Scottish Court of Session Decisions

You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Standard Commercial Property Securities Ltd & Anor v. City Of Glasgow Council & Anor [2004] ScotCS 260 (03 December 2004)
URL: http://www.bailii.org/scot/cases/ScotCS/2004/260.html
Cite as: [2004] ScotCS 260

[New search] [Help]

Standard Commercial Property Securities Ltd & Anor v. City Of Glasgow Council & Anor [2004] ScotCS 260 (03 December 2004)

FIRST DIVISION, INNER HOUSE, COURT OF SESSION

Lord President

Lord Kirkwood

Lord Reed

P1082/03

OPINION OF THE COURT

delivered by LORD REED

RECLAIMING MOTION FOR PETITIONERS in PETITION and ANSWERS

STANDARD COMMERCIAL PROPERTY SECURITIES LIMITED and STANDARD COMMERCIAL PROPERTY DEVELOPMENT LIMITED

Petitioners;

against

CITY OF GLASGOW COUNCIL

First Respondents;

and

ATLAS INVESTMENTS LIMITED

Second Respondents:

for

JUDICIAL REVIEW

_______

Act: Currie, Q.C., Mure; Semple Fraser (Petitioners)

Alt: Agnew of Lochnaw, Q.C., Cowie; City of Edinburgh Council (First Respondents)

Hodge, Q.C., Williamson; Russel & Aitken (Second Respondents)

3 December 2004

Introduction
[1] These proceedings for judicial review concern a decision taken by the first respondents, City of Glasgow Council, concerning the exercise of powers of compulsory acquisition and disposal, under the Town and Country Planning (Scotland) Act 1997 ("the 1997 Act"), in relation to a site in Glasgow city centre. The first petitioners own property forming part of the site. The second petitioners are an associated company of property developers. The second respondents are also property developers, and own property forming part of the site.

[2] On 26 October 2000 the first respondents' Development and Regeneration Services Committee ("the Committee") approved a document entitled:

"Framework for the use of compulsory purchase powers (CPO) and back to back agreements with developers under the Town and Country Planning (Scotland) Act 1997".

[3] In subsequent documents prepared by the first respondents, this document is referred to as "the Framework". It is in the following terms:

"1. INTRODUCTION

1.1 Section 189 of the Town and Country Planning (Scotland) Act ('the

Act') authorises a local authority to acquire compulsorily any land (including buildings) which:-

1.1.1 Is suitable for and required in order to secure the carrying out

of development, redevelopment or improvement.

1.1.2 Is required for a purpose which it is necessary to achieve in the

interests of the proper planning of an area.

1.2 Section 191 of the Act sets out where disposing of land compulsorily acquired under Section 189, the authority may do so in such manner and subject to such conditions as considered expedient which result in either the best use of the land or the construction or carrying out of any works which appear to the authority as being needed for the proper planning of the area. Additionally, such land shall not be disposed of otherwise than as at the best price or on the best terms that can reasonably be obtained.

PROCESS

2.1 Phase 1 - Consideration

2.1.1 Consideration by the Council as to whether acquisition of land

by use of CPO powers under the Act is reasonably necessary for planning purposes.

2.1.2 This phase is usually triggered by approaches by a developer or

developers who has/have expressed an interest in developing land.

2.1.3 In determining whether CPO powers may be necessary regard

will be had to:-

2.1.3.1 The condition of the land.

2.1.3.2 The current use of the land.

2.1.3.3 The Development Plan and other relevant Council

policies.

2.2 Phase 2 - Publication of Intention

2.2.1 If officers determine that CPO powers may be necessary:-

2.2.1.1 A report will be presented to the Development and

Regeneration Services Committee for authority to

investigate the requirement for the use of CPO

powers."

2.2.1.2 If approved a notice will be issued to the developer(s)

who has/have approached the council indicating an

interest to develop along with all owners and occupiers

of the site declaring the Council's intention to use

CPO powers if necessary to assemble the site.

2.2.1.3 All parties will be invited to submit their proposals for

redevelopment etc. and/or any desire to remain and

carry on their business within the site.

2.3 Phase 3 - Evaluation

2.3.1 In determining which proposal(s), if any, should be supported

by the Council officers will evaluate all submissions against the following criteria:-

2.3.1.1 Design proposals (to include where practicable the

relocation of existing businesses wishing to obtain

accommodation within the site).

2.3.1.2 Ownership and/or attempts to acquire the site on a

voluntary basis.

2.3.1.3 Experience of development and financial soundness.

2.3.1.4 Timescale for commencement/completion of

development.

2.4 Phase 4 - Conclusion

2.4.1 Following a detailed evaluation as set out above officers will:-

2.4.1.1 Present a further report to the Development and

Regeneration Services Committee detailing the terms of the submissions received, the results of the evaluation process with a recommendation as to which, if any, developer(s) and development proposal(s) should be supported along with the extent to which CPO powers will be necessary. Approval will be sought to the recommendations along with authority to enter into a back to back agreement with the successful developer(s) which will set out the conditions required to be met by the developer(s) before CPO powers are used including; a planning consent is in place; the developer(s) can satisfy Council officers that reasonable offers have been made to acquire the site on a voluntary basis and all attempts to negotiate have failed and the developer(s) have agreed to meet all of the Council's costs including compensation associated with any use of CPO powers under deduction of any monies due to the Council in respect of outstanding charging orders over the site."

[4] It is to be noted that, although paragraph 1.2 of the Framework records the statutory requirement that land must not be disposed of otherwise than at the best price or on the best terms that can reasonably be obtained, paragraph 2.4 envisages that disposal will invariably be in terms of a back-to-back agreement entered into before the land is acquired, under which the developer will reimburse the costs incurred by the first respondents. The Framework does not envisage any consideration being given to the issue of what is the best price or the best terms that can reasonably be obtained for the disposal of the land.

[5] On 4 October 2001 the Committee resolved to investigate whether it was necessary to use compulsory purchase powers under the 1997 Act in order to facilitate development on land (including the site with which these proceedings are concerned) within an area of Glasgow city centre situated between Buchanan Street and West Nile Street, south of their junctions with Bath Street. Officials then made enquiries into the ownership and occupation of the land and the buildings there. The owners and occupiers who were identified were invited to submit any proposals for redevelopment. The information which was then received indicated that the first respondents did not require to invoke compulsory purchase powers in respect of the southern part of the area. In relation to the northern part, on the other hand, the situation was more complex. In a report to the Committee, dated 28 March 2002, the first respondents' Director of Development and Regeneration Services ("the Director") reported:

"4.1 ... The representations made to the Council have revealed a general

consensus by the key development interests that redevelopment in some form or other is required at this locus, but a clear difference of opinion as to how it should be achieved. Although there is recognition that the Council's use of its compulsory purchase powers may be required to effect some tidying up of the title deeds, the various development interests are potentially in dispute about the use of compulsory purchase at this time. Furthermore, the investigation has revealed at least three competing commercial operations, as well as evidence of continuing negotiation and dialogue between development interests."

