England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		16 February 2011

Mr Justice Ouseley :

1. Renaissance Habitat Limited, the Claimant, is a small developer carrying on business in West Berkshire. It obtained planning permission on 14 December 2005 for the development of land for residential purposes at 69 Bath Road, Thatcham, West Berkshire. As was commonplace for the Claimant and other developers in West Berkshire, it entered into an agreement with the Defendant, West Berkshire District Council, under section 106 of the Town and Country Planning Act 1990 on the same day as it was granted planning permission. Planning permission would not have been granted unless it had entered in to that section 106 agreement.
2. Under the agreement the Claimant agreed to pay money to the Council by way of contributions towards the infrastructure costs which the Council would incur in dealing with the effect of the permitted development. The agreement specified the sums due and the time at which they were due. The basis upon which those sums were calculated was set out in the Supplementary Planning Guidance produced by the Council in April 2004. In the first week of September 2007 the Claimant began development.
3. Various sums became due under the section 106 agreement in 2008 but not all were paid to the Council by the Claimant. On 13 August 2009 the Council issued an invoice for £57,792.88 as the balance of the sums due under the agreement. The Claimant calculated that the sums it owed were all paid off on 8 March 2010 by a payment of £20,236.90, which included interest and indexation. The Council says that a further £47,375.81, plus interest, is due. It issued proceedings in the Queen's Bench Division for the recovery of that amount as a debt due under the contract, i.e. under the section 106 agreement. Those proceedings are due to be heard in a trial window commencing 21 March 2011.
4. The Claimant in these Judicial Review proceedings challenges the decision of the West Berkshire District Council to bring those Queen's Bench proceedings, on the grounds that, since the December 2005 Agreement, the Council has changed the Supplementary Planning Guidance, SPG, upon the basis of which it calculated what developers should pay as infrastructure charges. It has done so in response to decisions of Inspectors on planning appeals against refusals of planning permission by the Council on grounds, among others, that the developer had refused to pay proper infrastructure contributions. Inspectors have rejected some of the Council's contentions as to what the proper infrastructure contributions should be. Two appeals by the Claimant against refusals of planning permission by this Council were allowed on those grounds on other sites. The disputes were not about the arithmetic but about the method of or inputs into the calculations. Circumstances have also changed since 2005 in relation to the need for educational provision so far as this particular development is concerned, because there is greater capacity now than was realised or expected at the school in relation to which the educational contribution was calculated.
5. The Claimant contends that if the infrastructure contribution were calculated by reference to the changed SPG as at the Council's final invoice date of 13 August 2009, no more would be due from the Claimant than it had already paid.
6. Hence it challenges the Council's decision to start proceedings on 1 April 2010 for the payment of the balance due under the s106 agreement on the grounds that it is seeking to enforce an unlawful obligation. The Council was enforcing the agreement for more than it could now justify under current SPG. It also challenges what it describes as the policy of the Council not to agree to vary s106 agreements in the light of changed SPG or changed circumstances, as set out in a letter dated 12 March 2010 sent to the local Development Industry Forum.
7. Mr Harwood for the Claimant sought at the last minute to raise a series of other points, not raised by counsel previously instructed. Consideration of many of these issues would have required the disclosure of documents, and an adjournment of the hearing. This in turn would have jeopardised the trial window. I refused permission for the amendments, save to the extent that they involved no need for further research by the Council; in reality those surviving grounds were no more than illustrations or reformulations of the points already made. Those I refused did not seem likely to advance the essential point anyway and likely to stand or fall for the most part with it.

The statutory framework

8. Section 106 of the Town and Country Planning Act 1990 provides:

"(1) Any person interested in land in the area of a local planning authority may, by agreement or otherwise, enter into an obligation (referred to in this section and sections 106A and 106B as "a planning obligations"), enforceable to the extent mentioned in subsection (3)-

(a) restricting the development or use of the land in any specified way;

(b) requiring specified operations or activities to be carried out in, on, under or over the land;

(c) requiring the land to be used in any specified way; or

(d) requiring a sum or sums to be paid to the authority…on a specified date or dates or periodically.

