What I’m going to show you, is the council had set up the process through which residents were to be involved in the evaluation of affordability, and that evaluation of affordability was going to inform residents’ expression of preference on the options. By suddenly announcing a decision on affordability, the council was unfairly, we say, not giving effect to the process upon which it had embarked. It simply cut things short.”
Mr Wolfe explained how in the summer of 2013, the council employed a company called “Social Life” to gather residents’ views. He said: “They basically paint a picture of resident satisfaction with the estate but dissatisfaction in relation to some repair issues. There’s a basic theme of residents happy living there. It’s low crime and congenial.”
In Spring 2014, a “project team” was set up to include representatives from the council, estate residents and various consultants, the court heard. The aims were to “steer and coproduce the terms of reference” for the consultation and to “scrutinise, question, and investigate issues brought to the project team”. “There is a very clear scrutiny role”, said the QC.
The court heard how Gerlinde Gniewosz, a resident representative on the project team who owns a flat on the estate, emailed a council officer two days before a scheduled September 2014 meeting, complaining: “I have not received any paperwork yet,” including details of 30-year “cashflow”, “debt headroom” and the “HRA [Housing Revenue Account] financial model”.
Mr Wolfe said: “She identifies a range of financial information that she says is necessary in order to assess the financial viability question. At no point does anybody say to her: ‘You’re asking irrelevant or excessive questions’ or ill-informed questions. Nobody complains about the scrutiny she’s pursuing.
“Cashflow is an important question because proposals aren’t those that take place over a single year. Costs are spread over several years, balanced with rental income, tenants’ payments etc – to evaluate the affordability of the options.
“It [the council] accepts it cut short the process, before that wider discussion on affordability had taken place.”
The court heard the council did not include rental income in its financial assessment of the refurbishment options.
Neil Vokes, the regeneration programme director, had emailed project team members on October 16, last year, agreeing that NPV [Net Present Value] calculations would be carried out to provide a “comparable baseline” for the options residents would be discussing at a series of workshops.
In November, Mr Vokes wrote to residents inviting them to the workshops, with the first objective being to set up working groups for digging deeper into the issues, including the finances.
“What’s then recognised is there are other financing frameworks that can be looked at which open the whole thing up,” Mr Wolfe told the court. “Mr Vokes then describes the working groups for looking at resident management options, green retrofit to consider green grants, and the financial viability subgroup. What he rightly notes is that there were a number of groups that were interacting on the way the process was to play out. Those groups were to look at that in more detail.”
In his witness statement, which attempts to explain why the discussions were closed down, Mr Vokes pointed the finger at Ms Gniewosz for asking too many questions. Mr Vokes highlighted an untitled and a note of meeting he suggested Ms Gniewosz had penned, but which was in fact written by a financial adviser indirectly hired by the council. Mr Vokes said: “The problem was, that Ms Gniewosz challenged so many of the underlying assumptions and numbers.”
The adviser, Gary Chase, was invited to the meeting by Simon Slater, a council-appointed resident adviser from east London-based regeneration consultancy Strategic Urban Futures. Mr Chase’s note expressed surprise that the NPV comparison was not being calculated by someone with a financial background. The expert also referred to Ms Gniewosz’s “searching questions concerning stock condition information”, and outlined further concerns he had about such things as “double counting” in the council’s costings and below-market “buyback” valuations being attributed to homeowners’ properties.
The lawyer said Mr Vokes, in his statement, “doesn’t question the criticisms in the notes, he doesn’t question how this process would work, he attributes the note wrongly as it happens to Ms Gniewosz, as showing her inappropriate or excessive questioning”.
Responding to the criticism, Ms Gniewosz said in her statement: “The tenor is that I should not have been doing that [questioning the buyback values].”
The QC remarked that she was in fact doing her job. He said: “Not only is she operating within the framework, she’s actually doing it on a specific matter as something identified as requiring specific scrutiny.
“We say it simply gets us nowhere and is based on a misunderstanding by Mr Vokes as to what meetings he was at.”
Describing the difference between the agreed approach to discussions with residents and the March decision, Mr Wolfe told the court: “The vice here is that when you come in in a few months’s time, there’s a decision, you won’t see anything approximating a 30-year cashflow or let alone an NPV. The 30-year cashflow crucially informs whether you have got the money.”
The judge stepped in to suggest there was “an ambiguity” because the council stated to residents that “residents would be asked for opinions only on the options that were affordable”.
