Outer House rejects challenge to council’s failure to approve funding for large mixed-use development area

Allanvale Homes (Prestwick) Ltd, which owned an area of land in south-east Ayrshire known as Corton that formed part of an area earmarked for wider development, contended that the funding was necessary to make development economically viable. Additionally, it argued the respondent, South Ayrshire Council, had failed to provide all relevant information to its councillors, including the second of two opinions of senior counsel on the lawfulness of the proposed arrangement.

The petition was considered by Lord Lake, with MacGregor KC and Blair, advocate, appearing for the petitioner and Crawford KC for the respondent.

Unlock development potential

The petitioner’s land formed part of an area known as the South-East Ayr Strategic Expansion Area and had been the subject of earlier planning permission for mixed use development. The council’s Local Development Plan anticipated that a new primary school would be required in the area following residential development and required the safeguarding of land for a park and ride facility. In 2024, the respondent decided that they were minded to grant planning permission in principle for a mixed-use development, subject to agreement between the parties as to conditions.

In due course, the petitioner provided draft Heads of Terms to the council seeking payment for the transfer of land to the council for a primary school, a neighbourhood park, and a park and ride site. They also sought payment in contribution for what the petitioner described as “common infrastructure”, including a new roundabout on the A77 giving access to the site and an access road to the proposed school. At a meeting of the councillors making up the respondent on 12 December 2024, a decision was made not to approve in principle the provision of the funding requested by the petitioner.

At the stage of considering the application, the council obtained an opinion of the Rt Hon James Wolffe KC on the question of whether, if the council made the payment sought, it could amount to a breach of the Subsidy Control Act 2022. The council disclosed this opinion to the petitioners who had some concerns regarding it. In light of those concerns, the council obtained a second opinion from Mr Wolffe, which the petitioners alleged was not provided to all councillors who voted in the meeting of 12 December.

The minutes of the meeting outlined four reasons for the decision, including that there was a significant risk that providing funding would be unlawful per section 12(1)(b) of the 2022 Act. It was also noted that the provision of funding would not be consistent with the duty of the council to secure best value and might place it in breach of its duties under the Public Contracts (Scotland) Regulations 2015.

It was submitted by the petitioner that the provision of a financial contribution by the council would not risk being an unlawful subsidy, as it would serve the public interest by creating the infrastructure necessary to unlock the development potential of the whole site. The respondents disputed that the decision was unlawful and argued that there were insufficient facts before the court for it to grant the declarator sought by the petitioner.

Not sufficient information

In his decision, Lord Lake said of the effect of non-provision of the opinion of counsel: “Where, as here, the councillors have been made aware that a document forming the source material exists even if they have not been given a copy. It would be open to any councillor who wished to consider the matter in more detail to request a copy of the document.

“If they had done so and considered that their request was not met, it would be for them to raise this before the vote. They might insist on getting the document or information in question and/or might seek to have consideration of the issue put off to another meeting in future. Taking that action would be consistent with securing the proper conduct of council business and making decisions which can be relied upon by the public.”

He added: “The councillors were notified of the existence of the opinions and were given a fair and accurate summary of them. It can be inferred that the councillors, in acting in accordance with the recommendation in the report, did so following the reasoning stated in the report. They may have had a copy of the opinions available to them but will have had the summary contained in the report. There is no basis for the assertion that they failed to have regard to the advice that had been obtained.”

Turning to the issue of whether any payment would be considered a subsidy, Lord Lake said: “The question of whether the funding for infrastructure is a subsidy does not have a simple clear answer. It would depend on the view taken of whether the funding constituted a benefit specifically to the petitioners. As Mr Wolffe notes, this would require evaluation of the facts that but for the petitioner’s development the council would have no reason to undertake the works.

“The report notes that there is no proposal to develop the wider area in a manner that would require the works and in the absence of the petitioner’s proposed development, the council would not wish to fund them. These factors mean the court does not have sufficient information to state definitely that the funding cannot be a subsidy.”

On the adequacy of the council’s reasons, he concluded: “As the vote was in accordance with the report, it can be assumed that the reasoning set out in the report applied. Having regard to this information, it is not apparent in what respects the petitioner claims to be in real and substantial doubt as to the reasons for the decision.

“The petitioner claims that the decision made no reference to, and did not indicate why, the submissions that had been made by the petitioner were rejected. As noted above, the council elected to frame the issues that arose relating to subsidies and procurement as ones of avoiding risk. This was a decision that they were entitled to make.”

The petition was accordingly refused.