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The Queen (Sky Blue Sports & Leisure Limited; Arvo Master Fund Limited; Otium Entertainment Group Limited) v Coventry City Council [12.10.2018]

The Court of Appeal have unanimously refused permission for the judicial review of a local authority decision to grant a lease extension, due to the failure to support an allegation that it amounted to state aid.

Background

In October 2014, Coventry City Council (the Respondent) granted an extension to an existing lease on the Ricoh Stadium, to Arena Coventry Limited, the full shareholding in which, had been purchased by Wasps Holdings Limited (the Wasps) from the Respondent, and from the Trustees of the Alan Edward Higgs Charity. The Ricoh is the home ground of the famous Wasps Rugby Club. Coventry City Football Club, owned by the SISU group of Companies (The Appellants) play at the Ricoh under license from the Wasps. The Appellants alleged that the lease extension, viewed together with the share purchase, was undervalued to such an extent, that it amounted to unauthorised state aid. This allegation, however was based on later valuations.

In fact, at the time of its decision to sell the shares and lease extension, the Respondent Council had relied upon a valuation report produced by KPMG, and Wasps had paid the top end of those valuations after arm’s length negotiations. Wasps, as an interested party to the proceedings, asserted that by seeking to rely on later valuations, the Appellants were attempting to compare ‘apples with pears’, and in particular ignoring the added value that the Wasps have brought to the Ricoh Stadium.

In July 2017 Mr Justice Singh agreed with the argument put forward by the Wasps, and refused the Appellants permission for a judicial review. The Appellants obtained permission to appeal against that refusal.

The decision on appeal

By a unanimous decision the first instance refusal of permission for judicial review was upheld. The Court of Appeal were firmly of the view that the Appellants were wrongly seeking to compare ‘apples and pears’. Later valuations were irrelevant because they were in respect of an amalgam of assets collected together by the Wasps from various sources and there had been no state aid involved.

Permission to appeal to the Supreme Court was therefore refused.

Comment

Parties discontented with local authority decisions should think long and hard before seeking to challenge them on the grounds of state aid where proper valuations have been obtained and relied upon at the material time. The fact that subsequently significant added value accrues by the prestige, goodwill and efforts of the body acquiring an amalgam of assets, does not mean there was state aid at the time a decision was reached to undertake a transaction.