Local government — Disposal of land by local authority — Section 123(2) of Local Government Act 1972 — Obligation on authority to obtain the best consideration reasonably obtainable — Complaint that best consideration was not obtained — Proposals put forward by rival developers — Application for judicial review by local development company whose proposals were not selected by respondent authority
application for judicial review concerned land belonging to a local authority
which was due for disposal — The disposal was subject to section 123(2) of the
Local Government Act 1972, which provided that ‘Except with the consent of the
Secretary of State, a council shall not dispose of land under this section,
otherwise than by way of a short tenancy, for a consideration less than the
best that can reasonably be obtained’ — The duty thus imposed was somewhat
similar to that of trustees — It did not mean that the highest offer should
necessarily be accepted; an authority had discretion to act with proper
prudence — The applicants here had made certain proposals for development to
the local authority — The respondents, part of the Asda group of companies, who
were interested in obtaining part of the land for a superstore, initially put
forward proposals for development within the ambit of the applicant’s scheme —
Later, however, the respondents made an independent offer for development of
part of the site — The local authority had in the meantime been receiving
professional advice from a well-known firm of chartered surveyors and property
consultants, who recommended that the authority should take steps to secure a
supermarket operator without delay — The applicants were slow in furnishing
detailed plans, appraisals and costings in respect of their scheme and in
particular failed to produce proposals which recognised the authority’s
financial constraints — In the end the authority accepted the offer made by the
respondents, which the surveyors considered to be the preferable one
applicants’ main complaint, in support of their application for judicial
review, was that the authority were disposing of the land for a consideration
below the best that could reasonably be obtained — There were subsidiary
complaints that the authority’s resolutions were unreasonable and that there
had been a lack of fairness in the procedure — Kennedy J’s general view was
that the applicants had been given ample opportunity to produce and, if
necessary, modify their proposals — He rejected a contention that, after the
authority had received the respondents’ offer, the applicants should have been
given an opportunity to see if they could match it — In regard to a complaint
by the applicants that the authority’s financial constraints made the task
impossible, because of the fluctuation of the financial market, the judge
commented that a fluctuating market was a background against which developers
always had to operate — The judge considered in detail the criticisms made by
the applicants in pursuance of their main complaint but concluded that they had
failed to establish that the authority had accepted a consideration that was
less than the best or had otherwise acted unlawfully — He stated that in
principle a court is only likely to find a breach of section 123(2) of the 1972
Act if a council has (a) failed to take proper advice, or (b) failed to follow
proper advice for reasons which cannot be justified, or (c) has followed advice
which was so plainly erroneous that in accepting it the council must have
known, or at least ought to have known, that it was acting unreasonably —
Application dismissed
The following
cases are referred to in this report.
Buttle v Saunders [1950] 2 All ER 193; (1950) 66 TLR (Pt 1) 1026
R v Commission for the New Towns, ex parte Tomkins (1989) 87
LGR 207; sub nom Tomkins v Commission for the New Towns [1989] 1
EGLR 24; [1989] 12 EG 59
R v Essex County Council, ex parte Clearbrook Contractors Ltd
unreported April 3 1981
R v Lancashire County Council, ex parte Telegraph Service Stations
Ltd The Times June 20 1988
This was an
application for judicial review by Indescon Ltd challenging the validity of the
disposal by Darlington Borough Council of land at Yarm Road, Darlington, on the
ground that, contrary to section 123(2) of the Local Government Act 1972, the
council had failed to dispose of the land for the best consideration reasonably
obtainable.
Michael Mark
(instructed by Booth & Co, of Leeds) appeared on behalf of the applicants;
Duncan Ouseley (instructed by the solicitor to Darlington Borough Council)
represented the respondent council.
Giving
judgment, KENNEDY J said: Darlington Borough Council owns land at Yarm
Road, Darlington. In 1987 Indescon, which is a Darlington-based property
development company, proposed to the council that the land should be developed.
During 1988 Gazeley Properties Ltd became involved. It is part of the Asda
group of companies and was interested in having part of the land for a
superstore and a non-retail unit.
