Case No: C1/2011/1243
Neutral Citation Number: [2011] EWCA Civ 1575
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION 
THE ADMINISTRATIVE COURT
SIR MICHAEL HARRISON
(Sitting as a Deputy High Court Judge)
[2011] EWHC 1060 (Admin)
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 16/12/2011
Before :

LORD JUSTICE PILL
LADY JUSTICE ARDEN
and
LORD JUSTICE MCFARLANE
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Between :

	The Queen on the application of Milton Keynes Council & Ors	Appellants	
	- and -		
	Secretary of State for Communities & Local Government	Respondent	
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Timothy Mould QC and Richard Moules (instructed by Milton Keynes Council) for the Appellants
Tim Morshead QC (instructed by Treasury Solicitor) for the Respondent

Hearing date : 23 November 2011
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Judgment
LORD JUSTICE PILL : 
1.	This is an appeal against a decision of Sir Michael Harrison, sitting as a Deputy High Court Judge, on 11 April 2011.  Milton Keynes Council (“the council”), Oxford City Council and Newcastle City Council sought to quash a decision of the Secretary of State for Communities & Local Government (“the Secretary of State”), dated 1 September 2010, to make two statutory instruments, the Town & Country Planning (General Permitted Development) (Amendment) (No.2) (England) Order 2010 (“the GPDAO”) and the Town & Country Planning (Compensation) (No.3) (England) Regulations 2010 (“the compensation regulations”).  The councils sought to quash certain provisions of those statutory instruments which relate to houses in multiple occupation (“HMOs”).  The judge refused the application and the council appeal to this court.  The council’s claim before the judge and in this court is that the Secretary of State erred in law, in July 2010, in failing sufficiently to consult, before making the orders, local planning authorities.  The judge held that “the failure of the [Secretary of State] to consult [councils] directly, rather than through their representative bodies, was not so unfair in the circumstances as to render the consultation exercise unlawful.”  
The statutory scheme
2.	The judge helpfully described the legislative changes effected by the Orders at paragraphs 2 to 7 of his judgment:
“2. 	The GPDAO amends Class I of Part 3 of Schedule 2 to the General Permitted Development Order 1995 by including, as permitted development under Class I, the following development: 
‘Development consisting of a change of use of a building- 
(a) to a use falling within Class C3 (dwelling houses) of the Schedule to the Use Classes Order from a use falling within Class C4 (houses in multiple occupation) of that Schedule; 
(b) to a use falling within Class C4 of that Schedule from a use falling within Class C3." 
3.	The claimants' objection relates to paragraph (b), which grants a new permitted development right enabling a change of use from use as a single dwelling house to use as a small house in multiple occupation (an "HMO") without the need to obtain planning permission. There is no objection to paragraph (a), which allows a change of use in the reverse direction and which had been contained in a previous statutory instrument. 
4.	The Compensation Regulations limit the liability of local planning authorities ("LPAs") to pay compensation in the event that they decide to make an Article 4 direction to remove the new permitted development right granted by the GPDAO. It does so by providing in Regulation 2 as follows: 
‘For the purposes of paragraphs (2A)(a) and (3C)(a) of section 108 of the Act (compensation where development order or local development order withdrawn), development of the following description is prescribed- 
... 
(b) development permitted by Class I of Part 3 of Schedule 2 (changes of use relating to dwelling houses and houses in multiple occupation).’ 
5.	Section 108 of the Town and Country Planning Act 1990 provides for the payment of compensation in certain cases where planning permission granted by a development order is withdrawn and where, on an application for planning permission for that development, the application is refused or permission is granted subject to conditions. 
6.	The combined effect of Regulation 2 and section 108 of the 1990 Act is convoluted to explain, but the parties are agreed that the resulting position is that LPAs' liability to pay compensation where they make an Article 4 direction withdrawing the permitted development rights under the GPDAO is reduced in the following two situations: 
i. Where 12 months' notice is given in advance of an Article 4 direction taking effect, there will be no liability to pay compensation, and 
ii. Where an Article 4 direction is made with immediate effect or with less than 12 months' notice, compensation will only be payable in relation to planning applications which are submitted within 12 months of the effective date of the direction and which are subsequently refused or are granted permission subject to conditions. 
