R (Sainsbury's Supermarkets Ltd) v Wolverhampton City Council

This appeal concerned the lawful scope of local authorities' powers to use compulsory purchase under section 226 of the Town and Country Planning Act 1990, as limited by section 226(1A). The central legal principles decided were (1) that section 226(1A) requires the acquiring authority to consider whether the development to be facilitated by the compulsory purchase will itself contribute to the economic, social or environmental well‑being of the area, and does not authorise taking into account benefits that flow only from the separate redevelopment of an unconnected site; and (2) that for the purposes of section 226(1)(a) only relevant matters with a real connection to the proposed CPO site may be taken into account and a developer's unilateral commitment to subsidise an unrelated redevelopment (a cross‑subsidy) is not a legally relevant matter to justify compulsorily acquiring another owner’s land.

The court therefore held that the Council had acted unlawfully in purporting to treat Tesco's commitment to redevelop the separate Royal Hospital site as a lawful ground for making a CPO of Sainsbury’s land at Raglan Street. The proper approach requires a strict construction of the statutory power to deprive owners of property and a real (not remote or fanciful) connection between off‑site benefits and the land subject to compulsory acquisition.

This case arose from competing redevelopment proposals for the Raglan Street site in Wolverhampton. Sainsbury’s controlled the majority of the site and proposed to redevelop it; Tesco controlled other interests and proposed an alternative scheme. Tesco had undertaken, in effect, that if it were allowed to develop Raglan Street it would enable and commit to the redevelopment of a separate Royal Hospital site (RHS) by means of a commercial cross‑subsidy. Wolverhampton City Council favoured Tesco’s proposal in part because of Tesco’s commitment regarding the RHS, and resolved in principle to make a compulsory purchase order (CPO) of land owned by Sainsbury’s to enable Tesco’s scheme.

Procedural history: Sainsbury’s sought judicial review. Elias J dismissed the claim at first instance. The Court of Appeal ([2009] EWCA Civ 835) dismissed Sainsbury’s appeal, effectively accepting that the Council could take the RHS benefits into account. The matter came to the Supreme Court on appeal.

Nature of the claim / relief sought: Declaratory relief and quashing of the Council’s resolution insofar as it relied on Tesco’s commitment to redevelop the RHS as a justification for a CPO of Sainsbury’s land.

Issues framed by the Court:

• Whether, under section 226(1A) of the 1990 Act, a local authority may take into account a developer’s commitment to secure by cross‑subsidy the redevelopment of another, unconnected site when deciding whether the development facilitated by a CPO would contribute to the well‑being objectives in subsection (1A).
• Whether such a commitment is a relevant matter the authority may take into account when deciding whether and how to exercise powers under section 226(1)(a).

Reasoning and decision: The majority held that section 226(1A) does not permit treating benefits that flow only from a separate, unconnected site as benefits of the CPO site: the subsection requires that the development facilitated by the CPO itself be likely to contribute to the well‑being objects. On section 226(1)(a), the Court emphasised the need for a strict approach to compulsory acquisition because of the serious invasion of proprietary rights; only matters with a real connection to the CPO site may be considered. Tesco’s contractual cross‑subsidy of the RHS was held not to create the requisite legal connection and therefore was not a lawful consideration in deciding to make a CPO. The majority rejected the argument that the Council could permissibly separate acquisition (section 226) from disposal (section 233) and thereby rely on section 233 considerations to justify the CPO: to deprive an owner of property on the basis of benefits wholly unconnected with acquisition would be unlawful.

Subsidiary findings: The Court analysed planning authorities' treatment of planning obligations and prior authorities (including Monahan, Plymouth, and Tesco Stores Ltd v Secretary of State) and concluded that the tests developed in the planning permission context provide useful analogy but must be applied more strictly in the compulsory purchase context.

Practical implication: A local authority must show a real, not remote, connection between off‑site benefits and the development which the CPO is intended to facilitate; contractual promises to redevelop unrelated sites will not justify compulsory acquisition.

Appeal allowed. The Supreme Court held by a majority that the Council lawfully could not take into account Tesco’s commitment to redevelop the separate Royal Hospital site as a justification for making a compulsory purchase order of Sainsbury’s land. Section 226(1A) requires that the development facilitated by the CPO itself contribute to the well‑being objects, and section 226(1)(a) permits only consideration of matters with a real connection to the CPO site; a cross‑subsidy to an unconnected site is not a legally relevant basis for depriving an owner of land.

First instance: judicial review claim dismissed by Elias J ([2009] EWHC 134 (Admin)). Court of Appeal: appeal dismissed ([2009] EWCA Civ 835). Supreme Court: appeal allowed ([2010] UKSC 20).