Salford Estates, R (On the Application Of) v Salford City Council

Local Government Act 1972, section 123 imposes an outcome duty: the council must obtain the best consideration reasonably obtainable, but need not follow a prescribed disposal process. An open-market sale may be necessary where value cannot reliably be assessed otherwise, but an independently supported valuation may suffice where the authority rationally explains its chosen course. The decision is reviewable only on ordinary public-law grounds. The authority must be aware of the statutory duty, although that awareness need not be expressed in a particular form. A court must not substitute its own view of value or commercial judgment for that of the authority.

Salford City Council agreed to sell a development site to Tesco Stores Ltd by exclusivity agreement and conditional contract. Salford Estates challenged the decision by judicial review, alleging that the Council had failed to understand its duty under section 123 of the Local Government Act 1972 and had failed properly to consider an open-market sale. The claim was heard on a rolled-up basis, with delay and permission in issue. The central questions were whether section 123 required market exposure, whether the Council’s reliance on independent valuation and its treatment of Tesco’s landholding were irrational or legally erroneous, and whether the claim was brought in time.

1. Permission refused. The claim was substantially out of time, and no extension was justified. The court nevertheless determined the merits because full argument had been heard.
2. Section 123 imposes a duty to achieve the outcome of obtaining the best consideration reasonably obtainable. It does not prescribe a particular process, such as auction, tender or an open-market sale. The Council’s discharge of the duty was therefore reviewable on ordinary public-law grounds, including irrationality, legal error, failure to consider material matters and reliance on immaterial matters.
3. An open-market sale may be the only reliable method where valuation cannot meaningfully be assessed, as in Tomkins v Commissioner for New Towns [1989] 1 EGLR 24. That was not this case. The Council obtained independent specialist valuations using market evidence. Its decision that Tesco’s centrally located land was a critical obstacle to marketing the assembled site, and that compulsory acquisition would be costly, lengthy and uncertain, was rationally open to it.
4. The Council had been consistently aware of section 123. Express reference to the duty in every report was unnecessary. The substance of the decision-making mattered, and the court rejected the proposed higher standard of “rigour” and “open-mindedness” derived from due-regard cases. The Council had properly considered the alternative market route and the Asda enquiry.
5. The Council followed proper valuation advice and did not act irrationally, unlawfully or on an immaterial basis. In any event, Salford Estates had not shown that £16 million was materially below the best price reasonably obtainable. The substantive challenge therefore failed.
6. The operative decision was at latest the exclusivity agreement of 4 November 2009, making the claim issued on 26 August 2010 out of time. The final order was refusal of permission.

First-instance judicial review proceedings. No appellate history is stated in the judgment.