The report noted that detailed planning permission had been granted for the commercial redevelopment of a parcel later referred to as Phase A. That permission had been granted to the first petitioners. In relation to Phase A, the report stated:

"The development interests in control of the site have confirmed their intention to proceed with the redevelopment as soon as possible."

The report also noted that a second developer owned another parcel, and that a third developer had also expressed an interest in the redevelopment of parts of the area. The Director concluded:

"4.5 The investigation into the requirement for the Council to use its powers

of compulsory purchase has revealed a situation as challenging as it is potentially contentious. Apart from the competing development interests with their own separate agendas and aspirations, the northern part of the street block is also home to individual proprietors and at least one long-term tenant.

4.6 It is therefore suggested that all relevant parties should be invited to

meet with the Council to discuss their redevelopment proposals and aspirations in greater detail with a view to assisting the evaluation process."

[6] That report was considered by the Committee on 11 April 2002. It then instructed the Director to contact all relevant parties in the northern part of the area, "with a view to evaluating their redevelopment proposals and aspirations in greater detail". It also instructed the Director to inform owners and occupiers in the southern part of the area that the first respondents intended to eliminate them from any further investigation into the need to use compulsory purchase powers.

[7] The matter next came before the Committee on 7 November 2002, when it considered a further report by the Director, dated 28 October 2002. In his report, the Director stated that, at the meeting on 11 April 2002, "authority was given to the Director of Development and Regeneration Services to implement Phase 1 of the Framework". He reported that the site (i.e. the northern part of the larger area originally considered) consisted of twelve parcels. The general condition and appearance of the site was in marked contrast to its surroundings. The properties were generally in poor condition and either vacant or under-occupied. In terms of the development plan, the site had a joint designation of DEV 6 (Principal Office Area, City Centre) and DEV 7 (Principal Retail Area, City Centre). The Director noted that three parties had expressed an interest in the redevelopment of the site, either in part or in whole. He continued:

"5 ASSESSMENT

5.1 Council has the choice of two options:-

(a) non-intervention; or

(b) declare its intention to use CPO powers if necessary to

assemble the site for development.

(a) Non-intervention will require the various parties to come together to

effect a solution for the redevelopment of the site. Although the market may provide the answer, no development has taken place on the site and two existing planning consents for full and partial redevelopment remain unimplemented. Another major consideration is that of unknown timescale. Whilst it is possible that the market will move towards resolution, there is every prospect that the situation may still be unresolved for years to come.

(b) This option requires the Council to make a judgement whether the best

interests of the City would be served waiting for the market to provide a solution. Current evaluation would suggest that all the evidence still points to market failure. The uncertainty and obstacles to development are likely to persist to the detriment of all the tests set down in the Town and County Planning (Scotland) Act 1997. By supporting this option, it is hoped that the Council's intervention will remove uncertainties and may provide the catalyst for the market to initiate action of its own accord to resolve differences and bring forward the development of the site.

6 CONCLUSION

6.1 Members will be aware of the history of judicial review and planning

permission affecting the site. It would appear this has left a legacy of mistrust and uncertainty that has impacted upon the ability of the various commercial interests to achieve satisfactory development.

6.2 Consideration of the facts and circumstances relating to Phase 1 of the

Council's CPO Procedures - Consideration would suggest that there is a case for Council to declare its intention to use CPO powers if necessary to assemble the site.

6.3 In so doing all parties would be invited to submit their proposals for

site redevelopment and/or any desire to remain and carry on their business within the site.

6.4 In determining which proposal(s), if any should be supported, Council

Officers will evaluate all submissions against the following criteria:-

design proposals (to include where practicable the relocation of existing businesses wishing to obtain accommodation within the site);
ownership and/or attempts to acquire the site on a voluntary basis;
experience of development and financial soundness; and
timescale for commencement/completion of development.

6.5 A Development Brief has been prepared for the site (see Appendix 1)

which sets out the planning and design considerations required for development or developments at this location. All proposals will be evaluated against these policies and standards".

The criteria mentioned in paragraph 6.4 were those listed in paragraph 2.3.1 of the Framework.

[8] The development brief appended to the report made clear the commercial importance of the site:

"The site is one of the most prominent within Glasgow City Centre, in terms of both significance and location. Situated within the heart of the commercial core of the City Centre, it is the final element with regard to the redevelopment of the northern end of Buchanan Street, which has seen it become the principal retail location within the United Kingdom, outside of London."

[9] At its meeting on 7 November 2002, the Committee approved the development brief and instructed the Director to

"proceed to investigate the requirement for the use of CPO powers to facilitate the redevelopment of the site under Phases 2-4 of the framework for the use of CPO powers".

[10] The first respondents' Chief Solicitor then wrote to all owners and occupiers of subjects within the site, including the second petitioners and the second respondents, by letter dated 16 December 2002. She stated that the first respondents had instructed the Director to investigate the requirement for the use of compulsory purchase powers to facilitate the redevelopment of the site, and that "this procedure will follow phases 2 to 4 of the Council Framework Procedure for the use of CPO Powers". She stated that the addressees were invited to submit their proposals for the redevelopment of the site. She continued:

"EVALUATION CRITERIA

In determining which proposals, if any, should be supported, a panel of Council officers will evaluate all submissions against the following criteria.

1. Financial soundness.

2. Experience of development.

3. Design proposals.

4. Ownership.

5. Timescale for commencement/completion of development.

Criteria 2-5 will be weighted as follows:-

Experience 15%

Design 40%

Ownership 20%

Timescale 25%

Each criteria will be broken down into sub-headings. These are set out in the Evaluation Assessment Record attached hereto and marked Appendix 4.

AGREEMENT

Before any evaluation is undertaken in respect of criteria 2 to 5, an assessment of the financial soundness of each Applicant will be completed. The Council requires to be satisfied that the Applicant has sufficient financial backing for their proposed development. Essential to this will be the Applicant's commitment to enter an Agreement with the Council whereby the Applicant will indemnify the Council against all costs incurred by the Council in pursuing any CPO to assemble the Site. The Council's style Agreement is attached marked Appendix 5.

DEVELOPMENT BRIEF

The Council has approved a Development Brief for the Site which sets out the planning and design considerations required for development at this location. All proposals will be evaluated against the policies and standards set out within the Brief. The Brief is attached marked Appendix 6."

[11] The "style Agreement" appended to the letter is a standard form of contract between the first respondents and a developer. The Agreement begins with a preamble:

"Whereas the Council has determined to promote under powers contained in the [Town and Country Planning (Scotland) Acts] the Compulsory Purchase Order after referred to; And Whereas it has been agreed between the Council and the Company that the Council will convey to the Company the CPO Subjects as after defined on certain terms and conditions; THEREFORE the parties have agreed and Do Hereby Agree as follows".

