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Judgments - Standard Commerical Property Securities Limited and others (Respondents) v. Glasgow City Council (Appellants) and others (Scotland) Standard Commerical Property Securities Limited and others (Respondents) v. Glasgow City Council and others (Appellants) (Scotland) Conjoined Appeals)

HOUSE OF LORDS

SESSION 2006-07

[2006] UKHL 50

 

OPINIONS

OF THE LORDS OF APPEAL

for judgment IN THE CAUSE

 

Standard Commercial Property Securities Limited and others

(Respondents) v. Glasgow City Council (Appellants) and others

(Scotland)

Standard Commercial Property Securities Limited and others (Respondents) v. Glasgow City Council and others (Appellants) (Scotland) (Conjoined Appeals)

 

Appellate Committee

 

Lord Nicholls of Birkenhead

Lord Hoffmann

Lord Hope of Craighead

Lord Rodger of Earlsferry

Lord Brown of Eaton-under-Heywood

 

Counsel

Appellants:

Glasgow City Council

Gerry Moynihan QC

Sarah Wolffe

(Instructed by City of Edinburgh Council)

Atlas Investments

Roy Martin QC

Jacqueline Williamson

(Instructed by Russel + Aitken)

Respondents:

Heriot Currie QC

James Mure

(Instructed by Semple Fraser)

 

Hearing dates:

3 and 4 october 2006

 

on

thurSDAY 16 november 2006

 


HOUSE OF LORDS

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

Standard Commercial Property Securities Limited and others (Respondents) v. Glasgow City Council (Appellants) and others (Scotland)

Standard Commercial Property Securities Limited and others (Respondents) v. Glasgow City Council and others (Appellants) (Scotland)

[2006] UKHL 50

LORD NICHOLLS OF BIRKENHEAD

My Lords,

    1.  I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Hope of Craighead and Lord Rodger of Earlsferry. For the reasons they give, with which I agree, I would allow this appeal.

LORD HOFFMANN

My Lords,

    2.  For the reasons given by my noble and learned friends Lord Hope of Craighead and Lord Rodger of Earlsferry, I would also allow this appeal and make the order which they propose. I would also associate myself with the comments of my noble and learned friend Lord Brown of Eaton-under-Heywood.

LORD HOPE OF CRAIGHEAD

My Lords,

    3.  The law does what it can to assist local authorities to promote redevelopment where this is in the interests of the proper planning of the areas for which they are responsible. They have been given powers of compulsory purchase which can be used to bring this about where alternative means are not available. But an indication that compulsory powers will be used tends to provoke objection, and few proposals for redevelopment can have been as frustrating to those who seek to promote them as this one.

    4.  No-one has questioned the need for such a scheme in the area which has been proposed for redevelopment in this case. It lies in the centre of Glasgow, within a block bounded by Buchanan Street, Bath Street, West Nile Street, Nelson Mandela Place and West George Street. As the Lord Ordinary, Lady Paton, said at the outset of her opinion, this is a prime site, and it is badly in need of redevelopment: 2004 SLT 655, para 1. But the site is in multiple ownership. Glasgow City Council ("the council") has insufficient funds of its own, and it has proved impossible to co-ordinate the different views and interests of the various proprietors. Attempts to find a solution to the problem have raised questions as to their legality. Years have been spent in litigation. Contracts for the carrying out of the work have not yet been entered into. The site remains an eyesore.

    5.  The solution which the council wished to pursue was to identify a suitable developer, and then to enter into an arrangement under which the council would, having acquired the land compulsorily, transfer the land to the developer in exchange for its undertaking (a) to carry out the development and (b) to indemnify the council in respect of all of its costs. The question which this case raises is whether its decision to pursue this course was within the powers that the council has been given by the statute. The powers are set out in Part VIII of the Town and Country Planning (Scotland) Act 1997, which deals with the acquisition and appropriation of land for planning purposes.

    6.  No-one has questioned the legality of the use of the power to acquire land on this site compulsorily to promote its redevelopment. Nor is it disputed that it is open to the council to use this power to assemble the site for redevelopment by someone else, and in particular by a private developer. The issue that has been raised relates to the terms which the council have proposed for its disposal to the preferred developer and to the question whether it was entitled to conclude that those terms are the best that can reasonably be obtained. Local authorities have power under section 191(1) of the 1997 Act to dispose of any land which has been acquired or has been appropriated for planning purposes. But the power to do so is qualified by the statute. This gives rise to the two questions which lie at the heart of this appeal. The first is whether the terms on which the council proposes to make the assembled site available to the developer are within the scope of that power. The second is whether the council took all relevant considerations into account when it decided to exercise the power in this way.

