England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
ADMINISTRATIVE COURT

		Sitting at: Manchester Civil Justice Centre 1 Bridge Street West Manchester M3 3FX
		17th May 2011

HHJ WAKSMAN QC:

Introduction

1. On 28 July 2009 the defendant, Salford City Council ("the Council"), resolved to enter into an exclusivity agreement with the interested party, Tesco Stores Limited ("Tesco"), and thereafter a conditional contract, for the sale by the Council to it of a plot of land in Pendleton, Salford ("the Site").
2. The Site had been allocated as town centre land by the 1995 and later unitary development plans. Subject to the obtaining of planning permission, Tesco's intention was to build a superstore on the Site. On 4 November 2009 an exclusivity agreement was made and on 18 March 2010 the conditional contract was made. The purchase price of the Site was £60 million of which £4 million was now being paid. On 22 October 2010 planning permission was granted.
3. The claimant in these proceedings is Salford Estates (No 2) Limited ("SEL"). Its holding company, Praxis Holdings Limited ("Praxis"), owns an existing retail development near the Site on the other side of what is presently a dual carriageway called Pendleton Way. That development is known as Salford Shopping City. Praxis contracted to acquire it from the previous owner, Prime Commercial Properties Limited ("PCP"), on 16 February 2010.
4. The sale of the Site by the Council to Tesco was governed inter alia by section 123 of the Local Government Act 1972 which provides so far as material as follows. Under section 123(2):

"Except with the consent of the Secretary of State, a Council shall not dispose of land under this section, otherwise than by way of a short tenancy, for a consideration less than the best that can reasonably be obtained."

5. As this was not a disposal by way of a shorthold tenancy or with the consent of the Secretary of State the Council had to fulfil the stated duty.
6. On 26 August 2010 SEL issued these proceedings seeking judicial review of the Council's decision to sell to Tesco. Originally a plethora of challenges was made. They included an allegation of unlawful state aid, breach of legitimate expectation, breach of the Public Contract Regulations 2006 and also the positive allegation that the Council was in breach of section 123 because the sale to Tesco was at a clear undervalue and was therefore not at the best price reasonably obtainable. That allegation is no longer pursued. Instead a more attenuated claim is made. This alleges that the Council was in breach of section 123 because it failed to have or have any sufficient awareness of the full scope of its section 123 duty and gave no proper consideration to an alternative to dealing exclusively with Tesco, which was to offer the Site for sale on the open market.
7. As to the price actually obtained of £16 million, the position of SEL, as stated in oral argument, was that it was probable that the Site was worth more than £16 million in March 2010 but it cannot say by how much. I am not invited to reach that somewhat vague conclusion by deciding the issue on the basis of the expert evidence put before the court by SEL but simply because I should accept that competition in the market place tends to drive prices up and there was no such competition here.
8. For their part, and to the extent that this court should enter the territory of assessing the sufficiency of the price obtained at all, the Council and Tesco both contend as at March 2010 £16 million was in fact the best reasonably obtainable price or that on any view, there is no real evidence to show that significantly more could have been obtained for it.
9. I should add that by proceedings commenced on 21 January 2011 SEL sought to challenge by way of judicial review the planning permission granted to Tesco on 22 October 2010 referred to above ("the planning permission claim"). By the judgment which has just been handed down by me immediately prior to this one, I dismissed that claim save in one limited respect and declined to quash the permission. In addition on 25 August 2010 SEL had sought permission to seek judicial review of the Council's decision to adopt a negative screening opinion so that an environmental impact assessment was not required in respect of Tesco's application for planning permission; however this was not pursued by SEL and at its request, permission was refused on paper on 26 October 2010. Subsequently it was ordered to pay the Council's costs.
10. SEL's claim in these proceedings comes before me on a rolled-up basis so I have to decide first if permission to bring it should be given. Here the Council and Tesco allege not only that the claim is not arguable, but that it is made out of time and no extension is justified. For the reasons given later in this judgment I consider that their point on delay is well founded. On that basis, permission should be refused. Had I been considering the question of permission initially and putting delay to one side, I would have found it to be arguable as a matter of substance. I have in fact heard full argument on the claim over two days and in deference to that, and unless I be wrong on the question of delay, I propose now to determined the substantive claim fully.

The Facts

The Site

11. It is necessary first to set out the facts in some detail. In so doing, I shall at various points make comments which will hereafter need to be read with my analysis of the claim itself.
12. First, the location of the Site. The Site as a whole is shown bounded in red on the plan at bundle 2E 2, page 1. Pendleton Way can be seen to the east, and to the east of that is Salford Shopping City. It is about 9.44 acres in size. As at March 2010 the Council owned or would be able to deliver all of the Site except for one part which was already owned by Tesco. This is shown on the plan at 2E 2. Page 2 marks "the Tesco Land" and I shall refer to it as such. Tesco had acquired it from Limes Developments Limited on 23 August 2001 when it was known as "the laundry site". The Tesco Land is thus in the middle of the largest section of the Site. It is in that part of the Site where the superstore itself would be located. The rest of it would be occupied by car parks, a filling station and service yards. All of that is best seen from a plan which in fact was at page 202 of the bundle from the planning permission claim but with which all the parties are familiar since they are the same parties, and the document should now be formally added to the trial bundle here.
13. It is common ground that any superstore to be built on the Site would itself have to be in this general area of the Site although the precise location and the size of the store could vary. I deal below with a suggestion that a superstore of considerable size could be built next to, but not actually on, the Tesco Land.
14. Returning to the plan at 2E 2, page 2, There is an access road running directly north from the Tesco Land to Seedley Road. It lies between the northwards red and dotted lines. As the owner of the Tesco Land, Tesco has a right of way over that road which would bind any purchaser of the land to the north of the Tesco Land. Highway access to the Tesco Land is presently effected by means of Eller Street and Coleridge Street as is shown on the same plan. If the land stayed in separate ownership Tesco would be entitled to have alternative highway access to its land if those particular roads were stopped up to facilitate some other development, and alternative access would have to cross the site of any other store. I shall deal below with the detailed submissions made about the significance of the Tesco Land but at this stage I should indicate my view which is that it has fairly been described by the Council and Tesco in these proceedings as a ransom strip with significant marriage value for the owner of any adjoining land.
15. By 2000 the Council owned all of the Site except for the Tesco Land, the primary school shown above and to the right of Coleridge Street on the plan at 2E 2, page 2, and the Methodist church at the southern end of the Site. From an early stage it was expected that the Council would be able to acquire the two latter sites as part of a plan to market the Site as a whole. In the event and following the construction of a new school, the Council's acquisition of the primary school part of the Site was completed on 5 January 2011. It bought the Methodist church on 26 February 2007 and gave vacant possession once a new church had been built in February 2011.
16. Also by 2000 the Council was interested in having the Site developed as a retail centre to be integrated if at all possible with the shopping centre so that both sites would be enhanced. Although this ultimately foundered there were three-way discussions between the Council, Tesco and PDP, the then owner, to that end between 2002 and 2009; but the area that interested Tesco itself was always the Site originally without the land occupied by the Methodist church. By January 2003 all discussions proceeded on the basis that this land would also be the subject of any sale to Tesco. The detailed history of the Site can be seen from the witness statement of Mr Peter Openshaw, a surveyor employed or engaged at all material times by the Council.

Early Dealings with the Site

17. On 21 August 2001, ie two days before Tesco in fact acquired the Tesco Land, Mr Openshaw reported to a cabinet meeting of the Council as follows. He stated first that the subject was a potential foodstore site. He asked the Council to note that further work was being undertaken to fully confirm the financial viability of the proposals, the additional work taking place was to prepare design marketing brief for the Site and that a CPO may be required to secure all the lands required the opportunity to proceed.
18. I then turn to the detail of his report at page 140 under section 2. He provided information as to the existing ownerships, being the Council, Salford Diocese, the Laundry Building, still then owned by Limes Developments and Salford Methodist Church.
19. At paragraph 2.4 he said that:

"Limes Developments had until recently only an option to apply the laundry building. The option has now been exercised and we have had some initial discussions with Limes about what their intentions are. Whilst the land owned by Limes is fairly small it forms a critical part of the overall development site"

20. And then at 2.11:

"While not owning any land required for the development opportunity Novembre Properties at Salford shopping centre will be indirectly affected by the proposal in terms of transport re-organisation in the area where support is likely to be required."

21. Under "3.0 Financial":

"While officers are confidently saying that the sale of the Site for the foodstore opportunity can generate sufficient funds to cover the cost of the relocation of the.. school and the ..church and other costs these need to be confirmed before any agreements are entered into."

