Daniel Johns Manchester Ltd v Manchester City Council

A public authority’s decision concerning disposal of land under a statutory power is not automatically subject to the full range of public law controls merely because the authority has public functions or previously granted planning permission affecting the land. The court must examine the transaction, the statutory power, the surrounding statutory framework and the connection between the decision and the alleged public law error. In the absence of a substantial public function element, intervention will ordinarily require fraud, corruption, bad faith or the knowing pursuit of an improper purpose. Wider grounds may apply where there is a sufficient public law nexus. A prior planning permission does not invariably constrain a later decision by the authority acting as landowner, particularly where the transaction was expressly subject to contract and circumstances have materially changed.

The claimant sought judicial review of Manchester City Council’s refusal to proceed with the proposed sale of the freehold reversion of commercial land. The council had previously indicated, on a without prejudice and subject to contract basis, that it would consider the sale following completion of development in accordance with an existing planning permission.

The council later rescinded its resolution authorising the disposal. Its concerns included the proposed scale and density of development, the claimant’s ability to deliver and manage the scheme, and the desirability of pursuing an enlarged regeneration proposal. The claimant alleged improper motive, irrationality, irrelevant considerations, procedural unfairness and failure to take material considerations into account.

1. Permission and outcome. Permission to apply for judicial review was granted, but the substantive claim was dismissed. Permission to appeal was refused and the claimant was ordered to pay the council’s costs.
2. Amenability and applicable public law grounds. Applying the approach stated in Trafford v Blackpool Borough Council [2014] EWHC 85 (Admin), the court had to consider the nature of the transaction, the statutory power, the statutory framework and the connection between the impugned decision and the alleged public law error. Where a public body acts under a statutory power in relation to a contract, but there is no substantial public function element, genuine challenges based on fraud, corruption, bad faith or the knowing pursuit of an improper purpose will ordinarily remain available. The availability of wider grounds depends on the circumstances and the existence of a sufficient public law nexus.
3. Planning permission and land disposal. The council’s earlier grant of planning permission did not impose the full range of public law obligations on its later decision, taken as landowner, not to proceed with a proposed freehold sale. The heads of terms were expressly without prejudice and subject to contract and created no enforceable obligation or legitimate expectation.
4. Improper purpose and rationality. The council’s primary purpose was to encourage discussion of the Yikman proposal or prevent an increased-density scheme. That was a genuine and legitimate objective connected with regeneration and planning responsibilities. The council was not seeking to prevent development under the existing permission or punish the claimant. Its decision was therefore neither an improper purpose nor irrational. In any event, the council had rational grounds for considering that the planning circumstances had materially changed since the permission was granted.
5. Other grounds. The council was entitled to consider the claimant’s ability to deliver and manage the development and the wider regeneration consequences. Procedural fairness did not require a formal notice-and-response process beyond the discussions which had occurred. The Powergen and Sears principle was not universally applicable and did not govern this case. The arguments based on failure to consider consequences, equity or beneficial purpose therefore failed.
6. The court found that the claimant had standing and would, if necessary, have extended time, but those issues did not affect the dismissal of the claim.