Initially,
Gazeley was content to have its proposals considered as part of the Indescon
package, but in January 1989 the council, through Chestertons, the independent
chartered surveyors and property consultants instructed by the council to
advise in connection with this development, invited Gazeley to submit its own
development scheme for consideration. Gazeley did so, and on February 14 1989
the policy and resources committee of the council resolved, subject to
contract, to accept the Gazeley offer. That resolution was ratified by the
council on February 23 1989, and it is those two resolutions of February 14 and
February 23 which are now being challenged by Indescon’s seeking judicial
review in these proceedings.
That Indescon
has the necessary locus standi seems to be conceded. Certainly no one
has argued otherwise, and Indescon raises three grounds of challenge. First, it
is said that the resolutions contravened section 123(2) of the Local Government
Act 1972, which provides:
Except with
the consent of the Secretary of State, a council shall not dispose of land
under this section, otherwise than by way of a short tenancy, for a
consideration less than the best that can reasonably be obtained.
It is common
ground that what was here proposed was a disposal of
consent of the Secretary of State. The question raised is whether it was a
disposal for a consideration less than the best that could reasonably be
obtained. Second, Indescon says that the resolutions were unreasonable and were
arrived at only because the council’s officers made serious mistakes in their
report. Third, Indescon says that there was a lack of fairness. Indescon
alleges that it had a legitimate expectation that the council and its officers
would accept the Indescon offer if no better offer was forthcoming or would
afford Indescon a proper opportunity to tender on the same basis as Gazeley.
As I said to
Mr Mark in the course of argument, I cannot on the facts of this case envisage
any circumstances in which the applicants could succeed on the second or third
ground of challenge if they fail on the first, and I do not understand Mr Mark
to have taken issue with the proposition. The vital question, as it seems to
me, is whether it can be shown by Indescon that what was proposed by these two
resolutions was a disposal for a consideration less than the best that could
reasonably be obtained.
There have not
been many cases in which it has been necessary to consider in any detail
section 123(2) of the Local Government Act 1972 or its predecessor, section
26(4) of the Town and Country Planning Act 1959, but the duty imposed upon
local authorities is clearly somewhat similar to that which the law has long
imposed upon the trustees, and in Buttle v Saunders [1950] 2 All
ER 193 Wynn-Parry J said of trustees at p 195D:
They have an
overriding duty to obtain the best price which they can for their
beneficiaries. It would, however, be an unfortunate simplification of the
problem if one were to take the view that the mere production of an increased
offer at any stage, however late in the negotiations, should throw on the
trustees a duty to accept the higher offer and resile from the existing offer.
For myself, I think that trustees have such a discretion in the matter as will
allow them to act with proper prudence. I can see no reason why trustees should
not pray in aid the common-sense rule underlying the old proverb: ‘A bird in
the hand is worth two in the bush.’ I
can imagine cases where trustees could properly refuse a higher offer and proceed
with a lower offer. Each case must, of necessity, depend on its own facts.
In R v Essex
County Council, ex parte Clearbrook Contractors Ltd April 3 1981,
unreported, McNeill J accepted the submission of counsel on both sides that the
principle set out in Buttle applies mutatis mutandis to sales by local
authorities. He also accepted that when considering a decision of an elected
local authority charged with public duties a court is not entitled to
substitute its own opinion on the facts and merits for that formed by the
authority. As he said at p 8G of the transcript:
The approach
should be to interfere only if there was no material upon which the decision
could have been reached or if, in reaching the decision, the authority
disregarded matters which it ought to have taken into consideration or paid
attention to matters (or allowed itself to be influenced by considerations)
which were not material to or should not have influenced the decision.
I recognise,
as McNeill J recognised, that in a case like this a judge has the benefit of
hindsight and of full legal argument, benefits not enjoyed by a local authority
taking a decision, and that although there is a duty to probe and to explore
any offer that may be made there may also be a danger that too much probing or
indecisiveness may lead to the loss of a bargain, especially if in reality
there is only one source of funds. At p 37B of the transcript McNeill J said:
In the expert
conduct of negotiations, the council’s officials are not to be criticised — and
even if found to be in error it is not open to this court to grant relief by
way of judicial review — unless they were also acting unlawfully, in the sense
which the law attaches to that word in proceedings for judicial review — if,
for example, they thought it right to bring negotiations to a conclusion and to
recommend no further deferment of a decision.
