Judge refuses permission in latest state aid challenge over sports stadium

The city council owns the freehold of the Ricoh Arena, which is managed by Arena Coventry Ltd (‘ACL’) under a long lease.

On 7 October 2014, the council decided to sell its 50% share in ACL to the owners of London Wasps Rugby Club for £2.77m, and to extend ACL’s lease of the Arena for a further £1m.

It had obtained independent advice from KPMG prior to doing so. This advice set out that the terms of the deal would be acceptable to a private vendor in the council’s position.

On 19 December 2014 the claimants filed an application for judicial review of the council’s decision to extend ACL’s lease of the Arena. At that point, they did not seek to challenge its decision to sell its shares.

Between 30 January 2015 and 28 November 2016 the proceedings were stayed pending the outcome of the claimants’ appeals in earlier judicial review proceedings against the council: R. (Sky Blue Sports and Leisure Ltd) v Coventry City Council [2014] B.L.G.R. 616 (‘Sky Blue No. 1’).

Those proceedings were finally determined when the Supreme Court refused the claimants’ application for permission to appeal.

On 17 March 2017, the claimants applied to amend their grounds to add a challenge to the share sale, a claim that the council failed to comply with the duty to obtain best consideration under s 123(2) of the Local Government Act 1972, and a claim for damages.

The claimants also applied for permission to rely on expert evidence.

At a hearing last week (14 July) Mr Justice Singh, sitting in the High Court in Birmingham, refused each of the claimants’ applications.

11KBW, whose James Goudie QC and Ronnie Dennis acted for the council, said that:

• On the application to amend, the judge refused permission because of the claimants’ delay, in particular between 28 November 2016 – when the stay expired – and 17 March 2017, when they made their application. Mr Justice Singh also found that there would be detriment to good administration and prejudice to third parties, including Wasps and other commercial entities with whom they had contracted, if the application was allowed.
• On the claimants’ application for judicial review on their original grounds, the judge found that these had no realistic prospect of success. The council had the benefit of both internal advice from its (then) Assistant Director for Finance, and external advice from KPMG. KPMG valued the lease extension at between £0.6 – £1m, and the price the council obtained was at the top of this estimate. By contrast, the claimants relied on later valuations of ACL’s long lease of the Arena. In doing so, they sought to compare “apples with pears”.
• The claimants’ application to adduce expert evidence was made largely redundant by the judge’s earlier rulings. However, he also refused this application because, applying the principles laid down by the Court of Appeal in Sky Blue No. 1, the question before the Court was not one on which it would be assisted by expert evidence.

James Goudie QC and Ronnie Dennis were instructed by Council Solicitor Helen Lynch.