Council faces £250,000 bill

South Holland District Council, Spalding
South Holland District Council, Spalding

South Holland District Council is awaiting a judge’s decision on whether it must pay £250,000 compensation to a developer.

The council has ended up in the High Court after offering to pay just £50,000 to Nestwood Homes for its “maladministration”.

Nestwood Homes Developments is asking the High Court to order South Holland District Council to reconsider its offer after a Local Government Ombudsman (LGO) found the council guilty of maladministration in respect of a development at Old Main Road, Fleet Hargate.

The developer says that, in a report in October 2011, the LGO found serious maladministration on the part of the council and that it and its director had suffered financial difficulties and losses, damage to reputation, stress and strain as a result.

When the council offered £50,000 in compensation, a second LGO, in March 2013 recommended payments totalling more than £250,000. Nevertheless, in May last year, the council issued a final decision standing by its offer of £50,000, plus interest.

Now Nestwood – which claimed before the LGO to have suffered losses of £1.2m as a result of the council’s conduct – is asking one of the country’s top judges, Mr Justice Sales, at London’s High Court, to order the council to reconsider.

James Findlay QC, representing Nestwood, accepted that the Council had discretion how to act on the LGO’s recommendations, but argued that it was “very rare” for a local authority not to accept them.

Adding that a recommendation to pay a sum as high as £250,000 was “unusual”, demonstrating that the LGO found the level of maladministration and injustice “significant”, he told the judge: “In my submission it is an important starting point that this was a very serious catalogue of maladministration.

So much so that the Ombudsman suggested that there should be an apology in person to representatives of Nestwood.”

In written submissions, the QC argued that no reasonable authority would have concluded that the “arbitrary” sum of £50,000 plus interest was an appropriate response.

He said: “The financial circumstances of the council are pressured but not dire. The award was unreasonably low.”

The council maintains that its offer was fair and reasonable, taking the important issue of affordability into account. It also disputes Nestwood’s evidence of loss.

In the October 2011 report, the LGO found that a council officer had inadvertently given permission for raising land levels on the site, so the new houses were built higher.

When neighbours began to object, the council sought the opinion of lawyers, who said that the permission remained valid unless quashed by a judicial review in the High Court.

However, the LGO found that this advice was not correctly communicated to Nestwood and the council took enforcement action requiring four properties, three garages and much of the boundary walls and fencing to be demolished.

It was found that, in addition, prospective purchasers of the houses were put off by the publicity that resulted.

Nestwood subsequently appealed successfully to the Government against the enforcement action.

The LGO found that officers’ reports to the council’s Planning Control Committee had materially misrepresented counsel’s opinion, and recommended action that did not reflect the officer’s professional views and did not comply with national guidance.

In addition, the LGO found that a number of the committee members had predetermined their view about enforcement action and were influenced by irrelevant negative interpretations of Nestwood’s actions that were not supported by any evidence.

The judge has reserved his decision in the case, and will give a judgment in writing at a later date which is yet to be fixed.

A spokesman for the district council said it would not comment until after the judgement.