The decision
of McNeill J was extensively referred to by McCowan J (as he then was) in R
v Lancashire County Council and D Kitchen Ltd, ex parte Telegraph Service
Stations Ltd June 5 1988, unreported. I was referred to The Times
newspaper report of that case during the course of argument, but have since had
an opportunity to consider the transcript of the judgment in each case, as the
passages which I have cited must have made clear. In the recent case of R
v Commission for the New Towns, ex parte Tomkins (1989) 87 LGR 207*,
Dillon LJ said at p 216:
the phrase
‘the best price that can reasonably be obtained’ refers, in my judgment, to the
highest price in money that can be got, subject to such considerations of
prudence as are discussed by Wynn-Parry J in Buttle v Saunders . . .
*Editor’s
note: Reported at [1989] 1 EGLR 24 sub nom Tomkins v Commission for
the New Towns.
Although the
applicants took out a summons for an order that the authors of affidavits
attend for the purpose of cross-examination on their affidavits, and although
Mr Mark indicated during his opening submissions that he might in due course
ask me to make such an order he did not in the end do so, and so I have to deal
with this matter, as is usual, on documentary evidence alone.
In the light
of the law, as it emerges from the authorities to which I have referred, I turn
now to look at the allegations which are made by the applicants, and those
allegations can best be considered in the context of the history. It was in
November 1987 that the applicants first put a proposal to the council in
relation to the property at Yarm Road. It is perhaps worth noting that the
initiative did come from the applicants. A month later they made an application
for planning permission, and in early 1988 the council decided to appoint an
independent firm of chartered surveyors and property consultants to advise the
council in relation to the proposed development. There is some doubt as to the
precise date upon which Chestertons were appointed, but for present purposes
that date does not matter.
In very broad
terms the concept of the development was that part of the land would be sold to
a large supermarket operator and that the sale of that land would generate
enough money to fulfil two other objectives. First, it would enable the council
to move its cattle market from the centre of the town to land near to but not
forming part of the land involved in the development proposals and, second, it
would enable the council to subsidise the development of the rest of the land
involved in the development proposal for industrial units. Accordingly, it was
a key factor in the proposal that a large supermarket operator should become
interested, and in March 1988 the applicants approached Gazeley.
The
respondents have complained that in looking for a supermarket operator at this
stage the applicants were not only jumping the gun but were actually causing
the respondents certain difficulties. Be that as it may, what is clear is that
as early as March 1988 Gazeley was showing interest not only in the development
site with which I am concerned but also in other sites in the Darlington area.
On March 16 1988 the managing director of Gazeley wrote to the applicants a
letter part of which reads:
You are aware
of our involvement with the Darlington Rugby Club ground. However,
confidentially, this has not precluded our looking at several other sites
within the Borough.
On April 22
1988 Gazeley made an offer of £5.5m for that part of the land at Yarm Road
which was to be the supermarket site. The offer was addressed to the applicants
and it was subject to contract. On May 5 1988 outline planning permission was
granted in respect of the land at Yarm Road, subject to a number of conditions
all of which are to be found in the papers and some of which relate to road
layout.
It can be seen
from the report that as early as May 1988 the applicants were informed by the
council officers what money was likely to be available. Essentially the
position was quite simple. If Gazeley paid £5.5m, half of that sum would be
required to relocate the cattle market. That was the council’s first priority,
and it would leave the balance of £2.75m to go towards the cost of making the
Yarm Road land available for development, that is to say the cost of roads,
sewers and other services, and also to form a subsidy towards the cost of new
industrial units.
It is very
much at the heart of the respondents’ case that from May 1988 onwards the
applicants knew precisely what council money was likely to be available, yet it
was not until December 1988 that the applicants showed any signs of coming up
with a proposal which responded to the known financial constraints. In a report
to the council dated June 3 1988 Chestertons set out the options available to
the council in respect of the land. That report is in the papers and it is
worth noting that the first option put forward was to sell the freehold of the supermarket
site by competitive tender.
