In Case C39/14, BVVG v Erbs, Judgment on 16 July 2015, the ECJ has again considered when land disposals by public bodies amount to State Aid within TFEU Article 107(1), in accordance with which save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings is, in so far as it affects trade between Member States, incompatible with the internal market. 

The ECJ reiterated that in order for a measure to be categorised as ‘aid’ for the purposes of Article 107(1) TFEU, all the conditions set out in that provision must be fulfilled.  For a measure to be classified as State Aid for the purposes of Article 107(1) TFEU, first, there must be an intervention by the State or through State resources; second, the intervention must be liable to affect trade between Member States; third, it must confer an advantage on the recipient; and fourth, it must distort or threaten to distort competition. The concept of aid may include not only positive benefits such as subsidies, loans or direct investment in the capital of undertakings, but also interventions which, in various forms, mitigate the charges which are normally included in the budget of an undertaking and which therefore, without being subsidies in the strict sense of the word, are of the same character and have the same effect. To that end, for the purposes of establishing the existence of State Aid, a sufficiently direct link must be established between, on the one hand, the advantage given to the recipient and, on the other, a reduction of the State budget or a sufficiently concrete economic risk of burdens on that budget.

It cannot therefore, as a rule, be precluded that a sale of public land at a price lower than the market value might constitute State Aid.  Such a sale may confer on the purchaser, as a recipient, an advantage which, in essence, leads to a reduction of the State budget consisting in the State forgoing the difference between the market value of the land and the lower price paid by that purchaser.

In particular, in relation to the sale by public authorities of land or buildings to an undertaking or to an individual involved in an economic activity, such a sale may include elements of State Aid, in particular where it is not made at market value, that is to say, where it is not sold at the price which a private investor, operating in normal competitive conditions, would have been able to fix.

It follows that the application of rules must, in order to comply with Article 107 TFEU, result in all cases in a price as close as possible to the market value.  A number of methods are capable of providing prices corresponding to the market value. Those methods include sales to the highest bidder or an expert report. Likewise, it cannot be ruled out that other methods may also achieve the same result.

In a case concerning the sale by a public authority of an undertaking belonging to it, that, where that authority undertakes an open, transparent and unconditional bidding procedure, it can be presumed that the market price corresponds to the highest offer, provided that it is established, first, that that offer is binding and credible and, secondly, that the consideration of economic factors other than the price is not justified.  In such circumstances, it is not necessary to resort to other methods in order to check the market price, such as independent expert reports.

In Tower Hamlets LBC v Bromley LBC [2015] EWHC 1954 (Ch) the Chancery Division of the High Court was asked to determine the ownership of a Henry Moore sculpture.  Tower Hamlets LBC (“TH”) as the successor to the Stepney Borough Council (“SB”), pursuant to the London Government Act 1963 (“the 1963 Act”).  Bromley LBC (“Br”) was the successor to the London Residuary Body (“the LRB”).  The LRB was the successor to the Greater London Council (“the GLC”) pursuant to the Local Government Act 1985.  The GLC was successor to the London County Council (“the LCC”) pursuant to the 1963 Act.

In 1957 Henry Moore, reflecting on his wartime experiences of the London Blitz and his war artist drawings, created a sculpture which became known as “Draped Seated Woman”. It is a large bronze figure sitting upon a stepped plinth. At least 6 casts were made. On 15 September 1962 one of these was purchased by the LCC.  It was shortly thereafter placed near three tower blocks on the then recently constructed Stifford Estate in the area of SB.  Could TH sell the sculpture to fund local services; or should it be kept for the benefit of the people of London. Who owned the Henry Moore sculpture?

By the mid 1950s the LCC took the view that it had both a cultural and educational responsibility to do what it reasonably could to encourage and assist in the provision of works of art: and that it had two means of doing so. First, the LCC considered that its powers to provide and furnish buildings for various functions included, within the bounds of what was reasonable, an inherent power to provide by way of adornment appropriate and suitable works of art. Second, the LCC had a specific statutory power which provided that it might acquire, by agreement, any work of art, and might erect and maintain, or contribute towards the provision, erection and maintenance of, any work of art in any place within the LCC area.