7.	The position therefore is that, prior to 1 October 2010 when the GPDAO and the Compensation Regulations came into force, planning permission was needed for a change of use from a dwelling house to an HMO (ie from Class C3 to Class C4) so that LPAs could control the potential amenity and environmental problems that can arise from HMOs, by either refusing planning permission or by the imposition of planning conditions. Now that such a change of use is permitted development, the LPAs have no control over the change of use, except by making an Article 4 direction which will expose them to the risk of compensation in the circumstances I have just described.”
An attempt to pray against the statutory instruments in Parliament with a request that they be annulled failed and they came into force on 1 October 2010.  
3.	The council made two article 4 directions.  The first affects the entire Borough and was made on 22 December 2010 and comes into effect on 23 December 2011.  The second, affecting only a part of the Borough, was made on 29 December 2010 and came into effect on following day.  
The problem 
4.	As the Local Planning Authority (“LPA”) for its area, the council has for many years suffered problems as a result of the conversion of single dwelling houses into HMOs.  Conditions have been imposed on grants of permission limiting the number of lettable rooms and dealing with such questions as cycle storage, parking, on-site clothes drying facilities, bin storage, and sound insulation.  Mr Nicholas Fenwick, the council’s Assistant Director of Planning said in his statement of 22 September 2010 that HMOs “can have negative effects to the community in terms of social cohesion, parking, character, noise and litter”.  At the date of the statement, prepared for the present litigation, there were about 160 HMOs in the Borough with planning permission.  Conditions have been imposed relating, for example, to noise mitigation, parking and waste management.  Mr Fenwick acknowledged the difficulty of enforcing planning control stating that, as of September 2010, “there are still in excess of 400 existing unauthorised HMOs . . . operating without planning permission today in Milton Keynes.”  I assume the figures reflect a situation which had existed for some time.    
The 2009 Consultation 
5.	Mr Fenwick’s concerns were shared nationally and on 13 May 2009, the Government published a consultation paper entitled ‘Houses in Multiple Occupation and Possible Planning Responses’.  In a comprehensive consultation exercise, three options were canvassed:
(1)	Option 1:
	Make no change to the planning legislation but promote best practice, focusing on local management of HMOs through other means and existing legislative powers; 
(2)	Option 2:
	Amend the Use Classes Order (“UCO”) to introduce a new HMO use class and a definition of an HMO along the lines of the Housing Act 2004;
(3)	Option 3:
	Amend the UCO to introduce a new HMO use class and a definition of an HMO along the lines of that in the Housing Act 2004 and also amend the GPDO to allow for changes of use between a dwelling and an HMO to be permitted development, leaving LPOs to issue directions under article 4 of the GPDO if they wish to remove permitted development rights in respect of defined areas.  
6.	Sixteen specific questions were posed in the consultation.  A total of 948 responses were received and a summary of them was published in January 2010.  It revealed:
(i) 	“the majority of respondents were in favour of the second option outlined in the consultation” (paragraph 1.4); 
(ii)	“option 3 was deemed to be overly bureaucratic and ran the risk of local authorities being subject to compensation payments to development” (paragraph 1.5); 
(iii)	of those consultees who expressed a preference “a combined total of 92% expressed a preference for some form of option 2” (paragraph 2.14), “option 1 was preferred by 6%” (paragraph 2.15) and “option 3 was preferred by 1%” (paragraph 2.17).  
At paragraph 3.63 it was stated:
“Option 3 was the least popular option, being preferred by only 1% of respondents.  These were mainly individuals or landlords, although a few local authorities who were not experiencing problems with the concentration of HMOs were supportive of this option.  It was felt that this option could give LPAs the highest level of control to manage the problems locally.”
