England and Wales High Court (Administrative Court) Decisions

Westmorland Motorway Services Ltd. v Secretary of State for Transport, [2002] EWHC 847 (Admin) (29th April, 2002)

IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
ADMINISTRATIVE COURT

		48/49 Chancery Lane London, WC2A 1JR
		29 April 2002

Mr George Bartlett QC:

1. This is an application under section 288 of the Town and Country Planning Act 1990 to quash a decision of an inspector appointed by the first defendant dismissing an appeal against the deemed refusal by the second defendant of an application for planning permission by the claimant. The planning application related to the use of a development called the Rheged Discovery Centre, which stands on a site on the A66(T) some 2.5 km to the west of central Penrith. Outline planning permission was first granted on appeal in May 1991 for a new visitor centre, tourist information centre, restaurant, business centre, outdoor activity area, car park and fuel/motorists’ facilities. The permission was renewed twice, latterly in January 1997, and other permissions and approvals before and after that covered access arrangements, reserved matters and various amendments.
2. The development was completed and opened for business in July 2000, having cost £18.735m, including £3.418m grant aid. It consists of the Rheged Discovery Centre building, a petrol filling station with associated services, and car parking. The building is on five levels with ramps between levels and is set into a former quarry. It is earth-covered and is said to be the largest earth-covered building in Europe. It contains 8,517m² gross internal floorspace in a complex layout. Among the uses that it houses are exhibition halls, conference and meeting rooms, two cinema/theatres and a restaurant. The application that has led to this appeal was made shortly after the centre had opened, on 26 September 2000. It sought permission for a mix of uses, including up to 2,800m² gross of retail units and the unrestricted use for live performance and entertainment of the two cinema/theatres. The inspector held an inquiry over 6 days in June and August 2001.
3. The proposal was thus that one-third of the floorspace of this unusual building, which had been permitted and was being operated as a tourist attraction, should be used for retail purposes, with only a small part being reserved for the exhibition shop and the service station store. The large auditorium contains an Imax large-screen cinema, and it was proposed that this should be used for showing general-release films, if necessary excluding those on current release. The nearest large-screen cinemas are in Glasgow and Bradford.
4. The case for the appellant was that the Rheged centre was of great importance to the tourist strategy of Cumbria and to the economy of parts of Cumbria outside the Lake District, and should for these reasons be kept open. The need to do so had become greater as a result of the foot and mouth epidemic in 2001. Without the retail and entertainment uses for which permission was sought, the centre would be uneconomic and would close. While the proposed uses were contrary to planning policies that sought the location of such uses in town centres, the harm caused to Penrith town centre would be very small. If permission were refused, so that the centre closed, there would be job losses and the building would either remain empty or would be used for other less suitable purposes. Overall, therefore, the balance lay in favour of the grant of permission. The case for the council was based on the policy objections to the retail and leisure uses. They said that locating these at the centre would lead to an increase in car journeys. They argued further that the case for enabling development had not been made out. There was no evidence that other ways of operating the centre within the scope of the existing permission had been tried and had either failed or been rejected for good reason. They said also that there was no evidence that the proposed uses would increase the numbers of paying visitors to the centre.
5. In her decision, under the heading “Main issue” the inspector said:

“9. The proposal is business plan led: the amount of retailing and the extension of use of the cinema are said to be enabling development required to secure the future of Rheged. The main concerns expressed by the Council are with regard to the impact of general retailing and the showing of general release films both individually and in the context of the impact of the overall mix of uses proposed, particularly on Penrith town centre. From what I have heard, read and seen, I consider the main issue to be whether the proposal amounts to a sustainable form of development, bearing in mind the continuing overarching objective of securing benefits associated with an expanding tourism industry in Cumbria, particularly outside the Lake District National Park.”