In 1956 the General Purposes Committee of the LCC proposed that the LCC should earmark annually a sum of money which would be available for the acquisition of works of art for both new and existing buildings and schemes.  That proposal was implemented.

The Stifford Estate was built at Clive Street in Stepney and completed in the early part of 1961. The three tower blocks were regarded as a prime example of modern architecture.  They were built within their own modest grounds abutting onto Jamaica Street at the front, and separated at the rear from Stepney Green by a sizeable public path. They were designed without reference to the inclusion of any particular piece of art, but from an early stage it was contemplated that a work of art would be commissioned and placed somewhere in relation to the development.

Henry Moore confirmed his willingness to sell the sculpture on 4 January 1962.  He was paid for it in September 1962.

Norris J concluded that (paragraph 15) the sculpture, which was originally a chattel, remained a chattel, and never formed part of the realty; that (paragraph 16) the LCC bought the sculpture in discharge of its cultural and educational responsibility; and that (ibid) it did so pursuant to the specific power referred to above.

On the abolition of the LCC, and the creation of the GLC and the various London Boroughs, including TH and Br, the sculpture vested in the GLC, either “in connection with” the Stifford Estate or (as the Judge favoured) as property vested in the LCC.

The Stifford Estate, however, was transferred to TH. Norris J accepted (paragraph 28) that what was transferred was “transferred property”; and that land included property held in connection therewith.  He rejected, however, the submission on behalf of TH that the sculpture was held “in connection with” the Stifford Estate.  Norris J said:-

“31. The 1963 Act was concerned to deal with the transfer of land which had been held by the LCC “for the purposes of their functions as a local authority under the Housing Act 1957”: and the onward transfer by the GLC to a London borough had an identical focus. So the underlying concept is “functionality”: what passes is land held for the purposes of an identified function. If personal property held “in connection with” such land is to pass, it too must have some connection with the discharge of the function of a local authority under the Housing Act 1957. If the LCC had held a collection of pictures which from time to time it displayed in the entrances to public offices and blocks of flats as part of its arts education programme it would have held none of them in connection with the discharge of its function as a local authority under the Housing Act 1957. Those pictures hanging in the hallways of blocks of flats  would not have passed to the GLC as part of the housing stock (as property held in connection with land used to discharge the council’s housing function), leaving those hanging in offices vested in the LCC. The “function” in connection with which the pictures were held was something other than the function of a local housing authority.

32.In my judgment the sculpture was not property “held in connection” with specifically described land held by the GLC for the purposes of its functions as a local authority under the Housing Act 1957. It was held by the GLC (and had been held by the LCC) in connection with its arts education programme as is evident from the circumstances surrounding is acquisition. The power which authorised the acquisition of the sculpture was s.157 of the Local Government Act 1939, not the Housing Act 1957. The power which authorised the retention of the sculpture was s.84 of (and paragraph 16 of Schedule 2 to) the 1963 Act, not the Housing Act 1957. The money that paid for the sculpture was the specific annual allocation for arts purchases and was not accounted for as a housing cost. The sculpture was sited on the Stifford Estate and no doubt benefited the residents of the Stifford Estate, but it also benefited any member of the public using the path alongside Stepney Green or using Jamaica Street.”

Norris J therefore held (paragraph 39) that when the housing accommodation which comprised the Stifford Estate passed to TH, the sculpture was vested in the GLC; and (paragraph 40) that when the GLC was abolished it vested in the LRB.

However, he accepted TH’ case that it had since 1985 repeatedly (and in good faith) believed the sculpture to be its own, and treated it as its own property, including sending it on a long-term loan to Yorkshire, without complaint from the LRB or Br.  Those were acts of conversion. By application of Section 3(2) of the Limitation Act 1980 Br’s title was extinguished.  Norris J held that TH now owned the sculpture. Norris J held (paragraph 49) that the title of BR had been extinguished because various events between 1997 and 2002 were all assertions by TH of rights of dominion over the sculpture inconsistent with the ownership rights of Br.  He said:-

“52. Counsel for Bromley finally objected that Tower Hamlets had no power to acquire property through an act of conversion. But in my judgment it was not “the act of conversion” that conferred title: it was the effect of s.3(2) of the 1980 Act in consequence of the inaction of Bromley (in failing to bring proceedings within the statutory period) even though the sculpture which it now says was intended to benefit and enrich all Londoners was openly on display in Yorkshire.