The April 2010 Orders 
7.	In the event, statutory instruments which entered into force on 6 April 2010 gave effect to a form of option 2.  It amended the Use Clause Order  (“UCO”) to introduce a new HMO use class (C4) together with a definition of HMO along the lines of the Housing Act 2004 and amended the GPDO to permit a change of use from an HMO to a dwelling house without the need for planning permission.  Planning permission would continue to be required to change the use of a dwelling house to use as a small HMO, the basic requirement supported by the great majority, over 90%, of the consultees.  
New policy
8.	Following the general election of May 2010, the new government took the view that the level of regulation provided in the 2010 Orders, the ‘blanket requirement’ for planning permission, was not justified.  The Government was concerned that the requirements would deter prospective landlords from entering the market, leading to inadequate supplies of low-cost housing in many areas.  The draft Ministerial statement provided:
“This change will allow the free development of smaller shared housing, which is a vital component of our private rented sector, unless there is a serious threat to the area.”
The 2010 Consultation
9.	The question arose whether further consultation was required before the new policy was implemented.  Ministers were advised that there was no formal requirement to consult but that it would be helpful to seek the views of key stakeholders.  If significant issues arose there could, it was contemplated, be a return to the possibility of a formal consultation.  
10.	Explaining the Government’s position in a statement dated 17 February 2011, Ms S.G. Turner, Team Leader with policy responsibility for the UCO at the Department for Communities and Local Government stated, at paragraph 28:
“However, it was not considered prudent simply to announce unilaterally that Option 3 would be implemented without seeking the view of key interests one final time to verify that there was nothing further that they wished to bring to the [Secretary of State’s] attention in relation to this policy.  In view of the unpopularity of Option 3 during the first public consultation, Ministers were conscious that any implementation of Option 3 would have to be sensitively handled.  To this end, in accordance with the advice of their officials, Ministers agreed that it would be sensible to give key partners, representing the full range of interests in this policy area, one last opportunity to express any views in relation to Option 3 so that they could inform the detailed implementation of the policy in due course.”
(The expressions “one final time” and “one last opportunity” appear to me to be insensitive when it was the Government’s own change of mind that led to the need to permit further representations.)
11.	Ms Turner’s approach is reflected in advice given to Ministers on 21 May 2010.  It was noted that the Minister had “envisaged an early announcement and looked for implementation as soon as possible.”  The proposed change “would in effect restore flexibility between family housing and shared housing.”  Reference was made to the previous consultation and to option 3 which, in something of an understatement, was stated to be “not well supported when it was put forward in the consultation.”  Ministers were advised that “it would be helpful to seek the views of key stakeholders and to work with them to develop the proposals and achieve a workable solution.”  “Unless discussions with key stakeholders raised significant new problems, we will aim to introduce the necessary legislative changes before the summer recess.”  
12.	At paragraph 27, Ms Turner stated that Ministers agreed that a further consultation was not necessary.  There had already been “detailed analysis of views” on Option 3. 
13.	The “key partners” selected were:
(i)		National HMO Lobby; 
(ii)	Local Government Association;
(iii)	British Property Federation; 
(iv)	Planning Officers’ Society; 
(v)	Residential Landlords’ Association; 
(vi)	National Landlords’ Association; 
(vii)	National Union of Students; 
(viii)	Universities UK  
14.	The consultation questions were posed in a letter of 17 June 2010.  Responses were required within three weeks:
•	Do you consider that the proposals will allow local areas to take action without imposing unnecessary burdens on unaffected areas? 
•	If not, why not?  What do you think could be done, within the constraints of the current planning framework, instead? 
•	Do you think there will be unintended consequences as a result of the proposed changes?  If so what will they be and how do you think they could be mitigated?
•	Do you think there are any other changes which need to be made to make this approach work more effectively e.g. to HMO definition? 
•	Do you have any information on costs/benefits which would be relevant to impact assessment? 
•	Do you think LPAs will choose to issue Article 4 directions with immediate effect or less than 12 months notice? 
•	How should we monitor the impact of these proposals and assess their success?  What is the best review approach? 
