COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MR JUSTICE COLLINS
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE SEDLEY
LADY JUSTICE SMITH
| THE FIRST SECRETARY OF STATE & ANOTHER
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Timothy Corner QC and Lisa Busch (instructed by Messrs Denton Wilde Sapte) for the Respondent
Crown Copyright ©
Lord Justice Sedley :
This is the judgment of the court.
"The First Secretary of State accepts that need can be expressed in quantitative and qualitative terms but considers that evidence presented on need is becoming increasingly and unnecessarily complicated. He therefore places greater weight on quantitative need for new retail provision to be defined in terms of additional floorspace for the types of retail development distinguished in PPG6, which are comparison and convenience shopping."
Convenience goods are short-life products; comparison goods are more durable products for which people can be expected to shop around.
11. The Secretary of State notes that the applicant has put forward a case for retail need using quantitative and qualitative indicators. He notes that the existing store is trading at a sales density some 50% above the company average [IR 14.20] and agrees with the applicant that this is an indicator of a qualitative need for the proposed extension. However, he does not agree with the Inspector that this can be regarded as an indicator of a quantitative need for additional floor space; the fact that the store is trading better than other Sainsburys stores does not demonstrate quantitative retail need in this location [IR 14.24]. Overall, having regard to the Inspector's conclusions in paragraphs 14.20 – 14.24, the Secretary of State considers that there is evidence demonstrating a qualitative need for the proposal.
12. The McNulty Statement acknowledged that need can be expressed both in quantitative and qualitative terms. However, it also states that greater weight will be placed on quantitative need for new retail provision to be defined in terms of additional floorspace for the types of retail development, meaning comparison and convenience shopping. The Secretary of State notes that the application has used both a business based and a class of goods approach to calculating quantitative need. Following the McNulty Statement, the Secretary of State considers that more weight should be attached to the evidence contained within the good-based approach, and he has considered the issue of quantitative need in this case in that way.
13. The Secretary of State notes that the applicant has assessed quantitative need based on the estimated increase of expenditure on convenience and comparison goods in the Primary Catchment Area between 1991 and 2006, compared to the estimated turnover of the proposed extension [IR 14.18 – 14.19].
14. For the reasons given in paragraphs 14.15 – 14.16, the Secretary of State agrees with the Inspector that the three postcodes zones identified by the applicant represent a reasonable assessment of the Primary Catchment Area [IR 14.16]. For the reasons given in paragraph 14.17, he also agrees that the population increase figures presented by the applicant form a reasonable basis on which to assess an increase in expenditure in the Primary Catchment Area [IR 14.17]. On this basis, the Secretary of State is satisfied that there has been a growth in estimated expenditure of £8.5 million on convenience goods in the Primary Catchment Area in the period from 1991 to 2003, and that this is likely to grow by a further £2.3 million in the period to 2006.
15. However, the Secretary of State disagrees with the Inspector that the estimated growth in convenience expenditure in the Primary Catchment Area is a demonstration of a quantitative need. This is because the applicant has not compared this estimated or potential growth in expenditure with actual existing expenditure. The Applicant has submitted an assessment of a growth in expenditure, not evidence of a quantitative need for additional floorspace, over and above the existing floorspace, to satisfy an unmet demand in Kidlington. The applicant has not therefore demonstrated that there is expenditure in the catchment area that has not been, or is not being, met and that there is available capacity to justify a need for additional retail facilities [IR 14.25]. The Secretary of State does not agree, therefore that the applicant had demonstrated a quantitative need for the proposal.
16. In conclusion, while the Secretary of State considers that qualitative need has been established, quantitative need has not been demonstrated. The Secretary of State has borne in mind that the McNulty Statement indicates that greater weight will be placed on quantitative rather that qualitative need and overall, he does not consider that the applicant has demonstrated a convincing need for the proposed extension to the store. For these reasons, he does not agree with the Inspector's overall conclusion on need [IR 14.25]. In reaching this view, the Secretary of State has taken full account of paragraphs 5 – 12 of the Inspector's addendum report but considers that this does not provide any further evidence of a quantitative need for the proposed extension.
