Supreme Court allows challenge by Sainsbury's Supermarkets Ltd to Wolverhampton City Council's decision to exercise compulsory purchase powers under section 226 of the Town and Country Planning Act, in favour of a scheme promoted by Tesco Stores Ltd.

Sainsbury's and Tesco had advanced competing proposals for the redevelopment of a site at Raglan Street, Wolverhampton, 86% of which was owned by Sainsbury's and 14% by Tesco. The Council decided to grant planning permission for both schemes. Neither could be implemented without the use of compulsory purchase powers.

The Council decided to make a compulsory purchase order in respect of Sainsbury's interest in the site, in favour of the Tesco scheme, having found that the "decisive advantage" of the Tesco proposals was an offer by Tesco to use the development of the Raglan Street site to cross-subsidise the regeneration of the Royal Hospital Site elsewhere in the city, which Tesco also controlled.

J Sainsbury argued that this offer of cross-subsidy could not lawfully be taken into account by the Council when considering the exercise of its relevant compulsory purchase powers under section 226 of the Town and Country Planning Act 1990, as amended, on the grounds that it was unrelated to the development of the Raglan Street site.

The Council and Tesco argued that the decision to support the Tesco proposals was lawful, because the Tesco proposals for the Raglan Street site would be likely to contribute to the achievement of the promotion or improvement of economic, social or environmental well-being in the area and would therefore fall within subsection 226(1A) of the 1990 Act. Alternatively, they argued that the Council was required to have regard to all material considerations when deciding whether to make a CPO under section 226, and was therefore entitled to have regard to all of the benefits which would flow from facilitating the carrying out of a proposed redevelopment scheme when deciding which of two rival redevelopment schemes it should support by the making of a CPO.

By a 4-3 majority, the Supreme Court allowed Sainsbury's appeal. Giving the lead judgment on behalf of the majority, Lord Collins held

• Principles derived from cases concerning the matters which may lawfully be taken into account in determining planning applications apply equally to compulsory acquisition for development purposes provided it is recognised that, because of the serious invasion of property rights involved in compulsory acquisition, a strict approach to the application of those principles is required. One of these principles is that it is legitimate for a local authority to take into account "off-site" benefits of a proposed development provided that such benefits are related to or connected with the development itself. In compulsory acquisition, as in planning cases, there must be a "real rather than fanciful or remote" connection between the "off-site" benefits and the development for which the compulsory acquisition is made
• In the present case, there was only a "connection" between the proposed development on the Raglan Street site and the benefits from the development of the RHS in the sense that the Council was being tempted to facilitate one development because it wanted another development, or that Tesco was being tempted to undertake one un-commercial development in order to obtain the development it wanted. The claimed financial connection between the two sites was not such as to amount to a relevant matter, notwithstanding the fact that Tesco was prepared to commit to undertake the regeneration of the RHS by agreement with the local authority.

Christopher Lockhart-Mummery QC, Eian Caws and Charles Banner acted for Sainsbury's Supermarkets Ltd, instructed by CMS Cameron McKenna.

Neil King QC and Guy Williams acted for Wolverhampton City Council, instructed by Wragge & Co.

Christopher Katkowski QC and Scott Lyness acted for Tesco Stores Ltd, instructed by Ashurst LLP.

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