(2) A planning obligation may-

(a) be unconditional or subject to conditions;

(b) impose any restriction or requirement mentioned in subsection (1)(a) to (c) either indefinitely or for such period or periods as may be specified; and

(c) if it requires a sum or sums to be paid, require the payment of a specified amount or an amount determined in accordance with the instrument by which the obligation is entered into and, if it requires the payment of periodical sums, require them to be paid indefinitely or for a specific period."

9. There are two provisions for the discharge of these obligations. For the first 5 years after entry into the agreement, "the relevant period", it can only be varied or discharged by agreement. This may well reflect the total of 5 years during which a developer with the benefit of a permission must normally commence development. Thereafter, if the authority refuses the application to vary, the developer can appeal to the Secretary of State, who can impose a variation or discharge. The current provisions are in ss106A and B:

"S106A (1) A Planning obligation may not be modified or discharged except-

(a) by agreement between the authority by whom the obligation is enforceable and the person or persons against whom the obligation is enforceable; or

(b) in accordance with this section and section 106B…

(3) A person against whom a planning obligation is enforceable may at any time after the expiry of the relevant period, apply to the local planning authority by whom the obligation is enforceable for the obligation-

(a) to have effect subject to such modifications as may be specified in the application; or

(b) to be discharged.

(6) Where an application is made to an authority under subsection (3), the authority may determine-

(a) that the planning obligation shall continue to have effect without modification;

(b) if the obligation no longer serves a useful purpose, that it shall be discharged; or

(c) if the obligation continues to serve a useful purpose but would serve that purpose equally well if it had effect subject to the modification specified in the application, that it shall have effect subject to those modifications."

Section 106B deals with appeals and provides

"(1) Where a local planning authority-

(a) fail to give notice as mentioned in section 106A(7); or

(b) determine that a planning obligation shall continue to have effect without modification

the applicant may appeal to the Secretary of State…

(4) Sub-sections (6) to (9) of section 106A apply in relation to appeals to the Secretary of State under this section as they apply in relation to applications to authorities under that section…

(6) The determination of an appeal by the Secretary of State under this section shall be final."

10. It was not disputed, at least for these purposes, that s106A(6)(b) and (c) meant that the authority could discharge or vary the agreement if it no longer served a useful "planning" purpose, or could serve it equally well in a different form. That word, submitted Mr Harwood, was necessarily implied since the agreement could only be made in the first place for a planning purpose, which is correct, and could only be enforced by a public body acting for a public purpose under the Planning Acts. It was not exercising some private power or purely contractual power. Sullivan J had so held in R (Batchelor Enterprises Ltd) v North Dorset District Council [2003] EWHC Admin 3006.
11. I am prepared for present purposes to accept that point, but I note that "planning", the word implied, very broad though it is, may lead to a debate about what constitutes a planning consideration for these purposes as opposed to some other useful public purpose which could be pigeonholed under some other head, or even a private purpose such as the protection of private views, which may show the implied restriction to be unjustified. Sullivan J also relied on Ministerial guidance which in fact contradicts this interpolation since it said that an agreement should "normally", rather than "always", be discharged when there is no planning purpose to be served by its continuance. The learned editors of the Planning Encyclopaedia, without explanation, and both before and after Batchelor, have said that no planning purpose was necessary. Curiously, there is no express obligation to discharge if conditions s106A (6)(b) or (c) are satisfied, though "may determine" could be so interpreted.

The s106 agreement and facts

12. The recitals record that the development can be permitted but that the Council "desires" that certain planning obligations be entered into: contributions towards educational facilities as defined, towards healthcare "throughout the district", towards improvements to "existing open space in Thatcham" as defined, towards the costs of providing stock for the Library Service throughout the district, and towards the costs of carrying out various transport improvements in the vicinity of the site and in West Berkshire more widely.
13. The obligations bit if the development were commenced. The payment obligations in clause 1 were as follows:

"(a)…(i) to pay to the Local Authority the sum of…(£14,936.00) as a contribution to meet the impact of the Development on the secondary catchment school…such sum to be paid as to 50% thereof no later than fourteen days from the date of commencement of the Development and as to the remaining 50% thereof not later than six months from the date of commencement of the Development…

(ii) to pay to the Local Authority not later than fourteen days from the date of commencement of the Development the sum of…(£1,320.00) as a contribution towards the cost of the Local Authority of carrying out the Healthcare Provision.

