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Home / News and Insights / Blogs / Charity Law / 17: Equality Act 2010 exceptions and charities – the Supreme Court decision in the Agudas Israel Housing Association case
28 October 2020

17: Equality Act 2010 exceptions and charities – the Supreme Court decision in the Agudas Israel Housing Association case

On 16 October 2020, the Supreme Court gave judgment in the case of R (on the application of Z and another) (Appellants) v Hackney London Borough Council and another (Respondents). The Court upheld the decisions of the Divisional Court and the Court of Appeal in finding it lawful for the Agudas Israel Housing Association (the Charity) to maintain a policy which in practice allocated housing only to members of the Orthodox Jewish community (the Community). The case will be of interest to charities, particularly those which operate by benefiting particular groups defined according to a protected characteristic under the Equality Act 2010 (the Act).

Background

The Charity is a housing association whose purpose is to ‘carry on for the benefit of the community (and primarily for the benefit of the Orthodox Jewish community) the business of providing housing, accommodation and assistance to help house people and associated facilities and amenities for poor people or for the relief of the aged, disabled, handicapped … or chronically sick people’.

The Charity’s housing allocation policy is not limited to members of the Community, but notes that its ‘primary aim … is to house members of the … Community’. Demand for social housing from the members of the Community continually outstrips the properties which the Charity has available, meaning that, in practice, all of the Charity properties are allocated to members of the Community.

The Charity makes properties available to Hackney London Borough Council (the Council) for applicants for social housing identified by the Council as having a priority need. The Council can nominate eligible individuals for tenancies in the Charity’s properties but cannot compel the Charity to take tenants who do not fall within the scope of its charitable object and its selection criteria. In practice, the Council only nominates and the Charity only accepts members of the Community for the Charity’s properties. The Charity’s properties make up only about 1% of the Council’s social housing stock.

A local mother of four children was identified by the Council as having priority need to be housed in a larger property. She was not from the Community and was not nominated for, and did not apply for, the Charity’s properties. While waiting to be rehoused, properties owned by the Charity which would have been suitable for her became vacant and were allocated to families from the Community who had also been identified by the Council as having priority needs.

The mother brought proceedings against the Council and the Charity claiming unlawful direct discrimination on grounds of religion or race, contrary to the Act. The Divisional Court and the Court of Appeal dismissed her claim and she appealed to the Supreme Court.

Issues before the Supreme Court

The Supreme Court had to consider whether the lower courts were right to find that the Charity’s housing allocation policy was lawful discrimination under the Act.

In certain circumstances, including when providing public services or exercising a public function, the Act makes it unlawful to discriminate directly against any person on the basis of certain ‘protected characteristics’, which include religion or belief and race (which encompasses colour, nationality, ethnic or national origin). On the face of it, therefore, direct discrimination on the basis of religion, as the Charity’s policy did in practice, would be unlawful, unless a defence was available to the Charity.

The Charity relied on three of the exceptions permitted in the Act:

  • Section 158 (positive action): An exception from unlawfulness for positive action which is a proportionate means of achieving the aim of addressing certain needs or disadvantages experienced by persons who share a protected characteristic.
  • Section 193 (charities exceptions): Two exceptions specifically for charities acting in pursuance of a charitable instrument:
    • section 193(2)(a) – which permits the charity to restrict benefit to those with a protected characteristic if the restriction is a proportionate means of achieving a legitimate aim; and
    • section 193(2)(b) – which permits the charity to restrict benefit to those who share a protected characteristic if the restriction seeks to prevent or compensate for a disadvantage linked to the characteristic.

If any one of these exceptions applied, the Charity’s actions would be lawful. (It was common ground that the Charity was acting in pursuance of its charitable instrument).

The Court also considered a new question which had not been before the lower courts, namely whether the policy was unlawful under the Race Directive as being discrimination on the grounds of race or ethnic origin. However, that point was dismissed on the basis that the Charity’s policy differentiates on the basis of religious observance, not race or ethnic origin.

