Panayiotou v Waltham Forest London Borough Council

The Court of Appeal considered the meaning of the word "significantly" in the Supreme Court's vulnerability test in Hotak v Southwark LBC ([2015] UKSC 30) when applied to section 189(1)(c) of the Housing Act 1996. The court reaffirmed that the correct comparator is an ordinary person if made homeless and that the enquiry is a practical, contextual assessment concerned with an applicant's vulnerability if not provided with accommodation. "Significantly" was held to be qualitative rather than to import a novel quantitative threshold: the applicant must be at risk of suffering harm or detriment to a degree that would make a noticeable difference to his or her ability to deal with homelessness.

The court applied that test to the two appellants. The review decision in Mr Panayiotou's case applied the correct legal test and the appeal was dismissed. By contrast, the reviewer in Mr Smith's case appeared to apply an additional quantitative threshold (requiring "more harm plus") and his decision was set aside and remitted for redetermination.

The court also held that contracting out homelessness review functions under the 1996 Order and associated arrangements does not absolve the public sector equality duty (PSED) because the duty applies to the authorised person and section 72 of the Deregulation and Contracting Out Act 1994 treats acts of an authorised person as acts of the authority; contracting out was not unlawful on the constitutional or procurement points raised in the appeal.

Background and parties

• The appeals arose from two separate homelessness review decisions under Part VII of the Housing Act 1996 made by local housing authorities and challenged by Mr Jesse Panayiotou and Mr Steven Smith. Both appellants contended that they were "vulnerable" within the meaning of section 189(1)(c) and therefore in priority need for accommodation. Both appeals reached the Court of Appeal from the County Court at Central London.

Nature of the application

Each appellant appealed under the statutory route to challenge the lawfulness of a homelessness review decision. The principal legal issue in both appeals was the correct meaning and application of the word "significantly" in the Supreme Court's formulation of the comparative vulnerability test in Hotak v Southwark LBC. In Mr Smith's appeal additional issues were raised about whether a local authority may lawfully contract out homelessness review functions in circumstances engaging the public sector equality duty and whether the procurement and contractual arrangements complied with the PSED and the council's constitution.

Issues framed by the court

1. What is the proper meaning of "significantly" in the comparative vulnerability test derived from Hotak?
2. Whether the reviewers in the two cases applied the correct legal test and made requisite factual findings.
3. Whether a local authority can contract out homelessness review functions consistently with the PSED and its constitution, and whether the procurement complied with the PSED (raised in Mr Smith's appeal).

Court's reasoning

The court reviewed prior authorities (including Pereira and a line of Court of Appeal decisions) and concluded that Hotak correctly established a comparative test using the comparator "an ordinary person if made homeless". The court rejected an interpretation that "significantly" imposes a new quantitative threshold akin to the statutory definition of "substantial" in the Equality Act 2010. Instead "significantly" should be read qualitatively: the applicant must be at risk of suffering harm or detriment to a degree that makes a noticeable difference to his or her ability to deal with being homeless, focusing on impairment in the ability to find accommodation or to cope without it.

Applying that formulation, the court found the reviewer's reasoning in Mr Panayiotou's case to apply the correct test and to take account of relevant facts; his appeal was dismissed. In Mr Smith's case the reviewer appeared to treat "significantly" as requiring a higher quantitative threshold and to exclude an applicant who was "more vulnerable" but not so beyond some numeric measure; the court allowed that appeal and remitted the matter for redetermination.

On contracting out and the PSED the court held that statutory contracting-out under the 1996 Order and the operation of section 72 of the Deregulation and Contracting Out Act 1994 mean that the authorised body (or its employees) exercise the function and are subject to the PSED; the PSED therefore continues to apply and contracting out is not precluded. The court rejected the constitutional argument that the council could not contract out review functions in the circumstances and dismissed the procurement/PSED challenge based on the material before it.

Other points: the court observed that appeals under section 204 may give rise to wide-ranging challenges but noted that some such issues (for example procurement challenges) may be more appropriately prosecuted by other routes; comments on scope were obiter.

Appeal allowed in part. The court held that "significantly" in Hotak is to be read qualitatively: an applicant is vulnerable if, compared to an ordinary person if made homeless, he or she is at risk of more harm or detriment to a degree that makes a noticeable difference to the ability to deal with homelessness. Applying that test the court dismissed Mr Panayiotou's appeal (reviewer had applied the correct test) but allowed Mr Smith's appeal because the reviewer appeared to apply an impermissible quantitative threshold; Mr Smith's case was remitted for redetermination. The court also held that contracting out review functions under the 1996 Order does not avoid the PSED and that the procurement and constitutional arguments failed on the facts before the court.

On appeal from the County Court at Central London (Recorder Bellamy & Recorder Lowe QC) (case numbers B40CL365 and C40CL135). The Court of Appeal ([2017] EWCA Civ 1624) allowed Mr Smith's appeal in part and remitted his case for redetermination and dismissed Mr Panayiotou's appeal.