The statutory powers

    7.  Section 188(1) of the 1997 Act provides that a planning authority may acquire by agreement any land which they require for any purpose for which a planning authority may be authorised to acquire land under section 189. Section 189(1) is in these terms:

    "A local authority shall, on being authorised to do so by the Scottish Ministers, have power to acquire compulsorily any land in their area which -

    (a)  is suitable for and is required in order to secure the carrying out of development, redevelopment or improvement;

    (b)  is required for a purpose which it is necessary to achieve in the interests of the proper planning of an area in which the land is situated."

Section 189(4) provides:

    "It is immaterial by whom the local authority propose any activity or purpose mentioned in subsection (1) … is to be undertaken or achieved and in particular the local authority need not propose to undertake that activity or achieve that purpose themselves."

    8.  Section 191, so far as relevant to this case, provides:

    "(1)  Where a planning authority -

    (a)  has acquired or appropriated land for planning purposes, and

    (b)  holds that land for the purposes for which it was so acquired or appropriated,

    the authority may dispose of such land to such person, in such manner and subject to such conditions as may appear to them to be expedient for the purposes mentioned in subsection (2).

    (2)  Those purposes are to secure -

    (a)  the best use of that or other land and any buildings or works which have been, or are to be, erected, constructed or carried out on it, whether by themselves or by any other person, or

    (b)  the erection, construction or carrying out on it of any buildings or works appearing to them to be needed for the proper planning of their area.

    (3)  Subject to the provisions of subsection (7), any land disposed of under this section shall not be disposed of otherwise than at the best price or on the best terms that can reasonably be obtained.

    (10)  In relation to any such land as is mentioned in subsection (1), this section shall have effect to the exclusion of the provisions of any enactment, other than this Act, by virtue of or under which the planning authority are or may be authorised to dispose of land held by them."

    9.  Section 191(7) of the 1997 Act is designed, so far as practicable, to protect the interests of persons living or carrying on business or other activities on the land. No issue has been raised about its application in this case. Among the provisions which are disapplied by section 191(10) is section 74(1) of the Local Government (Scotland) Act 1973. That section confers a general power on local authorities to dispose of land held by them in any manner they wish, subject however to subsection (2) which provides:

    "Except with the consent of the Secretary of State, a local authority shall not dispose of land under subsection (1) above for a consideration less than the best that can reasonably be obtained."

The effect of section 191(10) of the 1997 Act is that land which has been acquired or appropriated for planning purposes, and is being held for the purposes for which it was acquired or appropriated, cannot be disposed of under section 74 of the 1973 Act. The Scottish Ministers have no power to permit its disposal other than as provided by section 191(3). It cannot be disposed of otherwise than "at the best price or on the best terms that can reasonably be obtained".

    10.  The facts must now be described in more detail, to set the scene for a closer examination of the words of section 191(3) in their proper context.

The background

    11.  The site comprises an area of land and buildings in the northern area of Buchanan Street at its junction with Bath Street which is bounded on the west by West Nile Street. It includes a block of buildings facing largely on to Buchanan Street which comprise 3-7 (or 1-7) Bath Street and 185-221 Buchanan Street. The corner building at 3-7 Bath Street and 221 Buchanan Street has been demolished. The other buildings are run down and not in character with the surrounding area. The site at 3-7 Bath Street and 221 Buchanan Street has been referred to as Phase A of the proposed development. It is in the exclusive ownership of Standard Commercial Property Securities Ltd ("SCPS"). The other buildings within the site are in multiple ownership. Phases Band C comprise 209-217 Buchanan Street and 106A West Nile Street. The buildings in this Phase are owned partly by SCPS, partly by Atlas Investments Ltd ("Atlas") and partly by others who are not parties to this appeal. The remainder of the site, referred to as Phases D-H, is owned for the most part by Atlas and, as to the rest, by others who are not parties to this appeal.

    12.  SCPS is a wholly owned subsidiary of Mitchell & Butlers plc. It acts as its property owning subsidiary in relation to the development. Its associated subsidiary, Standard Commercial Property Developments Ltd ("SCPD"), acts as its property developer. They seek to develop the site, or part of it, and it was at their instance that these proceedings were brought. On 1 November 2000 SCPD were granted planning permission to redevelop 3-7 Bath Street and 221 Buchanan Street (Phase A). A revised permission to develop this part of the site was obtained in 2001. Atlas, who claim ownership of about 88 per cent of the slum area of Phases A-H, are also interested in developing the site. They, together with Glasgow City Council, are the appellants in this appeal.

    13.  At a meeting of its Development and Regeneration Services Committee ("the committee") on 26 August 1999 the council approved in principle the promotion of a compulsory purchase order over subjects at 185-221 Buchanan Street and 1-7 Bath Street. This was substantially the same area as that with which these proceedings are concerned. It authorised officials to conclude a binding agreement with Atlas which would enable the council to proceed with the promotion of the compulsory purchase order. Clause 5 of the agreement provided that Atlas was to reimburse to the council the total compensation or purchase price for the subjects together with interest and the reasonable costs properly incurred by it in connection with the promotion and confirmation of the compulsory purchase order. On 19 and 20 October 1999 a minute of agreement was entered into between the council and Atlas in the terms that had been approved.