Clause 1 defines certain terms, and in particular defines "The Consideration" as meaning "the aggregate of the sums referred to in clause 5 hereof". Clause 2 provides:

"2. The Council will submit the Compulsory Purchase Order to the

Scottish Ministers and shall use their reasonable endeavours to have the same confirmed by the Scottish Ministers as expeditiously as possible and shall thereafter (subject to the terms of Clauses 7, 9, 10, 11 and 12 hereof) upon expiry of the Appeal Period in the event that no application has been made to the Court of Session proceed to have the General Vesting Declaration executed and shall agree with the Company a date of entry to The CPO subjects being a date no earlier than the date occurring three months after the date on which the notice of confirmation of the making of The Compulsory Purchase Order was first published. On the date of entry the Council shall register title to the CPO Subjects by General Vesting Declaration. Upon the date of entry the Council will in exchange for the Consideration (and subject to the terms of Clauses 7, 9, 10, 11 and 12 hereof) convey the CPO Subjects to the Company."

Under clause 5, the company undertakes to reimburse to the first respondents the compensation due by the first respondents to the proprietors or tenants of the CPO subjects, together with the costs incurred by the first respondents in connection with the compulsory acquisition, and other sums of a similar nature. The remaining provisions of the Agreement can be broadly summarised as follows. Under clause 6, the company undertakes not to claim compensation in respect of so much of the CPO subjects as may already be in its ownership. Under clause 7, the contract is made conditional upon the confirmation by the Scottish Ministers of the compulsory purchase order and the subsequent vesting of the CPO subjects in the first respondents. Under clause 8, the company's date of entry to the CPO subjects is the first respondents' date of entry or such earlier date as may be agreed. Under clause 9, the sums due by the company to the first respondents are to be paid on the company's date of entry. Clause 12 provides:

"The Company or its successors as proprietors of the CPO subjects shall (1) use the CPO subjects only for the purpose of [ ] and for no other purpose whatsoever ... And (2) carry out upon the CPO subjects development in accordance with the planning consent issued by the Planning Authority on

[ ] ... "

Clause 15 provides:

"Nothing in this Agreement shall prejudice or abridge the rights, powers, and duties of the Council as local authority for the said City under the Town and Country Planning (Scotland) Acts and any other Acts or under any Statutory Instrument, Order or other made pursuant thereto and the Council shall be entitled to exercise the said rights and others as fully and freely as if the Council were not party to the said Agreement."

[12] What was envisaged in the letter of 16 December 2002, accordingly, was that the first respondents would evaluate developers' proposals according to each developer's financial soundness, its experience of development, its design proposals, the extent of its ownership of the relevant part of the site, and the timescale for its development. The developer whose proposal received the highest evaluation against these criteria would then enter into a contract with the first respondents in terms of which the first respondents would undertake to acquire the site and to dispose of it to the developer in return for their costs being reimbursed by the developer.

[13] In response to the letter of 16 December 2002, three development proposals were received. The second respondents submitted one proposal covering the entire site (Phases A to H). The second petitioners and its partners submitted two proposals. One of these, submitted by the second petitioners in partnership with Lujo Properties Ltd, related to part of the site (Phases A to C). The other, submitted by the second petitioners in partnership with Hermes Property Asset Management, related to Phases A to H. The first respondents' officials then evaluated those proposals. In a report dated 4 April 2003, the Director reported to the Committee the results of the evaluation exercise:

"3.2 The Council evaluated all submissions against the following criteria:-

A. Financial soundness

B. Experience of development

C. Design proposals

D. Ownership

E. Timescale for commencement/completion of development.

3.3 Criteria B - E were given the following weighting:-

Development Experience 15%

Design Proposals 40%

Ownership 20%

Development Timescale 25%

...

A Financial Soundness

4.2 The Applicants have satisfied internal Audit that all schemes have access to sufficient funding to deliver the respective developments on the Site.

4.3 The Applicants have also confirmed their commitment to entering a Minute of Agreement with the Council whereby they will indemnify the Council against all costs incurred by the Council in pursuing any CPO to assemble the Site.

B. Development Experience

4.4 The information submitted by the Applicants highlighted the variety and value of previous developments undertaken. Consideration of this information confirmed that all the Applicants had undertaken substantial development projects and had a satisfactory level of experience. However, in view of the scale of the proposed development at Buchanan Street, the scoring reflects the additional experience of one Applicant in undertaking development of the scale envisaged.

C. Design Proposals

4.5 The highest score was accorded to Atlas, followed by SCPDL/Hermes Property Asset Management, and finally SCPDL/Lujo Properties Limited.

...

4.6 In all three submissions, however, there was little or no Urban Design and Townscape Analysis provided (E3), and the provision of Sight Lines and Views (E5), and design proposals for Scale, Massing and Evaluation Form (E4) fell short of the aspirations set out in the Development Brief.

4.7 Whilst all submission (sic) were considered to be bases for acceptable schemes, they all would require to undertake development, design and technical modifications before the necessary consents could be obtained.

D. Ownership

4.8 The Applicants have submitted sufficient information to meet the requirements of the questionnaire.

4.9 Atlas Developments Limited have declared an 88% ownership of the entire Site. SCPDL, for Phases A - C scheme have declared a combined ownership of 75% and a 10% ownership for the Phases

A - H scheme.

E. Development Timescale

4.10 The Applicants were required to submit market analyses, a letting strategy, the experience and structure of their Development Team and their development programme (G1-G4).

4.11 The difference is scoring on G1-G3 reflects the variation in depth and quality of the detail within the submissions received.

4.12 The Applicants have submitted outline development timescales for the individual schemes submitted. There is very little difference in terms of the programmes for all the schemes.

5. CONCLUSION

5.1 Consideration of all the submissions received, and representations made by third party ownership interests, would confirm the view that there still is a requirement for Council to make use of its CPO powers to facilitate the redevelopment of the Site.

5.2. The final evaluation scores for the submissions received are:

Atlas Investments Limited 70.51

SCPDL/Lujo (Phase A - C) 60.67

SCPDL/Lujo/Hermes (Phase A - H) 47.15

5.3 On this basis, Atlas Investments Limited can be recommended as preferred developer for the redevelopment of the Site.

5.4 Prior to any CPO being progressed, Atlas will be required to:

1. Enter a Minute of Agreement with the Council whereby they
will fully indemnify the Council against all costs in promoting any CPO;

2. Obtain planning permission, conservation area consent and listed building consent prior to any CPO procedure being commenced. In doing so, Atlas will require to address all development, design and technical defects identified both through the evaluation process and arising through the statutory consultation process of the respective applications. In particular, they will require to address:

(i) Commitment to support a Traffic Regulation Order for West Regent Street/West Nile Street;

(ii) Refurbishment of the listed property at 110-126 West Nile Street/17-19 Bath Street;

(iii) Retention of the listed façade to 106 West Nile Street;

(iv) Exclusion of tower from the development;

(v) Undertake improvements to proposals submitted for the scale, massing and elevational form of the street block;

(vi) Detail financial commitment to featured elements of environmental enhancement (lighting, public art, and public realm enhancement/remediation); and

(viii) Ensure compliance with the Building (Scotland) Act 1959 as amended.