And then at the end of that section:

"Costs currently being identified and a design brief is being prepared to enable the opportunity to be put to the market to determine the level of interest in the Site and the value that potential developers place on the opportunity."

22. So at that stage the intention was to put the foodstore opportunity to the market at an appropriate point.
23. Mr Openshaw's next report is dated 17 September 2002, by which time matters had moved on significantly. First of all under section 2.1 he noted that at the time of the last report the laundry building had been acquired by Limes but shortly after acquisition it had sold it to Tesco. He said that Tesco was very keen on the Site and would like to own it in partnership with the Council to secure redevelopment. Discussions were ongoing with Tesco on the basis that the City Council were willing to consider giving Tesco preferred development status but subject to certain conditions which are listed.
24. Within 2.1 said this:

"Tesco have undertaken ground and service investigations within the site area and believe a development opportunity.. has a residual value of £12 million in which all costs of acquisition would have to be met. Tesco had confirmed they were able to offer the store as a fully fledged partnership store offering considerable employment for local people."

25. And then under "Actions Required - Recommendations:

"2.1.1 That the City Council confirm that discussions with Tesco should continue and that a statement of Intent/Heads of Terms and legal mechanism for securing and subsequently developing the Site being agreed and entered into between the Council and Tesco.

2.1.2 That Tesco be encouraged to submit a planning application at the earliest opportunity.

2.1.3. That in conjunction with a planning application for the site, the City Council initiate the making of a ..CPO on the Site to secure a good title to enable a Freehold sale to Tesco in due course.

2.1.4 In view of Tesco's acquisition of the former Laundry building, 'marketing of the foodstore development to other operators is impractical. As we will therefore be in one-to-one discussions with Tesco it is proposed to seek additional valuation advice on the Council's position and likely receipt'."

26. I interpose there to observe that the reference to valuation in the context of a projected sale to one identified purchaser can only be because Mr Openshaw was mindful of the Council's section 123 duty. That fact is demonstrated by his following paragraph 3.0 under "Financial implications":

"The residual value Tesco have placed on the Site of £12 million, which is likely to increase if the size of the foodstore is increased by the inclusion of the church area, will require independent ratification as being a market price for the opportunity offered. This is particularly important given the proposal to sell on a one to one basis and the city's obligations under section 123 of the Local Government Act."

27. Indeed at paragraph 82 of his witness statement Mr Openshaw says that the Council at that stage was fully conscious of its section 123 duty. For that reason it took two particular steps in late 2002. First on 28 August 2002 Mr Openshaw wrote to a number of surveyors and valuers to obtain quotations as to the value of the Site including the firm of Drivers Jonas ("DJ"). DJ responded on 19 September 2002 and its letter notes on the first page that the Council had received an approach from a food retailer who was interested in developing the Site for a major foodstore and the Council considered the proposed use to be appropriate in planning terms, and wished to progress negotiations with the operator. In view of this the Council required an independent valuation of the development site.
28. And then over the page, under "Best value considerations", the letter says that in addition to assessing the value of this site the author [this being Mr Whaley] would advise the Council as to the appropriate method of disposal taking its obligations to achieve best value under section 123 fully into account. His initial thoughts in respect of best value were that the Council must demonstrate the price being obtained was under the circumstances the best price that could be obtained for the property; consequently the success of any application if required for special dispensation from the Secretary of State will largely depend on the circumstances and level of offer. Clearly the best value that can be obtained from the open market is a function of what is achievable, and planning and other factors. The Council will need to demonstrate that the price being offered is as high as one could expect from the open market for the permitted use. This issue would be considered as part of the report.
29. While the first half of that section contemplates some advice being sought or offered from the valuers about marketing, the last part is clearly suggesting that any valuation will need to be on the footing of what price one could expect from the open market, the author being aware that the Council had had an approach from one particular retailer with whom it wished to deal. There was no suggestion in that letter or thereafter that it would be impossible or unwise for DJ to provide a valuation by reference to the price one could expect in the open market conditions. Further details as to the basis of the valuation as a yardstick by which to assess the appropriateness of an offer from Tesco were set out in DJ's later letter of 9 October 2002. DJ produced its first report and valuation on 31 October 2002.

Counsel's Advice

30. By this time the Council had also taken the step of seeking Counsel's advice on the lawfulness of not putting the Site on the open market but instead dealing with Tesco against the backdrop of an independent valuation. It also sought advice as to the risk of any legal challenge occurring if it took that course. It is necessary to refer in detail to various parts of that advice which was produced in October 2002.
31. In paragraph 3, Counsel, Mr Barrett, refers to the location of the development which was noted to be suitable for one of the limited range of major national retailers and one such retailer had secured an interest in part of the Site, namely the laundry site. Counsel noted that consideration of the plans demonstrated that the Council would not be able to bring forward these proposals without either gaining control of the site or alternatively securing the agreement for the development proposal by the owner. He noted in paragraph 4 that the retailer in control of the laundry site was anxious to negotiate a beneficial arrangement, no doubt with a view to becoming the sole operator of the redeveloped Site.
32. In paragraph 8 he noted that what he was specifically asked to address related to the statutory duty in section 123. He noted that the service development manager was confident that in disposing of the land he could comply with the statutory duty and that he had appointed external surveyors to provide assistance in that regard but noted in paragraph 9 that there was a concern that the Council's actions may be subject to strict scrutiny, especially by retail competitors. He says that there was obviously scope for challenge by competing retailers by way of judicial review of any action required of the Council which would be capable of being seen as favouring one retailer above the remainder. Indeed, says Counsel, it was his experience and that of the services manager that competing retailers would utilise the prospect of judicial challenge to any decision on the part of the Council as a mechanism to frustrate the development of alternative and competing stores. Paragraph 10 says it was against that background that he was asked to advise.
33. The first question was whether the Council's proposed exercise of its powers fully satisfied its best price reasonably obtainable obligations. Counsel said that there was no requirement on the part of the Council as a matter of law to demonstrate that the best consideration obtainable has been secured by any particular means of disposal such as sale by auction or tender. However, as he was to develop, the competitive bidding situation whether by auction or tender was the most likely mechanism by which a Council could demonstrate that the best consideration had in fact been obtained. The proposal by the Council that it negotiate with one retailer would plainly be the subject matter of suspicion on the part of competing retailers, and while the employment of independent advisers to the Council in relation to the best consideration that could be obtainable in respect of its land owning would go a long way of demonstrating compliance with the statutory duty under the Act it could in no way guarantee that a competing food retailer would not utilise the fact that closed negotiation had taken place as a means by which a judicial challenge could be mounted.
34. And then under (ii), as to whether there were any elements in the proposed strategy which might render the Council vulnerable to an action for judicial review either as a spoiling tactic or as a general means of complaint brought by a rival retailer, he said this:

"It would be naïve to proceed upon the assumption that the Council's actions would not be scrutinised with the greatest care by rival retail operators. Whatever action the Council proposes to take in respect of this site there is considerable scope for litigation by means of judicial review in order to frustrate a commercial competitor securing the beneficial development site. The simple commercial equation of preventing the opening of a new foodstore or delaying it by judicial means will be attractive as a proposition in its own right for a rival developer. Irrespective of the degree of probability in succeeding in a judicial review of the Council's actions, it may be a commercially attractive proposition for a rival operator to secure a delay in the opening of a rival store by an application for judicial review. Whilst the application for judicial review by a rival operator may ultimately be unsuccessful by means of the Council being able to demonstrate that it did as a matter of fact obtain the best consideration that was available, the financial equation of commencing that litigation may justify the expenditure of the cost involved."

For the reasons I have set out above the simple act of negotiating with one retail operator to the exclusion of others opens up the prospect of judicial review... The action would presumably be based on the contention that the City Council were simply not in a position to judge what the best consideration would be obtained unless it was put on the open market and/or the contention that the consideration that the Council was to receive would have been exceeded by any particular rival developer.

The upshot of my Advice is that the course proposed by the Council does render it vulnerable to an action for judicial review; however, provided that the Council pursues its strategy of obtaining independent advice from competent sources, the likely success of the judicial review would be minimised.

On the same basis, provided the City Council could demonstrate that its strategy was informed by competent independent consultant's views on the fact that it was receiving the best consideration available, no legitimate criticism by the district auditor is likely to be successful."