    14.  The agreement thus entered into has been referred to colloquially as a "back-to-back agreement". This is a short-hand way of describing the essence of the arrangement. The site was to be made over to the developer in exchange for its undertaking to carry out the work at its own expense and to indemnify the council for the money expended in assembling the site and making it available. The council was not to be paid any more than the total amount due under the indemnity. In effect the developer was to be put into the same position, no more and no less, as it would have been in if it had power to acquire the site itself compulsorily. The council for its part was to achieve its planning purpose at no expense and without the risk of incurring a loss on the proposed redevelopment.

    15.  SCPS decided to challenge the council's decision to proceed in this way. It presented a petition for judicial review in which it sought declarator that the council's decision was ultra vires and reduction of that decision and the minute of agreement. On 15 August 2000 Lord Nimmo Smith sustained the petitioner's pleas in law and pronounced decree of declarator and reduction: Standard Commercial Property Securities Ltd v Glasgow City Council, 2001 SC 177. He did so not because he was of the opinion that the council did not have power to enter into a back-to-back agreement in the terms which the minute of agreement set out. His reason for granting these orders was that the committee had failed to take into account relevant and material considerations in exercising their discretion under sections 189 and 191 of the 1997 Act. It had assumed that a single comprehensive development of the whole site was required. But the site was occupied by several buildings with different owners, and there had been no discussion of the possibility of the involvement of more than one developer or of separate but mutually compatible redevelopments of different parts of the site. Another proprietor had made proposals, and there had been no comparison between its proposals and those of Atlas: 2001 SC 177, 201, para 44.

    16.  The question whether a back-to-back agreement of the kind contemplated was within the powers of the Act was however the subject of detailed submissions in that case, and Lord Nimmo Smith delivered a ruling on it which provides an important part of the background to what happened next. As he pointed out in para 42, subsection 189(4) does not expressly authorise a local authority to enter into an agreement, such as a back-to-back agreement, with the person who is to carry out the redevelopment. Authority to do this must be found in section 191(1). In his opinion land might properly be described as held by a local authority within the meaning of that subsection as soon as it was vested in them by virtue of a general vesting declaration following the procedure for compulsory acquisition. In considering whether to dispose of the land, however, the local authority would have to consider what manner of disposal, and what conditions to which it should be made subject, might be expedient for the purposes mentioned in subsection (2). As for the terms that were to be sought for the disposal, he said this in para 42 at pp 200H-201B:

    "Section 191(3) does not prohibit such a disposal otherwise than at the best price that can reasonably be obtained. The expression in that subsection is 'otherwise than at the best price or on the best terms that can reasonably be obtained' (my emphasis). It would therefore be for the local authority to consider not only the price (as related inter alia to the amount of compensation payable under the compulsory purchase procedure) but also the terms offered by any person to whom the disposal might be made. These terms would include those which would be most conducive to achievement of the purposes set out in subsection (2), and would thus include matters such as the likely ability of the person, on the basis, for instance, of past experience and financial soundness, to carry the development through to completion."

    17.  He developed this point further in the following paragraph, para 43:

    "Read together, sections 189 and 191 appear to me to provide a statutory framework within which a local authority may decide to acquire land compulsorily and to sell it to a developer under a back-to-back agreement, provided that proper account is taken of all the considerations I have mentioned, particularly the planning purposes in section 189(1). I thus reject the submission for Standard (which was in any event, as I understood it, departed from), that a decision to enter into a back-to-back agreement cannot competently be made at the same time as a decision compulsorily to acquire the land in question."

The overriding consideration for the local authority, as it appeared to him, was whether acquisition of the land by them and its development by the developer with which a back-to-back agreement was to be entered into were reasonably necessary for planning purposes.

    18.  On 26 October 2000 the committee approved a framework for the use of their compulsory powers in conjunction with a back-to-back agreement. As the Lord Ordinary (Lady Paton) noted in para 11 of her opinion, this document was a direct consequence of what Lord Nimmo Smith had said in his judgment of 15 August 2000. It was headed: "Framework for the use of compulsory powers (CPO) and back to back agreements with developer(s) under the Town and Country Planning (Scotland) Act 1997". In the introduction to this document a summary was given of the relevant provisions of sections 189 and 191. There then followed a description of the process that was to be followed through. It was to consist of four phases: (1) consideration as to whether the use of CPO powers was reasonably necessary for planning purposes; (2) if it was, the presentation of a report to the committee for authority to investigate the requirement for their use and, if approved, the giving of notice to interested parties of the council's intention to use CPO powers if necessary to assemble the site inviting them to submit their proposals for its redevelopment; (3) evaluation of all submissions against four stated criteria; and (4) conclusion, following the detailed evaluation as set out above.

 
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