5.4 The detailed planning permission which was obtained by Standard Commercial Property Securities Limited on 2 October 2001 for the redevelopment of [Phase A] did not reflect a major redevelopment of the adjacent site. SCPDL now own this corner site (referred to as Phase A) which is currently under demolition in terms of a section 13 Notice. SCPDL have indicated that, notwithstanding the outcome of this process, they intend to implement this development. Whilst Atlas have incorporated this corner site into their proposals, they acknowledge that it may be developed by SCPDL.

5.5 It remains to be determined whether the development of Phase A should be implemented in isolation. Until this issue is resolved, it is necessary to incorporate this corner site into the comprehensive development scheme."

[14] The Report was considered by the Committee at a meeting on 10 April 2003. The minute of the meeting records:

"With reference to the minutes of 7^th November 2002 (Print 5, page 779) approving the development brief for a site at Buchanan Street/Bath Street/West Nile Street (Ward 17) in respect of a proposed Compulsory Purchase Order (CPO), there was submitted a report by the Director of Development and Regeneration Services regarding the outcome of an investigation into the use of CPO powers under the Town and Country Planning (Scotland) Act 1997 to facilitate the redevelopment of land situated to the north of 179 and 183-195 Buchanan Street through to the boundary between 88-102 and 104 West Nile Street, with the exception of the building at 11-15 Bath Street known as Albert Chambers, intimating that

(1) on 16^th December 2002 the Council had issued a letter of invitation to all identified interests within the site to submit proposals for the re-development of the site and/or any desire to remain and carry on business with a closing date of 14^th February 2003 being set;

(2) 3 development proposals had been received 1 from Atlas Investments Ltd, with 2 submissions from Standard Commercial Property Developments Ltd (SCPDL);

(3) the Council had evaluated all the submissions against the criteria detailed in the report and applicants were invited to present their proposals to an executive panel and a technical evaluation team as detailed in the report resulting in Atlas Investment Ltd being awarded the highest score for the development;

(4) whilst all submissions were considered to be bases for acceptable schemes, they all required to undertake development design and technical modifications before the necessary consents could be obtained; and

(5) having considered all the submissions received and representations made by third party ownership interests, it was agreed that there was still a requirement for the Council to make use of its CPO powers to facilitate the re-development of the site.

After consideration, the committee

(a) agreed to the selection of Atlas Investments Ltd as preferred developer for the site;

(b) instructed the Director of Development and Regeneration Services to enter into

(i) a back-to-back agreement with Atlas Investments Ltd for the use of CPO powers to achieve the re-development of the site; and

(ii) discussions with SCPDL and Atlas Investments Ltd in respect of the feasibility of the development at 221 Buchanan Street/3-7 Bath Street being implemented in isolation; and

(i) progress under Phases 2-4 of the framework procedure for the use of CPO powers; and

(ii) that the Director would report back on the conclusion of the framework procedure."

[15] Subsequent events can be summarised briefly. At a meeting on 6 June 2003, and in letters of 25 June and 4 July 2003, the petitioners expressed dissatisfaction with the decisions taken on 10 April. They suggested that the first respondents were "placing the cart before the horse" in deciding to enter into a back-to-back agreement with the second respondents for the compulsory purchase of the entire site and its disposal to the second respondents for development by them, at a time when the optimum development had not yet been determined, and when the petitioners remained committed to their scheme for Phases A to C. In response, the first respondents wrote on 7 July 2003 requesting the petitioners to clarify their intentions in respect of Phase A. On 22 July 2003 the petitioners commenced the present proceedings. On 25 July 2003, the petitioners informed the first respondents that it was their intention to develop Phase A, either in isolation or as part of a larger scheme for Phases A to C. On 28 August 2003 the first respondents informed the petitioners that Phase A would be excluded from the site to be compulsorily acquired, and that the second respondents would be advised to exclude Phase A from their application for planning permission. On 8 September 2003 the petitioners applied for detailed planning permission for the development of Phases A to C. On 8 October 2003 the second respondents applied for detailed planning permission for the development of Phases B to H. Both applications have been granted.

[16] In the present proceedings, the petitioners challenge the legality of the decisions recorded in the minute of the meeting on 10 April 2003. They seek declarator that the first respondents' decisions of 10 April 2003 to agree to the selection of the second respondents as preferred developer for the site, and to instruct the Director to enter into a "back-to-back" agreement with the second respondents for the use of compulsory purchase powers to achieve the re-development of the site, are ultra vires et separatim unreasonable. They also seek the reduction of those decisions.

The Submissions
[17] In his submissions, senior counsel for the petitioners challenged the decision to enter into the back-to-back agreement. His submissions proceeded on the basis that, if that decision was vitiated, then the decision to select the second respondents as preferred developer must equally fall. Counsel for the respondents did not demur to that approach.

[18] Counsel's submissions concerned sections 189 and 191 of the 1997 Act. So far as material, they are in the following terms:

"Compulsory acquisition of land in connection with development and for other planning purposes.

189.-(1) A local authority shall, on being authorised to do so by the Secretary of State, have power to acquire compulsorily any land in their area which -

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

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

(2) A local authority and the Secretary of State in considering for the purposes of subsection (1)(a) whether land is suitable for development, redevelopment or improvement shall have regard to -

(a) the provisions of the development plan, so far as material,

(b) whether planning permission for any development on the land is in force, and

(c) any other considerations which would be material for the purpose of determining an application for planning permission for development on the land.

(3) Where a local authority exercise their powers under subsection (1) in relation to any land, they shall, on being authorised to do so by the Secretary of State, have power to acquire compulsorily -

(a) any land adjoining that land which is required for the purposes of executing works for facilitating its development or use, or

(b) where the land forms part of a common or open space, any land which is required for the purpose of being given in exchange for the land which is being acquired.

(4) It is immaterial by whom the local authority propose any activity or purpose mentioned in subsection (1) or (3)(a) is to be undertaken or achieved and in particular the local authority need not propose to undertake that activity or achieve that purpose themselves.

...

Disposal of land held for planning purposes

191.-(1) Where a planning authority -

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

and

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

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

(2) Those purposes are to secure -

(a) the best use of that or other land and any buildings or works

which have been, or are to be, erected, constructed or carried out on it, whether by themselves or by any other person, or

(b) the erection, construction or carrying out on it of any buildings

or works appearing to them to be needed for the proper planning of their area.

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

...

(7) In relation to land acquired or appropriated for planning purposes for a reason mentioned in section 189(1)(a) or (3), the powers conferred by this section on a planning authority shall be so exercised as to secure, so far as may be practicable, to persons who -

(a) were living or carrying on business or other activities on any such land,

(b) desire to obtain accommodation on such land, and

an opportunity to obtain accommodation on it suitable to their reasonable requirements on terms settled with due regard to the price at which any such land has been acquired from them.

...

(10) In relation to any such land as is mentioned in subsection (1),

this section shall have effect to the exclusion of the provisions of any enactment, other than this Act, by virtue of or under which the planning authority are or may be authorised to dispose of land held by them."

