Standard Commercial Property Securities Ltd v Glasgow City Council (No 2)

A planning authority disposing of land under section 191 of the Town and Country Planning (Scotland) Act 1997 must satisfy two distinct requirements. It must select conditions which secure the statutory planning purposes, and must then obtain the best price or broadly commercial terms reasonably available within those conditions.

The authority need not maximise price or make a profit. Planning gains having value to the authority, the timing and completeness of development, and protection against expenditure or loss may form part of the overall commercial package. A disposal in return for an indemnity of the authority’s acquisition costs is therefore lawful where that package represents the best terms reasonably obtainable. An agreement may be made before compulsory acquisition if it preserves the authority’s statutory freedom to respond to material changes.

Glasgow City Council wished to assemble a deteriorated, multiply owned city-centre site by compulsory purchase and transfer it to a private developer. The developer would complete the redevelopment and indemnify the council against its acquisition, compensation and legal costs. Following an earlier successful challenge to its selection process, the council invited and evaluated competing proposals and selected Atlas Investments Ltd as the single preferred developer.

The Lord Ordinary refused Standard Commercial Property Securities Ltd and its associated developer’s petition for judicial review: 2004 SLT 655. The First Division allowed their reclaiming motion, holding that the council had failed to consider whether reimbursement of its costs represented the best value reasonably obtainable under section 191(3) of the Town and Country Planning (Scotland) Act 1997: 2005 SLT 144.

The central issues were the proper meaning of “best price or best terms”, whether the indemnity arrangement satisfied that requirement, and whether the council could select a single developer and contract before acquiring the land.

1. Appeal allowed unanimously. Lord Hope of Craighead and Lord Rodger of Earlsferry delivered the principal speeches. Lord Nicholls of Birkenhead and Lord Hoffmann agreed with both; Lord Brown of Eaton-under-Heywood agreed substantially and added observations. The First Division’s interlocutor was recalled and the Lord Ordinary’s interlocutor refusing the petition was restored.

2. Per Lord Hope and Lord Rodger, section 191 of the Town and Country Planning (Scotland) Act 1997 pursues two distinct objectives. Under subsections (1) and (2), the planning authority must determine the person, manner and conditions of disposal needed to secure the best use of the land or works required for proper planning. Subsection (3) separately protects the public purse by requiring the best price or best terms reasonably obtainable, consistently with those planning conditions. “Terms” concern commercial value, although commercial value is to be understood broadly: paras [34], [57]–[59].

3. The authority need not maximise the cash price or seek a profit. It must obtain the best reasonably available package given its planning requirements. Relevant benefits may include valuable planning gains, early possession and commencement, prompt or comprehensive completion, economic benefits, and an indemnity protecting the authority from acquisition costs and financial risk. Lord Brown described the inquiry as identifying the best overall deal serving both planning and commercial objectives: paras [59], [70]–[76].

4. A back-to-back disposal for an indemnity alone is not inherently inconsistent with section 191(3). The site’s poor condition, multiple ownership, the council’s lack of development funds, the extensive planning gains required, and the absence of any indication that either realistic developer would pay more supported the conclusion that the indemnity and associated benefits were the best terms reasonably obtainable. The challengers bore the burden of establishing unlawfulness and had not done so: paras [35]–[42], [61]–[67], [77].

5. Per Lord Hope and Lord Rodger, a planning authority may agree in advance to dispose of land which it intends to acquire compulsorily. Acquisition and the proposed disposal are integral to a back-to-back arrangement. Such an agreement is lawful where the authority can assess the likely best terms and retains freedom to alter course if circumstances materially change: paras [43], [53]–[54].

6. The decision to pursue comprehensive redevelopment through one preferred developer, without awaiting planning applications, fell within the council’s planning discretion. The council had addressed the defects identified in the earlier selection process, and the decision was neither ultra vires nor one which no reasonable authority could reach: paras [44]–[46], [66]–[67].

1. House of Lords: Allowed the council’s appeal, recalled the First Division’s interlocutor and restored the Lord Ordinary’s interlocutor: [2006] UKHL 50.
2. First Division of the Court of Session: Allowed the reclaiming motion, declared the council’s decisions ultra vires and unreasonable, and reduced them: 2005 SLT 144.
3. Outer House of the Court of Session: Lady Paton refused the petition for judicial review: 2004 SLT 655.