Tesco was given an unfair advantage by planners when it was favoured for prime development land in the centre of Wolverhampton, rival Sainsbury’s argued in the High Court.

The grocery giants have been at loggerheads in a second High Court showdown over the right to build a multi-million pound retail development where the Lord Raglan pub used to stand.

The supermarket giants have been battling to build a store, homes and other amenities on the site off the Wolverhampton Ring Road, for a decade. Tesco recently won the right to spearhead the transformation at the site off Ring Road, St Mark’s, after a High Court tussle in January.

But Sainsbury’s yesterday fought the decision at the Court of Appeal in a bid to overturn Wolverhampton City Council’s ruling that it hand over its 86 per cent share of the site to its competitor.

Mr Christopher Lockhart-Mummery QC, for Sainsbury’s, argued city planning chiefs acted “unlawfully” when they backed Tesco’s bid, partly due to the firm’s pledge to use some of its profit from the Raglan Street revamp to redevelop the derelict Royal Hospital site it owns in All Saints with offices and homes.

He said there was nothing wrong in considering the beneficial “ripple effects” of developing the Raglan Street site, but he said it was unlawful that the deal between the council and Tesco hinged on the supermarket’s £50 million designs for the disused hospital.

Mr Lockhart-Mummery QC said the “offer” or “commitment” in the agreement gave Tesco a “decisive advantage” over Sainsbury’s competing proposals.

But Mr Christopher Katkawski QC, representing Tesco, said planning chiefs were well within their rights to take into account the wider benefits to the city that would arise from the Raglan Street development.

He said: “In this case it is good paying for good – all that is happening here is that Tesco is taking some of its profit and cross-subsidising the restoration of a very important building – the Royal Hospital site.”

Lord Justice Ward, Lord Justice Mummery and Lord Justice Sullivan reserved judgement to a later date.