R v Hackney London Borough Council, ex parte Lemon Land Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE LIGHTMAN |
| Judgment Date | 11 May 2001 |
| Neutral Citation | [2001] EWHC 336 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/340/2001 |
| Date | 11 May 2001 |
[2001] EWHC 336 (Admin)
IN THE HIGH COURT OF JUSTICE
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Lightman
Case No: CO/340/2001
Mr Timothy Mould (instructed by Messrs Charles Russell, 8–10 New Fetter Lane, London EC4A 1RS for the Claimant)
Mr Richard Clayton (instructed by Hackney Legal Services, 183/187 Stoke Newington High Street, London N16 0LH for the Defendants)
INTRODUCTION
1. This is an application made by Lemon Land Limited (“Lemon”) pursuant to permission granted on the 1st February 2001 by Ouseley J for judicial review of a decision made by the Regeneration Committee of the Mayor and Burgesses of the London Borough of Hackney (“the Council”) to sell 2–10 Hertford Road Shoreditch (“the Property”) to the London Development Agency (“the LDA”). The issue raised is whether the sale is “for a consideration less than the best that can reasonably be obtained” within the meaning of section 123(2) of the Local Government Act 1972 (“the 1972 Act”). Lemon is interested as an alternative prospective purchaser who claims to have offered a higher price and consequently a better consideration. Whether Lemon has done so turns on the question whether, and if so to what extent, the Council can treat as part of the consideration offered by LDA the value placed by the Council on the prospects of job creation perceived to be afforded by the proposed use of the Property which will follow the LDA purchase.
FACTS
2. The LDA (a division of the Greater London Authority) is one of nine Regional Development Agencies (“RDAs”) created by the Regional Development Agency Act 1998. The remit of LDA as a RDA is threefold, namely (1) to prepare and implement strategic economic plans for the region addressing economic development, social and physical regeneration, competitiveness and innovation; (2) to market the region and develop financial packages for inward investment; and (3) to be responsible for administering specific regeneration packages on behalf of sponsor bodies. The LDA manages the Economic Development function of the Greater London Authority and uses its funding when it is required to ensure that development is socially, economically and environmentally sustainable. The LDA's Project Team appraises and manages major projects.
3. Both the Council and the LDA are anxious to ensure that the use and development of the Property are such as generate employment opportunities for the Borough. The need to retain such uses of land within the Borough is perceived to be fundamental to its long term prosperity: for there is extensive unemployment. A serious obstacle in the way of retaining such land use is that developers will pay more for the use of land for residential purposes. To this end the Council wishes to sell the Property to the LDA; and the LDA has agreed draft Heads of Terms with a company called Strongroom (also known as Basin Developments Limited) providing for the grant to Strongroom of a building licence to develop the Property for commercial purposes which will generate jobs and of an option on completion of the development to purchase the Property. Accordingly on the 11th January 2001 the Council (through its Regeneration Committee) resolved to sell the Property to the LDA, accepting their offer in preference to that of Lemon. The question raised is whether this proposed sale is in conformity with section 123(2) of the 1972 Act. Section 123(1) confers upon the Council the necessary power of sale, but section 123(2) 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.”
The Council has not and is not willing (at least at present) to seek the consent of the Secretary of State. In this, as in at least one previous similar transaction, it has taken the view that such consent is unnecessary.
4. The valuation evidence before the court in respect of the Property reveals that as at the 11th January 2001 its open market value (reflecting the realistic assumption that planning permission would be granted use of for up to 50% of the Property for residential accommodation) was £2.2 million. On the assumption that planning permission would be granted for use of the entire Property for residential accommodation the value was £2.5 million.
5. As at the 11th January 2001 the Council had on the table two rival offers. The first was from LDA for £1.65 million and the other was from Lemon for £2.064 million. The offer by LDA represented the existing (non residential) use value of the Property, for the LDA is unwilling to pay for any “hope value” i.e. the prospect that planning permission may be given for an alternative (and in particular residential) use. The offers from the LDA and Lemon were made on different bases. The offer from LDA was for the Property with vacant possession. The offer from Lemon was made on the basis that the Property was sold encumbered by an obligation to continue to accommodate a charity rent free on the party of the Property. The Council had long previously told Lemon that this was the case, and only disabused Lemon on the 9th January 2001 long after the Lemon offer had been made. After Lemon had the opportunity to reconsider the offer it was willing to make in the light of this new information, on the 12th February 2001 it increased its offer to £2.45 million.
6. The Council resolved to accept the LDA offer on the ground that, whilst the proposed development by Lemon would create between 160–200 jobs, the proposed development by LDA would create 322 jobs; that the value of the 120 extra jobs to be created by the LDA development (valuing each job at £6,000) was some £732,000; and that adding the value of this non-monetary benefit of £732,000 to the offer of £1.65 million, the offer by the LDA provided the better consideration and therefore could and should be accepted. The issue before me is whether for the purposes of section 123(2) the value attributed to the job generation benefits of the LDA offer can be treated as part of the consideration in this way. I may add that the sale to the LDA is to be subject to an Overage Agreement yet to be drafted entitling the Council to 50% of any net additional value received within 10 years by the LDA upon disposal (except to Strongroom under an approved form of development agreement) or any use of the Property for residential purposes. But it is not argued that the potential benefits under that proposed agreement affect the issues before me.
7. The valuation of a “job” is a familiar concept in the field of grant making for public sector grant funding purposes: it is a tool used to measure the socio-economic benefits of job creation. Mr Scarth, the Senior Development Manager of the LDA says in paragraph 31 of his witness statement:
“31. In working with Basin, the LDA takes account of the number of jobs that will be created and ‘values’ the outputs in accordance with accepted criteria to justify its involvement. The criteria have been used for many years by the Governments Regeneration Agency, English Partnership. The criteria is defined in its Development Practice notes four and six. Note 4 states that the usual cost per job is in the region of £10,000.”
8. The Council argues that it is entitled to adopt the conservative criterion of £6,000 a job in...
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