35. Under (iii) as to how, if any issues arose, the Council address them, Counsel said that he anticipated the potential claim would be on the basis there was not an opportunity for rival developers to put to the Council an offer. The argument would be run along the lines that unless open market had been tested either by way of offer of tender or auction the city Council could simply not be informed as to what the best consideration for that particular site would be. He referred to the fact that in the report of August 2001 the author noted that so far as the laundry site was concerned they could buy it by agreement or CPO. The second option would be to work with the owners of the laundry site to bring it forward as part of a commercially astute negotiation for the overall development of the proposal.
36. To specifically answer the point raised, Counsel set out how the potential claim was likely to arise in that particular case. He emphasised that irrespective of the prospects of success of judicial review it was likely to be in the commercial interests of a rival foodstore to seek to attempt to frustrate the development proposal being brought to fruition. He said that at the simplest level the best means by which the Council could avoid the prospect of challenge or of judicial complaint would be to secure the whole investment and put the proposal to the market. He appreciated that as the laundry site is in the control of a food retailer the Council could anticipate that in formulating any CPO of the parcels of land not currently in its ownership they would be subject to some delay and the probability of a public inquiry. However, if there was a compelling case in the public interest to secure the control of the Site in order to deliver a superstore development, the Council should not in his view be dissuaded by that reason alone from pursuing a CPO of the relevant land. If the CPO was confirmed the Council would be in a position to put to the open market the total site. That course of action would in his view be the best evidence that is likely to be available in order to demonstrate that the Council had secured the best consideration available. Self evidently the open opportunity to make a bid in respect of the Site was extremely compelling evidence of what the market would stand for a site with the benefit of planning permission for development. Another consideration was that if a CPO was to be pursued for other land, because a financial arrangement having been made with a food retailer it would be open to argument at any public inquiry in relation to that CPO that the Council's approach to the compulsory acquisition was flawed because the development being pursued was for the benefit of an individual operator. There would have to be a requirement to balance the private interest of the existing land owner against the merely private interests of the identified retail operator.
37. In conclusion he said this at paragraph 12:

"First the strategy least likely to attract judicial challenge and criticism would involve putting to the open market the assembled site secured by agreement and/or a CPO which involved all the land interest necessary to enable development to succeed."

In other words the laundry site would be brought under the control of the Council.

"Secondly there is no legal impediment in the strategy currently contemplated by the city Council. That strategy involves the negotiation of one retailer informed as to what the best consideration for the Site would be by independent consultants. Whilst that is a perfectly proper way forward it inevitably involves the risks that an agreed developer or other third party could raise the issue that best consideration was not being obtained because the market had not been tested. While taking independent financial advice as to value and following the procedure set out in the December 1998 letter should inevitably mean that any criticism and/or judicial review would be unsuccessful, it would be naïve to assume that such litigation complaint would not be made to secure a commercial advantage. I advised the city Council that the strategy it is proposing in this particular case is one which is both lawful and legitimate but it carries the risk of a judicial challenge and criticism which is high as a consequence of dealing with only one developer. That should not dissuade the Council from entering this course of conduct it is proposing but it inevitably means that it is subject to a much higher degree of scrutiny than would be the case if the Council had pursued a course of comprehensive CPO (inaudible) and thereafter putting the assembled site with planning permission to the open market."

38. In my judgment the essential thrust of that advice is clear. To sell to Tesco at a price which is supported by an appropriate independent valuation would be lawful and legitimate; however, it would be likely to attract scrutiny by other retailers which might well result in a legal challenge. Such a legal challenge would ultimately be seen off but that would not deter a competitor from making a claim at the first place. The best way to see off such a challenge from a practical point of view would be to put the Site to the open market so as to prove its value but that did not mean that the other course proposed by the Council was illegitimate. Thus Counsel advised both as to the lawfulness of what the Council wished to do and also as to the likelihood of a legal challenge in any event. Those are two separate matters.
39. On any fair reading of that advice Counsel was not advising the Council that as a matter of law it needed at that stage still to consider actively a sale on the open market, still less that it undertake such a sale at that stage against a background where an independent valuation was to be obtained.

Valuation

40. I now return to DJ. Its first report dated 31 October 2002. First of all at the beginning it stated its conclusion which was that in the opinion of DJ the market value of the freehold interest in the Site identified on the plan was £13.25 million. Then, turning to matters of detail, internal page 5 of the report, section 4:

"Market conditions and food retail

4.2. The subject site had been earmarked as the most suitable site for some years by the city Council for retail development.

4.3. Noting the supermarket is competitive and as such often very secretive, terms of transaction are often subject to confidentiality agreements and even where these are absent operators are often reluctant to reveal full terms to the wider market.

4.4. This site would be of interest to actively acquisitive retailers should it be offered to the market in a competitive bidding situation.

4.5. Activity in the sector, although there were regional differences, is dominated by Tesco, Sainsburys, Morrisons, Asda, Wal-Mart and Safeway.

4.6. Competition for sites is often the main driving factor behind site value if competition for the good sites in the food sector remains strong in the northwest as with the rest of the UK.

4.7. Foodstores retailers will have regard to the following: formulating the proposal, the scarcity of sites of location to accommodate modern foodstores of over 60,000 square feet, a more restrictive planning regime, financial protection, foodstore operators' desire to achieve maximum coverage geographically, and competition for market share.

4.8. Due to the scarcity of suitable sites there have been relatively few foodstore openings in and around Greater Manchester. This however is not representative of demand for sites in the sector."

41. And then at internal page 8 section 6, "Valuation issues", in arriving at the valuation both of rental value and of site value having regard to figures achieved elsewhere there was a schedule attached of comparable evidence gathered from sites throughout the northwest of England, and then rental figures were stated in 6.3, 6.4 and 6.5, and then site value, 6.6. Here it was said that site values varied widely both nationally and regionally. The very best sites in the northwest could command site values of £2.25 million per acre but this is the exception rather than the rule and occurs only on sites of multiple occupier interest. And in 6.7, site values in the northwest typically range from £0.85 million to £1.5 million per acre. It said in 6.8. that "We believe the subject site would command a site value in the order of £1.25 million in a competitive bidding situation."
42. Then they say the Site is suitable for development as supermarket use and in view of the scarcity of good quality sites such development likely to provide maximum value and they then adopt two approaches to valuation. The first is the residual appraisal. The second is a site comparison and all of that is then set out. The residual appraisal gave a value of £13.2 million. The comparison appraisal gave a value of £13.25 million.
43. That valuation was on the basis of the entire site, including the land then owned by the Methodist church and the Tesco Land. On the basis of that valuation and Counsel's opinion the Council continued to negotiate with Tesco as the potential purchaser of the Site either by itself or as part of a larger development including Salford Shopping City. It did not place the Site on the open market. At this point I deal with the question of the Tesco Land in detail.

The nature of the Tesco Land

44. The Council and Tesco say that from the Council's point of view it was right to regard it as a real stumbling block to putting the Site on the open market, as Mr Openshaw had communicated in his report of 17 September 2002, which I have read. First its location meant that any developer of the Site would have to acquire it unless there was to be a very significantly smaller store, which would in turn reduce the price of the Site for that particular operator. That view is supported by a later independent valuation commissioned by the Council in relation to these proceedings and produced by Tushingham Moore on 3 February 2011 but without sight of the DJ valuations or knowledge of the purchase price agreed with Tesco.
45. I will read certain parts of it now. First of all under the heading "Existing Tesco ownership" internal page 46, section 14.

"14.1.2. The site which is currently cleared and accessed via a public highway is positioned just north of the centre of the larger site and is fundamental to the development of the Site as a major foodstore providing in excess of 137 square feet.

14.1.3. In my opinion it would not be possible to develop a store of this size on the larger site without the area of land already owned by Tesco. Importantly subject to considering alternative layouts it appears also to be very unlikely that the maximum format Asda superstore, 100,000 square feet, could be accommodated without this land."

46. It also noted at 14.2.2 that it was unlikely a third party developer would have been prepared to spend the time and cash resources working at a superstore development scheme on the Site at their own cost knowing that one of the UK's main supermarket operators was already in possession of a key holding in the middle of the Site. In paragraph 14.3.3 the author's opinion, taking all the factors into account describing that section, was Tesco was in a very strong negotiating position by virtue of acquiring the important ownership. They, importantly, should be expected to maximise their commercial position by paying a value significantly below the prevailing market rates as a result.
47. And then on the question of location of the land in the supplemental report, at page 319, produced on 8 March 2011. First at 2.6:

"The Tesco land is positioned at the heart of the larger development site and its importance to the redevelopment prospect was exacerbated by convoluted access via two highways."