•	Do you have any comments on the legislation as drafted? 
These were quite general questions, permitting of a range of responses.  
15.	The Royal Town Planning Institute (“RTPI”) discovered the consultation through its members and asked to be consulted.  The council found out via the RTPI when 17 days of the consultation period remained.  The council made representations, to which I will refer, by letter dated 9 July 2010.  
16.	In an Impact Assessment dated September 2010, the Government acknowledged that, under the proposed Orders, “where directions have been made with less than 12 months notice local authorities may be liable to pay compensation.”  Under the heading “Key assumptions/sensitivities/risks” it was stated:
“There is a great deal of uncertainty regarding the extent of the problem of HMOs and the extent to which local authorities will decide to use their article 4 powers.  Costs and benefits will vary by local authority depending on level of HMO development.
. . .
It is assumed that 12% of local authorities could make article 4 directions; applying a blanket requirement for planning permission in their areas.  There is a risk that there may be an increase in concentration of HMOs with associated problems, such as noise, litter, ‘ghost towns’, in some areas if local authorities do not take other action to prevent this where it is required.”
Submissions 
17.	For the council, Mr Mould QC acknowledged that the Secretary of State was not under a statutory duty to consult.  For his part, Mr Morshead QC, for the Secretary of State, accepted that if he did consult, a proper consultation was required.  In R v North and East Devon Health Authority ex parte Coughlan [2001] QB 213, Lord Woolf MR, giving the judgment of this court, stated, at paragraph 108: 
“It is common ground that, whether or not consultation of interested parties and the public is a legal requirement, if it is embarked upon it must be carried out properly. To be proper, consultation must be undertaken at a time when proposals are still at a formative stage; it must include sufficient reasons for particular proposals to allow those consulted to give intelligent consideration and an intelligent response; adequate time must be given for this purpose; and the product of consultation must be conscientiously taken into account when the ultimate decision is taken (R v Brent LBC ex parte Gunning (1985) 84 LGR 168).”
18.	As between the April 2010 and the September 2010 Orders, the Government had gone from one end of the spectrum to the other.  Before that was done, a fuller consultation was required.  The fairness of a consultation, it was submitted, necessarily included a fair approach as to what parties should, in the circumstances, be consulted.  All local planning authorities should have been consulted and given an appropriate time to respond.  
19.	The questions posed in 2010 were different from those posed in 2009, it was submitted.  They plainly required a response from LPAs.  Only LPAs, for example, could state whether article 4 directions with immediate effect would be chosen.  If further information was needed by the Secretary of State, LPAs were the obvious entities to provide it.  
20.	Further consultation would have permitted consideration of a range of intermediate measures and better ways of achieving the Secretary of State’s objectives.  Further opportunity should have been given to consider what the Secretary of State had raised.  In his third statement, Mr Fenwick has set out a list of matters which might have been raised with the Secretary of State by the council, and by other LPAs.  Their input as to the practical effects of the proposal was essential, it was submitted. 
21.	In its response of 9 July 2010, the council stated that it was “outraged at the narrowness and shortness of the consultation.”  “The scope of the consultation is too narrow.”  It was hoped that the Department would “reflect on their error of judgment on this and delay the implementation of these changes until the impacts have been considered in full which can only happen after a full consultation.”  It was requested that the Department “rejects the proposed amendment in terms of the lack of evidence provided to justify its conception and the lasting damage which will be caused to communities, if implemented.”  
22.	While including specific answers to some of the questions posed, a fundamental objection to the proposal was expressed by the council.  “The evidence gathered during the previous 2 year long consultation provided proof that this is the least popular option.”  “No evidence has been provided that there is a need for a further change other than landlords being opposed to the extra regulation.”  
23.	The RTPI’s response stated:
“In the Institute’s view it was an error not to allow a formal period of consultation on these proposals which would have drawn on the practical experience and judgment of local authorities and communities, in particular those that expressed views on the last set of proposals which were recently and widely discussed.”