[19] Counsel for the petitioners focused in particular on the question whether the decision had been taken consistently with section 191. In counsel's submission, when the first respondents decided to enter into the back-to-back agreement with the second respondents, they were not in a position to (and did not) have proper regard to the purpose of securing the best use of the land, as required by subsection (1) read with subsection (2)(a); nor did they have regard to the requirement under subsection (3) that the land should not be disposed of otherwise than at the best price or on the best terms that could reasonably be obtained. Counsel made no submission as to whether section 191(1) enables a planning authority to decide to enter into a contract for the disposal of land on particular conditions at a time when neither paragraph (a) nor paragraph (b) is yet satisfied in relation to that land (the land being at that time in private ownership). We accordingly express no opinion on that matter.

[20] Counsel observed that neither the Framework nor the Agreement was specific to the site in question. It appeared that the first respondents had a general policy of entering into a back-to-back agreement, on the terms set out in the Agreement, whenever they decided to use their powers of compulsory purchase under the 1997 Act. The Lord Ordinary had accepted the submissions of counsel for the first respondents to that effect, stating (at paragraphs 7 to 8 of her Opinion, reported at 2004 SLT 655 at page 657):

"[7] Despite having the power to effect a compulsory acquisition, the City Council do not have the funds. If the Council were to spend funds on a compulsory purchase of the site, including claims for compensation, disturbance, expenses, and severance payments, and if no developer then showed an interest in the site, the Council would risk losing sums which they could ill afford.

[8] The Council's solution to financing was to try to obtain the commitment of a private developer (or developers) at a stage prior to the compulsory purchase of the site. The Council accordingly sought to identify a suitable developer or developers who would enter into a contractual commitment with them in the form of a back-to-back agreement. In that agreement, the Council would undertake to dispose of the land compulsorily acquired to the developer(s) for the purpose of the development, and the developer(s) would undertake to indemnify the Council of all costs arising as a result of the compulsory purchase."

These statements about the first respondents' financial difficulties were however unsupported by any evidence, or even by any averments: they reflected the ex parte assertions of counsel for the first respondents. On any view of the matter, there was no indication that the first respondents had ever considered, in relation to the site in question, how its acquisition could best be financed, or the terms on which it could best be disposed of. There was no indication that they had considered whether to enter into a back-to-back agreement in advance of acquiring the site, and in advance of receiving or determining any applications for planning permission, was the best approach either to section 191(1) or to section 191(3). There was no indication that they had given any consideration to the requirements of section 191(3). They had proceeded on the basis that the procedure described in the Framework met, as a matter of course, all the requirements of sections 189 and 191. In particular, they had proceeded on the basis that compliance with section 191(3) could be assumed to follow automatically from their being indemnified in respect of their costs.

[21] The first respondents' submissions to the Lord Ordinary about this matter were summarised at paragraph 61 of her Opinion (at pages 663-664):

"In relation to 'best price', the consideration in a back-to-back agreement was in effect that the developer would pay any compensation due to the landowner from whom the land was being compulsorily acquired. The price on compulsory purchase was the land's market value. If any bidding was developed, one would eventually end up with the market value. The Lands Tribunal, in determining compensation for a compulsory purchase, was obliged to ascertain the market value. The difficulty in the present case was that the Council was trying to achieve the best price for the land without having acquired it. The back-to-back agreement made appropriate provision, and in the result the 'best price' would be the open market value and any interest accruing."

In counsel's submission, however, it could not be assumed that the best price obtainable if a "bidding war" developed would be identical to the figure assessed by the Lands Tribunal. More generally, it could not be assumed that the market value of the site as a whole, in single ownership, would be equivalent to the compensation payable for the individual properties out of which the site had been assembled.

[22] Counsel noted that the Lord Ordinary had, at paragraph 129 (page 671), interpreted section 191(3) as enabling the planning authority to take a wide range of matters into account:

"Section 191(3) stipulates two qualifications: the 'best price', or 'the best terms that can reasonably be obtained'. In my view, on a proper construction of that subsection, the word 'or' is used disjunctively, and accordingly section 191(3) can be satisfied if a local authority such as the Council demonstrate that they achieved 'the best terms that can reasonably be obtained ... '. I consider the concept of 'best terms' to be broader and more flexible than that of 'best price'. The concept includes price, not as the determinative factor but simply as one of many factors to be taken into account. It is quite conceivable that, in a particular case, the best terms overall might not necessarily include the best price which could ever be achieved. In circumstances such as those prevailing in the present case, the best terms may well comprise certain terms relating to financing, timing, design, and construction, together with a 'price' which amounts to no more than a reimbursement of all the costs and expenses incurred by the local authority in the course of the compulsory purchase."

Counsel submitted however that even if the planning authority might be entitled to dispose of land for less than the "best price" obtainable because other terms made that disposal preferable, they would have to know what prices were on offer in order to make such a judgment, and they would have to consider the matter in order to determine what constituted "the best price or ... the best terms". In the present case, the first respondents did not know what prices might be obtainable, and they had not considered whether other terms outweighed the best price.

[23] In relation to section 191(1) and (2), counsel observed that the first respondents had committed themselves to acquiring Phases A to H and disposing of them to the second respondents at a time when it was not clear to the first respondents whether Phase A would be included in any development carried out by the second respondents, and at a time when the first respondents had yet to consider applications for planning permission. In the event, the petitioners had subsequently been granted planning permission for the development of Phases A to C; but the practical effect of the decision to enter into the back-to-back agreement with the second respondents was to foreclose any possibility of the petitioners' implementing that permission. In addition, the planning permission eventually granted to the second respondents excluded Phase A, and was in other respects materially different from the proposal which had been before the first respondents on 10 April 2003. The first respondents had not been in a position to form a view as to the matters referred to in section 191(1) and (2) on 10 April 2003. They had not, in particular, been in a position to determine that the land should be disposed of to a single developer for a single comprehensive development. They had not considered what planning consents were likely to be available.

[24] In reply, counsel for the first respondents emphasised that the legality, in principle, of entering into a back-to-back agreement prior to exercising compulsory purchase powers had not been challenged. Accordingly, if it was competent in principle to take a decision to dispose of land on specified terms and conditions at the same time as deciding to exercise compulsory purchase powers, the question of compliance with section 191 had to be assessed as at that point in time. In that regard, counsel referred to the Opinion of Lord Nimmo Smith in Standard Commercial Property Securities Ltd v Glasgow City Council, 2001 SC 177 at page 201, where sections 189 and 191 were described as giving rise to "a single, composite discretion".