(iii) to pay to the Local Authority not later than the date on which the Development or any part thereof is first used and occupied as such the sum of £33,064.00 as a contribution towards the costs of the Local Authority of carrying out improvements to existing public open space in Thatcham.

(iv) to pay to the Local authority not later than fourteen days from the date of commencement of the Development the sum of £1,360.00 as a contribution towards the cost of the Local Authority of carrying out the Library Provision

(b) pursuant to Section 106 of the Planning Act and Section 278 of the Highways Act and all other enabling powers:

(i) to pay to the Local authority not later than the date upon which the Development or any part thereof is first used or occupied as such £14,400.00 as a contribution towards the costs of carrying out the Highway Works."

Each obligation involved further payments by reference to increases in RPI.

14. When the Claimant commenced development, the first half of the education contribution became due and was paid. The second indexed half (£8,168.00) was due on 1 March 2008 but was not paid. On 1 June 2008, the open space and highway contributions became due but were not paid. Index linking had raised these to £36,794.00 and £16,026.00 (rounded) respectively. The balance, including interest, as the Claimant sees it was paid in March 2010.
15. SPG changed in the following ways. In May 2006, the Council removed a rounding up process whereby forecast pupil numbers per household were rounded up to the next highest rather than the nearest whole number. On 3 September 2007, the Council lost an appeal by the Claimant against the refusal of planning permission. Its infrastructure calculations were criticised by the Inspector for using an average occupancy rate for all dwellings, which produced a higher occupancy rate than was appropriate for the particular type of development, and for using an out of date and higher census figure for average occupancy anyway. This affected the library, health and open space contributions. The open space contribution was excessive and the calculation for equipped play space unreasonable in that case. SPG was changed in October 2007 to reflect those points. There was a very marked reduction in the amounts required for open space from developers.
16. In August 2009, following another successful developer's appeal in March 2009 and after all the sums had become due in respect of 69 Bath Road, SPG was further revised to reflect the Inspector's criticisms of the Council's assumption that new housing would generate more children that old housing, and would do so even where the development consisted of flats replacing family houses, contrary to the Council's own data.
17. If the 69 Bath Road contributions had been assessed at 12 August 2009 on the current SPG, the highway contribution would have increased from £15000 to £ 18000. The education contribution would have gone down from £14936 to £405, because there was capacity at the primary school for the catchments and the situation at the catchment secondary school had changed since the grant of permission; there was now capacity and so no contribution would be sought. The sum was not reduced to nil but to £405 because of an SPG requirement new in 2008 that a sum be paid towards special needs education. The open space contribution would have gone down from £33,000 to £10,496.
18. The Claimant challenged the Council in correspondence in December 2009 to explain what it would do with the "surplus" contribution that it was now going to receive. Although, the highway contribution was lower than SPG would now require, the Council explained the variety of transport improvements in Thatcham town centre to which the money received for highways would go: cycle, pedestrian, public transport and junction improvements. The sum received for education would contribute to the "re-provision and expansion of the secondary school's indoor sports provision or expansion of the sixth form provision." The open space contribution would be allocated to the programme of improvements at a local sports ground, subject to members' approval.

