Case No: CO/4396/2010
Neutral Citation Number: [2011] EWHC 382 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 02/03/2011

Before :

FRANCES PATTERSON QC
(Sitting as a Deputy High Court Judge)
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Between :

	Harold William Rencher-Paine
(named in the planning application as Harold Paine)	Applicant	
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	Secretary of State for Communities and Local Government
-	and –
-	Newark and Sherwood District Council	First Respondent

Second Respondent	

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Lisa Busch (instructed by Sills and Betteridge) for the Applicant
Stephen Whale (instructed by Treasury Solicitor) for the First Respondent
The Second Respondent was not represented and did not appear

Hearing date: 4 February 2011
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Judgment
Frances Patterson QC Sitting as a Deputy Judge of the High Court: 
1.	This is an application under section 288 of the Town and Country Planning Act 1990 to challenge a decision letter of 5th March 2010 in which an inspector appointed by the Secretary of State for Communities and Local Government dismissed an appeal by Mr Harold Paine, the Applicant, against a decision made by the Newark and Sherwood District Council to refuse planning permission for a one bedroom earthship dwelling including an internal farm office. 
2.	The appeal site is some 0.8 hectares of land at Scarecrow Patch Farm in the open countryside outside Spalford village. The Applicant and his wife operate an ostrich farm on the appeal site and on a larger piece of land of some 4.3 hectares which is a short walk away. The 4.3 hectare parcel of land is leased by an agreement which was due to expire about eighteen months after the appeal hearing. At the time of the hearing there was an agreement in principle to extend the lease until 2015. On the site is a temporary caravan which was allowed on appeal and is occupied by the Applicant and his wife. In allowing that appeal in 2008 the then inspector found that the caravan met the test set out in Annex A to PPS7 for a temporary agricultural dwelling and granted a conditional planning permission. On the 28th February 2009 the Applicant sought planning permission for a permanent dwelling on the appeal site. That application was refused by the local planning authority. The appeal against that decision culminated in the decision letter the subject of this challenge. 
The Decision Letter
3.	The main issue in the appeal was defined by the inspector at paragraph 2 as being “whether the agricultural justification for the proposed dwelling is sufficient to override the presumption against new dwellings in the open countryside.”
4.	The inspector approached that issue by reference to guidance set out in Annex A to PPS7. She referred to the fact that the test was more stringent for a permanent dwelling than for a temporary dwelling. In paragraph 4 of the decision letter she said “it is agreed between the parties, following the findings of the previous inspector, that a functional need exists for the proper functioning of the business and to provide care and supervision of the birds at short notice. I have no reason to dispute this.”
5.	PPS7 Annex A at paragraph 3 sets out a series of tests which a proposal should meet before planning permission is granted for a new permanent dwelling. A clearly established functional need is the first of those. Of particular materiality here are the following two criteria, 
ii)	“The need relates to a full time worker, or one who is primarily employed in agriculture and does not relate to a part time requirement; 
iii)	The unit and the agricultural activity concerned have been established for at least three years, have been profitable for at least one of them, are currently financially sound, and have a clear prospect of remaining so (see paragraph 8 below);” 
Paragraph 7 of Annex A goes on to consider the position if a functional requirement is established when it is then necessary to consider the number of workers needed to meet it, for which the scale and nature of the enterprise will be relevant. 
6.	The inspector considered that requirement in paragraph 6 of her decision letter where she set out the council’s labour requirement assessment, which was not disputed by the Applicant. The calculations were based on business data from 2007 and established a labour requirement for 0.24 of a full time person on the land owned by the Applicant rising to 0.3 of a full time person if the leased land was included. The Applicant offered no alternative calculation. In paragraph 7 the inspector concluded that the business of sixty or so birds was not materially different from the situation three years previously when there had been fifty four. She recognised that the continual breeding programme could be very intensive. The inspector recorded also other activities on site such as the repair of fences due to damage by ostriches or vandals and trips to take birds to be slaughtered (in paragraph 8). 
7.	In paragraph 9 the inspector noted another important element of the business which was the production of food products made from ostrich meat which were sold online, at the appeal site and at farmers’ markets. She continued, “while I can appreciate that this element of the business is time consuming and hence why both Mr and Mrs Paine are kept busy all of the time these processes do not necessitate an open countryside location, such as this, and so cannot be included in the labour requirement, as explained in paragraph 6 of PPS7”
8.	In paragraph 10 the inspector set out that she was not convinced even taking account of the leased land and the slight increase in bird numbers that there was a demonstrable need for a full time worker on the holding who was employed primarily in agriculture. As a result there was a significant conflict with paragraph 3 (ii) of Annex A to PPS7 and the appeal must fail. 