6. The inspector identified the planning policies that she considered to be relevant. They related to tourism, retail, leisure and entertainment, and landscape. She then set out the reasons for her decision in sections dealing with the principal topics. She started with “The Business Case” and, having identified what she considered to be the right approach on viability, she said that Rheged was not viable as it was then being operated nor would it be if the appeal proposal were implemented. It followed that she did not regard the need to enable the appellant’s particular operation to remain open a material consideration to which she could attach significant weight. On “Retail” she concluded that the proposal would have unacceptable consequences for the implementation of the council’s strategy for Penrith town centre so far as shopping provision was concerned. On “Leisure/Cinema Uses” she saw force in the argument that Rheged would be a much greater draw than evening uses in Penrith town centre, and she concluded that the proposal would fail to encourage investment in the town centre. On “Tourism” she concluded that the proposal would make Rheged a destination in its own right, rather than a stepping-off point to other areas, to the detriment of the towns and rural areas outside the Lake District national park, and particularly Penrith. She regarded the loss of existing jobs that would result from closure as a comparatively small and acceptable adverse impact in relation to the others that she had identified. Her overall conclusion was that the harmful effects on Penrith town centre and on its evening economy outweighed the benefits attached to the appeal scheme; and she considered that the amount of retail floorspace proposed would lead to an unnecessary and unacceptable increase in journeys by private car.
7. For the claimant Mr Andrew Gilbart QC puts forward some ten grounds of challenge. His first, and principal, ground relates to the inspector’s conclusions on the Business Case. As advanced by the appellant, this assumed a continuation of the current Rheged operation. In a Statement of Common Ground the parties agreed three possible tests of viability. Each test made two alternative projections – Plan A, which assumed Rheged operating as at present with no further planning consent, and Plan B, which assumed the additional planning consent and resultant retail lettings and broader use of the cinema in accordance with the submitted application. Over half the increase in revenue under Plan B (£442,000 out of £854,000) would come from retail lettings and the evening cinema. The rest would be derived from greater receipts from the existing facilities; and the assumption was that the annual “footfall” through the exhibition would increase from 250,000 under Plan A to 300,000 under Plan B.
8. Viability test 1, “adopted by the directors of Westmorland Services Limited” (as it was put in the Statement of Common Ground), assumed that Rheged would be a division of the Westmorland Group and that tax losses generated by its operation would be surrendered for cash to other group companies. On this test, Rheged would be viable under Plan B but not under Plan A. Viability test 2, “adopted by the council”, assumed Rheged as a free-standing commercial entity and took into account the depreciation of capital assets and the capital repayment of the bank borrowings. On this test Rheged would not be viable under either plan. Viability test 3, like VT2, assumed Rheged as a free-standing commercial entity but one that had been acquired by another operator at less than its cost, with consequential reductions in depreciation and interest charges. This produced viability on Plan B but not on Plan A.
9. Giving her reasons on the Business Case, the inspector said:

“20. Advice in Circular 11/95 is that since planning controls are concerned with the use of the land rather than the identity of the user, the question of who is to occupy premises for which permission is to be granted will normally be irrelevant. Existing planning permissions relating to the appeal site are not personal permissions. There has been no suggestion that any permission granted now should be subject to such a limitation.

21. The proposal involves general retailing with no limitation proposed by way of condition on type of goods. The appellants suggest that the goods on offer would tend to be of a sort that would be linked with the Rheged or mountaineering themes. An undertaking relating to a modest part of the retail area addresses that to a limited extent. It might also generally prove to be so in the appellants’ hands, but taken overall that does [not] provide any meaningful or enforceable form of control in planning terms. In any event neither existing planning permissions nor conditions proposed in connection with this appeal specify precise themes.

22. These factors lead me to conclude that the Council’s approach to assessment of viability on the business case is the correct one: for the purposes of this appeal the proposal must be assessed on the basis that the enterprise is a free-standing commercial entity. It is common ground that in this circumstance Rheged is not viable as it is presently being operated, nor would it be if the appeal proposal were implemented. It follows that I do not regard the need to enable the appellants’ particular operation, Rheged, to remain open, a material consideration to which I can attach significant weight.

23. It is of course a commercial decision for a developer whether or not and how to proceed with the implementation of a planning permission, within the parameters it provides for. I acknowledge that the financial burden amassed bringing the project to its present state is a heavy one. But it is clear to me from examination of the feasibility study dating from 1989 and subsequent business and marketing plans that alternative approaches to implementation have been put forward at various times. I have no evidence from which I could conclude that the precise route taken by the appellants was the only or most appropriate way to implement the planning permission granted. It is true that no new or different options or modifications were suggested at the inquiry. But that does not mean they do not exist.”