[25] Counsel acknowledged that the criteria on the basis of which the first respondents had evaluated the competing proposals for development, prior to taking the decisions on 10 April 2003, had not included the price or other terms on which the land would be acquired from the first respondents. The first respondents' general approach proceeded on the assumption that full indemnification of their costs constituted the best price. It was reasonable for the first respondents to assume that full indemnification was more or less the best price they would achieve. The value of the individual properties would be approximately the same as the value of the site as a whole, even where the development value of the site was conditional on the agglomeration of the individual properties. To invite offers would merely set the market price, which the Lands Tribunal would assess in any event. Moreover, under section 191(3) the "best terms" were an alternative to the "best price". In Standard Commercial Property Securities Ltd, Lord Nimmo Smith had observed (at pages 200-201):

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

The "best terms", within the meaning of section 191(3), were thus the terms which were "best" for securing the purposes mentioned in section 191(2). The evaluation carried out under the Framework was intended to identify, for the purposes of exercising a composite discretion, the preferred developer, having regard to the nature of the proposed development and the likely ability of the developer to carry the development through to completion. By following the Framework procedure, the first respondents complied with the requirements of sections 189 and 191. If, contrary to counsel's submissions, the decisions challenged contravened section 191(3), then it was accepted that the Court could not sustain the first respondents' plea of personal bar. Reference was made in that connection to Thomas v University of Bradford (No 2) [1992] 1 All ER 964 at page 979.

[26] On behalf of the second respondents, counsel submitted that it was apparent from section 189(2) that there was no requirement that planning permission must exist before powers of compulsory purchase were exercised under that section. It followed that there was no requirement that planning permission must exist before land was disposed of under section 191. In relation to section 191(2), the second respondents' proposal had fitted the development brief better than the petitioners' proposals. One of the petitioners' proposals had been for the development of Phases A to C only, whereas the first respondents wished to see the whole site developed. The petitioners' proposal for the development of the whole site had not included any element of residential use, which the first respondents had supported in the development brief. The second respondents' proposal had been the only proposal for the development of the whole site which included residential use. The first respondents were entitled to consider that it was appropriate to select a preferred development proposal and to proceed with that proposal rather than to have rival schemes advanced simultaneously. There was a risk that developers would be unwilling to bring forward an application for planning permission without the "comfort" of being designated as the preferred developer. There was also the risk that rival developers might produce revised schemes at the last minute, delaying a final decision. In relation to section 191(3), counsel submitted that, where land was disposed of simultaneously with its acquisition, there was no difference between the "best price" and the market value as assessed by the Lands Tribunal. There was no rule that an assembled site was worth more than its constituent parts. The reference in section 191(3) to "best terms" in any event allowed the planning authority to consider all the circumstances, including the best land use. The first respondents were entitled to conclude that the conditions contained in the Agreement constituted the best terms available, since they were calculated to promote the expeditious development of the land and to avoid any financial risk to themselves. It was acknowledged that these matters were not considered by the first respondents in the specific circumstances of any particular case. The first respondents had a general policy. In relation to the interpretation of section 191(3), reference was made to R. v Commission for New Towns, ex parte Tomkins (1988) 87 LGR 207 and to Stannifer Developments Ltd v Glasgow Development Agency, 1999 SC 156.

Discussion
[27] Section 191(1) of the 1997 Act, read with subsection (2), confers a power upon a planning authority which is drafted in wide terms: to dispose of land which they have acquired or appropriated for planning purposes, and which they hold for those purposes,

"to such person, in such manner and subject to such conditions as may appear to them to be expedient"

for the purposes mentioned in subsection (2): broadly speaking, to secure the best use of the land, or to secure the construction of buildings or carrying out of other works needed for the proper planning of the area. These provisions allow the planning authority considerable flexibility as to the arrangements for disposal. Whether it is open to the planning authority to determine the "expedient" conditions in advance of their acquisition of the land in question is, as we have mentioned, a question which was not argued before us, and as to which we therefore express no opinion.

[28] Section 191(3) on the other hand imposes a prohibition upon the planning authority:

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

Subsection (7) is intended to protect, to a limited extent, the interests of persons living or working on the land. It was not founded on in the present proceedings. Apart from the reference to subsection (7), the prohibition imposed by section 191(3) is unqualified.

[29] In addition to the power conferred upon them by section 191 in their capacity as planning authorities, local authorities possess a more general power to dispose of land "in any manner they wish", under section 74(1) of the Local Government (Scotland) Act 1973. That power is made subject by section 74(2) to a prohibition which is expressed in terms bearing some similarity to section 191(3) of the 1997 Act:

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

Land which has been acquired for planning purposes cannot however be disposed of under section 74 of the 1973 Act, since the application of that section to such land is excluded by section 191(10) of the 1997 Act. The Scottish Ministers therefore have no power to relax the prohibition imposed by section 191(3).

[30] There appears to be no authority on the interpretation of section 191(3) of the 1997 Act, or, so far as we are aware, the equivalent English provision, other than the observations of Lord Nimmo Smith in Standard Commercial Property Securities Ltd, which we have quoted and to which we shall return. Provisions analogous to section 74(2) of the 1973 Act have however been considered by the courts on a number of occasions; and we were referred to two such cases. Given the similarity in wording, it is appropriate to consider those authorities, but it is also necessary to keep in view the differences in statutory context.

[31] R v Commission for New Towns, ex parte Tomkins concerned a provision in the New Towns Act 1981 prohibiting the disposal of property by the Commission for New Towns "for a consideration which is less than the best reasonably available". Dillon LJ noted that the wording of the provision was very similar to that of the provision which applied under English law to sales by trustees, and to that of section 123(2) of the Local Government Act 1972 (the English equivalent of section 74(2) of the 1973 Act), and continued (at pages 216-217):

"In all these contexts the phrase 'the best price that can reasonably be obtained' refers, in my judgment, to the highest price in money that can be got, subject to such considerations of prudence as are discussed by Wynn-Parry J in Buttle v Saunders [1950] 2 All ER 193 such as that a bird in the hand may on occasion be worth more than two in the bush."

Bingham LJ observed (at page 218):

"The policy embodied in s 37(3) of the Act of 1981 is plain: it is to ensure, so far as reasonably possible, that public assets are not sold at an undervalue save on the authority of the Secretary of State. The public interest underlying the policy is obvious."

We note that the observations in Buttle v Saunders concerning trustees, to which Dillon LJ referred, were to the following effect:

"They have an overriding duty to obtain the best price which they can for their beneficiaries. It would, however, be an unfortunate simplification of the problem if one were to take the view that the mere production of an increased offer at any stage, however late in the negotiations, should throw on the trustees a duty to accept the higher offer and resile from the existing offer. For myself, I think that trustees have such a discretion in the matter as will allow them to act with proper prudence. I can see no reason why trustees should not pray in aid the common-sense rule underlying the old proverb: 'A bird in the hand is worth two in the bush.' I can imagine cases where trustees could properly refuse a higher offer and proceed with a lower offer. Each case must, of necessity, depend on its own facts."

[32] This general approach has been applied in a number of subsequent English decisions. Although not cited in argument, some of them appear to us to be of assistance in understanding the principles which have been developed in England. The first of these is R v Pembrokeshire County Council, ex parte Coker [1999] 4 All ER 1007, which concerned the provision in section 123 of the 1972 Act prohibiting the disposal of land "for a consideration less than the best that can reasonably be obtained." The local authority had decided to accept an offer for a lease of council land and to reject another proposal, which was at a preliminary stage, but which held out the possibility of a higher rent being offered at a later stage. It was found by Lightman J (at page 1012) that the local authority had acted lawfully in preferring the "bird in the hand":

"It seems to me that it was clearly common sense for the council to accept the 'bird in the hand' offered by CSSL and to make every effort to do a deal before CSSL moved elsewhere, leaving the council high and dry. The offer by the applicants was a bird in a far away bush: any negotiations with the applicants were fraught with uncertainty and might prove fruitless. No reasonable or responsible councillor could in the circumstances take any risk of losing CSSL in order to pursue further negotiations with the applicants."