53. Accordingly I answer the question raised by this action in the sense that the Henry Moore sculpture “Draped Seated Woman” now belongs to Tower Hamlets.”

On 30 June 2015 the European General Court in Joined Cases T-186/13, T-190/13 and T-193/13, Netherlands v Commission, annulled an EU Commission Decision that had found a sale of land by a public private partnership set up by a municipality allegedly below market price to be unlawful State Aid. The Court’s Judgment is not yet available in English.  In determining whether there was selective aid the Court applied the Market Economy Investor Principle and a margin of appreciation for the authority.

In R (Galaxy Land) v Durham County Council [2015] EWHC 16 (Admin) the authority’s decision to dispose of land was held to have been flawed.  Section 123 of LGA 1972 did not require any particular process, but the authority had not been provided with the information necessary in order to enable it to take into account obviously relevant considerations, and the disposal had not been publicized notwithstanding that the land, which had been used for public recreation, was open space.

Cranston J said, at para 44, having referred to the relevant parts of Section 123:

“44.       Under these provisions the grant of an option to purchase is a disposal of land: Trustees of the Chippenham Golf Club v North Wiltshire District Council [1991] 64 P&CR 527. Ordinarily a decision of a Council to sell land is a private law matter, not amenable to judicial review. However, judicial review is possible where there is a public law element to the decision making process: R v Bolsover District Council ex parte Pepper [2000] 3 LGLR 20. An attempt to give effect to planning policy or objectives is sufficient to inject a public law element into a decision. In R (on the application of Molinaro) v Royal Borough of Kensington and Chelsea [2001] EWHC (Admin) 896, Elias J held that the fact that a local authority is exercising a statutory function ought to be sufficient to justify the decision itself being subject in principle to judicial review if it is alleged that the power is being abused: [65]-[64]. In my view the position here is that there is a public law element to the disposal, given the circumstances I have outlined.”

Having referred at para 48 to R (Salford Estates) v Salford City Council (2011) LGR 982 and R (Midland Cooperative Society) v Birmingham City Council (2012) LGR 393, Cranston J continued:

“49.       In my judgment the Cabinet was not provided with the necessary information so that it could take into account obviously relevant considerations. The Salford Estates and Midland Cooperative Society cases make clear that while section 123 does not require any particular process, a purported discharge of a duty under the section can be impugned on ordinary public law principles. I preface my remarks by observing that the Cabinet did not need to be appraised of everything which was within the knowledge of the officers. The officers are there to digest material and to bring to bear their expertise, which the Cabinet members will not have. The Cabinet can rely on the officers’ fair summary of relevant matters and their balanced evaluation of the implications. If the officers have given proper consideration to different arguments and then come to a conclusion there is no necessary error should the report not refer to the different contentions but only to the conclusions reached.

50.        With that as background my difficulty with the Cabinet report in this case is threefold. First, there is no evidence before me that the officers had considered and resolved a number of obviously relevant issues behind the recommendations being advanced.”

R (Maries) v Merton LBC (2014) EWHC 2689 (Admin) concerned the exercise by the Council of its powers of appropriation of land under s122(a) of the Local Government Act 1972 and whether land is no longer held for the purposes for which it is currently held.  The land in question is a recreation ground acquired pursuant to s164 of the Public Health Act 1875 on trust for the enjoyment of the public.  The Council proposed to expand an adjacent primary school onto part of the recreation ground.  The Court, para 59, distilled 3 material principles: (1) whether land is still or is no longer required for a particular purpose, meaning no longer needed in the public interest of the locality for that purpose, is a question for the local authority, subject only to Wednesbury;  (2) the legislative provision is concerned with relative needs or uses for which public land has or may be put, and does not require it to fall into disuse before the authority may appropriate it for some other purpose; and (3) the authority is entitled when exercising its appropriation power to seek to strike a balance between comparative local needs and to take a broad view of local needs.

