Jewish Girls High Ltd, R (on the application of) v London Borough of Barnet

Under section 123(2) of the Local Government Act 1972, a local authority must obtain the best consideration reasonably obtainable when disposing of land. Consideration may include money and other elements with commercial or monetary value to the authority, provided they relate to the land or the transaction. Purely social benefits, such as creating affordable housing, do not qualify. Payments under section 106 of the Town and Country Planning Act 1990, intended to offset development costs, are not part of the consideration. Procedural defects may assist in assessing whether the statutory outcome is lawful, but the duty is directed to outcome rather than process. Benefits from nomination rights may potentially qualify, although that observation was obiter.

The claimant, a Jewish girls’ school, challenged two decisions by the London Borough of Barnet to proceed with the sale of a vacant football ground to MontClare Developments Ltd. The claimant argued that the proposed sale breached section 123(2) of the Local Government Act 1972, because Barnet had taken account of benefits that could not lawfully form part of the consideration and had failed properly to assess competing bids and overage payments.

The first challenge led to an injunction and reconsideration of the sale. The second challenge concerned Barnet’s later decision to proceed with the MontClare sale. The central issue was whether the proposed transaction represented the best consideration reasonably obtainable, having regard to the competing bids and the elements said to benefit Barnet.

1. The claims for judicial review were dismissed. The injunction was not extended pending an appeal, and permission to appeal was refused.

2. Section 123(2) requires consideration of the best consideration reasonably obtainable. Applying R v Middlesbrough Borough Council ex p Frost Tree Ltd (16 December 1988), consideration may comprise the cash price and other elements with commercial or monetary value capable of valuation. The approach in R v Pembrokeshire County Council ex p Coker [1999] 4 All ER 1007 was also adopted: only elements of the transaction having commercial or monetary value to the local authority may be considered.

3. Purely social benefits, including the creation of affordable housing units, cannot form part of the statutory consideration. Payments under section 106 of the Town and Country Planning Act 1990, intended to offset development costs, likewise cannot be counted as consideration for the land.

4. The claimant’s unconditional, financially supported offer could not be discounted because of uncertainty about its ability to develop the site. By contrast, the court accepted the valuation approach to MontClare’s overage provisions. Subsequent heads of agreement guaranteed a minimum payment which made MontClare’s offer worth more than the claimant’s offer. On the facts then known, Barnet would have breached section 123(2) if it had not sold to MontClare on those terms.

5. Procedural failings may be relevant to the statutory outcome, although the duty is directed at outcome rather than process, as explained in R (On Application of Midlands Co-operative Society Ltd) v Birmingham City Council [2012] EWHC 620 (Admin). The accepted criticisms of Barnet’s process were not material to the lawfulness of the sale.

6. The possible value of nomination rights was discussed tentatively. Such rights might constitute commercial or monetary benefits arising from the future use of the land and might therefore be included. The observation was expressly obiter and was not necessary to the decision.

7. No order for costs was made on the first claim. The claimant was ordered to pay 50 per cent of Barnet’s costs of the second claim. No order for costs was made between the claimant and MontClare.

First-instance judicial review proceedings. The judgment itself records that the first challenge led to reconsideration of the sale and that the second challenge concerned the later decision to proceed with the sale. Permission to appeal was refused.