Summary: A nursery complains the Council withdrew its support for new premises, resulting in significant financial loss. The Ombudsman discontinued his consideration of this complaint. This is because even if we were to investigate the matter further and find the Council was at fault we cannot achieve compensation for the considerable financial loss the nursery attributes to the Council’s actions.

The complaint

1. The complainant, whom I shall call Mrs B, complains on behalf a nursery for which she is the Chair of Trustees that the Council unreasonably withdrew its support for the building of new premises. She complains that the Council’s action resulted in a significant financial loss.

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The Ombudsman’s role and powers

2. We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word ‘fault’ to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. We provide a free service, but must use public money carefully. We may decide not to start or continue with an investigation if we believe, for example, that we cannot achieve the outcome someone wants, or there is another body better placed to consider this complaint. (Local Government Act 1974, section 24A(6), as amended)
3. We can decide whether to start or discontinue an investigation into a complaint within our jurisdiction. (Local Government Act 1974, sections 24A(6) and 34B(8), as amended)

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How I considered this complaint

4. I considered all the information provided by Mrs B about this complaint. I also considered the Council’s response to the complaint Mrs B had made to it.
5. Mrs B and the Council had the opportunity to comment on a draft of this decision. I fully considered all comments received in response to the draft.

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What I found

Background

6. Mrs B is the Chair of Trustees of a not-for-profit company which operates a pre-school nursery. In 2016 Central Government invited applications for grants for funding of capital projects for the expansion of childcare provision. The nursery agreed with a proposal put forward by the Council that an application be made for this funding for a new building. The grant application was successful, with £666,120 being awarded in January 2017. This sum was to be supplemented by a contribution of £333,060 from a developer, X. Under the funding arrangements the grant monies from Central Government could not be used until the balance from X was committed to the project. But the offer of funding to be provided by X was conditional upon that developer obtaining planning permission from the Council for a change of use of land it owned, adjoining the Council owned land on which it was proposed the new nursery building might be built. The land owned by X was designated in the Council’s Core Strategy for employment use, and if it was to be used for other purposes such as housing, planning permission for a change of use would be required.

Planning permission for the nursery

7. The nursery engaged an architect and designer to work up proposals for the new nursery building. They then applied to the Council for planning permission, initially in outline and subsequently in full, and this was granted. By March 2019 the costs incurred by the nursery in respect of this project amounted to some £75,000.
8. Mrs B reports that the projected costs of the final design and build escalated to some £1.8 million, but that X agreed to fund the shortfall. However, as noted in paragraph 5, the offer of funding from X was conditional on approval being obtained for the conversion of employment land to housing land.

Developer X and the change of use

9. The Council had some pre-application discussions with X but it never received an application for planning permission for change of use, which it had made clear was necessary. The Council could not therefore formally consider for approval a change of use of the land required to meet the developer’s condition for the release of its contribution towards the funding. And, because of the funding arrangements, without the developer’s contribution the grant funding received from Central Government could not be released.

The complaint to the Council, and its response

10. In June 2019 Mrs B made a formal complaint to the Council, noting that at this point the nursery had spent more than £80,000 and was anticipating the loss of the Government grant which was to expire in September 2019.
11. The Council considered the matter was not within the remit of the corporate complaints procedure, but it conducted a review and provided a report to Mrs B when it had done so. The review noted the facts outlined above and set out that by March 2019 it had not received an application for the change of use of the land and it advised X that its proposal was unacceptable on a number of grounds, in particular the linking of payment for the nursery to the securing of permission for change of use of the land designated for employment.
12. In its review report the Council noted that the nursery and the local Member working with them took the view that officers had agreed the project could proceed. However, the Council’s view was that while officers may have considered that the project would be acceptable in planning terms, the issue of the change of use of land owned by X would still need to be resolved in order for the project to go ahead as intended, since X’s offer of funding was conditional on it securing planning permission for that change. And, as the Council noted, the change of use was dependent on separate planning considerations which could only be considered if an application was made for the change of use.
13. The report noted that in April 2019, responding to a request from the local Member for reimbursement of the nursery’s current outgoings and pre-planning spend, the Council paid a contribution of £30,000 towards these ‘at risk’ costs. The report noted that the Council’s stated expectation was that the nursery would not incur any additional cost until the position on the match funding had been resolved.
14. Concluding its review report the Council noted that control over making an application for the change of use rested with X from the outset and it was a risk that was always present in the application for grant funding.
15. Mrs B considers the report contained inaccuracies and biased assertions.

Analysis

16. Mrs B takes the view that the nursery had every reason to proceed with the project having been given to understand the Council supported it, and it incurred huge costs as a result. However, it was clear from the outset that the grant funding for the project was dependent on the contribution from X being secured, and that contribution was conditional on the Council agreeing to a change of use for X’s land. The submission of an application for a change of use for consideration by the Council was a matter for the developer and was not within the Council’s control. Mrs B asserts that the reason the developer did not apply for that permission was because the Council was no longer confirming that it was open, in principle, to the change of use of the land from employment to housing. However, even if that were the case, without a formal application no formal determination (with associated appeal rights) could be made, and submission of such an application was not in the Council’s control. The nursery elected to commit significant funds to work on the project when there could be no guarantee of the scheme going ahead, because the grant funding was contingent on a contribution from a developer.
17. Mrs B wants the Council to pay a further £54,000 to clear the debt incurred by the nursery in work undertaken on this project. She says if this was paid from the grant funding the nursery would re-invest it in an alternative nursery project. Failing this, she wants the Council to pay the nursery £150,000. These sums amount to compensation (or, as Mrs B sees it, restitution) for economic loss arising from a failed scheme to expand the nursery, and it is not a remedy the Ombudsman could achieve.
18. Further, the Ombudsman cannot act as a surrogate for legal action to determine liability for economic loss. That would be matter for the courts.

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Final decision

19. For the reasons set out above, I have discontinued my consideration of this complaint.

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Investigator's decision on behalf of the Ombudsman