R v Middlesbrough Borough Council, ex parte Fortrees Ltd

Surplus land — Marketed for two years — First offer accepted — Second and higher offer made by adjoining landowner — Council deciding to proceed with first offer — Whether obtaining best price reasonably obtainable — Meaning of “consideration” — Whether fulfilling statutory dutyThe respondent council are the owners of the freehold of 33-65 Station Road, Middlesbrough. In 1980 a 15-year lease was granted to Factory Carpet Centre Ltd. In March 1987 that firm offered to surrender the lease to the respondents, who indicated that they might be prepared to accept a surrender but that the lessees should continue their efforts to market the lease. In July 1987 a Mr Williamson, acting for the Olympia Health and Fitness Club, made an offer to the respondents to purchase the freehold interest for £70,000. By November 1987 the decision of the respondents’ Land Subcommittee to accept a surrender of the lease and to dispose of the freehold was ratified by the Policy and Resource Committee. Terms were then agreed between the parties. In February 1988 an offer to purchase the freehold interest for £85,000 was made on behalf of the applicants, Fortrees Ltd, owners of the adjoining property. The respondents considered the new offer, their obligations under section 123(2) of the Local Government Act 1972 not to dispose of land “for a consideration less than the best that can reasonably be obtained” and the advanced arrangements with Mr Williamson, the latter not having been informed at an early stage of a contract race in accordance with the Law Society guidelines. They decided to proceed with the sale to Mr Williamson. The applicants obtained an injunction restraining the sale to Mr Williamson pending the outcome of the present proceedings; they contended that the provisions of section 123 of the 1972 Act required the respondents to consider and accept the highest offer. The respondents submitted that “consideration” in section 123 must be given a wide interpretation, and “reasonably” does not mean going to unreasonable lengths to get the best price; it is not necessary to get the best possible price. Held The application was granted. The words of section 123(2) of the 1972 Act are similar to those in issue in R v Commission for the New Towns, ex parte Tomkins [1988] EGCS 141. In that case the Court of Appeal held that the obligation not to dispose of property for “a consideration which is less than the best reasonably obtainable” gave a meaning to “consideration”; it was the highest price in money that could be got. Section 123 places a statutory duty on the respondents which they had failed to comply with. R v Lancashire County Council, ex parte Telegraph Service Stations Ltd [1988] EGCS 96 considered. Henry Harrod (instructed by Alex Lauriston & Son, of Middlesbrough) appeared for the applicants; and Stephen Hockman (instructed by the solicitor to the Middlesbrough Borough Council) appeared for the respondents.