14.18. The increase in convenience goods based expenditure in the Primary Catchment Area in the period 1991 to 2003 is estimated to be £8.5m [7.20]. It is forecast to increase by a further £2.3m by 2006 [7.20]. The equivalent convenience business based figures are £28.6m and £8m. Allowing for the only significant foodstore development in the Primary Catchment Area since 1991, the Marks & Spencer food hall in Summertown (£6.5), this would leave an increase in capacity of £4.3m on convenience goods based basis or £30.1m on convenience business based basis.
14.19. In estimating the turnover of the extended store, it has been assumed that the proposed additional floorspace would trade at a lower sales density than the existing store. It has been assumed that this would be 33% of the existing sales density [7.19]. The estimated additional turnover would be £7.09m. That is accepted by all parties and appears to me to be reasonable figure. The convenience goods based capacity estimate would just be sufficient to accommodate the proposed extension if allowance is made for 15% of the £7.9m turnover of the store extension to be on comparison goods and assuming only 70% of the turnover comes from the Primary Catchment Area [7.30]. It is evident that on the business based expenditure figures, more than sufficient capacity exists for the proposed extension.
14.20. I was told that the existing store is trading at a sales density some 50% above the company average even after the opening of the Marks & Spencer store in Summertown [7.10]. Accepting that the turnover of that store might increase slightly from its present level, it is not expected to alter the overtrading situation at the Kidlington Sainsbury's store [7.10]. Although put forward as part of the qualitative need for the proposed extension, I consider that this degree of overtrading can also be regarded as an indicator of a quantitative need for additional floorspace.
14.21. Set against those indicators of quantitative need is the evident underperformance of the existing supermarkets in Kidlington shopping centre. The reported sales figures for the stores accepted by all parties at the inquiry, when compared with those in the earlier MVM report which based the estimated turnover figures for Tesco and the Co-op on company average sales density figures, indicate £4.5m under-trading by Tesco and £1.5m under-trading by the Co-op [7.47]. It is agreed between the parties that the figures for Iceland in the original MVM report were based on an erroneous estimate of the floorspace of the store and that at £1.5m the store is trading slightly above the company average.
14.22. It is common ground between the parties that a qualitative need for the proposed extension can be demonstrated [7.12-7.17]. The overtrading referred to above leads to cramped conditions for customers and the need for frequent restocking of shelves [7.13, 7.17]. It is also claimed that the inability to carry as wide a range of products as other company stores also represents an element of qualitative need [7.13-7.15].
14.25. The growth in convenience expenditure in the Primary Catchment Area has given rise to a quantitative need, whether it is assessed on the lower convenience goods basis or the higher convenience business basis. The 2 under-trading stores in Kidlington shopping centre are not meeting that need and the evidence points to that situation continuing. I conclude therefore that there is a substantive quantitative need for the proposed development on the Sainsbury's site, whether that is assessed on a convenience goods or convenience business basis. Moreover qualitative considerations further strengthen the case for the proposed development on grounds of need.
The combination of the error in paragraph 11, that is to say the failure to regard the overtrading as a possible indicator of quantitative need, coupled with the lack of proper reasoning in paragraph 15, does lead to a need to quash this decision because it has those errors of law.
(1) The Secretary of State failed to give reasons in §11 for finding that overtrading at the existing store could not be treated as an indicator of quantitative need in the circumstances of the case.
(2) The Secretary of State's reasoning in §15 was unintelligible; if, however, it was that Sainsburys' approach to quantitative need overlooked where it was that the new purchasing capacity was or would be spent, it was wrong.
The reasons for a decision must be intelligible and they must be adequate. They must enable the reader to understand why the matter was decided as it was and what conclusions were reached on the "principal important controversial issues", disclosing how any issue of law or fact was resolved. Reasons can be briefly stated, the degree of particularity required depending entirely on the nature of the issues falling for decision. The reasoning must not give rise to a substantial doubt as to whether the decision-maker erred in law, for example by misunderstanding some relevant policy or some other important matter or by failing to reach a rational decision on relevant grounds. But such adverse inference will not readily be drawn. The reason need refer only to the main issues in the dispute, not to every material consideration. They should enable disappointed developers to assess their prospects of obtaining some alternative development permission, or, as the case may be, their unsuccessful opponents to understand how the policy or approach underlying the grant of permission may impact upon future such applications. Decision letters must be read in a straightforward manner, recognising that they are addressed to parties well aware of the issues involved and the arguments advanced. A reasons challenge will only succeed if the party aggrieved can satisfy the court that he has genuinely been substantially prejudiced by the failure to provide an adequately reasoned decision.