The nature of the case

19. There was and is no challenge to the lawfulness of this agreement in the first place, nor to its materiality to the grant of permission. The Claimant was well aware of the SPG when it entered into the agreement, and SPG had in fact been the subject matter of public consultation. The Topic Papers which explained the formulae which led to the specific sums in respect of education, open space, health and so on were publicly available, though they had not been the subject of public consultation. The Claimant could have refused to enter into the agreement and appealed against the consequent refusal of planning permission on the grounds that the infrastructure contributions it refused to pay were unreasonable, and did not justify a refusal of permission. It did so, successfully, on two other occasions, but it did not go down that route on this development. The parties could have agreed provisions which enabled obligations to be adjusted with changes to SPG or in specified circumstances, but did not do so.
20. This is not a challenge to any refusal of the Council to discharge or vary the agreement under s106A, although that would have tested directly the lawfulness of any such refusal. That route has not been followed. The issue is raised by the sidewind of a claim that enforcing the agreement, unvaried and undischarged, is unlawful. Its legal scope is therefore narrower than a challenge to a refusal to vary or discharge the agreement. It is simply that, as the sums due would not be calculated in August 2009 as they had been in 2005, because of what Inspectors later thought were unreasonable inputs or because of changed circumstances, they could not lawfully now be demanded. S106B, and the appeal provisions are not in play.
21. The case does not turn either on whether the s106 agreement on its true construction means that the sums claimed are due. This case assumes that some or all of those sums are due on the true construction of the agreement but it is not for me to rule on that. I mention it because the way the different obligations are expressed may give rise to argument: does the educational contributions clause permit of an argument that if the school in question had or already has capacity without more, it envisaged that no contribution would be payable?
22. The date chosen by the Claimant for the purposes of assessing how much is due does not necessarily reflect what the position was as at the various dates when sums were due under the agreement. The picture has been assessed at a single date and not at the dates when particular payments were due under the terms of the agreement, and there has been no examination of precisely how SPG stood at those particular dates. That does not affect the principle of the challenge, although that may be how any challenge should have been framed for which it is out of time; but it does illustrate a larger point. The sum which would have been due as a contribution to education, if it varied over time with SPG, is greater as at the August 2009 date selected, albeit not by much , than was due at an earlier stage. That works in the Council's favour if it is not entitled to enforce the agreement as it stands. But the highway contribution would have increased and that has not been offset in the calculation undertaken by the Claimant. So the date or dates at which the enforcement of the obligation has to be judged for lawfulness can be important on the Claimant's arguments, and the lawfulness of any offset can illustrate the effect of confining the useful planning purpose to the purpose for which the contribution was payable.

The submissions

23. Mr Harwood's case was that the SPG charges which were embodied in the agreement were based on "erroneous/unreasonable calculations, and therefore the charges themselves constitute unlawful demands for payment." He put it in other ways: the Council had failed to consider whether any land-use planning purposes would be achieved by enforcement. Enforcing the terms of the agreement had to achieve a useful planning purpose. The ability of the Council to make some public use of the money was not the same as it having a planning use. As his argument developed, and in the light of how the Council said it would now use the money, he said that the planning purpose had to be related to the development to which the s106 agreement was connected. There was no effect on schools from the development and so no impact to be absorbed by the Claimant's contribution. He accepted, when pressed, that a useful planning purpose would be served by attributing a surplus contribution for one purpose to make good a deficient contribution for another.
24. Mr Jefferies, leading for the Council, submitted that there was no need for the s106 agreement, when initially entered into, to relate to any development proposal so as to be a material consideration to the grant of permission. It only needed to be entered into for the purpose of restricting or regulating the use or development of land, and not for the purpose of any particular permission. It only needed to have that relationship were it in fact to be taken into account in the decision whether or not to grant permission. He relied on the decision of the Court of Appeal in J A Pye (Oxford) Ltd v South Gloucestershire District Council [2001] EWCA Civ 450. That case was a stark example of the enforcement of an agreement which regulated the use of land, providing for the funding by the developer of the acquisition of land for a road. It was assumed for the purposes of the challenge to the enforcement of the agreement that the provision of the road was immaterial to the development which had led to the agreement. That fact that it might have been unlawful for the Council to have had regard to the agreement when granting permission did not mean that it was unlawful to enforce the agreement. On that basis, there was no scope for construing the agreement so as to require the contribution to be connected to any effect of the development. But in any event, the sums were to be used for a planning purpose and for a planning purpose which would at least benefit the people who would live in the new dwellings.