9.	In paragraph 11 of the decision letter the inspector considered paragraph 8 of PPS7 where it states, “new permanent accommodation cannot be justified on agricultural grounds unless the farming enterprise is economically viable.” She recited the agreement that the business had been profitable for three years and calculated from figures given to her by the Applicant that given the amount of the minimum agricultural wage in 2009 of £14,770 there would be about £3,000 per annum to sustain the cost of a dwelling in the longer term i.e. a mortgage. 
10.	Whilst the Applicant in his circumstances was able to finance the project the inspector concluded (in paragraph 12) that it would be very difficult for another future occupier. That difficulty would be exacerbated if the leased land (which even taking account of the agreement to extend was secure only until 2015) was lost. 
11.	As a consequence the inspector concluded that “the business could not at present support a permanent dwelling.” Consequently the proposal would also fail to accord with paragraph 3 (iii) of Annex A to PPS7.
12.	In paragraph 13 the inspector considered the local plan policies and said, “I have had regard to the sustainability credentials of the proposed earthship dwelling and while Mr Paine is to be commended for his choice of dwelling this does not outweigh the significant harm to the open countryside that I have identified.”
13.	The Applicant challenges the decision letter on grounds of irrationality and inadequate reasons. 
Legal Framework
14.	In relation to inadequate reasons  it is common ground that the correct legal position is set out in South Buckinghamshire District Council v Porter (No.2) [2004] 1 WLR 1953 at paragraph 36. In summary, the reasons given have to deal with the principal controversial issues and enable the reader to understand why the matter was decided as it was. In addition, the decision letter is to be read in a straightforward manner recognising that it is addressed to the parties who are well aware of the issues involved and the arguments advanced. 
15.	On irrationality as Sullivan J, as he then was, said in Newsmith Stainless Ltd v SSETR [2001] EWHC 74 in any case where the expert tribunal is the fact finding body the threshold of Wednesbury unreasonableness is a difficult obstacle for an Applicant to surmount. The difficulty is greatly increased in most planning cases because the inspector is not simply deciding questions of fact but is reaching a series of planning judgments. 
Ground 1 The Functional Test
16.	The Applicant’s case is that the inspector was irrational in her approach to the functional test set out in Annex A to PPS7 which had to be satisfied to establish a need for a permanent new dwelling. 
17.	It was submitted that the inspector failed to consider a material consideration, namely, whether the Applicant was a person primarily employed in agriculture. The question before the inspector was whether there was a functional need relating to a full time worker or one who is primarily employed in agriculture. The requirements in PPS7 were disjunctive. 
18.	Where the inspector had fallen into error was to elide both elements of the test thereby ignoring the decisions of Petter and Harris v SSETR (2000) 79 P&CR 214 and R (Vale of White Horse DC) v SSCLG [2009] EWHC 1847 which were to the effect that one had to look at the rationale of the policy and give it a purposive construction. Further, Miss Busch submitted that had the inspector addressed the question of whether the Applicant was primarily employed in agriculture the only rational conclusion was that the Applicant was such a person. The Applicant’s production of honey and eggs on site and husbandry of other animals led inexorably to such a conclusion.
19.	The respondent points out that the Applicant advanced no case on the functional test at the hearing. He had neither disputed the labour calculations on the part of the council nor produced any alternative. The undisputed evidence before the inspector was of an absolute maximum labour requirement of about 0.3 of a full time worker. The inspector had considered the other activities on site such as the on site production of honey and eggs and other retailing but concluded that the processes did not necessitate a countryside location and so could be discounted.
20.	Petter and Harris was distinguishable in that it was concerned with PPG7, it did not have the functional test as an issue and the Claimant there was seeking a further temporary planning permission. The case of the Vale of White Horse District Council reiterated a purposive approach to the guidance in PPS7 in accordance with its requirements to safeguard the countryside from isolated new homes whilst allowing accommodation where it is essential to support agriculture and other rural based enterprises. 
Discussion
21.	The starting point is PPS7. In considering it I accept that one must have regard to its purpose. The purpose of the guidance in Annex A is reflected in paragraphs 1 and 2 of the introduction to the Annex which restates paragraph 10 of the main PPS which makes it clear that special justification is needed to grant planning permission for an isolated new home in the countryside. One example of the special justification is the requirement for an agricultural full time worker to live at or in the immediate vicinity of their work. Whilst each case will turn on its own facts what is essential will depend on the need of the enterprise concerned and not on any personal circumstances.