48. And then 4.9:

"Importantly even if alternative layouts are considered the larger formats of all the major foodstore operators could not be accommodated on the Site without the Tesco Land. Tesco would argue strongly that their site and the access roads to it enable significant marriage value to accrue from the larger site by amalgamating the two interests"

49. Here Tushingham Moore considered that, if one excluded the Tesco Land and looked at the remaining areas, which it called for the purpose of its report areas A, B and C (see the plan at page 348), Areas A and C could be developed but because of the shape and awkward topography they could not be realistically developed as a food superstore. The area at B could be developed as a superstore but the maximum size of such a store would be 39,000 square feet as opposed to 140,000 square feet for Tesco's intended superstore. If the Tesco Land were excluded, the total market value of the Site on the basis of areas A and C would be only in the region of £6 million. Further observations are contained in a later letter from Tushingham Moore responding to certain questions made on 14 March 2011.
50. It says this:

"There was a complication because Tesco in all probability would be entitled to the share of any marriage value."

51. And then under question 6:

"In this case, importantly, the city Council did not own the whole site with an important area right in the middle and preventing comprehensive development owned by one of the most likely buyers ie Tesco. I would expect this fact to deter many parties from considering the opportunity. The timelines suggest that all the major operators were deterred by this factor not having made an offer for the Site for over a nine year period where it has been brought forward as a supermarket development site."

52. And he said that in that scenario his recommendation would have been to have the Site independently valued by a consultant with specialist supermarket development expertise and trying to negotiate a price with Tesco at a level close to this value.
53. At the end of the letter the author, Mr Jones, also points out that the layout of a proposed store contained in an offer by Asda which had been made not to the Council but to SEL or Praxis in October 2010 dealt with below would potentially sit on the Tesco Land.
54. In relation to these points SEL's expert in these proceedings Mr Stephens of CBRE London suggested in a supplemental report that a large superstore could in fact be accommodated without encroaching on the Tesco Land.
55. In his supplemental report he said this at paragraph 4.3:

"I do not agree that the Site could not be developed as a supermarket without the Tesco Land. Their site extends to only 1.7 acres out of a total of 10.6 acres. Mr Jones has not justified in describing as a ransom holding. It could quite easily be built around and ignored. See the title plan and my proposed alternative layout plan in appendix 3."

56. But his somewhat crude drawing or computer generated drawing showing the layout of another very large store, as can be seen on the plan at page 341, actually cuts into not only the Tesco Land but also the public highway. In relation to this point I refer to the second witness statement of Mr Madden, who is the solicitor for Tesco, who says this, starting at paragraph 15.1 of his recent witness statement. He said that it would be astonishing if any supermarket operator would be prepared to invest many millions into a site where the central part of the Site was owned and by its main competitor and in 15.3 he says he had been informed Mr Taylorson who is a surveyor employed or engaged by Tesco following consultation with Tesco's only trained architect neither of the alternatives postulated by Mr Stephens could be accommodated within the Site without impinging on the ordinary site. And Mr Taylorson also observed that there was no credibility because it took no cognisance of complex planning and design issues. Tesco had spent some five years developing that. In 15.5 he said that Asda had not at any time expressed a desire to purchase the land excluding the laundry site and they had not sought the Council's assistance to CPO the land.
57. And then, as far as Tushingham Moore are concerned, in a yet further supplemental report from them, the supplemental report served recently on 26 April 2011, at paragraph 4.14 they comment on the suggestion that the Tesco Land could easily be built around and ignored. They say these alternative layouts are of poor quality and of low standard. Even then, one of the two options goes right through the Tesco site. So it seems that Mr Stephens had actually proved its importance. And then paragraph 4.6 said it would be very likely that Tesco, who are a commercial operator, would sell the land by negotiation rather than risk a formal CPO. Tushingham Moore observes this statement suggests that having secured a key holding at the very heart of the development the company by two adopted roads that zigzag across the whole site Tesco would be willing to sell by agreement most likely to a major national competitor directly or via the city of Salford under the threat of a CPO rather than speculate fees and time associated with defending a CPO order:

"This is a naïve suggestion as at the very least Tesco would be expected to use their position to stymie any move to deliver the Site to a competitor for years rather than advance and show the basic lack of understanding of how a foodstore market works."

58. In my judgment no real credence can be given to the suggestion made by Mr Stephens. In addition to this are the access rights of Tesco referred to above which relate to areas outwith the Tesco Land itself but which would have to be dealt with. In my judgment there is simply no evidence to suggest that in truth the Tesco Land was not central to any superstore development on the Site, of anything even approaching the size of the Tesco proposal. The Council was right to consider it critical, and certainly for present purposes it cannot possibly be suggested that it acted irrationally or perversely in coming to that view, informed as it was by its own surveyor. All of that is supported by the evidence that the Tesco Land as a ransom strip and with marriage value would have had a considerable value if being sold to another potential developer. Tushingham Moore puts its value at between £4 million and £5 million as at March 2010: see paragraphs 1.2 and 1.3 at 14.1 of the main report and section 7 of its supplemental report at 3E 10.3.34 to 10.3.35. As against that, it is suggested that its value must be very much less since Tesco only acquired it from Limes Development Limited for £200,000 back in 2001, but there is no detail as to the negotiations for that purchase or their basis and the fact is that there is sound expert evidence which places it in Tesco's hands at a very much higher value.
59. Another point is whether, if the Council were to offer the Site as a whole, Tesco would be willing to sell the Tesco Land at all if it would enable a competing development. Certainly the notion that it would sell to a competitor seems unlikely in the extreme. Its strategic value was noted by Mr Taylorson, Tesco's own surveyor, when his firm first became involved: see paragraph 12 of his statement. So the only way that the Council could ensure that it could realistically put the whole site on the market would be to make the Tesco Land subject to a CPO. I accept that such an undertaking would be far from likely to succeed but if any CPO was at hand it would involve the Council in very considerable cost. As to the prospect of success, Tesco would be hardly likely to give up the Tesco Land without a fight. To succeed the Council would have to show, probably at a public inquiry, that there was a compelling case in the public interest for the deprivation of private rights. The interests here would simply be to enable the Council then to offer the Site to other developers when it had one who was interested in proceeding where there was no need for a CPO and where any sale would be informed by a valuation.
60. As to that, Mr Openshaw in his witness statement said that Tesco had acquired a strategic plot precisely to put itself in a good position in terms of securing a development. It would be naïve to assume that Tesco would give it up easily in face of the CPO. In his experience it would take 9 to 18 months for the matter to come before an inspector and then the various appeals provided for could last several years. As well as a time delay the Council would be put to considerable cost in pursuing the CPO route. Further so long as Tesco were offering best consideration it was unlikely that there a CPO would be enforced. Where the aim was to sell the land for the best price that Tesco were offering to pay it would be considered that an inspector would see no benefit in enforcing a CPO so that the Council could purchase it and then sell it to a third party.
61. Mr Lowe for SEL argued that there could still be said to be a public interest because the Council might then promote a different, more integrated scheme or another retailer might do so, seized of the land. Perhaps, although negotiations between Tesco and PCP and the Council did not ultimately get anywhere after a number of years; but in any event I am not at all persuaded that from the Council's point of view a CPO, if challenged ultimately by Tesco, would not be a questionable proposition and even if upheld the compensation payable to Tesco was likely to be very substantial indeed. See the figures put on its value by Tushingham Moore in those parts of its report referenced above.
62. Additionally to issue and uphold the CPO would undoubtedly take time. Mr Lowe is right to point out that section 123 is about price and not about speed of sale but that does not mean that a Council should delay a proposed sale by what might be a period of time at least of many months and possibly into years where there is an uncertain outcome in terms of achieving a CPO or in terms of a very high cost. It is of course right to say that on 22 October 2010, at a stage when it looked like a proposed sale to Tesco would founder, the Council did issue a CPO on the Tesco Land but it was never actioned and it was later withdrawn once the negotiations with Tesco picked up again. So that very limited exercise is not really indicative of anything. And the fact that it was not moved forward is noted by Mr Openshaw at paragraphs 109 and 110 of his witness statement.
63. Obviously if Tesco refused to pay a proper price and a deal came to nought there might be little alternative ultimately but to make and enforce a CPO if the Council wished to obtain all the land. In this respect see paragraphs 106 and 107 of Mr Openshaw's report, where that was something which was put to Tesco if they were unwilling to pay a price which was the proper price the best consideration obtainable. But matters never came to that here.