Conclusions

25. There appear to be two related aspects to Mr Harwood's submissions: unlawfulness by reference to the cause of the "surpluses" and unlawfulness because of the purpose to which the "surplus" contributions will be put. I deal with those in turn.
26. Is the decision to enforce the agreement unlawful because of the subsequent changes to SPG, the reasons for the changes, or because of changes in circumstances? In my judgment, it is not unlawful. First, the Council is simply seeking to enforce an agreement which was incontestably lawful when entered into. The Claimant could have contested the merits had it wished before an Inspector, so it was not forced to enter the agreement. It did not challenge its lawfulness before starting development; nor at any subsequent stage when payments were due, or when SPG changed, or educational circumstances changed. It did not avail itself of the statutory means of seeking a variation or discharge, and challenging as unlawful any refusal of variation or discharge. The parties could have stipulated for the changes which occurred. It would be very strange if enforcing the agreement were unlawful in those circumstances.
27. Second, the lawfulness of enforcing the agreement does not in my view depend on the lawfulness of the calculations or method whereby a sum was put forward by the Council and agreed by the Claimant. The agreement simply contains the specific sums and not a particular method whereby sums are to be calculated. So the basis for the amounts, which is what is said to be unlawful, does not form part of the agreement at all. The sums demanded are lawfully demanded because the Claimant agreed to pay them. The Claimant in any event knew of the SPG, and could see the Topic Papers. It could ask about the method if it did not know. It could appeal against a refusal of permission based on excessive demands.
28. Third, no challenge has been brought to the lawfulness of the SPG which underlies the s106 agreement, although a challenge could have been made back in 2005 or 2007. The mere fact that SPG has changed in response to criticisms does not show that the earlier SPG was unlawful. The fact that Inspectors found that the basis of the calculations of contributions led to sums which did not fairly or reasonably relate to the effects of the development, and were therefore contrary to Government policy, does not and could not by itself amount to a finding that the SPG was unlawful. I am not prepared to accept that the Inspectors' comments show them to be unlawful. Although the calculation methods as explained to me favoured the Council unduly, I am not prepared to hold them unlawful on the limited material I have. SPG had to be changed only because Inspectors would not support it. The contributions sought were characterised in argument as "erroneous or unreasonable"; that does not mean they were unlawful in public law terms.
29. Fourth, if the S106 agreement, on its true construction, does require the educational contribution to be paid in changed circumstances where the impact which originally justified its calculation in SPG terms no longer exists, the developer is simply being held to his agreement. Those changed circumstances do not make enforcement unlawful. This moreover invites the Court to rewrite the agreement without going through an available statutory process, judicially reviewable, in which variations can be negotiated and refusals to change the terms justified in law.
30. The fallacy underlying this aspect of Mr Harwood's submissions is that there is a necessary unlawfulness in enforcing an agreement which the Council could not now force the developer to enter as the price for permission, since the developer would succeed in an appeal against the refusal of planning permission. It simply would not be unlawful for the Council and Claimant now to enter precisely this same s106 agreement, and for the Council to enforce it. The SPG changes and changes in circumstance simply do not and would not make that agreement unlawful under s106, nor its enforcement.
31. The other aspect of Mr Harwood's argument as to unlawfulness concerns the absence of a lawful purpose within s106 to which the "surplus" contributions will be put. On the assumption that enforcement of the payments due is only lawful to the extent that those payments would still serve "a useful planning purpose", Mr Harwood's arguments remain without substance.
32. First, the useful planning purpose does not have to be related to the development in connection with which the s106 agreement was entered into. The decision in Pye is quite clear, and I accept Mr Jefferies' submissions, set out above, as to its effect. Since there is no need for a connection between the agreement and the permission, in the first place, in order for the agreement to be lawful and enforceable, it is quite impossible to imply into s106A (6)(b) and (c) on variation or discharge, a requirement that the "useful planning purpose" must be one related to the permission itself. Since there is no need for the agreement to have any connection at all to a permission or a particular development, the variation or discharge power cannot be constrained in a way in which the power to enter the agreement in the first place is not. There is nothing in the Act which requires variation or discharge for want of useful planning purpose to be judged by reference to the development to which the agreement was related. There is nothing unlawful about enforcing an agreement in circumstances which would not warrant its variation or discharge.
33. There is therefore, second, no reason why the useful planning purpose still being served should not be a different one from that which led to the agreement in the first place; the statutory provisions do not contain such a limitation, and it is not there by necessary implication. Richards J took a similar view in R v (The Garden and Leisure Group Ltd) v North Somerset Council [2003] EWHC 1605 (Admin) para. 46. There is nothing of course, to stop the parties agreeing to provisions which cover changes in circumstances, if they wish.
34. Since there is no requirement that the useful planning purpose relate to the development itself at all, there can be no requirement either that it relate to an impact of the development at all, or to the same impact for which it was originally sought.
35. There is no unlawfulness if the "surplus" contributions are applied for a useful planning purpose to the benefit of the area where the new residents will live, and from which they can benefit, even if they are not spent on the particular aspect of the development's effects for which they were originally sought. In so saying, I am not holding that to be a necessary test of lawfulness, merely that it cannot be unlawful to do so.
36. Third, on the facts here Mr Harwood's own case is unsustainable. Each of the useful planning purposes on which the Council is proposing to spend the "surplus" contributions is related to the development in at least this sense, that the people living in the development will benefit from the useful planning purposes to which the contributions will be put. That is sufficient, even on Mr Harwood's approach to the scope of s106. But the Council's case is stronger than that.
37. The Council proposes to spend the "surplus" open space contribution on improving open space provision locally in Thatcham. It is impossible to contend that that is not a useful planning purpose and one related to the development. It does not cease to be a useful planning purpose simply because the basis upon which the agreed sum was calculated was found to be unfair or unreasonable by an Inspector. (It seems, though it is not for me to decide whether this precludes a defence to the claim, that this proposed expenditure falls within the unvaried terms of the obligation anyway.). The educational provision on which the "surplus" is to be spent is undoubtedly a useful planning purpose related to the development; it is not for me to judge whether it falls outside the contractual provision so as to afford a defence to the claim as a matter of contract.
38. The claim that the decision to enforce the s106 agreement is unlawful is untenable.