22.	Paragraph 3 of the Annex sets out criteria to be satisfied if permission for a new permanent dwelling is to be forthcoming. As 3(i) was satisfied the inspector moved on to consider 3(ii). In my judgment its objective is to secure that the need for the new dwelling arises either from a person who is a full time agricultural worker or a person who is mainly employed in agriculture and therefore cannot be regarded as a part time worker or hobby farmer.
23.	The inspector clearly understood the test that she had to address by setting it out in terms in paragraph 5 of her decision letter. In the following five paragraphs the inspector analysed the activities on site and noted that the council’s labour requirement calculations were not disputed by the Applicant who produced no alternative figures. She considered the nature of the enterprise including the food production, honey and eggs, but concluded that although the activities were time consuming they could not be included in the labour requirement of PPS7 as the activities did not require an open countryside location. Those conclusions were ones that she was entitled to come to on the evidence before her and were in accordance with policy advice in paragraph 6 of Annex A to PPS7. Both food processing and food retail are outside the definition of agriculture in section 336 of the Town and Country Planning Act so that the inspector was correct to exclude those activities from any labour calculation. Further, the labour requirement calculations produced by the local planning authority, although directed at an appraisal as to whether there was a need for a full time worker could also be used as a gauge against which to judge whether the Applicant was primarily employed in agriculture. On the undisputed figures (0.3 at the highest) the Applicant was clearly not primarily employed in agriculture. As to the other activities, which Miss Busch prayed in aid the inspector had considered them and did not regard them as agricultural which she was entitled to do for the reasons that I have set out.
24.	I do accept that the wording in paragraph 10 of the decision letter is not as pellucid as it might be. But reading the decision letter as a whole and with regard to the careful analysis that the inspector had carried out in the earlier paragraphs it is apparent that she did not either misunderstand or misapply the test in paragraph 3 (ii) of Annex A. She had in mind the disjunctive nature of the test that she had to carry out and did so. In so doing the inspector was having regard to the reality of the agricultural enterprise as she found it to be. 
25.	The case of Petter and Harris does not assist the Applicant. It was concerned with the test for a temporary agricultural dwelling and the predecessor to PPS7, namely PPG7. But, insofar as it confirms that a decision maker must apply the underlying policy of preventing non agricultural residential occupation arising in a case where a proposed agricultural occupation fails it does not assist the Applicant. It follows that ground one fails.
Ground 2 The Financial Test
26.	The Applicant submitted by reference to paragraph 3 (iii) of Annex A of PPS7 that 
i)	The unit and the Agricultural activity has been established for at least three years; 
ii)	The enterprise had been profitable for at least one of those years (it had in fact been profitable since at least 2006);
iii)	The enterprise was financially sound at the current time;
iv)	There was no reason to suggest that the enterprise would not remain financially sound.
In particular, it was submitted that the inspector made no finding in relation to the 2008 decision letter where that inspector had found that there was a clear prospect that the enterprise would remain financially sound. Next, it was submitted that the inspector compared the cost of financing the dwelling with the current profits generated by the unit. She, therefore, erred in that she omitted to consider the clear financial soundness in the future. 
27.	As a result the inspector failed to take a realistic approach as set out in PPS7 and consider whether the nature of the operation meant that it could not and did not operate on a truly commercial basis. It was more analogous with subsistence farming. 
28.	The respondent submits that the Annex A paragraph 3 (iii) test is only met if there is a clear prospect of the unit or agricultural activity concerned remaining sound “such that the unit can sustain the proposed dwelling in the long term.” On that basis the inspector had no evidence before her beyond the year 2015.
29.	As to the ability of the unit to finance a mortgage that was material as it had been raised at an earlier occasion by the Applicant’s agent. The fact that the Applicant could finance the build costs was a reflection of his personal circumstances and not material to the exercise which the inspector had to carry out. 
Discussion
30.	It is pertinent to set out paragraph 8 of Annex A to PPS7 which reads as follows
New permanent accommodation cannot be justified on agricultural grounds unless the farming enterprise is economically viable. A financial test is necessary for this purpose, and to provide evidence of the size of dwelling which the unit can sustain. In applying this test (see paragraph 3(iii) above), authorities should take a realistic approach to the level of profitability, taking account of the nature of the enterprise concerned. Some enterprises which aim to operate broadly on a subsistence basis, but which nonetheless provide wider benefits (e.g. in managing attractive landscapes or wildlife habitats), can be sustained on relatively low financial returns.
