Many local authorities and their developer partners promoted compulsory purchase orders (CPOs) before the economic downturn. This was on the basis of developments which can no longer proceed because they are not viable. Or, in some cases, the developer partner cannot secure funding or may have even gone into administration.

CPOs must be implemented by the service of a notice to treat or the making of a general vesting declaration within three years of the date the local authority published notice of confirmation by the Secretary of State (or in Wales the National Assembly). Can the local authority implement the CPO if the original development is no longer to proceed? Or, must it start the CPO process again with the risk of a further public inquiry and more delays, perhaps then missing any upturn in the market?

This issue came before the Administrative Court in R (on the application of Iceland Foods Limited) v Newport City Council [2010] EWHC 2502.

The council made the Newport City Council (redevelopment of John Frost Square) Compulsory Purchase Order 2006 under the Town and Country Planning Act 1990. This was to secure a comprehensive scheme of development (including retail, leisure, residential and hotel uses together with car parking, highway alterations and public realm works). The CPO was confirmed by the National Assembly in March 2007 after a public inquiry.

The council had chosen Modus Corovest Newport Ltd as the preferred developer for a retail-led, mixed-use development. The description of the scheme in the statement of reasons issued with the CPO said that the order land was required "to allow the redevelopment of the existing built development on the Land to be Acquired to provide a mixed-use development" which was to comprise particular uses and floor spaces. These included retail and restaurant floorspace, a cinema, a hotel, residential development and car parking.

Modus went into administration and the council decided to draw up proposals to remarket the site and implement the CPO by making a general vesting declaration. Iceland challenged the making of the general vesting declaration by judicial review. Its application failed before Mr Justice Wyn Williams.

It was accepted by both parties that where a local authority obtains compulsory purchase powers which are expressed or limited by reference to a particular purpose, it is not lawful for the authority to use those powers for another or collateral purpose. This principle was decided in the House of Lords in the case of Simpsons Motor Sales (London) Ltd v Hendon Corporation [1964] AC 1088. In the Newport case the council had acted to facilitate the redevelopment scheme at John Frost Square at its own expense and it did not matter that it now intended to do so through a different developer.

The Newport decision was influenced by the report to the council's cabinet authorising the making of the vesting declaration. This stated that the council had decided to fund the acquisitions itself and re-tender the scheme but on the basis of the original development brief and the current planning permission. Mr Justice Wyn Williams thought that the council might have acted unreasonably in the Wednesbury sense (that is have acted in a way in which no reasonable authority would have acted, see Associated Provincial Picture Houses Limited v Wednesbury Corporation [1948] 1KB 223) if it had considered the scheme unviable for the immediate and foreseeable future.

This is a decision very much on its facts. By the time Modus went into administration the hotel had already been omitted from the scheme. The council was not prepared to consider a smaller scheme anchored by a Debenhams Store and a Vue Cinema, at least in part because it was advised that the variation to its development agreement would require further competition under the EU procurement rules.

The case demonstrates the importance of the report to Cabinet authorising the implementation of the CPO. Iceland does not appear to have challenged the council's view that a further competition for a development scheme, which had failed with Modus, will now produce a development partner willing to proceed given that the council will now finance the assembly of the site instead of the developer. Where, however, a local authority has received professional advice that the scheme is viable on this basis and that the developer market will take up the opportunity and be able to fund it, the local authority's decision is likely to be reasonable in the Wednesbury sense and unchallengeable.

The case does not deal with the position should the local authority want to implement the CPO for a different scheme. Or, where the local authority is advised that changes will need to be made to attract further developer interest to make the scheme viable in the current market.