Asda Correspondence

64. I now return to the chronology of events. While the Council was in the process of obtaining Counsel's opinion and the valuation from DJ there was the following correspondence with Asda. On 4 October 2002 the senior development adviser, Mr King, wrote to the head of property at Salford Council saying that it was his responsibility to seek out new store opportunities. As part of the process Asda had identified a requirement for a new store to serve the people of Salford. There were stores in the surrounding area but he felt that Salford was under-represented. An Asda store employs up to 350 people and they would look to invest over £20 million. With all this in mind he wrote to inquire whether there were any sites available for Asda to consider as he was led to believe "there is a site in the town centre and which is in control of the Council and that could be made available".
65. The response came on 22 October in fact from Mr Openshaw. It said this:

"The city Council is currently trying to assemble a site adjoining Salford Shopping City for the provision of a large food retail facility. It is one of Salford's four main centres. The site is in mixed ownership and the city is in active discussion with all land owners with a view to bringing the opportunity forward at the earliest opportunity. An integral part of the Site is in the ownership of a food retailer and discussions about the future development of the Site have been ongoing for some time. The city is aware of the competitive nature of the food retail sector in terms of securing sites and is, as I am sure you are aware, governed by section 123 in terms of achieving best price. We have therefore sought the opinion of Counsel as to whether the route the city is currently taking to deliver this opportunity the reasons behind its decision are justifiable. And As soon as we have Counsel's opinion I will contact you again."

66. On 25 November Mr King writes back referring to the earlier correspondence and saying that he noted they were in discussions with one of the competitors but seeking Counsel's advice and asked "Have you now received that advice and what route are the Council now preparing to take in respect of this development opportunity?"
67. The response came on the 10 February 2003:

"Counsel's advice had been received and was considered in a report to respective league members in January February. On the basis of the advice received league members noted the current position and authorised that discussions to secure the redevelopment of the Site for a foodstore should continue with the food retailer that owns part of the Site. On that basis the city Council intends to send out heads of terms for the sale of the Site in the near future."

68. Asda did not take this inquiry any further at the time and there is no evidence of any inquiry from any other retailer either over this period, or until the making of the conditional contract with Tesco in March 2010. Mr Lowe for SEL says that the Council was in error in not pursuing Asda's inquiry, but if the Council was not in error in taking the route of negotiating with Tesco against the backdrop of an independent valuation as opposed to going to the market it was unclear what was to be gained by dealing with Asda when negotiations with Tesco were under way. Secondly, of course, the fact remained that the Tesco Land was owned by Tesco and was not part of the overall site which could be offered by the Council.
69. According to Mr Openshaw he explained to Asda frankly what the position was in conversations which followed that correspondence and reference to the land owned by the retailer is mentioned in the letters. In 2009 he says that he spoke to Asda when negotiations were not going well with Tesco and they said they would be interested if the deal with Tesco broke down but this never happened because the deal proceeded. Mr Richardson, a surveyor employed by Asda, denies that there were any conversations in 2009 but says that there was contact in 2004 when Mr Openshaw told him of the Tesco ransom strip. I do not consider that any difference of recollection between Mr Openshaw and Mr Richardson is of any significance here. Mr Openshaw would, I imagine, accept, consistently with the position adopted at the end of 2002, that if Asda had come back to inquire as to the status of the Tesco negotiations he would have told them they were ongoing and that the Council were not at that stage offering it to the open market. Mr Richardson, while saying that he was rebuffed by the Council, does not suggest that he considered how if it were the case the ransom strip problem stated by the Council could have been averted, nor does he suggest that the Council had some clearly misconceived view about it as being an obstacle.
70. Asda returned to the scene by making an offer in October 2010 not to the Council but to SEL, and I deal with that below. That offer assumed that SEL could deliver all of the Site. At the time neither it nor the Council were actually in a position to do so.

Offers from Tesco

71. On 27 October 2003 there was a further report to the Council's cabinet and in that report Mr Openshaw stated as follows under "information" that Tesco had previously offered £12 million, that was on the basis of a 7,970 square metre store, then once the church was included Tesco increased their offer to £12.65 million. At paragraph 2.2 DJ were appointed to carry out an independent valuation so they could satisfy themselves as to true value proposed and also to provide a safeguard against possible future actions by other parties. DJ advised the Site had a value of £13.25 million. As a one-to-one transaction was being considered Counsel's advice on the actions of the proposed course was also sought. He then said the Council advised the course of action the city were taking and proposal to dispose of the Site by Tesco on a one to one basis was both lawful and legitimate:

"However, Counsel also advise us that this course of action carries with it a high risk of judicial challenge from aggrieved developers or others who had not had the opportunity to bid for the Site if the one to one negotiation with Tesco was pursued."

72. On the basis of the independent valuation, Tesco was advised that its offer was not acceptable. Tesco subsequently made a revised offer of £13.15 and then £13.4 million. That was on the basis of a 9,235 square metre Tesco Extra store. The report went on to say that "Negotiations with other landowners of the Site are progressing well." Paragraph 3, on financial implications, showed that on the basis of an offer of that price of £13.4 million after the various other costs had to be taken into account, including relocating of school and church, the estimated receipt to Salford Council was £4.6 million. The conclusion was that it was now intended that the heads of terms for the sale of the Site be progressed and negotiation with Tesco reported to league members. And so the recommendation was to continue those negotiations.
73. I do not consider that Mr Openshaw's summary of Counsel's advice in that report was in any way unfair or misleading. The later paragraphs indicate that the Council was very much following the line dictated by the DJ valuation. Mr Lowe has argued that the Council did not here "face up to" the question of going to the open market but it had already addressed this question earlier and I cannot see why it needed to address it again. Nothing in substance had changed save that Tesco had now raised its offer to an acceptable level after the earlier offer had been refused, having received DJ's valuation. If the Council's approach to going down this route was correct there could be no error in taking it forward to negotiating or agreeing heads of terms.
74. There was another report on 21 July 2004. It referred to the fact that negotiations had been protracted but were continuing. Tesco had been advised that the Council would rely on its land ownership powers to ensure a quality scheme "comes forward for the site meets our aspirations particularly in relation to ensure a full integration of the store with the adjoining Shopping Centre". And then at 2.6 it said that £13.4 million had been agreed in early 2003 but because of the passage of time the valuation will need to be revisited. It said that "It is likely that with the addition of floor space a land value of around £15 million could be achieved."
75. That is because the proposed size of the store was now 140,000 square feet and there was a draft development with Tesco's at an advanced stage. There is nothing exceptionable here save the Council was clearly still mindful of the importance of the valuation. There were further updated reports in 2005 at a time when the Tesco proposal was still being considered alongside development at the Salford Shopping City. Mr Lowe points out that there was no further consideration of value. That is so, but Mr Openshaw had previously indicated the need for a further valuation and expressed the views of Counsel. After negotiations stalled somewhat and then picked up in 2006 and 2007, he commissioned a second valuation from DJ. Again this was on the basis of vacant possession of the whole site and it now gave the Site a value of £16.77 million. That valuation was made on the same footing as before, ie proceeding from an assessment of market activity, which remained strong. In paragraph 3.6 of that report DJ stated as follows. :

"The supermarket sector is famously competitive and as such very secretive. Operators are often reluctant to reveal full terms. Competition for the Site is often the main driving factor behind the Site value. Competition continues to be strong in the northwest. There has been an increase in recent years in the number of large format stores. The scarcity of suitable size and location has curtailed the amount of these large stores rather than demand While we consider the Site would be of interest to active requirements in the food retail market it is recognised that negotiations have been going on with Tesco for a significant period of time."

76. I do not read that as suggesting that the valuation was not based on a full or proper assessment or appraisal of the price that could be achieved in open market conditions.
77. By early 2008 Tesco had offered £18.5 million. In the report of 26 February 2008, which refers to this, there is no further analysis of how to achieve best value but again nothing had changed from before when the Council had decided what approach to take. Subsequently in 2009 Tesco dropped the price to £16 million in the light of changed market conditions and the fact of the non-availability of a car park outwith the Site as a result of the collapse of the three-way scheme, but as Mr Openshaw pointed out in paragraph 97 of his witness statement that offer, when considered on a per acre value basis was still more than the per acre valuation implicit in DJ's valuation from 2007.

Acceptance of the Tesco Offer

78. Mr Openshaw produced a full report of the position with Tesco on 28 July 2009. This set out the background and then explained the current position with the negotiations for the 140,000 square foot store. There were at the time issues with the third party, PCP, here and in 2.8 the report stated that officers had met with Tesco to discuss the potential for a stand-alone superstore. They had confirmed their strong interest in making plans for a 140,000 square feet elevated superstore with high quality pedestrian linkages between this and the existing centre:

"2.9. In the course of discussions they confirmed they can only now offer £16 million. This is a reduction of £2.6m from the price previously agreed for the integrated store... This gross figure reflects a "green field" scenario and would reduce to reflect Tesco land holding costs in relation to the laundry building they acquired and other costs such as site levelling and remediation."