24.	The Planning Officers’ Society considered “that there should be a formal consultation with local authorities and other organisations before making this change.”  It was stated that the earlier consultation “showed an overwhelming preference for managing problems associated with high concentrations of HMOs through planning control, in the way which was introduced in April.”  The present very limited informal consultations did not give “the opportunity for all parties to give their views.”  The Local Government Group responded in a similar way.   
25.	In R v Secretary of State for the Home Department ex parte Doody [1994] 1 AC 531, Lord Mustill, at page 560, considered the concept of fairness in a different context, that of affording a prisoner serving a mandatory life sentence the opportunity to submit in writing representations as to the period he should serve for the purposes of retribution and deterrence.  Amongst the principles stated, which are of more general application, were:
“(3)	The principles of fairness are not to be applied by rote identically in every situation. What fairness demands is dependent on the context of the decision, and this is to be taken into account in all its aspects. 
. . . 
(5)	Fairness will very often require that a person who may be adversely affected by the decision will have an opportunity to make representations on his own behalf either before the decision is taken with a view to producing a favourable result; or after it is taken, with a view to procuring its modification; or both.”
26.	Mr Morshead submitted that, in making the order, the Secretary of State clearly had a political agenda and the decision to make the statutory instruments was overtly political.  The Secretary of State was entitled to inject a degree of urgency into the perceived need.  Mr Morshead relies on the approval by Laws LJ in R v Secretary of State for Education and Employment ex parte Begbie [2000] 1 WLR 1115, at 1130, of the statement in Wade and Forsyth Administrative Law, 7th edn (1994), p.404:
“Ministers’ decisions on important matters of policy are not on that account sacrosanct against the unreasonableness doctrine, though the court must take special care, for constitutional reasons, not to pass judgment on action which is essentially political.”
Laws LJ added, at page 1131C:
“The more the decision challenged lies in what may inelegantly be called the macro-political field, the less intrusive will be the court’s supervision.”
27.	In that context, reliance was placed on the statement of Lord Bridge in Re Westminster City Council [1986] AC 668, at 692H, when considering the doctrine of legitimate expectation:
“If the courts were to extend the doctrine of legitimate expectation to embrace expectations arising from the ‘scale’ or ‘context’ of particular decisions, the duty of consultation would be entirely open-ended and no public authority could tell with any confidence in what circumstances a duty of consultation was cast upon them.  The probable reaction of authorities to such an extension of the doctrine would be to opt for safety and assume a duty of consultation whenever there was room for doubt, to the detriment of the efficient conduct of public business.  The suggested development of the law would, in my opinion, by wholly lamentable.”
28.	In the Queen (on the Application of Greenpeace Limited) v Secretary of State for Trade & Industry [2007] Env. L.R. 623, Sullivan J, at paragraph 62, stated: 
“It must also be recognised that a decision-maker will usually have a broad discretion as to how a consultation exercise should be carried out.”
29.	On the strength of those authorities, Mr Morshead first argued that the decision-maker can decide whom to consult.  The council was not the object of consultation.  The council was outside the process and could not complain of unfairness.  Reliance was placed on the decision of this court in Buckinghamshire County Council v Royal Borough of Kingston-upon-Thames [2011] EWCA Civ 457.  It was held, in a quite different context, that the decision-maker’s duty, in the particular statutory context, was to the patient SL and not to another local authority upon whom a financial burden might fall as a result of the decision.  In a judgment with which Patten LJ and Munby LJ agreed, I stated, at paragraph 34: 
“In those circumstances, it is extremely difficult to find any legal basis upon which a duty of fairness to the appellants, in the form of a duty to consult them, when making a decision as to the placement of SL, can be established.”
Mr Morshead submitted that, in the present context, there was no duty to consult the council.  