The Supreme Court’s decision

The Court confirmed that the lower courts were correct to find that the Charity’s policy was lawful discrimination under each of the exceptions.

The Court considered the reasoning of the lower courts:

Needs and disadvantages

The courts had found there to be needs and disadvantages ‘connected with’ the religion of the Community which were ‘real and substantial’. These included that the Community tended to have larger families and hence a greater need for larger properties and, due to the need to remain proximate to the Community, tended not to bid for social housing elsewhere in the Council’s area. There was evidence of a heightened need for social housing within the Community and that members of the Community faced prejudice when trying to rent properties in the private sector.

The Charity’s housing allocation policy enabled members of the Community to avoid those disadvantages and meet those needs.

Proportionality

The courts had set out their reasoning for finding that the Charity’s policy was proportionate, both as positive action (for the purposes of section 158) and (for the purposes of section 193(2)(a)) as a means of achieving a legitimate aim, in this case of preventing or compensating for disadvantages linked to the protected characteristic.

The relevant question in this case was whether the arrangements, viewed as a whole and in the light of relevant market circumstances, address the disadvantages and needs of the Community in a manner that outweighs the disadvantage to non-members of the Community.

In this respect, the Supreme Court noted that the lower courts were entitled to weigh the benefits of the Charity’s policy for the Community as a group as compared with the disadvantages experienced by other groups as a result, rather than by comparing the benefits for the Community with the disadvantage suffered by one person drawn from those other groups. Parliament had contemplated that the proportionality of measures falling within section 158 and section 193 should be assessed on such a group basis.

The Supreme Court added that, given that the state is entitled to use ‘bright line’ criteria for distribution of social welfare benefits (focusing provision of such benefits on a particular group and hence excluding other groups), this will be still more true for a charity which does ‘not have the same responsibility as the state for ensuring equal treatment of citizens’. The Court noted that the aims of minimising wastage of resources on administration and encouraging charitable giving are themselves legitimate objectives to be brought into account in the assessment of proportionality.

The lower courts were satisfied that the proportionality test was met for both section 158 and section 193(2)(a) and the Supreme Court found no fault with the lower courts’ reasoning. Lord Sales, giving the leading judgment, went further, agreeing with the findings on proportionality. Lady Arden said that the appellate court should not make its own assessment of proportionality once it has determined there is no basis to interfere (but otherwise agreed with the lead judgment).

No implied proportionality requirement in the section 193(2)(b) charities exception

In this case, if, as the courts found, the section 158 positive action exception was satisfied, then, as it was accepted that the Charity was acting in pursuance of a charitable instrument, it followed that the section 193(2)(b) charities exception (where the restriction seeks to prevent or compensate for a disadvantage linked to the protected characteristic) was satisfied, without any need for a proportionality assessment.

The Court of Appeal had been asked to consider whether the section 193(2)(b) exception nevertheless contained an implied requirement of proportionality and had decided there was no such requirement.

The Supreme Court found that decision to be correct. It was clear that, where parliament intended a proportionality requirement to apply in any provision of the Act, it clearly said so – the omission of such a requirement from section 193(2)(b) was a deliberate choice by parliament.

The Supreme Court was satisfied that there was no proper basis to interfere with the rulings of the lower courts. The Charity could rely on all three defences and was not acting unlawfully in discriminating in favour of the Community on the basis of religious observance.

Comment

In approving the decisions of the Divisional Court and the Court of Appeal, the Supreme Court’s decision is useful in making a firm statement confirming that charities can, in the right context, restrict benefit to members of a group sharing a protected characteristic.

However, it is important to remember that the context is crucial when considering whether any of the defences in the Act apply. For example, in this case, the lower courts noted that the decision was made in the context of the Charity being a small provider of social housing (1% of the Council’s social housing stock) – it could not be assumed that the same conclusion would be reached where a service provider had a large share of the available properties. As so often in the law, decisions will still depend upon the facts of any particular case.

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