Applying those principles, the Court rejected the judicial review challenge to the appropriation of part of the recreation ground.  The correct statutory question had been addressed; the approach to considering the competing needs and to the question whether the land was no longer required for the purpose for which it was held had not been flawed; and the decision was not irrational.  In any event, paras 88-91, the Judge would have denied relief.

Many rounds of cuts include library closures.  In Draper v Lincolnshire County Council [2014] EWHC 2388 (Admin) a judicial review challenge to a decision to reduce library provision from 44 to 15 libraries succeeded.  It did so on two grounds.  One ground was that the authority had not properly considered an expression of interest from a charitable organisation to provide the services. The other ground was that consultation had not taken place at a formative stage.

Chapter 2 of Part 5 (Sections 81-85) of the Localism Act 2011 (“LA 2011”) introduced a mechanism by which civil society organisations can require local authorities to consider conducting a procurement exercise in relation to one or more of the services that they provide.  The basic structure is that a local authority is under a duty to consider an “expression of interest” that has been submitted to it by a “relevant body”.  An “expression of interest” is an expression of interest in providing or assisting in providing a service on behalf of the local authority.  A “relevant body” is a voluntary or community body, a charitable body, a parish council or two or more employees of the local authority at issue.  A voluntary body is one whose activities are not carried on for profit.   A community body is a body carrying on activities primarily for the benefit of the community.  There is no requirement that a “relevant body” have local connections.

Upon consideration of an expression of interest, one of three things can happen: it can be accepted, rejected or modified, but an expression of interest can be modified only in circumstances where the authority thinks that the expression of interest would not otherwise be capable of acceptance and the relevant body agrees to the modification.  In deciding whether to accept an expression of interest, the local authority must consider “whether acceptance of the expression of interest would promote or improve the social, economic or environmental well-being of the authority’s area”; and if a local authority accepts an expression of interest it must then carry out a procurement exercise: the exercise “must be such as is appropriate having regard to the value and nature of the contract that may be awarded as a result of the exercise”.

There have been made the Community Right to Challenge (Expressions of Interest and Excluded Services) (England) Regulations 2012, SI 2012/1313, Schedule 1 to which specifies requirements for expressions of interest.  Also, the Secretary of State has issued statutory Guidance.

In the Lincolnshire Libraries case, Greenwich Libraries Ltd (“GLL”), which manages libraries in the London Boroughs of Greenwich and Wandsworth, and which is a “relevant body”, submitted what Collins J found to be an Expression of Interest within Section 81 of LA 2011 made in time.  It proposed taking over the provision of the County’s library services and stated that it could do so retaining what existed and achieve savings.  Collins J found that the Expression of Interest was not “properly considered”: paras 46/47.

Further, consultation must of course be when proposals are at a “formative stage”.  At para 17 Collins J said:

“It is clear that it is proper for an authority to have a preferred option and to consult on the basis that that is what is proposed by the authority.  But for consultation to be meaningful the authority must be prepared to think again if those consulted are unhappy with the proposal and suggest a different solution.”

Collins J found, at para 27, that the consultation exercise was flawed.  This was because a central element in relation to the statutory service, namely to reduce it to 15 libraries with the targeting for those outside the 30 minutes travel area, could not be changed.

However, the inevitable PSED challenge failed, as did an irrationality challenge. The authority had identified the possible areas of discrimination and identified measures which it believed would ensure that there was no unlawful discrimination (para 50).  The “overwhelming objection” to the decision did not in itself mean that it was unlawful (para 53).  The decision to make the cuts was “a political one … which cannot be challenged in the Courts”:  “The need for cuts will inevitably produce hard decisions for many, but that does not make them unlawful”.

In refusing to offer a solicitor a new lease of her office premises a local authority had abused its powers.  So held the High Court in R (Trafford) v Blackpool BC [2014] EWHC 85 (Admin).  The stated reason for the refusal was that her firm had brought claims against the Council on behalf of clients seeking compensation for injuries alleged to have been caused by the negligence of the Council, predominantly in highways “tripping” type claims.