30.	In general submissions, Mr Morshead stated that this was a decision in the macro-political field.  It was made in a context in which the statutory instrument would be subject to Parliamentary scrutiny by the negative resolution procedure.  In this particular context, the council had had a full opportunity to express its views on HMOs in 2009.  Any detailed concerns could have been expressed then.  In 2010, the Secretary of State was entitled to consult on a more limited basis and to impose a strict timetable.  In making his decision, the Secretary of State was aware of the downside of his proposals for local planning authorities, possible degrading of some areas and a liability to pay compensation in some circumstances.  
31.	In a respondent’s notice, the Secretary of State submitted, as a freestanding ground, that because the statutory instruments were subject to Parliamentary scrutiny, and because the attempt to annul failed in Parliament, the court should in any event defer to the Parliamentary decision.  
Conclusions
32.	I do not accept the submission that a decision-maker can routinely pick and choose whom he will consult.  A fair consultation requires fairness in deciding whom to consult as well as fairness in deciding the subject matter of the consultation and its timing.  The Buckinghamshire case was in a different statutory context in which it was decided that the local authority need not be consulted.  No general principle that it is for the decision-maker alone to decide whom to consult can be extracted from that decision.  
33.	The particular context must, however, be considered.  The fairness of the 2010 consultation must be considered in the context of a very full consultation having been conducted in 2009.  In that consultation, over a longer period, the council and all local planning authorities were given an opportunity to make representations upon a series of options, which included Option 3 subsequently adopted by the Secretary of State in September 2010.  Option 3 was placed before them in 2009 and detailed submissions as to its adverse impact, and as to specific problems likely to arise, could have been, and probably were, made.  I do not accept that, upon a change of Government policy, the entire process needed to be repeated.  In 2010, the Government was entitled to conduct a more limited consultation, both as to the identity of consultees and the content and duration of the consultation.  
34.	The council became aware of the 2010 consultation, as might be expected given the parties consulted.  Having worked on the issue during the previous year, it could be expected to have relevant information available and to react promptly.  The council did make representations, though directed primarily to the fundamental question whether the political decision was a sound one.  
35.	As I see it, the appellants’ best point is that it was local planning authorities who were best able to answer the questions actually posed in the letter of 17 June 2010.  There is force in the submission that, if the Government wanted answers to those questions, it should have turned to local authorities to provide them.  However, I am not persuaded that the consultation is rendered unfair by the failure to consult them directly.  
36.	The central issue to be decided by the Secretary of State was whether to permit a change of use from a dwelling house to a HMO without the need for planning permission.  That required what was, adopting the expression of Laws LJ, a macro-political decision.  It was to be taken and implemented, it was stated, unless “significant issues” or “significant new problems”, the expressions used in the Ministerial briefing, arose during discussions with key stakeholders.  It appears to me from Ms Turner’s evidence, and the questions posed, that the consultation was conducted mainly as a public relations exercise because implementation of Option 3 “would have to be sensitively handled.”  It was still capable of being fair.  The possibility was left open, in the framing of the questions, that significant issues would arise which required further consultation.  The council has been unable to identify any such matters and I am not persuaded that they existed.  
37.	In a statement submitted shortly before the hearing before the judge, Mr Fenwick valiantly attempted to identify points which should have been addressed more fully but they appear to me to be matters inherent in the situation as it existed in 2009.  The Secretary of State was well aware of the strongly held views of local authorities, and other bodies, as a result of the 2009 consultation.  
38.	That recent and comprehensive consultation in 2009 is in my judgment the key to the decision in the present situation.  The Secretary of State was minded to make the orders challenged notwithstanding the strong, articulated objections to them by local planning authorities, of which he was aware.  The decision to make them was a political decision which the Secretary of State was entitled to make.  In the circumstances, he was then entitled, first, to make the consultation a limited one and, secondly, to decide that there was no evidence of significant new issues arising, which required fuller consultation.   
39.	If that is right, there is no need to consider the interesting issue raised as to the effect of the existence of a Parliamentary procedure upon the duty to consult. 
40.	For these reasons, which are essentially the same as those of the judge, I would dismiss this appeal. 
LADY JUSTICE ARDEN :
41.	I agree. 
LORD JUSTICE MCFARLANE :
42.	I also agree.