At the same time, Lightman J accepted (at pages 1012-1013) that the council could not lawfully accept the lower offer for non-commercial reasons:

"It is clear that an authority may lawfully and properly take into account, when deciding whether to make a disposition and the identity of the disponee, the social value of the effect of the disposition on job creation. But the social value of a disposition cannot be taken into account when questions arise of compliance with the obligation under s 123 to obtain the best consideration obtainable. Section 123 requires the consent of the Secretary of State before this obligation can be relaxed. When deciding whether (for the purposes of s 123) the best consideration reasonably obtainable has been obtained, the only consideration to which regard may be had is that which consists of those elements of the transaction of commercial or monetary value to the local authority; and undertakings to create a number of jobs or use land for a particular desirable purpose do not (at least normally) count as such consideration: see R v Middlesborough BC, ex p Frostree Ltd (16 December 1988, unreported)."

The approach adopted in this judgment thus draws a distinction between commercial issues and political decision making, and construes a prohibition on disposal for a consideration less than the best that can reasonably be obtained as being concerned solely with the former. That appears to be consistent with the judgments in Ex parte Tomkins.

[33] Lightman J followed the same approach in the subsequent case of R (Lemon Land Ltd) v Hackney London Borough Council [2001] EWHC Admin 336, [2002] 1 EGLR 81, where a local authority proposed to sell land under the 1972 Act to enable it to be developed to generate employment opportunities. The local authority resolved to accept an offer for the land which represented its non-residential value, and to reject a higher offer which represented its value for residential development. The local authority sought to justify their decision on the basis that the jobs to be created by the lower bidder had an economic value which could be taken into account as part of the consideration. The argument was rejected (at page 82):

"The policy behind section 123(2) is that in the sale of land by a local authority, a distinction must be drawn between commercial and non-commercial transactions. If there is any element of discount or grant in a transaction, the consent of the Secretary of State is necessary."

[34] The final English authority which we need mention illustrates circumstances in which matters which are relevant to development may properly be taken into account as affecting the commercial value of a disposal. In R (Lidl (UK) GmbH) v Swale Borough Council [2001] EWHC Admin 405 the local authority had entered into negotiations to grant a long lease of land to a supermarket operator, subject to planning permission being granted. At a late stage, when negotiations had been finalised and the application for planning permission was shortly to be considered, a rival operator, which had been pursuing an alternative site, offered to purchase the land owned by the local authority, at a higher price than the first operator had offered, subject to planning permission. The local authority received professional valuation advice, which recommended that they should proceed with the original proposal. One of the reasons given for that advice was that the second operator would find it difficult to obtain planning permission, since the first operator had already secured rights over adjacent land which was required in order to provide access, and it was therefore uncertain that a transaction with the second operator would proceed to completion. The first offer was considered to reflect the true value of the land. There were grounds for suspecting that the second offer was merely a spoiling tactic. The local authority followed that advice. A challenge to their decision was unsuccessful. Morison J stated (at paragraph 18 of his judgment):

"In my view the legal principles are not in dispute. The Council is in the position of a trustee in relation to the land which it holds on behalf of the community. Section 123 requires them to obtain the best consideration reasonably obtainable. That does not mean that the highest offer on the table is always the best because a Council is entitled to conclude that a bird in the hand is worth two in the bush, as this case demonstrates."

[35] Turning to Scottish authorities, Stannifer Developments Ltd v Glasgow Development Agency was concerned with a statutory prohibition imposed upon Scottish Enterprise from disposing of land, except with the consent of the Secretary of State, "for a consideration less than the best that reasonably can be obtained." Rival offers had been received for a major development site, each of which was subject to the grant of planning permission. Each offer included a cash price and also a share in the profits of the development proposed. In the assessment of the offers, account was taken of both these aspects of the consideration, and also of the ease with which each proposal could be progressed so as to obtain planning permission. The preferred bid offered the lower cash price, but a greater share of the profits, and was considered easier to progress to the stage of planning approval. Before the Lord Ordinary, Lord Macfadyen, it was argued that price was the sole criterion. In reply, it was argued that the statutory provisions involved an assessment not merely of the price offered, but of the economic standing of the offeror and the likelihood that any suspensive conditions attached to the offer would be satisfactorily and timeously purified. In support of that submission, reference was made to some of the English authorities which we have mentioned. In relation to these matters, the Lord Ordinary (whose Opinion is reported at 1998 SCLR 870) said, at pages 895-896:

"In my opinion 'consideration' cannot be equated with the cash-price element of the offers made by the petitioners and Millers. The cash price is a component, and plainly a very significant component, of the consideration offered. But the expression 'consideration' in the section is in my view plainly broad enough to include other financial return to the seller under the contract for the disposal of the site ...

Moreover, it is an oversimplification to look at the cash prices in the competing offers in isolation from the other terms of the offers. The offers are not offers to pay a fixed price on a fixed date of entry. The date in each offer is contingent on the purification of various suspensive conditions. Those conditions relate to such matters as the obtaining of satisfactory planning permission and the negotiation of a development agreement. To take the matter of planning as an example, the length of time required to obtain planning permission is likely to be affected by a range of considerations, including the degree to which the particular proposal is in accordance with the statutory development plans and the quality of the design proposed. While, therefore, I accept Mr Martin's submission that the respondents are not a planning authority and have no direct interest in securing a development of a particular sort or particular quality, the acceptability of a proposal in planning terms has, it seems to me, an important bearing on when the price offered is likely to be payable. It seems to me that the factor inevitably influences the judgment as to which offer affords the best consideration ...

More generally ... it seems to me to be clear in principle that it is open to the seller, disposing of property under the constraint imposed by section 8(1)(g), to make an assessment of how likely it is that each particular offer will be brought to fruition and to take that assessment into account in deciding which offer represents the best consideration ... The disposal which may be concluded without the consent of the Secretary of State is not the one which offers the highest cash price, irrespective of how long may elapse before all the suspensive conditions are purified and how uncertain it may be that the development will be brought to a satisfactory conclusion, but the one identified as yielding the best consideration that can reasonably be obtained."

[36] These observations were not challenged when the matter came before the Inner House. The Inner House adopted the same general approach in rejecting (at pages 162-163) an argument that irrelevant considerations had been taken into account:

"As counsel for the respondents pointed out, there was a concern as to whether the proposals of each of the developers are deliverable. This depended on a number of factors including the resources and experience of the developer, the commercial return to each of them as measured by NPV and the prospects of obtaining planning approval in each case. Thus, for example, if there were a major planning impediment facing a particular proposal, this would affect its deliverability. We accept that matters such as these were relevant to the consideration offered in each case."

