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The Howard League for Penal Reform could appeal in the House of Lords against a ruling that means councils do not need to automatically classify young homeless people as children in need.

Last week, it lost a second legal challenge to Hammersmith and Fulham Council's decision to place a 17-year-old girl, known as M, in bed and breakfast rather than accommodate her as a child in need.

Although the girl had never been formally in the local authority's care, counsel for the Howard League said she was "plainly and obviously a child in need" and should have been referred to social services under the Children Act 1989 rather than supported under the Housing Act 1996 (Case of homeless teenager placed in B&B could prompt policy shake-up).

M had turned to the council for help after being asked to leave home in April 2004.

She was later detained at Cookham Wood Young Offender Institution and was then not entitled to help as a care leaver because she had not been in the local authority's care.

Rejecting the argument of the Howard League for Penal Reform, Lord Justice Wall said: "It would have been absurd if the housing department had to turn away a 17-year-old who had never been in care or looked after by a local authority on the grounds that social services owed her a duty to accommodate her under the Children ActÉas a child in need."

Councillor Antony Lillis, Hammersmith and Fulham's cabinet member for health and social services, said the council was delighted that two successive judges had ruled in its favour.