The policy letter

39. The policy challenged in the letter dated 12 March 2010 to the local Development Industry Forum from the Council's Development Control Manager clarifies what he said at a meeting over a month earlier about how the Council would approach applications to modify s106 agreements. It said:

"For avoidance of doubt I would like to clarify what will be the Council's general position from now onwards. Where a developer applies to modify a section 106 planning obligation, on the basis that the Council's SPG relating to the relevant contribution(s) has changed since the date of that planning obligation, the Council's general position will be to reject such an application if the development has been implemented. By the implementation of the development, the developer will have obtained the benefit of the planning permission in question and it would not be appropriate to reopen the basis on which the associated s.106 obligations were negotiated. Section 106A(1) makes clear that on an application to modify a planning obligation the test is not whether the obligation remains necessary to make the development acceptable but simply whether it still serves a useful purpose. The provision of infrastructure contributions plainly serves a useful purpose.

Whilst this is intended to be a statement of the Council's general approach, it must be emphasised that all cases will be considered on their individual merits."

40. Mr Jefferies submitted that this letter was not reviewable since it did not even constitute a policy. I disagree.
41. Mr Harwood criticised it as embodying the same refusal to revise agreements when the agreed infrastructure contributions have been based on formulae which have been rejected by Inspectors and then changed; thus it was a policy of refusing to vary agreements to the extent that they no longer served a useful planning purpose. I reject that argument; it merely traverses the same ground as I have already covered. A change in SPG or circumstances such that the original charge would not now be sought in a new agreement does not mean that there is no useful planning purpose to be served by enforcing the agreement or anything unlawful in doing so.
42. I do not think that the omission of the word "planning" as controlling the nature of the useful purpose can be criticised as showing an error of law; after all the letter is quoting the wording of the Act. Nothing in the Council's behaviour or submissions suggested that it was approaching modification without examining whether a useful planning purpose was still being served.
43. Mr Harwood developed a further argument that the policy amounted to a general refusal to consider modifications after implementation of the permission. Yet the Act envisages that applications for modification or discharge will be made after implementation, that is after the five year period during which planning permission would normally have been implemented. There is nothing in this point. The letter is dealing with the Council's approach to agreeing modifications in the light of changing SPG. It is dealing with a confined area. It will normally agree to a modification to reflect the change before implementation but not after. The reason it gives is justifiable. During the five years after the agreement was entered into, it is entitled to adhere to the agreement, and for it normally to do so after implementation is obviously of itself not unlawful. After that five year period, the Council is unlikely to agree to a change to reflect changed SPG, but the developer has the remedy of appeal. If the developer's case is strong or of a type in which the Secretary of State has made his views known, the Council will not succeed and may modify its views. If the complaint is that the developer has to exercise the statutory remedy, and take its chances, I see nothing remotely wrong with that.
44. This application is dismissed.