Chestertons
pointed out that an advantage of that option would be that the council would be
testing the market fully and thus demonstrating ‘that it was getting the best
obtainable price for the land’. One of the disadvantages which Chestertons
identified in relation to another option, namely entering into an agreement
with the applicants for the development of the entire site, was that
negotiations with a single party obviate testing of the market and therefore
cannot guarantee the best obtainable price for the land.
It can be seen
that at a very early stage the council’s advisers were taking an independent
stand and were offering what would seem to
supermarket site is the key to the whole development, and they issued this
warning:
There is not
unlimited demand for additional supermarket accommodation in Darlington. It is
therefore vital that the council secures a supermarket operator without undue
delay in order to ensure an early start on development of the Century 21
proposal.
The Century 21
proposal was the proposal in respect of the development of the land at Yarm
Road. On June 6 1988 the council, having considered the Chesterton report, resolved
to enter into a formal agreement with the applicants for the development of
land, and also resolved that the applicants be requested to submit evidence of
offers received from potential purchasers of the freehold of the supermarket
site.
In the report
which he prepared for that meeting the council’s chief executive underlined the
point made by Chestertons in their report, namely that in deciding which course
to pursue the council would need to bear very much in mind their obligation to
obtain the best possible price for their land. In due course the conditional
offer which had been made by Gazeley was brought to the attention of the
council, and at the council meeting which was held on July 21 1988 that offer
was accepted, subject to contract.
A few days
later there was a meeting between the council’s officers and the
representatives of the applicants, and, as can be seen from the report, the
officers once again set the financial limits. Those limits were also reflected
in heads of terms, which were prepared by Chestertons and which were submitted
by Chestertons to the applicants in late July 1988. They did not meet with
immediate acceptance. In September an application was made for detailed
planning permission, and in that same month Chestertons pressed for agreement
on the heads of terms. As can be seen from the correspondence, there was a
meeting between Chestertons and the applicants on October 10 at which agreement
was reached on some points. A letter shows that the applicants, for their part,
were at this time making enquiries of the council as to the cost of certain
works of infrastructure.
Apparently the
applicants did produce something to Chestertons on November 2 1988 because on
November 4 1988 Chestertons wrote to the council:
One of the
factors that has materially hindered our negotiations has been the continual
failure by Indescon to submit detailed plans, appraisals and costings in
respect of the proposed development that would enable these to be considered.
As you are aware I only received these documents on Wednesday afternoon of this
week with some further information arriving on Thursday morning . . . From an
initial consideration of the proposals . . . I believe that the level of
support that the scheme requires is considerably less than that which is being
sought by Indescon.
In other
words, the belated proposals do not comply with the known financial
constraints. On November 8 1988 the council’s officers prepared a report for a
committee meeting which was to be held on November 15 1988. In it they review
the position as it then appeared to them and invite the members of the
committee to consider whether to continue to negotiate with Indescon or to
withdraw from negotiations and offer the land on the open market for a similar
scheme. Mr Mark asks me to note, and I do, that in that report the council’s
officers say that ‘it is obvious that the business park will be a loss making
scheme’, and they also say:
At the
present time, the Council have offered a total of £2.75 million in support for the
business park and infrastructure which is considered by your officers to be
generous, and should make the scheme viable. Indescon, on the other hand,
envisage support in the region of £7 million being required before the business
park and site infrastructure become viable.
Commenting on
the possibility that the council might go to the open market, the officers say
that to do so
would ensure
that the best deal was obtained and would enable the Council to specify the
precise terms which it would require. On the other hand, the involvement with
the local developer (Indescon) would be lost.
If the council
decides to persevere with Indescon the officers say that
Indescon
should be left in no doubt that if they fail to reach agreement by a specified
date, then the Council will have no hesitation in going to the open market.
The policy and
resources committee of the council considered the report of its officers and
resolved to continue with Indescon but subject to a deadline. That decision was
approved by the full council on November 24 1988, and on November 25 1988 the
council’s chief executive wrote a letter to Indescon. In that letter he tells
Indescon of the council’s decision that
unless
negotiations in respect of Phases I and II, including the specification and
detailed plans for the buildings, and the relevant development appraisal, have
been concluded by Monday, December 19 1988 . . . the Council will withdraw from
the negotiations and offer its land on the open market in accordance with the
terms of a planning brief.
