Lidl (UK) GmbH v Swale Borough Council and another

Council negotiating lease of land with Aldi Stores – Claimant rival company making higher bid for freehold – Council deciding to proceed with Aldi’s bid – Claimant contending council acting illegally – Whether council disposing of land for less than the best consideration that could reasonably be obtained for it – Section 123(2) of Local Government Act 1972 – Claim dismissed The defendant borough council owned land at Hope Street, Sheerness (the site). After about a year of investigations, Aldi Stores Ltd, a rival of the claimant discount retailer, concluded that the site could be turned into a new discount store, provided it could acquire the council’s land and some adjacent properties belonging to third parties. After negotiations with the council, in March 2000 Aldi agreed to purchase a long lease of the land for £650,000. Aldi also purchased the additional land and applied for planning permission to develop the site. The claimant had also been negotiating with the council for the development of a different edge-of-town site for its own discount store. However, in June 2000 it expressed an interest in acquiring the Hope Street site and made an offer to the council of £950,000 for the freehold of the site with vacant possession. The council, after considering a report from their valuation officer indicating that, if capitalised, the ground rent from Aldi would take its bid to between £800,000 and £890,000, assessed the value of the two bids as more or less the same. However, they took the view that the claimant’s bid was not of the same quality as Aldi’s, and concluded that the sale to Aldi should proceed. The claimant sought, and was granted, an injunction restraining the council from exchanging contracts pending an application for judicial review of the council’s decision. On that application, the claimant submitted that the council were in breach of section 123(2) of the Local Government Act 1972 by disposing of the land for “less than the best consideration than can reasonably be obtained” for it. Relying upon R v Pembrokshire County Council, ex parte Coker [1999] 4 All ER 1007; [1999] PLSCS 172, the claimant contended that the word “reasonably” in that section did not permit the council to have regard to moral issues or political preferences, and argued that they had failed in their duty to market the site, to obtain a valuation of it or to probe rival bids. The claimant further contended that the council were granting state aid to Aldi at its expense, and were therefore in breach of Articles 87 and 88 of the Treaty of Rome. Held: The claim was dismissed. The council were well aware of their statutory duty and had considered both bids. There was no absolute duty upon them to probe rival bids. There was nothing wrong with a council using their own officer’s expertise in assessing the value of the bids and advising members accordingly. Section 123 of the Act required the council to obtain the best consideration reasonably available. That did not mean that the highest offer was always the best. Aldi had been developing proposals for the site for a considerable time. The claimant, on the other hand, had made a bid without any supporting material. They had not properly identified the site when they first made their bid, they had not obtained a valuation or prepared a site plan, and they had not put forward a convincing case that a development without the extra land would work. In the circumstances, the council had behaved entirely properly. Hugh Mercer (instructed by Teacher Stern Selby) appeared for the claimant; Gillian Carrington (instructed by the solicitor to Swale Borough Council) appeared for the defendants; John Steel QC and Paul Brown (instructed by Hammond Suddards Edge) appeared for Aldi Stores Ltd. Sarah Addenbrooke, barrister