The Judge held that the Council had exercised its “wide discretion” under Section 123 of the Local Government Act 1912 for an improper purpose and was “fundamentally tainted by illegality” on that basis; and that the decision was both Wednesbury unreasonable and procedurally unfair.

The Council’s main defence was that its decision was not amenable to judicial review.  The issue was as to whether or not, and if so in what circumstances, a public body acting under statutory powers in deciding whether or to not to enter into, renew or terminate a contract will come under public law duties, and if so which ones.  Having reviewed the authorities, the Judge concluded that the decision was in principle amenable to judicial review.  He stated:-

“55.    Having considered these authorities my conclusions are as follows:

(1) In a case such as the present, involving a challenge to a decision of a public body in relation to a contract, it is necessary to consider:

(a) by reference to the contract in question, to the relevant statutory power, to the statutory framework (if relevant), and to all other relevant matters, whether or not, and if so to what extent, the defendant is exercising a public function in making the decision complained of;

(b) whether, and if so to what extent, the grounds of challenge involve genuine and substantial public law challenges to the decision complained of, or whether, and if so to what extent, they are in reality private law challenges to decisions made under and by reference to the terms of the relevant contract.

(2) In a case involving a challenge to a decision of a public body acting under a statutory power but in relation to a contract and in the absence of a substantial public function element, a claimant will nonetheless normally be entitled to raise genuine and substantial challenges based on fraud, corruption, bad faith, and improper motive (in the sense identified by De Smith of the knowing pursuit of an improper purpose).

(3) The extent to which a claimant will be entitled to raise genuine and substantial public law challenges beyond those limited classes will depend on a careful analysis of all of the relevant circumstances so as to see whether or not there is a relevant and sufficient nexus between the decision in relation to the contract which is challenged and the grounds complained of.”

From 25 June 2013 the Secretary of State will be able to give a General Consent to local authorities to dispose, for less than the best consideration reasonably obtainable, of land held for planning purposes, when the Growth and Infrastructure Act 2013 (No. 1) Commencement Order, SI 2013/1124 (C.49) brings into force, in relation to England, Section 8 of the Act, which amends Section 233 of the Town and Country Planning Act 1990.  Section 8 also extends to such disposals the protection for purchasers contained in Section 128 of the Local Government Act 1972.

In R (London Jewish Girls’ High Ltd) v Barnet LBC, Lawtel AC9301237, Mitting J, on 20 February 2013, dismissed the claim, which concerned the disposal of land by a local authority for “best consideration” under s.123 of the Local Government Act 1972.  The Court was entitled to have regard to the consideration offered as at the date of the hearing of the claim for judicial review, and not simply the competing offers as they stood before the decision maker.  On this basis, the proposed sale did not breach s.123 in circumstances where the developer’s proposal was clearly the better bid, having regard to the cash offered together with overage payments. Mitting J went on give guidance (obiter) as to what matters could be treated as consideration for the purposes of s.123. He held that the value of affordable housing units as part of a development scheme and contributions under a section 106 agreement could not amount to consideration within the meaning of s.123, however he held, tentatively, that nomination rights over affordable housing were capable of amounting to consideration on the basis that these were benefits accruing to the Council from the use of the land that are of commercial and monetary value to the Council.

In Barkas v North Yorkshire County Council [2012] EWCA Civ 1373 CA held that a playing field, which had been acquired by a local authority under s80(1) of the Housing Act 1936 (now s12 of HA 1985), and thereafter maintained as a recreation ground, had been appropriated for the purpose of public recreation, and that, since the authority had an express statutory power to maintain the field for recreation purposes, local inhabitants using the field had been doing so, not “as of right” but rather “by right”. Therefore the field could not be registered as a town or village green. S10 of the Open Spaces Act 1906, considered by HL in R (Beresford) v Sunderland City Council [2004] 1 AC 889, is not the only example of land which is provided by a local authority as open space which the public use for recreational purposes “by right”.