Nestwood Homes Developments Ltd, R (On the Application Of) v South Holland District Council

A local authority is not bound to accept a Local Government Ombudsman recommendation about remedy, although it must take the recommendation seriously and decide its response rationally, fairly and in good faith. Findings of maladministration, injustice and loss bind the authority unless successfully challenged. Affordability and the effect of compensation on public services are lawful relevant considerations, and the authority may give them significant weight. Where the decision directly affects substantial financial interests, fairness ordinarily requires disclosure of the material placed before the authority and an opportunity to make informed written representations. Oral representations are not necessarily required. Elected councillors may approach the issue with a predisposition to conserve public resources, provided they retain an open mind and there is no positive evidence of a closed mind or predetermination.

Nestwood challenged the Council’s decision of 15 May 2013 concerning how it should respond to Local Government Ombudsman findings of serious maladministration, injustice and loss. The Ombudsman had recommended an apology and compensation of about £250,000 to Nestwood and its director. After several reconsiderations, the Council accepted the findings but decided to pay £50,000 plus interest, apportioned between them.

The claim alleged inadequate reasons, excessive weight given to affordability, failure to consider relevant matters, procedural unfairness, predetermination and irrationality. The central issues were the extent of the Council’s discretion after an Ombudsman report, the weight it could give to financial pressures, and what procedural fairness required.

1. Outcome. The claim for judicial review was dismissed. The Council acted within the law in deciding to pay £50,000 plus interest.
2. Statutory framework. Under the Local Government Act 1974, findings of maladministration, injustice and loss bind the authority unless successfully challenged. The authority is not bound to accept the Ombudsman’s recommendation as to remedy. Its response remains subject to ordinary public law requirements, including good faith, rationality and fairness. The statutory publication machinery indicates that political sanctions, rather than an automatic legal duty to implement the recommendation, are contemplated.
3. Reasons and affordability. Although the Act imposed no duty to give reasons, the Council chose to do so. Its reasons, read with the Chief Executive’s report and financial note, adequately explained the decision. Affordability and the impact of compensation on the Council’s ability to provide services were lawful relevant considerations. The Council was entitled to give its severe financial constraints significant weight. It was not required expressly to consider a larger payment or payments spread over several years, since the recommendation and the financial material sufficiently addressed the general issue.
4. Fairness. The Council was required to provide Nestwood with the material placed before it and an opportunity to make informed written representations about remedy. It was not required to permit oral representations at the meeting. The Council had provided the Chief Executive’s report in advance and had afforded an opportunity to make written representations.
5. Predetermination and irrationality. Councillors could be predisposed to conserve resources, and their prior involvement did not itself establish a closed mind. Positive evidence was required to show an appearance of predetermination. The balanced report, the increase from the earlier proposed payment and the Council’s consideration of the further Ombudsman report showed that it remained open to persuasion. The irrationality challenge therefore also failed.

First-instance judicial review claim. The judgment records an earlier permission refusal by Nicol J, dated 16 August 2012, and withdrawal of earlier proceedings after a further Ombudsman report, but no appeal from the present decision.