A3/2000/3387

Neutral Citation Number: [2001] EWCA Civ 96
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(The Vice Chancellor)
							Royal Courts of Justice
							Strand
							London WC2

							Thursday, 25th January 2001
B e f o r e:

LORD JUSTICE PETER GIBSON
LORD JUSTICE KEENE

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PYE (OXFORD) LTD
Claimant/Applicant

- v -

SOUTH GLOUCESTERSHIRE DISTRICT COUNCIL

Defendant/Respondent
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(Computer Aided Transcript of the Palantype Notes of
Smith Bernal Reporting Limited, 190 Fleet Street,
London EC4A 2AG
Tel: 0171 421 4040
Official Shorthand Writers to the Court)

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MR MICHAEL BARNES QC (Instructed by Messrs Burroughs Day, 14 Charlotte Street, Bristol, BR1 5PT) appeared on behalf of the Appellant

The Respondent did not appear and were not represented.
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J U D G M E N T
Thursday, 25th January 2001 
1.	LORD JUSTICE PETER GIBSON: I will ask Keene LJ to give the first judgment. 
2.	LORD JUSTICE KEENE: This is a renewed application for permission to appeal against the decision of the Vice Chancellor made on 19th October 2000, permission having been refused on the documents by Nourse LJ. In his decision the Vice Chancellor upheld the validity of agreements under which the applicant, Pye, was required to reimburse Avon County Council, now represented by its successors, the respondents, for the purchase price of land needed for a link road. There were two such agreements, a formal one in October 1979, purportedly made under section 52 of the Town and Country Planning Act 1971 and various other statutory powers, and an agreement by correspondence in 1987. All the attention was focused on the 1979 agreement. 
3.	The background to this is that in 1979 Pye wanted to develop land at Bristol for residential and industrial purposes. It got planning permission in 1979, subject to conditions, one of which required it to construct a link road. That needed a piece of land to be acquired, then owned by British Rail. Kingswood District Council bought it in 1982 and sold it in January 1988 to Avon County Council at a price which has since been determined and which, with interest, now amounts to over £1 million. The link road was duly built by Pye over that land in 1988, or shortly thereafter. 
4.	By the October 1979 agreement made with Avon County Council Pye agreed to construct and dedicate to the public the link road. It was also provided in clause 3 (and I paraphrase) that if Pye seemed unlikely to be able to acquire the necessary land for the road in good time, Avon County Council would use its best endeavours to acquire it and Pye “shall repay to [Avon] such reasonable expenses including the purchase price thereof as [Avon] shall actually have incurred in those endeavours”. Clause 6 of the agreement provided that Pye would not develop more than 40% of the land intended to be used for industrial purposes until the link road had been built and dedicated to the public. There were then further provisions as to the use of the link road and so forth. 
5.	Pye in these proceedings has claimed that the agreement was invalid. The respondents, as successors to Avon, counterclaimed for the money due under the agreements. 
6.	The matter came before the Vice Chancellor as the trial of a preliminary issue, which I recite: 
“Whether on the hypothesis that there was no connection between the development permitted on Pye’s land and the construction of the link road ... [the Local Authorities] are nevertheless entitled to succeed on their counterclaim.”
7.	The Vice Chancellor, relying on Good v Epping Forest District Council [1994] 1 WLR 376 and Tesco Stores v Secretary of State [1995] 1 WLR 759, found that the October 1979 agreement was valid. He concluded that the term in that agreement whereby Pye was to reimburse Avon for the cost of acquiring land was incidental to the restriction or regulation of the development or use of Pye’s land. 
8.	The various grounds of appeal before us have, in effect, been concentrated by Mr Barnes QC into two grounds. The first of the two is not the main one which he pursues today, and in my view rightly. That ground deals with the fact that the planning agreement had, it is said, nothing to do with the development being permitted. It is well established on the authorities that a planning obligation in an agreement made under section 52 does not have to be related to a particular development. That was established in Good and approved in the Tesco case. In that respect it is quite unlike a condition on a planning permission. The agreement must, as section 52(1) said, be an agreement entered into “for the purpose of restricting or regulating the development or use” of land in the local planning authority’s area in which the other contracting party has an interest. The Vice Chancellor, in my judgment, was right to conclude that this agreement met that test. It contained provisions to that effect, especially clause 6 which I have set out earlier. The agreement, on the authorities, must be for a planning purpose. Clause 6 indicates that that was the case. The first ground of appeal is, in my judgment, unarguable. 
9.	The second ground is again based upon the hypothesis which the court is required to make, namely that the obligation to pay for the land for the link road had no connection with the development permitted. From this Mr Barnes seeks to derive the proposition that, consequently, the agreement was an attempt to buy planning permission. He says that if an agreement -- nowadays under section 106 of the Town and Country Planning Act -- is entered into in association with a planning application but unconnected with the development, the agreement cannot be valid under section 106. The planning gain must have some connection with the development. He relies upon Lord Keith’s words in Tesco (p.770) for that proposition. Consequently, he says, this would be an attempt to buy a planning permission. As I understand it, he does not seek to allege bad faith; but he does contend that the use of the statutory power by the authority would be a use for an improper purpose, not for the purpose for which Parliament provided those powers. In that sense, it is said, the agreement was ultra vires. That particularly arises, it is contended, because the agreement in this case was contingent on the grant of a planning permission. Moreover, although the agreement was with the County Council, which was not the development control authority for planning purposes, Mr Barnes points out that the highway authority was, in effect, acting as a conduit and that in reality the development control authority would be getting the money for the land. 
10.	I confess that I have found this a somewhat difficult argument because clause 6 in the agreement is there and the hypothesis which we are required to make is not easily reconciled with it. Nonetheless, it seems to me that the point which is being raised is one which could be of some significance in a wider context and does have some prospect of success. If truly an agreement is entered into by an authority, whether a planning or highway authority, for something which is an improper purpose, then it seems to me to be arguable that the obligation which arises under that agreement is one which that authority cannot enforce. The assumption has to be, of course, that the authority is aware that that is the particular objective for which the agreement has been concluded. 
11.	In those circumstances, albeit, I am bound to say, with some hesitation on my part, I have concluded that there is here a point which justifies in allowing this matter to go to appeal. I would therefore be prepared to grant permission to appeal but restrict it to the main point which Mr Barnes has argued before us today, which is number two in the appellant’s notice. 
12.	LORD JUSTICE PETER GIBSON: I agree. 
Order: 	Application allowed. Costs to be costs in the appeal.
(Order does not form part of approved Judgment)