Supreme Court rules council unlawfully exercised compulsory purchase powers in supermarket battle

The Supreme Court this week ruled that it was unlawful for Wolverhampton City Council to take into account a commitment from Tesco to regenerate a separate, unconnected site when it resolved to make a compulsory purchase order over land owned predominantly by rival supermarket group Sainsbury's.

The appeal in R (on the application of Sainsbury’s Supermarkets Ltd) v Wolverhampton City Council and another [2010] UKSC 20 related to the use by the local authority of its power under the Town and Country Planning Act 1990 to acquire compulsorily land in its area if it thinks that the acquisition will facilitate development on the land and that such development will contribute to the well-being of the overall area.

Sainsbury’s owned or controlled 86% of the site in Raglan Street that was subject to the compulsory purchase order, while Tesco controlled most of the rest. Both supermarket groups wanted to develop the land, and it was decided that outline planning permission should be granted to each of them.

However, it was clear that unless Wolverhampton used its compulsory purchase powers in relation to the site, neither development would take place. The two supermarket groups therefore attempted to persuade the council to exercise the power in their favour.

Tesco also controlled an unrelated site in Wolverhampton City Centre called the Royal Hospital site (RHS). This site has been in poor condition and the council has for several years sought to regenerate it.

As part of its bid to persuade the local authority to exercise its compulsory purchase powers over the Raglan Street site, Tesco promised – through a planning obligation – to regenerate the RHS. Tesco said that its development at Raglan Street would represent a subsidy equal to the loss it would sustain in carrying out the RHS development.

Wolverhampton subsequently made a compulsory purchase order in relation to the part of the Raglan Street site owned by Sainsbury’s. Tesco’s promise was key to that decision.

By a majority of four to three, the Supreme Court ruled that it was unlawful for the council to take the RHS site and Tesco’s promise into consideration.

Giving the lead judgement on behalf of the majority, Lord Collins said principles derived from cases concerning what can be lawfully taken into account in determining planning applications apply equally to compulsory purchases for development purposes.

The judge said it was therefore legitimate for a local authority to take into account “off-site” benefits of a proposed development provided that such benefits are related to or connected with the development itself.

He added: “There must be a real, rather than a fanciful or remote, connection between the off-site benefits and the development for which the compulsory acquisition is made.”

In this case, Lord Collins suggested, there was only a connection in the sense that the council was being tempted to facilitate one development because it wanted another development, or that Tesco was being tempted to undertake one un-commercial development in order to obtain the development it wanted. The claimed financial connection between the two sites was not a relevant matter.

Lord Walker, also in the majority, said Wolverhampton had a direct financial interest in the matter and a strict approach was therefore called for.

He said the reason why “is simply that it is not the right way for a local authority to make a decision as to the exercise of its powers of compulsory purchase, any more than it could choose a new chief executive, from a short list of apparently equally well qualified candidates, by holding a closed auction for the office.”

In his minority judgement, Lord Phillips said the local authority had two decisions to make: first, whether to exercise its compulsory purchase powers at all; and second, to decide to which of the rivals to sell the land.

The council would have been bound to disregard unconnected benefits when making the first decision, the judge said. However, he added: “In that second decision the local authority was entitled – and perhaps bound – to have regard to any unconnected benefit offered by the developer.”