Mr Wolfe argued that by the time of the March decision, the council had not progressed the affordability question with residents. This was demonstrated by the fact Lambeth had not provided any funding insights, and not since November, when a ward councillor told attendees at a workshop: “[Option] One is an option we can do if residents want it.”
The barrister was quoting from Social Life’s notes of the workshops – “chunks” of which he said never made it to the Cabinet report.
He also referred to a number of occasions where Ms Gniewosz “expresses concerns over the lack of information to enable progression of the discussion”. This included an email she sent to Cllr Bennett on November 23, asking about the timing of the “Test of Opinion”, a proposed survey of residents’ views on the options.
“Can you provide reassurance to the residents that the [Cabinet] report is being written after the test of opinion and not before?” wrote Ms Gniewosz. “If it is being written before, then I fear that residents will have no confidence in the council’s statements and claims that no decision has yet been made.” The court heard that Cllr Bennett reassured her that “…of course, no decision can be taken before the test of opinion,” but as it turned out, the March decision came first.
In a December 2014 briefing note to the project team, resident adviser Simon Slater said the options were likely to be narrowed for discussion at future workshops, with a hint that it might be option five that would be struck off.
Mr Slater said: “They [the council] have suggested in their information pack that option 5 [full demolition] is too unpopular and expensive to go ahead. On refurbishment, in that pack they also said: ‘the council would need to look at ways of reducing the refurbishment figure and/or find alternative funding sources to deliver the works.’ This raises the question of the consultant looking at green refurbishment grants, the financial appraisal group NPV analysis and also the assessment of Lambeth Living [the then borough housing manager] of the works required internally plus window costs.”
It was the “alternative funding sources” that were the still a live issue at the time the decision was made, the court heard.
As there had been no further meetings of the finance subgroup, Mr Wolfe said “in a state of desperation” Ms Gniewosz raised these matters in a project team meeting.
On January 26 this year, after a resident-appointed quantity surveyor (QS) more than halved the council’s £15m refurbishment costs estimate, the court heard Mr Vokes told Mr Slater: “On refurbishment, my submission is to find details on those things that may be needed and areas of contention.” Mr Vokes said he would be asking Lambeth Living for a “properly costed report based on evidence and sensible aspirations”.
Mr Wolfe said: “We may have a dialogue between three different QS’s but even Mr Vokes is shining a light on what is lacking from Lambeth Living.”
The barrister added that in January of this year – even the £7m costing “isn’t necessarily a showstopper”.
There was an email exchange between Mr Slater and Mr Vokes in late January, with the adviser feeding back to the council residents’ requests for information on “options and offers”, and “refurbishment”.
“Here’s the dialogue between them, making no mention of what they’re about to say,” said the QC. “No suggestion here from Mr Vokes that the roof’s about to fall in.”
Then on February 13, less than a fortnight before Cllr Bennett wrote to residents about the demolition decision, Mr Slater was still giving his views on the consultation timeline needing to reflect the “conclusion of workstreams and feedback to project board to assess outcomes…residents will want time to digest the information sent to them…”
There were ripples of laughter from the public gallery when Mr Wolfe read an extract of Cllr Bennett’s letter of February 26, telling residents: “The council has now undertaken the necessary financial analysis on the refurbishment options. We have worked with residents on these costings, and even using a best-case scenario the lowest cost for refurbishment of the whole estate is still three times what the council can afford, and it would not be right to consult with residents about an option that is simply unaffordable and cannot happen.”
“You can imagine what a surprise that was to residents,” said the barrister. “The last thing residents knew about the two other options four and five was that option five was ‘simply unaffordable’. What’s promised is an opportunity to explain the issue with affordability. What people are expecting isn’t’ to be told what the issue with affordability is but to be part of that process on deciding viability of the options, on which they would then express their views.”
“It [Lambeth Council] suddenly announced its decision on affordability, not doing any 30-year evaluation as was agreed would be the case,” said the barrister.
“If you’re going to reach a view on affordability – whether the council can afford to pay for it – you need to look at the council’s sources of income. What the council focused on was the HRA headroom.
“A critical and important point is that at no point did the project team or financial viability subgroup discuss any of those wider questions about affordability which came to be the show-stopping question. In simple terms, it rolled forward without discussion on those questions or agreement being reached.”