10. Mr Gilbart says that in paragraph 22 the inspector has concluded that viability should be assessed on the basis that the enterprise is a free-standing commercial entity but she has confined herself to considering VT2; and thus she concludes that Rheged would not be viable if the appeal proposal were to be implemented. What she should have done, says Mr Gilbart, was to go on to consider VT3, the other test that assumed a free-standing commercial entity. On that test viability was achieved under Plan B. Either she failed to consider VT3 at all, or she failed to give any reasons for rejecting it, or for adopting the assumption, reflected in VT2, that past borrowing must be taken into account in determining future viability.
11. Mr Timothy Mould’s response on this point for the Secretary of State is that, by accepting the council’s approach, the inspector must be taken to have rejected VT3. He referred me to the arguments advanced by counsel for the council in his closing submissions at the inquiry and he argued that the inspector must be assumed to have accepted these. All three viability tests had been based on plans A and B, both of which assumed a continuation of the present operation, augmented, in the case of plan B, by the new retail use and the unrestricted entertainment use. The council did not accept that the manner in which Westmorland Motorway Services chose to operate the centre was the only way in which it could be operated under the existing planning permission. Reliance had been placed on the accountancy evidence given on behalf of the council by Timothy Taylor, senior partner in the forensic accounting practice of KPMG. Mr Taylor questioned whether, as VT3 assumed, a purchaser would in reality pay £1.2m for the net book value of the fixtures and fittings of an unprofitable enterprise. He expressed the view that, if a forced sale meant that no proceeds were received by Westmorland, so that no depreciation or interest charges would be incurred, the forecasts provided by Westmorland in respect of VT3 showed the centre to be viable under plan A.
12. I have to say that I find the inspector’s decision at a number of points obscurely worded and difficult to follow. In paragraph 22 she says that she accepts as correct the council’s approach on viability and that, on this basis, it was common ground that the centre was not viable either as existing or as proposed. Thus she seems to be accepting VT2 as the appropriate test of viability. This, she says, leads her to conclude that no significant weight should be attached to “the need to enable the appellants’ particular operation, Rheged, to remain open.” Her conclusion on viability appears, therefore, to be an important element in her rejection of the appellant’s case.
13. Earlier in paragraph 22 the inspector says that she is led to the conclusion that the council’s approach on viability is correct by the factors she has previously set out. Those factors are, it appears, that the question of who is to occupy the premises is irrelevant (paragraph 20) and that there would be no enforceable means of ensuring that the goods sold in the shops would be linked to Rheged or mountaineering themes (paragraph 21). I do not see how these factors can be said to support the adoption of VT2. That test assumes a free-standing entity burdened by the debts of the Rheged enterprise but unable to exchange its tax losses for cash payments from other companies in the Westmorland Group. The council’s case, that the availability of such an exchange should be excluded from consideration because there is no guarantee that such an arrangement would be put in place and would continue, is an understandable one. That would represent the position that the Rheged operating company would be in if there was no subsidy from the rest of the group. But that is not the basis on which the inspector says that she is adopting VT2, and in my view her reasons do not support her adoption of it. If it is the case that the existing Rheged operating company is not to be taken to be the occupier for the purposes of the viability assessment, it is difficult to see why the assessment should assume an operator that is burdened by Rheged’s debts.
14. It is to be noted that the section of the decision letter dealing with Tourism contains this paragraph:

“45. Judging by visitor numbers, Rheged is already doing very well indeed compared to market leaders in Cumbria and nationally. This is in spite of a series of difficulties and delays. Especially when it is borne in mind that it is scarcely established, this appears to me to provide a clear demonstration of its potential. I accept that not all those who cross the door are guaranteed to be the paying customers at the Rheged experience upon which viability in the business sense depends for the appellants. But equally I find no substantial evidence that implementation of the appeal proposal would vary the correlation between visitor numbers and paying customers in a way or to an extent that would achieve the desired result or that the development without the amount of general retailing proposed could not.”