79. At 3.6 it was noted that if the Council went on a standalone basis with Tesco PCP would take legal action, something which I do not need to explore here.
80. It was then stated under "financial information" that the original projection which had been on a three-way basis when Tesco were paying £18.5 million, when all the costs were taken into account, would have produced a net receipt of between £8.3 and £8.9 million. There was then a recalculation of the scheme, still involving PCP, which would in fact be a negative result for the Council as was shown in paragraph 4.2. But then the most recent position is analysed at 4.3 on the basis of £16 million from Tesco and, then taking various costs into account; this ended up as a net receipt for the Council of £3.4 million and even if a clawback payment had to be made there would still be a net receipt of £2 million. The report noted that the reduction in offer price and the increase in upfront costs by Tesco had reduced the potential capital receipt on the standalone scheme from that previously reported. Paragraph 4.7 noted that the £16 million sum was now on offer and said this at 4.8:

"While there is no doubt that other foodstore and superstore proposals in the areas have advanced and conditions have generally worsened since Tesco put in their original offer, it is a question of whether Tesco is at liberty to use the impasse as a means to seek a better financial settlement. We therefore propose to seek a revised and better offer from Tesco reflecting the opportunity at Pendleton as part of moving towards a contractual position with them for the stand alone store... This does not mean ..that the Council will necessarily succeed in its endeavours and the Council needs to be careful that it does not overplay its hand."

81. The recommendations in section 6 noted the previous position, saying that the Council should approve and authorise the entry into a conditional contract with Tesco in respect of a sale of the land and authorise a payment of £250,000 to ensure exclusivity. It noted in paragraph 7.1 that, while it was regrettable that the three-way scheme did not proceed, Tesco were still keen to take it forward. There is then a risk assessment. Under "financial implications":

"From a purely financial perspective for the Council the option of a further scheme would have had a net cost shown at table 4.2. The cost to the Council would therefore require additional resources. While the option for a standalone scheme generates a lower receipt to the Council as shown at table 4.3 compared to that originally forecast, this is still the best financial option for the Council. The reasons for the reduction of the Council's expected receipts have been explained within the report."

82. The reference to "best financial option" has been the subject of some debate before me. It is clearly a reference to the comparison between the expressed yield to the Council under the three-way scheme in January 2008 (see paragraph 4.1) and the present expressed yield which is lower, and the fact that this proposal remains the best option. It is not a direct reference to the assessment of the Tesco offered price as the best reasonably obtainable in the circumstances but there is nothing adverse in that. Tesco's offered price was still above that advised by DJ's valuation in 2007.
83. This recommendation to cabinet was accepted and what follows was the exclusivity agreement on 4 November 2009 and the conditional contract on 18 March 2010.

The Praxis Offer

84. Mr Openshaw did not consider it necessary in mid-2009 to obtain a further valuation but nothing turns on this. It is not suggested that the prices and values have altered materially since 2007 and certainly not in an upwards direction but it is notable that in February 2010 Praxis, SEL's parent company, made an offer for the Site, on the basis of all of the land for £10 million, significantly less than the Tesco price. See the formal offer letter. This says that Praxis as imminent new owners of Salford Shopping City had concerns about the new proposed superstore. It noted that Praxis, was "extremely keen" to become involved in a proposal to develop a foodstore in the locality, on the basis of a 140,000 square feet foodstore. It was also on the basis, as can be seen from the conditions, of vacant possession. Now Mr Beckerman of SEL has said in his first witness statement that he would have been prepared to go further to £13.5 million, but even if that were so (and it was never offered) it was still a long way short of the Tesco price and, as I say, Praxis required vacant possession of all of the land. Moreover the £10 million was in fact described in the original grounds for this claim as the best reasonably obtainable price: see paragraph 16 thereof.

The first CBRE valuation

85. In addition, when SEL originally sought expert advice as to the value of the Site, it consulted the Manchester office of CBRE. This gave it a value of £13.5 million in its letter dated 20 August 2010. And that valuation is to be found at page 60 of the bundle. It said that, based on the author's knowledge of the sector they anticipated for a unit of this site of size, nine acres, that is 140,000 square feet, the value could be in the region of £1.5 million per acre, which equates to £13.5 million. It may be improved upon subject to competition for the Site. If there was a possibility that some of the other main players would be interested, Safeway, Asda, Morrisons, then the value could increase significantly.
86. But this figure was still significantly less both than the Drivers Jonas valuation in 2007 and the Tesco price. There is nothing to indicate that this figure was based on anything other than the whole of the Site and again, as I have noted, it was on the basis of 140,000 square foot store. A persuasive critique of aspects of this short CBRE report, including the level of supermarket interests for sites of that kind and its singular omission to discuss or raise the Tesco Land, has been made in the report of Mr Taylorson, the surveyor employed by Tesco, dated January 2011.

The Recent Asda Offer

87. Finally, turning to later events I refer to some matters which have arisen since the commencement of these proceedings. First in February 2011 it was disclosed by SEL for the first time that Asda had made an offer for this site to it of £21 million to it, not to the Council. That was by a letter dated 18 October 2010. As a piece of evidence, I do not consider that it adds anything. First it is made after the relevant time, which was July 2009 to March 2010. Second it is not made to the Council. Third and critically, it seeks vacant possession of all of the Site, which not even the Council could give and certainly not SEL which owns no part of it. It was also subject to Wal-Mart approval and various other conditions.
88. I have read the witness statement of Mr Hudson of Asda, who refers to an explanation as to why the offer was made like this and it was of course after the Council had entered into its exclusivity agreement with Tesco and the conditional contract; but the fact remains that it is not an offer as such to the Council and it was on a highly speculative basis that a) as a result of this claim, the Council would be obliged to offer it to the open market; b) Praxis or SEL would then bid for the Site and would do so at a proper price and c) that it would acquire the Site and also somehow the Tesco Land. Mr Hudson also says that the Council could use its CPO powers to force an obdurate land owner to co-operate but that brief statement vastly underplays the potential problems about a CPO which I have noted above.
89. In all of those circumstances the Asda offer cannot begin to constitute a serious dent in the price of £16 million actually achieved by the Council and considered by it to be the best price against the backdrop of the valuation evidence which it had obtained independently and for that purpose.

Expert evidence

90. There is then the welter of expert evidence produced for these proceedings and the question of the correct valuation as of March 2010. Mr Lowe does not invite me to make any positive findings on it and, as already noted, is not in a position to say what he contends the value of the Site is, if not £16 million, save that an open market sale would probably achieve more. In those circumstances I do not propose to undertake a detailed analysis of the conflicting evidence and it is not necessary to do so, but I do make the following observations. First, the Tushingham Moore evidence, referred to in part above, was commissioned as an independent report without sight of the DJ valuation and Tesco price. Tushingham Moore considered that the open market value as at May 2010 was £15.47 million and that included the Tesco Land, which itself it valued at around £4m. But on any view the valuation was less than the Tesco price, the Tushingham Moore reports were an entirely separate and independent valuation exercise and the reporting is full and comprehensive (see the very lengthy report in volume 2 contained between pages 217 and 288).
91. SEL produced further reports from CBRE but this time from Mr Stephens of the London office. These were simply critiques of the DJ reports with full knowledge of the Tesco price but suggested a valuation of some £26.5 million as at March 2010. Mr Stephens has sought to downplay very significantly the impact of the Tesco Land as noted above, but, and as also noted above, I found this to be particularly unpersuasive, and there is no real analysis of the saleability of the land or at what price without the Tesco strip. I also see force in the observations made by Tushingham Moore that the Site has been overvalued because Mr Stephens assumes that 140,000 square feet of retail space ought all to be valued on the same basis as opposed to recognising that significant parts of this will be the lobby and mezzanine areas where the notional rental yield would be much less (see the Tushingham Moore reports on this point at paragraphs 2.1 to 2.18, 2.46 to 2.7, 3.14 to 22 and 3.45 to 47 within the report contained at 3/E/11).
92. I have read the fourth supplemental report of Tushingham Moore, dated 26 April 2011, and the second witness statement of Mr Madden of Ashursts, which incorporates substantial comment from Mr Taylorson, the Tesco surveyor, and I have referred to parts of those documents above. Both of these seem to me to contain persuasive critiques of Mr Stephens' analysis, in particular of the significance of the Tesco Land and his rebuttal of the argument in relation to the calculation of yield in relation to floor space and the differentiation or otherwise between principal trading floor, mezzanine and lobby areas. And of course the valuation given by Mr Stephens is way in excess of that provided by the Manchester office of the same firm with local knowledge of the area concerned. He gives reasons for the dichotomy and argues that the London office in fact have more experience of the supermarket sector, but it remains very odd that there should be such a discrepancy, especially when CBRE Manchester obviously thought that it had sufficient experience to produce a valuation as it did, albeit of a somewhat desktop nature.
93. Moreover, although there has been no oral evidence or cross examination it is impossible to ignore paragraph 65.7 of Mr Gouding's skeleton argument which notes comments made about Mr Stephens by Hart J in the case of Royal v Healey & Baker [2000] All ER (D) 1388, and I have read the relevant passages and, as one would expect, they have been accurately cited. He found, at paragraph 35, that the thoroughness and fairness of Mr Stephens' conclusions had been subject to a searching examination, much of his evidence failed that test and he had been extremely selective in the materials he chose to highlight in the reports as supportive of his thesis.
94. As already noted, this is a trial of the value of the land, and it is not appropriate or necessary for me to resolve or the differences between the experts, but what can at least be drawn from this is that in my view there is no evidence on which it can be safely concluded that the best reasonably obtainable value in March 2010 of this site (which of course excluded the Tesco Land) was a value significantly in excess of the Tesco price. To the extent that this was a contention still being advanced by Mr Lowe at all, the burden would rest firmly on SEL to prove it and it has not done so.