By the time
that letter was written detailed planning permission had been obtained and,
following further discussions, on November 29 1988 Chestertons submitted
revised heads of terms to the applicants again emphasising that:
The total
Council contribution towards Phase I will be a maximum of £2.75 million out of
which must come the support for the Business Park, the infrastructure and the
5% profit attributable to Indescon.
It seems that
on December 13 1988 the applicants, being unable to produce a proposal which
complied with the council’s financial constraints, proposed that the council
dispose of 15 acres of land for £300,000, that being the land necessary for the
supermarket and the business park, and that Indescon commit itself to complete
the business park and infrastructure as necessary.
The council
was not attracted by that proposal, and in their letter of December 15 1988
Chestertons again warned the applicants that unless they were in a position to
proceed with the development in the form proposed by the council and subject to
the council’s contribution being no greater than £2.75m the site would be
placed on the open market in the New Year.
On December 19
1988, the very day by which the council had required that agreements be
concluded, there was a further meeting between the applicants and the council’s
officers. Following that meeting the chief executive wrote a letter proposing
some alteration in the phasing of the development, involving an addition of ‘no
more than half a million pounds’ or an outright sale of the land to the
applicants for that sum.
The chief
executive in his letter of December 19 1988 says that on confirmation of those
alternative proposals being received they will be placed before the policy and
resources committee on January 4 1989. In para 3.2 of the report which he
prepared on December 29 1988, before the January committee meeting, the chief
executive summarises the position as it was on December 19 1988. The summary
reads:
The situation
on 19th December 1988, was that, in addition to the £2.75 millions (maximum)
offered by the Council, Indescon were seeking a further £4 millions (approx),
giving a total of subsidy and contribution of £6.7 millions (approx). The
Council side were saying that, in addition to the £2.75 millions offered (and
in recognition of the higher costs of providing infrastructure), Indescon
needed only a further £1.4 millions, giving a total of subsidy and contribution
of £4.15 millions.
Clearly there
was no concluded agreement by the deadline date, so on December 21 1988 the
council announced that it was to offer the land on the open market in
accordance with the terms of the development brief. There is in the papers a
copy of a press release, prepared by the chief executive. Para 3 says the
council made it clear to Indescon that:
the most it
can afford to contribute towards their scheme is about £2 3/4 millions. A
similar amount is needed by the Council for the Cattle Market. It was up to
Indescon to tailor their scheme to the Council’s ability to pay and, in the
time limits set by the Council, they have not been able to do so.
In para 5 the
press release states:
The Council
feel that Indescon have been given a fair chance to reach agreement without
having to compete against other developers, but time is running on and it is
urgently necessary to make progress.
It seems that
the announcement made by the council produced an immediate reaction from the
applicants, who complained to a local Member of Parliament. He visited their
offices, and on December 24 1988 they wrote a letter to him which, say the
respondents, contains the first outline proposal from the applicants which
could be said to comply in any way with the respondents’ long-known financial
constraints.
In the letter
the applicants indicate a general willingness to abide by the heads of terms
and to make available to the council within 12 months, by staged payments, the
sum of £2.75m. They also indicate that in order to achieve this target it will
be necessary to redesign the first stage of the development. The proposal was
put to Chestertons, who, as can be seen from the report, favoured the initial
phase of the industrial units being limited to 40,000 sq ft so as to preserve
resources and not flood the market.
In the
supplementary report which he prepared on December 29 1988 for the meeting of
the policy and resources committee due to be held on January 4 1989 the chief
executive commented that the applicants now appear to appreciate the council’s
financial position, and he says: ‘It may be possible to conclude negotiations
quickly if the Council are prepared to grant an extension of the period of
time’.
The chief
executive also points out that continuing negotiations with the applicants need
not prejudice steps already being taken to advertise the opportunity of
developing the land. It seems that at about this time Gazeley was expressing
concern to the council at its inability to proceed with the applicants. On
about January 12 1989, Chestertons were instructed to approach Gazeley and to
invite that company to submit its own scheme for consideration should they wish
to do so. As Mr Black of Chestertons points out in his affidavit, the council
was anxious that the continuing delay might lead to Gazeley withdrawing from
the development in which case the whole scheme might collapse.
