LOCAL GOVERNMENTCouncil entering contract to sell property to tenants at less than best price possible - no 'disposal' of land until completion - transaction to be set asideR v Hackney London Borough Council, Ex p Structadene Ltd: QBD (Elias J): 10 November 2000The council intended to sell properties, which it let to tenants for business purposes, at auction.

The applicant, a property company, expressed interest but on the date of the auction was informed that the council had agreed, subject to contract, to sell to the tenants for 400,000.

The applicant put in an offer of 450,000 which was rejected.

An increased offer of 500,000 was also rejected.

Later that day a formal contract was entered into with the tenants.

The applicant obtained an injunction to prevent the sale and sought judicial review of the council's decision not to accept its higher offer.

The council accepted that its failure to obtain the best price for its property or the Secretary of State's consent to sell at an undervalue rendered their decision to sell to the tenants unlawful and in breach of s.123 of the Local Government Act 1972, but claimed that the contract constituted a 'disposal' which was valid pursuant to s.128(2) of the Act.

Kelvin Rutledge (instructed by Eversleys) for the applicant.

John Hobson QC (instructed by Pettman Smith) for the council.

Held, granting the application, that, although there was no linguistic reason why the word 'disposal' in s.128(2) could not describe the creation of the equitable interest arising when a sale contract was entered into, the concept of disposal would more naturally describe the transfer of the legal interest on conveyance rather than the creation of the equitable interest by the contract; that the conveyance was the point at which 'disposal' occurred; that the protection afforded by s.128(2) therefore applied only once completion had taken place; and that, accordingly, since the sale to the tenants had not been carried into effect, the decision to sell would be quashed and the contracts set aside.