The Law

95. Against that extensive factual background I now turn to the law. Firstly I accept the submissions made by the Council and Tesco that essentially section 123 imposes a duty to achieve a particular outcome, namely the best price reasonably obtainable; it is not a duty to conduct a particular process, for example to have regard to particular factors. Secondly - and I did not understand Mr Lowe to demur from this - as the duty rests upon the local authority, its purported discharge of that duty can only be impugned by this court on the usual public law grounds; that can be seen from the case of R v Essex County Council ex p Clearbrook Contractors Ltd 3 April 1981. At page 3 McNeil J said that he accepted the submission that where the decision challenged was the decision of the local authority in discharge of its public duties, a court is not entitled to substitute its own opinion on the facts and merits of that for that of the authority. The approach would be to interfere only if there was no material upon which the decision could have been reached or if, in reaching that decision, the authority disregarded matters which it ought to have taken into consideration, or had paid attention to matters or allowed itself to be influenced by considerations which were not material to and should not have influenced the decision.
96. Secondly, that statement of principle was approved by Kennedy J in R v Darlington Borough Council ex parte Indescon [1990] 1 EGLR 278 – see page 3 of the report. He also noted that in a case like this a judge has the benefit of hindsight and full legal arguments, a benefit not enjoyed by the local authority taking a decision, and although there is a duty to probe and explore any offer that may be made there is also maybe a danger of too much probing or that indecisiveness may lead to the loss of a bargain.
97. He added at page 9 of the report that certain principles can be distilled from the authorities:

"A court is only likely to find a breach or an intended breach of provisions of section 123(2) … if the Council has a) failed to take proper advice, or b) failed to follow proper advice for reasons which cannot be justified, or c) although following proper advice, following advice which was so plainly erroneous that in accepting it the Council must have known or at least ought to have known that it was acting unreasonably."

98. Thirdly, although there is no particular prescribed route to achieve the best price reasonably obtainable there may be circumstances in which an actual sale to the market is the only way to achieve it as opposed to one particular sale at a price according to an independent valuation. Those circumstances arose in the case of Tomkins v Commissioner for New Towns [1989] 1 EGLR 24, a decision of the Court of Appeal. Here the decision under challenge was that of the local authority to sell the property on the open market. In disposing of that property the New Town authority owed a duty under section 37(3) of the New Towns Act 1981, in like terms to section 123. The claimant invoked guidelines under which he had the right of first refusal. The local authority decided, however, that the statutory duty came first. This was a case where farmland would be used for development in circumstances where a meaningful valuation was not realistic.
99. Evidence was cited from a surveyor of great experience at page 6 of the judgment who said that it would be impossible to ascertain with any confidence the best price reasonable obtainable for the land for the subject of those proceedings without offering it in the market on a sale or tender basis. Dillon LJ said that, bearing in mind that this was farmland for development, the price would be very high; indeed any attempts attempt to estimate the price would be unreliable and virtually just a guess. The reasonable and sensible course therefore for any chartered surveyor advising a vendor would be to advise an offer for sale by tender.
100. Then at page 8 Dillon LJ he said that where there is land in a reasonably stable market like agricultural land without planning permission there should be no difficulty at all in putting a value on it and selling it at full open market value back to its former owners as agricultural land. There was no problem in the present case until it was realised that the land had prospects for development. Cases there the former owners would be willing to buy it back at development value because planning permission for residential development had been granted must be very rare.
101. Then in the judgment of Bingham LJ he says, two thirds of the way down on page 9:

"The Commission's evidence is that lack of comparable transactions and the lack of market experience in the Northampton area made it impossible to put any formal reasonably reliable estimate on the value of the land and it cannot be confident that the best consideration will be obtained unless the land was sold on the open market. That is a factual, not a legal assertion."

102. The evidence before that court did not show that opinion to be wrong, let alone irrational or absurd. If, therefore, the Commission showed that the value cannot be reliably ascertained except by offering the land on the open market, the former owners cannot be assisted by the language of the subsection. So the authority's decision was upheld.
103. Mr Lowe sought to put a gloss on the local authority's duty in relation to section 123 to the effect that Council members need not only be aware of their section 123(4) duty but that they should have a conscious approach to it and should exercise that duty with rigour and with an open mind. I accept that the Council would need to be aware of the section 123 duty, for otherwise it might not necessarily act so as to bring about the required best price reasonably obtainable; but of course if it was clear that the Council had that duty in mind it was not necessary to be explicitly stated; the question is substance, not form. The court so found in the case of R (Baker) v SSCLG [2008] EWCA Civ 141. This was a case concerned not with an outcome duty but a due regard to duty. As Dyson LJ put it in paragraph 37, to see whether that duty had been performed it was necessary to turn to the substance of the decision and its reasoning. A failure to mention the duty expressly does not itself show that the duty has not been performed. All the more so for the duty here, which is not a "due regard" duty.
104. As for rigour and open-mindedness, Mr Lowe derives those words from the case of Brown v Secretary of State for Work and Pensions [2007] All ER (D) 168, which was a case about the duty on a local authority to have due regard to the individual needs of disabled people under section 49(1) of the Disability Discrimination Act 1995. The question was then how to interpret the "due regard" requirement in that context. So in paragraph 19 the question was how the public authority fulfilled that duty. If there was an incomplete or erroneous appreciation of those duties, then due regard would not have been given to them; also the due regard that had to be given at the time the particular policy was being considered. It involved a conscious approach and state of mind, and then the duty should be exercised in substance with rigour and an open mind; it was not simply a question of ticking boxes. But the fact that the public authority did not mention specifically the section 49 duty when carrying out its function was not determinative, and then these is reference back to the decision of Dyson LJ in Baker.
105. But the context in Brown was entirely different from the case before me and I see no basis for overlaying the Council's normal public law duty concerning section 123 as set out above with some higher standard of scrutiny or care. I was also referred to Roberts v Hopwood [1925] AC 578 but I did not find that to be of any real assistance; it was a very different kind of case and does not entail the kind of increased duty contended for here.

