R (on the application of Clays Lane Housing Cooperative Limited) v The Housing Corporation) December 8 2004
 EWCA Civ 1658
CA (Civ Div) (Brooke LJ (V-P), Waller LJ, Maurice Kay LJ)
For property transactions such as the transfer of housing under the Housing Act from one registered landlord to another, the appropriate test of proportionality under Article 1 Protocol 1 required a decision which was justified on the basis of a compelling case in the public interest and as being reasonably necessary but not obligatorily the least intrusive of Convention rights.
The respondent Housing Association was the regulatory body for social landlords. Having inquired into the affairs of the appellant Housing Cooperative it had determined that there had been mismanagement such that the appellant's land should be transferred to the Peabody Trust (which was a large social landlord but not a cooperative) pursuant to the Housing Act 1996 Sch.1 para.27. The appellant appealed against this decision ( EWHC 1084 (Admin)) since it wanted the land to be transferred to another cooperative, and in June 2002 the respondent association agreed to defer a decision as to the identity of the transferee while consideration was given to transferring the appellant's engagements to a Scottish cooperative. However, three months later the Housing Association decided on a transfer to Peabody and ten months later that decision was confirmed.
In this appeal the appellant submitted that (1) a compulsory transfer to Peabody amounted to a disproportionate interference with its rights under Article 1 Protocol 1 of the Convention, because the Housing Association had failed to consider properly whether a decision in favour of Peabody was more intrusive of the appellant's rights than was necessary in the circumstances; (2) the respondent had failed to observe the requirements of procedural fairness by not giving the appellant the opportunity to resolve any difficulties with the proposed cross-border merger with the Scottish cooperative; (3) there had been a material change of circumstance in Peabody's financial position between the decision to transfer and its confirmation and the appellant ought to have been given the opportunity to make further representations about that.
Any deprivation under Article 1 of the First Protocol 1 had to be necessary and proportionate. In the context, "necessary" meant "reasonably", rather than "strictly" or "absolutely", necessary, James v UK (1986) 8 EHRR 123 and R v Secretary of State for the Home Department ex p Daly (2001) UKHL 26. The test of what was necessary was driven by the balancing exercise rather than by a "least intrusive" requirement. The context in the instant case was that the respondent, the statutory regulator, having unobjectionably decided upon a transfer, then had to choose between two alternative transferees. In a situation where the essential conflict was between two or more groups of private interests the appropriate test of proportionality required a balancing exercise and a decision which was justified on the basis of a compelling case in the public interest, and as being reasonably necessary but not obligatorily the least intrusive of Convention rights, a test that was applied in Lough v First Secretary of State (2004) EWCA Civ 905 , (2004) 1 WLR 2557. Samaroo v Secretary of State for the Home Department and Sezek v Secretary of State for the Home Department (2001) EWCA Civ 1139 , (2001) EWCA Civ 1139 could distinguished from the present case.
If the respondent Housing Assocation had applied that test explicitly, it would have come to the same conclusion as it did and for the same reasons. It did consider the implications of dual cross-border regulation and there was no evidence that the decision-making process was tainted by any lack of procedural fairness. It was incumbent upon the respondent to make known to the appellant its concerns about dual regulation and to give due consideration to any representations made by the appellant and it did so. But it did not need to go any further; it was not obligatory, for example, to meet with the appellant's representatives for that purpose. In any event, there was a meeting which was preceded by disclosure of the respondent's concerns and the appellant was able to make representations in writing and at the meeting through counsel. There was no lack of opportunity to make representations. As far as Peabody itself was concerned, on the evidence there was no change in that body's financial position to the respondent's knowledge before the decision to transfer was confirmed.
COMMENT (June 2005)
The primary question arising in this case was whether the interference with the appellant's First Protocol rights was proportionate. The focus of the judgment therefore was the test as applied to property rights, and whether it was, or should be, a subtly different test to the proportionality assessment in relation to interferences with other rights in the Convention.
Normally the test for proportionality under Article 1 Protocol 1 is articulated as an assessment of "a compelling case in the public interest" which fairly reflects the necessary element of balance between the community and the individual (as put by Sullivan J in Tesco Stores Limited v. Secretary of State for the Environment Transport and the Regions (2000) 80 P&CR 427).
The appellant argued that the more rigorous test for proportionality should be applied, such as the one set out in the Samaroo case, namely whether the objective of the measure may be achieved by means which are less interfering of an individual's rights. Applying that type of proportionality test to the facts at issue in this case, it would therefore not be be enough to decide in favour of Peabody and against the appellant simply because a compelling case in the public interest had been established. It was necessary also to consider whether such a decision was the least intrusive of the appellant's rights under Article 1 of the First Protocol. That in turn required a consideration of the relative intrusiveness on the appellant's rights of a decision in favour of Peabody.
But Samaroo involved an interference with the claimant's Article 8 rights. In the landmark case of James v UK (1986) 8 EHRR 123, the Strasbourg Court appeared to suggest that the balancing exercise carried out in the name of proportionality was different for property rights. It was not necessary for the respondent to establish that the measures it had adopted were the least intrusive possible in order to achieve its legitimate aims.
However, that is not the end of the story. As the appellant argued here, it may well be that Strasbourg jurisprudence applies a less rigorous test of proportionality in the context of Article 1 of the First Protocol than it applies in the context of other Convention rights. But the domestic courts are bound by the House of Lords and previous decisions of the Court of Appeal. If those demand a more rigorous test and one which equiparates to that applicable in the context of other Convention rights, then the Court of Appeal in this case must apply the more rigorous test, over and above the Strasbourg test. The proper approach, submitted the appellant, was that propounded by the House of Lords in R (Daly) v Secretary of State for the Home Department  2 AC 532 and R v Shayler  1 AC 247.
The Court of Appeal rejected this argument, observing, as had been pointed out in Daly, that in law, context is everything. There was no doubt that this case concerned a "bare deprivation of power". But the context in which the transfer had been made is to be found in the Housing Act which grants the power. Section 27(4) of the Act reads as follows:
"The transfer shall be on such terms as the Corporation may direct on the basis of principles determined by it. …"
The action taken by the respondent therefore was wholly within its powers, and, having lawfully decided that there would have to be a transfer, the decision was simply then one between two legitimate alternatives. If there was any conflict, it was one "between two or more groups of private interests".
In terms of property managment, obliging the decisionmaker to adopt the "least intrusive" step would result in administrative chaos. As the Court of Appeal observed,
"…. If "strict necessity" were to compel the "least intrusive" alternative, decisions which were distinctly second best or worse when tested against the performance of a regulator's statutory functions would become mandatory. A decision which was fraught with adverse consequences, would have to prevail because it was, perhaps quite marginally, the least intrusive. Whilst one can readily see why that should be so in some Convention contexts, it would be a recipe for poor public administration in the context of cases such as Lough and the present case."
It is not entirely clear why the test of proportionality should differ depending on which Article of the Convention has been breached; this would seem to go against the spirit of Article 1 of the Convention which obliges the Contracting parties to "secure to everyone" [even property owners] "within their jurisdiction the rights and freedoms defined in Section 1 of this Convention". However the jurisprudence that has accumulated around Article 1 of the First Protocol is fraught with the difficulties inherent in this much embattled right and its many derogations; it is not surprising that the test for justification provides a lower hurdle for respondents to clear. Perhaps it should no longer be called the "proportionality" test; Article 1 Protocol 1 should be given a differently labelled set of justifications.
Rosalind English, 1 Crown Office Row