15. Despite the obscurity of parts of this paragraph, as Mr Gilbart points out, the inspector appears to be treating the potential increase in visitor numbers as the factor on which viability depends; whereas, as I have observed earlier, on the tests put forward, over half the increase in revenue was assumed to come from the independent retail lettings and the evening cinema. There is moreover an apparent conflict between this paragraph, which, having said that Rheged is doing very well indeed and has potential, suggests that “the development without the amount of general retailing” might boost visitor numbers and paying customers sufficiently to “achieve the desired result”, and the conclusion in paragraph 22, on the basis of VT2, that Rheged is not viable now and would not become viable if the appeal proposal were implemented.
16. In my judgment the inspector has failed to deal adequately with the viability issue. The reasons given for her adoption of VT2 do not support it; she fails to give any reasons for rejecting VT3; and there is no explanation of the apparently conflicting conclusions in paragraphs 22 and 45. One is left with the strong impression that the inspector may not have understood the viability issue, which formed the principal matter in dispute. Certainly her reasons fall far short of enabling the informed reader to understand why it is that she has rejected the appellant’s case. I think, however, that the correct inference is that she failed to take account of important aspects of that case. It does not follow that, had she done so, she would have allowed the appeal. Indeed, on the other side, the council adduced arguments that appear to have much force. But it seems to me that an inspector, properly considering the question of viability, could have come to a different decision, and the application must accordingly succeed on this first ground
17. Mr Gilbart advances two grounds of challenge specifically directed to paragraph 23 of the decision letter, in which the inspector concluded that it would have been possible to adopt other methods of implementing planning permission. In the first of these grounds (ground 4), he says that the inspector took into account an immaterial consideration. What the inspector was required to consider was not whether it was right that the building could or should have been permitted or constructed in some different form but what use could and should be made of the building now that it was constructed. Mr Mould says that this criticism is founded on a misreading of the paragraph. The inspector is indeed looking to the future rather to the past. Her reference to the 1989 feasibility study and subsequent business and marketing plans shows that there were a range of possible ways in which the centre could be operated. The paragraph is part of her reasoning to explain why she has not found the business needs of the claimant as the current operator of the centre to be a crucial consideration. This is indeed how she puts it later in her decision at paragraph 47, where she says in her “Overall Conclusion on the Main Issue”:

“…Because planning permission runs with the land, in this instance I have not found the business needs of the developer to be a crucial consideration.”

18. Paragraph 23 is another obscure paragraph. I find it impossible to decide with any certainty whether the point that the inspector is making is that the appellant could have incurred lower costs than it did in fact incur in developing the site; or that some different (and, impliedly, less uneconomic) operation could in future be carried on within the scope of the permission; or both of these things. Whichever of these it is, however, the point could well impact upon the inspector’s conclusion on viability in the previous paragraph since this was based on the costs that were actually incurred and the operation that is at present being carried on. Not only, therefore, should the point have been spelt out in order that one could see what it was, but there was also a need for the inspector to explain how it affected her conclusion on viability, the principal issue in the case. The inadequacy of this part of her decision is another reason for quashing the decision.
19. Mr Gilbart goes on to say (in his ground 5) that, in concluding that the financial burden could have been avoided by adopting other methods of construction or implementation, the inspector failed to have regard to evidence on the reasons for cost overruns or evidence from the Chief Executive of the Cumbria Tourist Board that there was no way of keeping the centre open without a scheme of the kind proposed. Alternatively her conclusion was irrational. Alternatively she failed to explain why she had rejected this evidence. Mr Mould says that here again the criticism is based on a misreading of the decision. The inspector was not rejecting the reasons why the level of costs had been incurred. Indeed she specifically said that she acknowledged the heavy financial burden. Nor was she rejecting the evidence of the tourist board. She was merely taking a less pessimistic view of the prospects. I am not satisfied, assuming Mr Gilbart’s interpretation is correct, that it would have been necessary for the inspector to have referred specifically to the evidence on cost overruns and the kinds of operation that were required. The cost overruns were the result of implementing the particular scheme of the appellant, and there would no doubt have been other, quite different, schemes that could have been devised under the outline planning permission. On the kinds of operation, it was the case for the council that there would be other ways of operating under the planning permission, and I do not think that any more would have been required of the inspector than to indicate which view she preferred. This ground of challenge is not made out.
20. Two of Mr Gilbart’s grounds of challenge relate to the benefits that the appellant, as part of its case at the inquiry, had contended that the proposed retail and entertainment uses would bring. Since, according to the appellant, the proposal would make an otherwise non-viable operation viable, it would prevent the adverse effects that would result from closure of the centre. These adverse effects were the loss of jobs and the fact that the building would be left empty. With the building empty, there would be the problem of finding an acceptable use for it, since it was next to a listed building (some old kilns) and there would be objections in locational and sustainability terms to commercial uses. The other benefit to which the appellant’s case had pointed was the new jobs that it said that the proposal would create. Of these matters, the inspector only referred to the loss of existing jobs at the centre, where in paragraph 46 she said:

“46. If the centre were to close, and for business reasons the owners chose not to sell it or reconsider their options, then existing jobs would be lost. However, bearing in mind the adverse impacts I have identified I regard the loss as a comparatively small and acceptable one.”

21. Mr Gilbart submits that, in dealing in this way with the effects of closure, the inspector erred in two respects. Firstly (ground 2) she left out of account (or failed to give reasons for discounting) evidence that had been given on the jobs attributable to the centre. This evidence had been that in addition to the existing 66 jobs at the centre, a further 70-80 other jobs were indirectly dependent on its continued operation; while 80 additional direct jobs would be created by the proposed retail and entertainment uses, together with a further 90-100 indirect jobs. The inspector in paragraph 46 was referring only to the loss of existing jobs. Moreover, Mr Gilbart said, there was substantial evidence before the inspector that the effect of closure would be to harm efforts to regenerate the Cumbrian economy in the wake of the foot and mouth epidemic. She either left this out of account or failed to explain why she discounted it. Secondly, in his ground 3, Mr Gilbart says that the inspector left out of account the consequences of the building standing empty.
22. Mr Mould says that the inspector made clear that she was weighing in the balance all the benefits claimed for the proposal by the claimant when, at paragraph 48, she said:

“48. On the evidence I have, I consider that the harmful effects I have identified on Penrith town centre and on its evening economy outweigh benefits attached to the appeal scheme, which would be contrary to the objectives of national and local retail and leisure policies I have identified.”

23. Mr Mould also points out that in paragraph 46 the inspector, having said that the loss of jobs would be comparatively small and acceptable, went on:

“In reaching this conclusion I have been mindful that since the application, and indeed the appeal was submitted, the impact of Foot and Mouth Disease has been strongly felt in Cumbria.”

24. The inspector had also considered earlier the effect on the proposal of the centre’s role as a tourist attraction and had concluded that the proposals would make the centre into “a destination in its own right to the detriment of the town and rural areas outside the national park, and particularly Penrith.” This, Mr Mould says, would have informed her judgement as to the significance of her decision in relation to the foot and mouth crisis. The fact that the inspector only mentions the loss of jobs as the consequence of closure does not mean, Mr Mould says, that she has ignored the other possible consequences of closure.
25. These grounds of challenge appear to me to raise matters that are contingent on the grounds related to viability. The appellant’s case was that, in the absence of the proposed uses, the centre would close but, with them, it would remain open. Had the inspector accepted this clear-cut analysis of the prospects, it would, I think, have been necessary for her to deal specifically with the principal effects of closure, and she would have needed to say more than that she recognised that there would be job losses. If, however, her view, properly reached on the material before her, had been that the centre would close with or without the proposed new uses, or that the centre would be likely to remain open without the proposed uses, or that it was simply impossible on the evidence to say what the prospects of closure were, the extent to which she would have needed to consider the consequences of closure would have been much less. Since she has reached no valid conclusion on viability, it is not possible to say how she should have dealt with the consequences of closure. These grounds, therefore, are not made out; but the possible need to consider more fully than the decision letter does the consequences of closure is an additional reason for quashing the decision on ground 1.
26. The conclusion of the inspector in para 44 that the Rheged centre would “change from an outward looking tourist destination…to one that would be much more inward looking” and that “it would first and foremost become a destination in its own right to the detriment of the towns and rural areas outside the national park” is the subject of Mr Gilbart’s ground 9. He says that she has failed to give adequate reasons for this conclusion since, if there are more visitors, the effect of the change in the proportion not visiting other locations may still result in more visitors going on to visit other towns and rural areas. Here again, it seems to me, the degree of detail into which the discussion needs to go must depend on the conclusions as to viability, and similar considerations apply as for grounds 2 and 3. Ground 9 is, therefore, not made out.
27. The section of the decision letter entitled “Overall Conclusion on the Main Issue” included the following paragraph:

“49. Tourism by its nature implies travel. I regard provision made on site for local buses and provision for and active promotion of the private coach trip counterbalancing factors in this respect. Nevertheless, in the absence of demonstrable need, and in the presence of a sequentially preferable location for retail development I consider that the amount of out of centre general retail floorspace in particular would lead to unnecessary and unacceptable increase in journeys by private car, particularly in the non-tourist sector. That would be contrary to the national objective of reducing the need to travel by concentrating such development in town centres.”

28. Mr Gilbart in his ground 6 says that in concluding that the development would lead to an unacceptable increase in journeys by private car the inspector failed to identify the scale on increase that led to the description “unacceptable” or to consider a matter that the appellant had put before her, namely the effect of the centre closing, which could lead to the establishment of a use which itself generated car journeys. She thus failed to give adequate or intelligible reasons when dealing with the issue.
29. There is, in my judgment, nothing in this ground of challenge. It is, I believe, sufficiently clear from a reading of the paragraph as a whole that the inspector was saying no more than that the increase in car journeys was unnecessary because there was a sequentially preferable location for the retail use and unacceptable because it was contrary national policy. The conclusion was not, on this reading, dependent on a calculation of the number of car journeys or extra miles. It was the fact that national policy was to reduce the need for travel by concentrating retail development in town centres that made the proposed development on an out of town site unacceptable.
30. Mr Gilbart raises three grounds of challenge on the inspector’s treatment of retail issues. The first (ground 7) concerns two surveys that were the subject of evidence before her, one a survey of users of Rheged and the other a street shopper survey of Penrith town centre. At paragraphs 32 and 33 she reached a conclusion on the likelihood of shoppers making linked trips to Rheged and Penrith town centre. She said:

“32…because of the overall range of the offer for tourists, I consider that the incentive for linked trips with Penrith town centre or other locations would be much reduced.

33. Co-incidentally, the survey indicates that the lack of clothes shops is also the main cause for dissatisfaction for non-tourists. While the distance between Penrith town centre and Rheged may not be large, it is much greater than to the sequentially preferable site at Southend Road. In the light of the greater choice that would still remain in Carlisle I see a real prospect that non-tourists would be less inclined to vary their shopping habits in favour of Penrith town centre.”

31. Mr Gilbart says that the Rheged survey addressed the question of linked trips whereas the Penrith survey did not. He says that the inspector in coming to her conclusion on linked trips failed to have regard to the Rheged survey or alternatively failed to explain her conclusion. Mr Mould points out that in paragraph 29 the inspector expressed her views on the value of the responses to the Rheged questionnaire. She said:

“29. Responses to a questionnaire available at Rheged represent the views of a small sample of visitors. As people have the choice about whether to pick one up and fill it in, there is no guarantee that respondents or their answers are representative of a cross-section of visitors. I do not regard the questions posed to have been constructed with the same rigour as those in the survey commissioned for Penrith town centre. Moreover, responses relate to a facility in various stages of emergence, and of necessity exclude views of those visiting the recently opened National Mountaineering Exhibition. Although they represent a flavour of the views of customers on an emerging facility, overall I regard the Penrith survey as more comprehensive for use in connection with my assessment of this proposal.”