Analysis

106. So one returns to the question: can the Council's approach here be impeached on the usual public law grounds? The key area of challenge is its decision, reached as part and parcel of dealing only with Tesco but against the backdrop of an independent valuation, not to go to the open market. First, reliance on valuation evidence cannot be disregarded here on the basis that it was manifestly inappropriate or unreliable, because such an exercise could be realistically conducted and was. Interestingly, not only did DJ not suggest that the nature of the valuation was a problem but no one else appears to have done so either, although different figures emerged. All professed familiarity with the retail development market and DJ used a standard approach to valuation having regard to its experience of that market sector, comparable sales and so on. The fact that DJ offered to advise the Council at one stage as to the appropriate methods to market the Site does not mean that they were saying that the valuation they tendered for was, in the same breath as it were, likely to be of no or little use. Nor on a proper reading of DJ's advice did they say that the Council positively should go on to the open market as opposed to selling only to Tesco, and their reference to strong market activity was because simply they had to take that strength in the market into account when coming up with their valuation. So the use of the valuation as advice was not in itself irrational, nor was that valuation advice manifestly erroneous.
107. Next, the decision to choose that route as opposed to an open market sale cannot be impeached either. As the reports to Council showed, the Council did initially see the open market as a way forward, but then the question of the Tesco Land arose. The Council took the view that this was a real and a critical obstacle to any sale on the open market and that a CPO would not by any means be an easy or inexpensive route. That view is backed up by a substantial amount of expert evidence, as noted above.
108. Again, that was a perfectly rational decision. Indeed, had the Council abandoned Tesco, as it were, and started again and gone to the market without including the ransom strip or halting negotiations and then seeking the CPO by the protracted process which that involved, so that it might later be able to offer it to the market, and thereby lose or potentially lose Tesco as a special purchaser whose price matched the valuation, that course itself might very well have been open to an allegation of breach of duty.
109. Of course, had the negotiations with Tesco ultimately foundered then the Council would then have to go to the market and consider if a CPO should be issued and followed through if it wanted to sell the land, but that situation is not this case. Not only was the advice of DJ proper and not erroneous, it was clearly followed. The last DJ valuation was £16.77 million and the Tesco price ultimately obtained after a deterioration of market conditions and other costs going up was £16 million, and of course the DJ valuation was the valuation of the whole site including the Tesco Land. It was also suggested that the Council somehow failed to follow Counsel's advice, but his advice as to the law was that their proposed course of action was lawful and legitimate and any legal challenge, although very likely to be made by a disgruntled competitor, would ultimately fail. In that respect such advice was entirely accurate; the pragmatic opinion that the Council would find it more easy to fend off such a claim by actually putting the Site on the market is readily understandable but it was absolutely not proffered as a matter of law.
110. Mr Lowe also said that the Council failed sufficiently to probe the value of going to the market or at any rate the Asda inquiry in 2002 as seen by Mr Openshaw, the local authority's very experienced surveyor and advisor. Once the Tesco Land had been acquired by Tesco the point was quite short and straightforward. The issue did not in truth require much probing, but it was properly considered. As for Asda, Mr Openshaw had on the one hand a simple inquiry as against a serious interest from Tesco which was thought to bear fruit and with ongoing negotiations, and also the fundamental difficulty of not being able in the short term to deliver the whole of the Site to a purchaser such as Asda anyway. He was in fact completely open with Asda as the correspondence shows, making explicit reference to the section 123 duty and obtaining a valuation. In fact, had Asda been very determined to obtain the land, even without the Tesco Land, and had it thought that the Council's approach was wrong, it would have had every incentive to challenge it there and then. It did not do so.
111. Mr Lowe took support for his alleged duty to probe from the Clearbrook and Indescon cases, but they were cases where there was a bidding situation between more than one bidder, and the question was whether the local authority had considered each of the competing bids sufficiently. In Clearbrook McNeil J said that there was a duty to probe or explore, to investigate, as far as reasonable, the limits of the bids or proposing bidders. He also said that what is reasonable depends entirely on the facts of the particular transactions (see page 4). That last part is important. In this case there was no competitive bidding situation and Asda was far from putting in a bid; and in any event the Council had rationally decided to pursue a different route.
112. In Lidl v Swale Borough Council and Aldi [2001] EWHC (Admin) 405 the local authority's approach in a competing bidding situation was approved, even though there they did not even take external advice about the preferred bid.
113. Mr Lowe also suggested, at least initially, that the Council was not aware of its section 123 duty, but, given the references to it and the active instructing of DJ and Counsel, that is an impossible proposition. Of course, it is not referred to in all the reports, but that was not necessary, and returning to DJ in 2007 is a further recognition of the duty. If it is suggested that by 2009 and 2010 the Council had somehow forgotten about its section 123 duty, that is fanciful in my view.
114. Mr Lowe then submits that there was an insufficient awareness of the duty. If that was a reference back to the duty of rigour and open-mindedness then I have rejected that notion anyway, and if it meant simply that the Council gave insufficient weight to its duty or perhaps to the alternative route of going to the market then that does not stand as a breach of a public law duty anyway. I should add that in any event, even if there were some higher duty of rigour or open-mindedness, the Council's decision-making process here does not seem to me to have broken it, having regard in particular to the difficulty surrounding the ransom strip, the valuation sought from and produced by DJ and Counsel's advice. At one point Mr Lowe argued that the best price reasonably obtainable meant that the Council had to take reasonable steps to obtain the best price. There was no detailed argument about whether this was the correct way to view the test and I have some doubts as to whether it is; but if it is, then on public law grounds there would be no basis for impeaching the local authority's view that it was reasonable to take the steps that it did towards getting a reasonable price. In fact, even if the court were to look at the matter directly I would have held that the Council would have taken such reasonable steps, for all the reasons outlined above.
115. Accordingly, on the substance of the claim my principal finding is that the Council did not act irrationally or upon an error of law, nor did it act on an immaterial consideration or leave out an account of material consideration. There are no public law grounds to impeach its decision to deal exclusively with Tesco and not put the Site on the open market. That is sufficient to dispose of this claim, but, in addition and to the extent that it is relevant and to the extent that it is still actually contended for by SEL, I would also hold that SEL has not satisfied me that the £16 million was not the best price reasonably obtainable in 2010. Although I consider that there was delay for the purposes of permission (see below), I would not for my part have rejected the claim substantively pursuant to section 31(6) of the Senior Courts Act 1981. In the light of my findings above it was not necessary to say any more about that aspect of the case.

Delay

116. Finally, I deal briefly with the question of delay. For the purpose of permission, the Council and Tesco say that SEL did not bring the claim within three months of its grounds arising or promptly and there is no basis for any extension. The principal submission is that the operative decision on which grounds arose was the 28 July 2009. This is when the Council resolved to deal exclusively with Tesco with a view to contracting with it for the sale of the Site. If one looks at how the claim has now been put, the central ground of challenge is the Council's decision not to place the Site on the open market. On that basis the operative decision was indeed that taken by the Council on 28 July 2009. I did not here find the analogy of planning resolutions and planning decisions particularly helpful here because, while a planning resolution can have no impact until followed by the decision notice, here the decision not to go into the market would operate at once from the Council's point of view; and of course my judgment on substance has already shown that the decision-making attacked goes a long way back before 2009; but, lest it be said that the Council had not committed itself fully until the exclusivity agreement of 4 November 2009 and taking a cautious approach, I would hold that the time started running at least from that date.
117. The fact that the original claim related to other matters, in particular to price, which was not known until later, cannot as a matter of analysis affect when the grounds for this claim as now advanced actually arose. On that basis time expired on 4 February 2010 and an extension is required from then until 26 August 2010, ie for some six months.
118. If I was wrong and time only started to run after the conditional contract was made then the relevant period would expire three months after the decision of 18 March 2010, ie 18 June 2010, and an extension of two months would be needed.
119. Knowledge of relevant facts by the claimant is relevant to an application for an extension, but it does not affect when the grounds for the claim first arose. Here SEL knew of the exclusivity contract by the 12 February 2010. I am prepared for present purposes to accept that it did not have confirmation of any concluded agreement between the Council and Tesco until 30 June 2010 when it received a redacted copy. Thereafter there was correspondence in relation to obtaining an unredacted copy but not much happened between 30 June and 30 July save there were some further documents in relation to the exclusivity agreement. After correspondence in August SEL decided to proceed without the evidence as to price. Considerations of commercially sensitivity have been invoked by the Council as a reason for non-disclosure. Subsequently to the commencement of proceedings, when Tesco was made a party, it was mutually agreed to disclose the price on a limited basis. In fact SEL thought, wrongly as it turned out, that the price that Tesco was paying was £7 million. Whether one takes the starting point as the 4 November 2009 or 18 March 2010, I cannot see why SEL was not in a position to issue proceedings by early July at the latest. It already knew there was exclusivity in place and had done so since February; it must have suspected that a contract was in place although it did not receive a copy until 30 June, and it had information on the price - at least what it thought was the price - by then.
120. It obviously was aware that time was running against it, and in fact it had threatened judicial review proceedings back on 14 June 2010. It knew that it could not wait for a copy of the complete contract which would contain the price because it issued before that stage was reached. Where time was obviously running and may well have expired, the fact that a pre-action protocol letter would normally be required is no reason for not issuing. Even allowing for a reasonable time to see if the Council would provide all the information sought, which process it had started back in April 2010, in my judgment there was no justification for starting these proceedings any later than the first part of early July. Eversheds for SEL had been actively engaged for months by then and the issue of lack of market exposure had in fact been raised along with various other provisions at the outset of the correspondence. The court is entitled to take the merits of the claim into account when dealing with an extension of time. That does not assist SEL here since I have found that there was no merit in the claim; nor do I consider that there is any substantial public interest of the kind which would justify the delay which has been occasioned so as to support the case for an extension.
121. Accordingly, I would refuse the extension necessary, whether the grounds first arose on the 4 November 20009 or, as was contended, on 18 March 2010. That would entail a refusal of permission, but I have of course determined the claim substantively in any event. Absent delay, had I been examining the case solely from the point of view of agreeability, I would have granted permission. In the event, the actual order is that permission is refused.