In a second witness statement, Mr Vokes said that the two most recent refurbishment costings – the residents’ £7m and the council’s revised £9.4m, “were always going to be unaffordable unless the sum available from the HRA could be increased above £3.4m”. The officer claimed this money was available from the 2012 Lambeth Housing Standard borough-wide refurbishment pot.
Mr Vokes added that on around February 16, he received “the updated HRA business plan that no more than £3.4m would be available for the estate from the HRA”, which Mr Wolfe said was the first time this sum had been referred to as a cash ceiling for funding the refurbishment of Cressingham Gardens.
Mr Wolfe added: “That has not featured in the discussion. His explanation was that suddenly from the sky, there is a simple cut-off figure to be compared with refurbishment cost to produce the affordability conclusion.”
The QC referred the court to evidence which showed that the sum was not even a provision, but an “early cost estimate”, with calculations for things like new rooves and new kitchens and bathrooms for council tenanted properties.
This evidence included the council’s March 2013 response to a freedom of information request by Ms Gniewosz, later confirmed in an email from Sue Foster OBE, executive director for housing, regeneration and environment.
Ms Foster wrote: “Therefore, the £3.4m has never been an allocated budget for the estate, but is an initial cost estimate of works required to bring properties up to Standard.”
Residents were clearly trying to identify the “nature and provenance of the £3.4m”, said the QC.
The barrister said Mr Vokes in his statement focused “entirely and squarely on the issue arising from the HRA business plan”, when that “isn’t the be all and end all of funding sources”.
“It’s not just a narrowing down [of the affordable options], it’s a narrowing down in the complete ignorance of the ongoing discussions about cashflow and other sources of money and so on,” added Mr Wolfe.
Following another freedom of information request by Ms Gniewosz shortly after the March Cabinet meeting, in which she requested the evidence supporting the decision, the council stated that the “March 9th Cabinet paper includes both within the body of the report and the accompanying appendices, the documentation, evidence and analysis used to support the conclusion that options 1-3 were not affordable.”
Ms Gniewosz gave the council a further opportunity to release the material, by requesting an internal review, and a copy of a business plan “dashboard” was supplied, the same document as was provided in December 2014. The council reiterated that the March Cabinet report “is all the recorded information that we hold relating to the estimated costs of refurbishment of the Cressingham Gardens estate”.
Nor had the elusive document been supplied to the court as part of the council’s supporting evidence, but Lambeth’s barrister Jon Holbrook, claimed it did exist. He said: “There are so many documents in this case, Mr Vokes has made an assertion and if I had to bring a document to support every assertion he makes, there would be a lot more documents than there are already. I can see it’s relevant and I can copy it and bring it to court.”
Mr Wolfe remarked: “You can see what efforts Ms Gniewosz made to get hold of that document and you can see what result she got from that process.”
In a statement Ms Gniewosz said: “I don’t believe there was an updated HRA business plan.”
Mr Wolfe said: “The suggestion that this figure came from some new analysis doesn’t stand scrutiny, but anyway, even if some document were to be produced that showed what it claims to show, that was precisely the document that should have been disclosed in the process.”
The QC said it was wrong for the council to claim that: “Even if we’d done it properly, it wouldn’t have made any difference,” because there was so much still to discuss.
He referred the court to the section of Ms Gniewosz statement entitled: “What needed to be considered,” and added: “She does her best with the publicly available information. She explains how even within the HRA headroom, Option 1 could be afforded, even assuming the worst case estimate of £16m. She says it is achieved because the refurbishment costs aren’t accrued in a single year …it would take place over six years.”
Concluding his case, Mr Wolfe said: “Lambeth put in place the arrangements it considered appropriate to inform residents and allow them to make and have considered their representations. Lambeth did that through putting in place workshops and subgroups to evaluate and inform residents who could then express their opinions.
“Lambeth cut short that process – they accept they cut short that process – by ruling out options one to three, but keeping in options four and five, including five which had always been said to be unaffordable.
“It did not consider the outputs of the sub-groups to be pertinent in that exercise. It did all that on the basis of a new assertion on affordability which had simply not been considered through the adopted and promised process.
“Had affordability been evaluated in that way then that could have been shown that there is in fact HRA headroom, and also other funding options could have been considered.
“And that’s why we say there’s been an unlawful failure to conscientiously take into account the consultation responses and that’s why we do invite the court to declare that the 9 March 2015 decision was unlawful, and to quash it.”
The case, heard on November 3 and 4, continues.
Read Court Report Part 2