32. Two things are, I believe, clear from the passages I have quoted from the decision letter. Firstly the inspector had in mind the survey material in the context of the issue of linked trips. This appears from paragraphs 32 and 33. Secondly she placed little weight on the results of the Rheged survey. This appears from paragraph 29. I therefore cannot accept Mr Gilbart’s contention that the inspector left out of account the evidence on linked trips contained in the Rheged survey. The decision letter shows that the contrary was the case – that the inspector did take it into account but that it did not persuade her that the incentive for visitors to go on to Penrith town centre after visiting Rheged was significant. The fact that only the Rheged survey contained answers on linked trips does not mean that the inspector was bound to accept those answers at face value and as being representative of the propensities of future visitors to the centre, and she explains why she places little weight on the survey with what in my view is sufficient particularity. Ground 7 accordingly fails.
33. The council’s strategy for Penrith town centre was for expansion in the area of Southend Road, adjacent to the existing shopping centre. In his ground 8 Mr Gilbart points out that in paragraph 34 the inspector noted that there was no evidence that the prospective developers of the Southend Road site were put off by the appeal scheme, but she went on:

“…But that project is founded principally on a convenience store, and it is common ground that there would be no impact in this respect if the appeal scheme proceeds.”

34. Mr Gilbart says that in fact the agreed evidence was that the Southend Road scheme included both a convenience store of 22,500 sq ft net and a large amount of comparison goods floorspace (52,000 sq ft net) as well. The appellant had called evidence that the appeal scheme would not harm the prospects of any of the Southend Road floorspace trading successfully. The appellant and the council agreed that the strategy of expansion of the town centre at Southend Road, so as to draw back to Penrith those currently shopping elsewhere, would not be harmed by the appeal proposals. In concluding as she did in paragraph 35, therefore, that “there would be unacceptable consequences for the implementation of the Council’s strategy for Penrith town centre so far as shopping provision is concerned,” the inspector left this evidence out of account or alternatively failed to give adequate reasons or alternatively came to an irrational conclusion.
35. In order to understand the inspector’s conclusion in paragraph 35, it is necessary to look at other parts of the inspector’s conclusions on the retail objection to the proposal and also at the case that was being put to her on behalf of the council. At paragraph 26 she says:

“26. It is common ground that the retail element of the appeal proposal would attract mainly comparison goods. As an indication of the possible level of impact on Penrith the appellants and the Council calculate that 2-7 comparison goods shops may be at risk of closure. By either calculation, that appears to me an adverse impact to weigh against the proposal, particularly as the retail development now proposed would be out of town. On either estimate however, given the buoyant state of Penrith town centre, the prospect of such loss, on the face of it, may not be crucial to its continued vitality and viability. However, it is important to examine the interrelationship between Rheged and Penrith town centre if this scheme proceeds.”

36. The inspector then goes on to consider the council’s survey of shoppers and the Rheged survey of visitors. At paragraph 31 she says:

“31. The Council’s emerging strategy for Penrith town centre still has some way to go before new shops appear on the ground. There are few vacant shops now. Therefore, if planning permission is granted on the appeal scheme, I see considerable force in the argument that Rheged would be particularly attractive to those parts of the comparison goods sector that tourists visit when they are in Penrith, and those they find most lacking in Penrith.”