In mid-January
the applicants were asked to expand upon the proposals set out in their letter
of December 24 1988, and they did so in a letter dated February 1 1989. That
letter, read together with the letter of December 24 1988, constitutes the
applicants’ offer. One of their present complaints is that in January 1989 they
were not given a free hand. They were simply asked to clarify their offer of
December 24 1988. The answer given by the respondents to that complaint is that
the applicants had the field to themselves for months on end and that in no
sense were they being put in a straitjacket as to how this development should
proceed.
I accept what
the respondents say about that. Gazeley’s proposals were submitted to the
respondents in a letter dated February 2 1989, the day after the applicants had
written their letter of clarification. The applicants contend that on receipt
of the Gazeley offer the respondents should have gone back to the applicants to
enable them to put further proposals on the same basis as that adopted by
Gazeley, and in particular to put proposals relating to the same acreage of
land.
In my
judgment, the respondents were under no obligation to adopt that course. As I
have already indicated, they had afforded to the applicants ample time in which
to develop their proposals, subject only to the overriding financial
constraint. In so far as the applicants complain that the financial constraints
made the task impossible because of the fluctuating financial market, it seems
to me that an adequate answer is given by the respondents when they say that a
fluctuating market is a background against which developers always have to
operate.
Naturally
Chestertons were asked to consider the two sets of proposals, and they did so
in a letter to the chief executive dated February 6 1989. It appears from the
third paragraph of that letter that the applicants’ clarification letter of
February 1 1989 was in response to enquiries made over a fortnight previously.
The sense of urgency which had led to the letter of December 24 1988 does not
seem to have lasted very long.
Assisted no
doubt by what was said by Chestertons, the council’s officers on February 6
1989 prepared their own report for the meeting of the policy and resources
committee which was due to be held on February 14 1989. The Chestertons’
conclusion clearly was that the offer from Gazeley was to be preferred, and the
council officers also recommended that that offer be accepted.
The applicants
cannot, therefore, complain that the respondents did not follow the advice of
their officers or of their independent consultants. What they say is that the
officers and the independent consultants gave bad advice, but there is no suggestion
that they did so otherwise than in good faith, nor is there any suggestion that
the officers or the consultants lacked the qualifications necessary for the
advisory task which they undertook to perform.
I shall turn
in a moment to the particular criticisms which are made of the advice which was
offered, but before I do so it is convenient to take the history up to the
meeting on February 14 1989. In a further letter to the chief executive dated
February 7 1989 Chestertons say that ‘both parties were asked to detail what
they could provide having regard to the overall draft development brief bearing
in mind the restriction on the level of support from the Council’.
The
applicants, knowing that they did not themselves receive a draft development
brief, complain, on the basis of the passage which I have just read out, that
Gazeley must have had an advantage which they did not enjoy. However, I accept
what is said by Mr Alderson, who was at the material time the chief estates
officer to the council. In his affidavit he says that ‘neither offer was
submitted with knowledge of the contents of the development brief, although the
applicant was advised of its possible contents’.
Furthermore,
as Mr Alderson points out in para 7 of his second affidavit, the councillors
who had to consider the offer would have known exactly what was the position in
relation to the development brief because it was still awaiting council
approval. On February 7 Chestertons asked for some clarification of the Gazeley
offer, and that clarification was provided by return of post.
By February 13
1989 it had come to the knowledge of Chestertons that some councillors were
thinking in terms of seeking bids for the development at Yarm Road, and Mr
Black of Chestertons then wrote to the chief executive a letter in which he
expresses his concern at that proposed course of action. In that letter he
says: ‘Asda/Gazeley have stated unequivocally that in the event of their offer
being unacceptable they will withdraw from the transaction’.
