Court of Appeal rejects challenge to £31m decision by city council to retrofit sprinklers to tower blocks after Grenfell

Birmingham City Council has defeated a Court of Appeal challenge over whether it failed to take account of legally relevant matters when on 24 May 2018 it confirmed its decision to retrofit sprinklers in its tower blocks following the fire at Grenfell Tower in London.

The appellant in Clarke, R (On the Application Of) v Birmingham City Council (Rev 1) [2020] EWCA Civ 1466 lives on the 20th (top) floor of a tower block owned by the respondent local authority.

Mr Clarke appealed against the order of HHJ David Cooke, sitting as a Deputy High Court Judge, on 4 July 2019 dismissing his claim for judicial review of a decision by the council's Cabinet taken on 24 May 2018.

By that decision the Cabinet confirmed its earlier decision of 27 March 2018 approving an amended capital investment budget that included provision of some £19m (out of anticipated total expenditure of £31m over three years) to fund the retrofitting of sprinkler systems to all tower blocks it owned.

The decisions in 2018 followed a decision taken by the Cabinet on 27 June 2017 in principle to install such systems in the wake of the Grenfell Tower fire.

The appellant, Mr Clarke, considered that the decision to fit sprinklers was a waste of public money that could be better spent elsewhere. He believed that the improvement in safety did not justify the expense and what he saw as other disadvantages, especially disruption to tenants.

He complained that the council had not investigated in any detail whether or not its tower blocks were subject to any material risk of catastrophic fire, sufficient to justify the cost of an additional contribution to reduction of risk of such a fire that might be achieved by fitting sprinklers ("the value for money issue").

In his view, the decision to fit sprinklers was a panic response by politicians, keen to be seen to be doing something in response to the tragedy at Grenfell Tower. A more considered evaluation would have shown that the fitting of sprinklers was not necessary or justified.

The sole issue before the Court of Appeal was whether, in reaching the May 2018 decision the Cabinet unlawfully failed to take into account:

a) the value for money issue;

b) certain additional specific matters identified by Mr Clarke.

On the first point, the Lord Chief Justice, Lord Burnett, said: “There was no statutory obligation on the Council or its Cabinet to take the value for money issue or any other specific matters into account. The power to decide to alter or improve its own housing stock is conferred by statute in the broadest and most permissive of terms (see ss. 9 and 21 of the Housing Act 1985). The Council points to the fact that under the Regulatory Reform (Fire Safety) Order 2005 it was obliged as a local authority landlord to consider what fire precautions were necessary. The Council had reached the stage of deciding to undertake the works. It had made budgetary provision, but at the time of the May 2018 Decision had not entered into contracts to do so.

“Mr Clarke must therefore identify something which the Council failed to take into account that was so 'obviously material' that it can be implied that the Cabinet was bound to take it into account. The starting point is the need to demonstrate that the matter was not taken into account.”

The Lord Chief Justice said there was no basis for suggesting that the Cabinet failed to consider the value for money issue, in the broad sense described, or to meet the Scrutiny Committee's request for reconsideration.

“It considered the value for money issue, and from the very outset. Thus, in June 2017 the Cabinet was clearly balancing its desire to ‘ensure that residents in [the Council's] tower blocks had the best possible protection in the event of a fire’ against the estimated cost ‘in excess of £31 million to retro-fit’,” he said.

Mr Clarke had raised other matters that he said the council had failed to take into account. The LCJ summarised these as follows: “calculations showing ‘trivially minimal low risk’; the fact that he himself as a tenant strongly opposed the retro-fitting; the ‘concrete compartmentation’ greatly reducing fire risk in the Council's tower blocks; the arrangement of the rooms relative to exit routes greatly reducing the fire risk; the huge disruption to tenants; the associated stress ‘causing infinitely more deaths than miniscule difference that the difference of fire risk could’; the permanent ‘gross uglification’ of residents' homes; the diversion of public funds that could be better used to tackle crime and security cuts.”

Lord Burnett said: “There was no express debate around these issues in these terms (though that is not to say that issues such as disruption to tenants may of course have been in the minds of individual Cabinet members). There was from the outset detailed fire safety evidence which considered risk. The written materials before the Cabinet as part of its consideration over almost a year did not deal with all the points that Mr Clarke now raises.

“That said, there was no legal obligation to do so. We reject the submission that the Council was under any implied duty to consider factors beyond those that it did (or that any failure to do so was irrational). There is no basis for criticising the reasoning behind the May 2018 Decision, set against the background of the earlier considerations and decisions in 2017 and 2018, let alone interfering with it.”

The Lord Chief Justice also gave a number of reasons why the fiduciary duty line of authorities – Bromley London Borough Council v Greater London Council [1983] 1 AC 768) – did not advance Mr Clarke's position:

i) The Council as landlord cannot be said to have owed Mr Clarke as tenant any fiduciary duty (or duty akin to a fiduciary duty);

ii) In so far as the Council is to be treated as owing a fiduciary duty to council taxpayers and business rate payers on the analysis above, the May 2018 Decision did not engage that duty. As confirmed by a witness statement from Mr Martin Tolley, one of the Council's local government officers, there are strict rules of local government finance as to how works such as the retrofitting of sprinklers to Council housing stock, held under Part II of the Housing Act 1985, can be funded. Those rules are principally to be found in Part VI of the Local Government and Housing Act 1989. Their effect is that council tax payers and business rate payers cannot fund any of the works in question. Nor could the Council increase rent levels to cover any additional costs (because of s. 23 of the Welfare Reform and Work Act 2016). In so far as there has been a recent change permitting the Council to increase rent levels from April 2020, that was not a change known in May 2018 and the Council has in any event not sought to fund the retrofitting works from rental payments. In short, at the time of the May 2018 Decision, there was no material conflict between the interests of those residents benefitting from installation of the sprinklers and council taxpayers, business rate payers or tenants. It is true that council tax and business ratepayers could be liable for the Council's borrowing to fund, in part, the retrofitting works if the ring-fenced Housing Revenue Account ran into difficulties in meeting interest and capital payments in the future, given the terms of s.13 of the Local Government Act 2003. But that is entirely theoretical and does not bear on a fiduciary duty argument. In the result, there was no balancing exercise by reference to those interests to be carried out;

iii) There is no basis for a finding that the Council acted in the arbitrary manner required to establish a breach of fiduciary duty and, as already indicated, Mr Clarke does not contend for one;

iv) The complaint that the Council failed to take account of a hypothetical fiduciary duty adds nothing to the 'value for money' argument. Lewison LJ was doing no more than flagging a possible relevant line of authority in connection with this issue when he mentioned 'fiduciary duty'.

The Lord Chief Justice dismissed the appeal.