[37] In the light of these authorities, it appears to us that a prohibition such as is contained in section 74(2) of the 1973 Act is intended, as Lord Macfadyen said in Stannifer (at page 890), "to protect the public purse from loss through the disposal of assets of a public body at an undervalue". It requires a judgment to be made by the authority in question as to what is the best consideration which can reasonably be obtained. In making that judgment, the factors which require to be taken into account, and the weight to be given to those factors, will depend on the circumstances of the particular case. The consideration to which regard must be had is what Lord Macfadyen described in Stannifer as the financial return: or, as it was put by Lightman J in Ex parte Coker, "those elements of the transaction of commercial or monetary value to the local authority". The pecuniary amount of the consideration offered may not however be the only relevant factor: the commercial value of a transaction may be affected by other matters, as is illustrated by the cases which we have mentioned.

[38] Returning to section 191 of the 1997 Act, subsections (1) and (2) confer upon a planning authority the power to dispose of land acquired or appropriated for planning purposes so as to secure the best use of the land or the carrying out of works appearing to them to be needed for the proper planning of their area. As we have already mentioned, the planning authority are given a wide discretion as to certain aspects of the disposal:

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

To secure the best use of land, or the carrying out of works needed for the proper planning of the area, may not necessarily be consistent with maximising the commercial value of the land in question. The planning authority may, in some circumstances, reasonably take the view that, in order to secure the purposes mentioned in subsection (2), it is necessary to dispose of the land to someone who is not the highest possible bidder, or to dispose of it in a manner which is not calculated to obtain the greatest possible financial return, or to dispose of it subject to conditions which have the effect of depressing the land's commercial value. For example, a planning authority may consider it expedient, in order to secure the best use of land, to dispose of it on terms which will ensure its use for industrial or recreational purposes, rather than permitting its use for residential purposes, although the consequence is to reduce the consideration which can be obtained. If, however, section 191(3) were to be interpreted as imposing an overriding prohibition on disposals which failed to obtain the best possible commercial return, then it would prevent the exercise of the power conferred by section 191(1), other than in circumstances where the authority were able to exercise the power in such a manner as to maximise the commercial value of the land in question. The consequence of such an interpretation of section 191(3) would thus be to restrict considerably the circumstances in which the power conferred by subsection (1) could be exercised. We consider that such an interpretation of section 191(3) must be rejected.

[39] In construing section 191(3), the starting point is that the provisions of section 191 have to be read together, and interpreted in the light of the policy and objectives of the Act as a whole. The statutory context of section 191, set as it is in planning legislation, suggests that its primary objective is to ensure that if land acquired or appropriated by a planning authority for planning purposes, and held by them for such purposes, is disposed of, the planning authority secure the best use of the land or the carrying out of works needed for the proper planning of the area. Section 191(3) should not therefore be interpreted so as to be capable of preventing that objective from being achieved.

[40] Moreover, as we have noted, section 191 applies to the exclusion of all other powers of disposal; and subsection (3) does not allow any exception to be made with the consent of the Scottish Ministers, such as is allowed under section 74 of the 1973 Act. Accordingly, if section 191(3) were to be interpreted as imposing an overriding obligation to secure the best commercial return that could reasonably be obtained, that obligation would apply uniquely to land held by a planning authority for planning purposes: other land held by a local authority could, with the consent of the Scottish Ministers, be disposed of on a non-commercial basis. That would appear to us to be a perverse result. The absence of any scope for an exception being made is, on the other hand, consistent with the view that section 191, read as a whole, permits land to be disposed of otherwise than on a wholly commercial basis, in appropriate circumstances.

[41] In Standard Commercial Property Securities Ltd, Lord Nimmo Smith reached this conclusion by construing the words "best terms" in section 191(3) as including those terms which would be most conducive to the achievement of the purposes set out in subsection (2). Although we have reached the same conclusion, we do not agree with that construction of "best terms". Section 191(1) empowers the planning authority to dispose of the land "subject to such conditions as may appear to them to be expedient for the purposes mentioned in subsection (2)." Section 191(3) cannot simultaneously prohibit the planning authority from disposing of the land otherwise than on those terms which would be most conducive to achieving the purposes mentioned in subsection (2): such a prohibition would be inconsistent with the discretion conferred by subsection (1) (or, if it were so construed as to be compatible with that discretion, would be otiose). It appears to us, rather, that section 191(1) must be interpreted as regulating (to the exclusion of subsection (3)) the planning authority's decision as to the aspects of the transaction which are intended to secure the purposes mentioned in subsection (2). Apart from that aspect of the decision, the statute requires in addition to regulate the value obtained for the public asset involved, so as to protect the public purse. That objective can be achieved, without undermining the primary purpose of section 191, by construing subsection (3) as prohibiting disposal "otherwise than at the best price or on the best terms that can reasonably be obtained" in the circumstances of a disposal which is in accordance with subsection (1), i.e. a disposal to such person, in such manner and subject to such conditions as may appear to the planning authority to be expedient for the purposes mentioned in subsection (2). So interpreted, subsection (3) is concerned solely with the commercial value of the transaction (i.e. the price, and other terms relevant to commercial value, as explained in such cases as Stannifer), but has to be applied consistently with subsection (1).

[42] Following this approach, the planning authority have to make a judgment under section 191(1) as to the aspects of the disposal mentioned in that subsection, according to what appears to the authority to be expedient for the purposes mentioned in subsection (2). In order to comply with their obligation under section 191(3), the planning authority have also to obtain the best value they can for the land (subject to subsection (7)), consistently with the exercise of their power of disposal in accordance with section 191(1). In doing so, they have to assess the price and any other terms affecting the value obtained.

[43] Reviewing the facts of the present case in the light of what we consider to be the correct approach to the interpretation of section 191, it appears in the first place that the first respondents gave no consideration, prior to the decision on 10 April 2003, to the question whether reimbursement of their costs constituted the best value that could reasonably be obtained. Neither the evaluation process nor the use of the standard form of contract involved any consideration being given to the value of the site or to what developers might be willing to offer for it. As counsel for the first respondents acknowledged, they proceeded throughout on the assumption that reimbursement of their costs constituted the best price that could reasonably be obtained. We consider that that was not an assumption which could reasonably be made. There is no indication that the first respondents had received any advice on the matter. It cannot reasonably be assumed, as a necessary truth in any and every case, that the value fixed by the Lands Tribunal is equivalent to the best price reasonably obtainable, or that the value of an assembled site is equivalent to the combined values of the individual properties from which it has been assembled. Nor can it reasonably be assumed, in any and every case, that the true value of a site can be determined without a competitive marketing exercise, or that its development value can be accurately assessed before the terms of any planning permissions are known.

[45] In these circumstances, we shall allow the reclaiming motion, recall the interlocutor of the Lord Ordinary, grant decree of declarator that the first respondents' decisions of 10 April 2003 to agree to the selection of the second respondents as preferred developer for the site, and to instruct the Director to enter into a back-to-back agreement with the second respondents, were ultra vires and unreasonable, and reduce the decisions accordingly.