The letter
then goes on to point out that the council might have difficulty in finding
another retailer who would be interested, and in any event there would be a
considerable delay. Mr Black concludes:
It is
necessary for the Council to take a decision now and the best offer to hand is
that from Gazeley Properties. The danger of delaying a decision is that no
development will take place for Gazeley Properties/Asda will withdraw. If the
site was to be placed on the open market it should have been done in May last
year. The dangers associated with such a course of action now are considerable.
When the
committee members met on February 14 1989 to take the first decision of which
complaint is made they had before them the reports of February 6 and the letter
to which I have just referred. They also had available a representative from
Chestertons who addressed the meeting and responded to questions. That can be
seen from the minute. In criticising the advice which was given to the
committee Mr Mark does not go so far as to say that the decision should have
gone in favour of the applicants. What he says is that the advice which was
being given seriously overstated the advantages of the Gazeley offer and
understated the advantages of the offer being made by the applicants.
A number of
particular criticisms are made. First, it is said that in comparing the cash
sums which were being made available reference should have been made to
Gazeley’s requirement that the council contribute a sum of £600,000. In answer
to that criticism the respondents say that the Gazeley requirement is made
entirely clear in the council officers’ report. In para 5.2 of that report it
is said that: ‘Gazeley are seeking a contribution of £600,000 from the Council,
being £475,000 for the buildings and £125,000 for the infrastructure.
Alternatively, Gazeley could pay the Council a net £2,900,000 for the store
site . . .’.
The
contribution which Gazeley required of the council is also referred to in each
of the three letters from Chestertons which were written after the offers were
received, and all of those letters were before the councillors. In my judgment,
it cannot be said that in this respect the councillors were misled as to the
nature of the Gazeley offer.
Second, it is
submitted that the council’s officers misunderstood the Gazeley offer which
involved recovering a proportionate part of the infrastructure costs when
business units were sold as a first charge before the distribution of the
proceeds of sale. I cannot see that there was any misunderstanding as to this
matter at all.
Third, it is
said that the officers did not make it clear that the Gazeley offer would
require 24 acres of land in the first phase, 19 of them for retail use, and a
further 3.5 acres of land in the second phase for business units if there
proved to be a demand. That fact seems to me to be manifest in the reports
prepared by the officers and in the supporting letters.
Fourth, it is
said that the officers failed properly to draw to the attention of the
councillors the fact that the applicants’ offer represented a better price per
acre. In fact, that fact is clear from the relevant schedule in the papers,
but, as Mr Ouseley points out, the price per acre cannot be the sole criterion.
Much will inevitably depend on what can be done with the land. For example, in
a two-stage development, if landscaping is to be left to the second stage it
may be appropriate to pay more per acre for the land in the first stage upon
which buildings are actually going to be built. In any event the suggestion
that there was some concealment of the price advantage is misconceived.
Next, it is
said that the Gazeley offer is overvalued, because it assumes that the
industrial units will yield more than £175,000, being
sum is uncertain. Here again the respondents say, in my judgment rightly, that
there has been no misunderstanding. The Gazeley offer undertakes to provide the
whole of the infrastructure, and seeks to recover the costs proportionally on
sale. There will be only a nil yield to the council over and above the sum
produced by sale of the land if Gazeley cannot sell the industrial units for more
than the proportional costs of the infrastructure.
It is clear
that the applicants’ offer envisaged the provision of only 30,000 sq ft of
business units in phase one, whereas the Gazeley offer provided for 40,000 sq
ft. The applicants now complain that councillors were not advised that the
applicants had reduced the square footage in accordance with the suggestions
emanating from the respondents. However, as Mr Ouseley points out, it is clear
from the documentation that the respondents never required the square footage
to go as low as 40,000 sq ft.
In December
1988, in order to assist the applicants, the respondents’ officers clearly
countenanced a reduction in the number of sq ft, and Chestertons then envisaged
that 40,000 sq ft would be sufficient having regard to considerations of
marketability. If the applicants felt able to provide 40,000 sq ft it seems
inconceivable that any objection would have been raised. But in any event the
councillors were well aware of the applicants’ assertion that their offer to
provide 30,000 sq ft was in accordance with the respondents’ instructions,
because that assertion appears in the applicants’ letter of February 1 1989,
which was annexed to the officers’ report of February 6 1989 as appendix ‘A’.