37. At paragraph 30 the inspector had noted that the survey showed that the lack of clothing shops was a major cause for complaint from tourists, and at paragraph 33, in a passage I have already quoted, she says that the survey showed that the lack of clothes shops was also the main cause for dissatisfaction among non-tourists. It is these shops, therefore, that in the inspector’s view are likely to be attracted to Rheged, if planning permission is granted, in advance of any such provision at Southend Road. That, it seems clear to me, is the particular adverse effect on the implementation of the council’s strategy that she has in mind when she says in paragraph 35 that the consequences would be unacceptable. She says, in paragraph 33, that she sees a real prospect that non-tourists, currently going to Carlisle, would be less inclined to use Penrith instead. It is also to be noted that the case for the council at the inquiry had been that the potential trade diversion from clothing and retail floorspace as a result of the proposal was 22%, in contrast to the much smaller diversion of 0.9-1.9% estimated by the appellant. The inspector does not refer to this evidence, but it is clear that she had material before her showing that the proposal would not necessarily be innocuous – indeed that it could be substantially harmful – in that sector where the town centre was already most deficient.
38. The fact that prospective developers would not be put off developing the Southend Road site by new retail floorspace at Rheged is not a matter, it seems to me, that impinges on the particular concern of the inspector, which relates to a specific sector of retail trade. To say, as she does, that the Southend Road scheme is “founded principally on a convenience store” is not on the face of it inaccurate. It may well be that, although there would be more comparison floorspace than retail, the key element of the development is the food store. Since there would be no impact on this element, the development as a whole could be expected to go ahead. But – and this is the inspector’s point – clothing floorspace would probably already have gone to Rheged. The extended town centre would thus not be as attractive as it would otherwise have been, and the likelihood of drawing back to Penrith those now shopping in Carlisle would be reduced. That was a conclusion that was undoubtedly open to her on the evidence, and she has explained it adequately.
39. Mr Gilbart’s ground 8 therefore fails. His ground 10 also relates to retail issues. I can deal with it very shortly. In her overall conclusions the inspector says that there was “a sequentially preferable location for retail development” – a reference to Southend Road. In paragraph 17 she had recorded:

“…The appellants accept that in terms of location, the Southend Road site is sequentially preferable to the appeal site. Equally, however, the Council acknowledges that in the context of the business plan led approach that underlies the appeal proposal the only location where the claimed need for retail development could be met is at Rheged.”

40. Mr Gilbart says that the effect of national policy on retailing is that the sequential test applies to the development whose need is under consideration. He refers to PPG6 paragraph 1.10 and to the ministerial statement of 11 February 1999. Here, he says, it was agreed that the need for the development in question could only be met at the appeal site, so that Southend Road could not be sequentially preferable to it. It seems clear to me, however, that in paragraph 49 the inspector is referring to the Southend Road site as being sequentially preferable in the terms accepted by the appellant (as this acceptance is recorded in paragraph 17). She is not at that stage considering the need for the proposal as enabling development, having already rejected the appellant’s case on that. There is nothing in this ground of challenge.
41. This appeal succeeds on two of the grounds advanced, and the decision must be quashed.
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THE DEPUTY JUDGE: For the reasons set out in the judgment, which I now hand down, the application succeeds and the decision is quashed.

Mr Copeland.

MR COPELAND: I am grateful, my Lord. As a result of that, may I apply for costs in this matter to follow the event?

MR MOULD: My Lord, I cannot resist that.

THE DEPUTY JUDGE: No. Thank you very much.

MR MOULD: My Lord, I believe we are agreed that, subject to your Lordship's views, the costs should be subject to detailed assessment, if not agreed.

THE DEPUTY JUDGE: Very well.

MR MOULD: My Lord, I have an application for permission to appeal. Can I straight away say that this is plainly not a case which raises any particular issue of principle but turns classically on its own facts. Your Lordship has been asked to consider a challenge essentially on grounds of a failure to take account of certain matters and a failure to give adequate reasons and has found against the decision in certain respects on such grounds. My Lord, all I say is this: whilst your Lordship has clearly found that the inspector's handling of the viability issue was not up to the adequate standard, and she must be considered not to have taken proper account of the case that was put on that basis, with respect the submissions that I made in support of the decision on those grounds at least are reasonably arguable. There is a reasonable prospect that the Court of Appeal may take a different view on that, predominantly on the basis that the inspector was required to give sufficient reasons for her conclusions on that issue, to enable informed parties to know what she had decided and why. My submission, as your Lordship will recall, as reflected in the judgment, is that she essentially said, "I accept the Council's case in relation to the issue of liability." I make the submission that she must be reasonably assumed to have accepted the Council's case for the reasons that the Council put forward. Your Lordship has not accepted that as a proper basis for upholding the decision, but my Lord, I simply say that there is a reasonable prospect that the Court of Appeal will take a different view, and on that basis I apply for permission.

THE DEPUTY JUDGE: Mr Mould, I think I must refuse permission.