A similar
complaint is made in relation to the fact that the applicants’ offer did not
provide for certain works of infrastructure in phase one. It is said that the
councillors were not informed that they had been omitted at the request of the
officers, but that assertion, too, appears in the letter of February 1 1989.
The councillors must therefore have been well aware of it. Whether it was well
founded is another matter. It seems clear to me that what was happening in
December was that the officers and Chestertons were prepared to countenance
some variation in the works to be undertaken as part of phase one in order to
enable the applicants to make an offer within the council’s financial
constraints. They were very far from requesting that any works of
infrastructure be omitted.
Finally, it is
said by Mr Mark that Gazeley’s offer, unlike the offer put forward by the
applicants, is plainly conditional, that the costings have not been verified,
and that by contrast the applicants were in a position to make an immediate
start. Furthermore, they were willing to develop the rest of the site on an
open-book basis subject only to a five per cent fee.
Mr Ouseley
submits that at this stage it is necessary to have regard to realities. Gazeley
was the only source of funds. In their offer they reduced the amount of retail
space required, and their requirements would have to be met even if the
applicants’ offer had been accepted. They had always put forward certain
conditions, such as acceptability to the Asda board, and at the end of the day
the applicants could not be in a better position than the hand that fed them.
That, in my judgment, must be right.
Mr Ouseley
submits that there were certain positive advantages which attached to the
Gazeley offer, which are identified in the officers’ reports, and in what was
said by Chestertons. There would be an immediate payment of £3.5m on day one.
Admittedly, as Mr Mark pointed out in his reply, the applicants must have moved
from their original offer of staged payments before this matter came to be
considered by the committee, but even so there was a cash advantage on day one
in the Gazeley offer.
Next Mr
Ouseley points out that Gazeley sought only a lease of the land, admittedly for
a peppercorn rent, but as the council would remain owners of the freehold
ultimate control would therefore remain with the council. By contrast, the
applicants required ownership. Under the Gazeley offer there would be no five
per cent fee involved in developing the rest of the site, and immediate
acceptance of the Gazeley offer, without going back to the applicants to see if
they could improve upon their offer, would obviate the risk of Asda’s
withdrawing and of the council’s being left with no provider of funds. As Mr
Ouseley points out, the situation was in some respect an unreal one, because
although there were nominally two offers there was only one provider of funds,
and that provider of funds, being well aware of the situation, might well, at
any stage, opt out or lower its price. Furthermore, looking at the matter in
the round, there would seem to be an advantage to the council in cutting out
the middleman. There is an issue on the affidavits as to whether a supermarket
operator can always outbit a developer, but there seems to be logic in favour
of the argument that he may well be able to do so.
I have
endeavoured in the course of this judgment to deal with all of the arguments
put forward by Mr Mark, either on paper or in the course of his submissions. It
may be that I have not dealt with every point he has made, and I am sure that
he would accept that some of the points which he makes are really the same
point looked at from different points of view. What, however, seems to me to be
clear at the end of the day is that certain principles can be distilled from
the authorities to which I referred much earlier on which are applicable to the
facts of this case. Those principles can be expressed in this way, that a court
is only likely to find a breach or an intended breach by a council of the
provisions of section 123(2) of the Local Government Act 1972 if the council
has (a) failed to take proper advice or (b) failed to follow proper advice for
reasons which cannot be justified or (c), although following proper advice,
followed advice which was so plainly erroneous that in accepting it the council
must have known, or at least ought to have known, that it was acting
unreasonably.
That third
proposition is the one which Mr Mark has set out to establish in this case. For
the reasons which I have endeavoured to explain, he has wholly failed to
establish it. As he concedes, it cannot be sufficient for anyone challenging a
council’s decision to show merely that others might have acted differently or
that it was possible to take a different view. That, to my mind, is the most that
he has done in this case. Harking back to what was said by McNeill J, I find
myself unable to say that there was no material upon which the council
decisions could have been reached. Quite the contrary. And certainly there is
no evidence that the council’s officers and the independent consultants, even
if in error, which I do not find to be established, were acting unlawfully.
Accordingly,
this application fails and is dismissed.
The
application was dismissed with costs.