The fundamental issue here is whether taking account of Annex A paragraph 3 (iii) the inspector took a lawful approach to the issue of whether the enterprise had a clear prospect of remaining financially sound. The preceding three steps of the financial test in paragraph 3 (iii) were not in dispute before the inspector. 
31.	The inspector in the 2008 decision letter was not applying the same test as the inspector in 2010 as he said he was satisfied that in the context of a temporary agricultural dwelling that an essential need had been demonstrated. His financial assessment and judgment was on the basis of whether the enterprise had been planned on a sound financial basis. He did not have to address whether there was a clear prospect of it remaining sound (see paragraphs 9 and 10 of the 2008 decision letter). In contrast the inspector in 2010 had to determine whether the then established enterprise had a clear prospect of remaining financially sound. In view of the different judgmental tasks and the fact that the 2010 inspector took the first three steps required under paragraph 3 (iii) as met I can see no deficiency in her failing to relate her approach and findings to that of the 2008 inspector. They each had different prospects to evaluate with the financial test for a permanent dwelling being considerably more stringent than for a temporary dwelling. 
32.	On the profitability of the business the Applicant submitted evidence on the actual and projected profitability of the business up until April 2010. The accounts showed increasing gross income from the enterprise on a year on year basis. In addition, the Applicant submitted evidence as part of his agricultural appraisal which related to the minimum agricultural worker’s wage and mortgage costs per annum. His agent raised also the issue of the mortgage capacity of the business and sought to demonstrate that the cost was well within the financial budget of the business.
33.	In those circumstances the inspector had before her evidence of the personal circumstances of the Applicant. In seeking to consider the position beyond that of the Applicant’s own occupation she was quite entitled, in my judgment, to consider the position on a more objective basis. Indeed, given the policy objective of PPS7 that was what she was required to do.
34.	Far from failing to consider the clear financial soundness in the future she expressly considered the position with the leased land the formal lease of which would have almost expired when the dwelling was built. The agreement to extend the lease continued only until 2015 leaving the dwelling to continue in use for a considerable period of time thereafter. As the inspector said she had no evidence as to how the dwelling could be supported financially from the small area of owned land. On the evidence before her the inspector was justified in coming to the conclusion that she did given the absence of any evidence that the enterprise would remain financially sound. Indeed, there was no evidence from the Applicant to enable her to take a different course. 
35.	In the circumstances the inspector took an eminently realistic approach to the future financial soundness of the enterprise as advocated by PPS7. She considered the short, medium and longer term future time horizon and concluded that she could not be convinced about financial soundness. Paragraph 8 of Annex A does refer to some enterprises which aim to operate broadly on a subsistence basis but which nonetheless provide wider benefit. From the Applicant’s appeal submissions he did not run his case at appeal as being a subsistence enterprise so that it is unsurprising that the inspector did not deal expressly with that point. But, even if the Applicant had done so, there was no evidence of the sort of wider benefits envisaged by PPS7 upon the Applicant’s agricultural enterprise. The inspector cannot be faulted, in these circumstances, for failing to deal with that part of paragraph 8. What I am satisfied of is that on the evidence before her the inspector adopted a realistic approach to the assessment of the future financial soundness of the enterprise.
36.	A somewhat fainter argument was raised by the Applicant that the development was part of diversification. In the circumstances of this case where the ostrich farm was established as a new enterprise I am not satisfied that the diversification policies in PPS7 apply but, even if they do, paragraph 31 of PPS7 makes it clear that a supportive approach to farm diversification should not result in excessive expansion and encroachment of building development into the countryside. The same policy objectives and tests of Annex A of the PPS that I have dealt with earlier would apply. In dealing with the financial test the inspector was rational and set out her reasons on the main points in issue. This ground fails.
Ground 3 Significant Harm to the Open Countryside
37.	The Applicant submits that although in paragraph 13 of the decision letter the inspector carried out a planning balance where she referred to the “significant harm to the open countryside” that she had identified earlier there was, in fact, silence in the decision letter as to any harm. 
38.	It was submitted that the Applicant already had planning permission in respect of development for ancillary activities which meant a considerable number of small buildings and paraphernalia had been permitted. In those circumstances that was part of the context for the grant of planning permission for the earthship dwelling. It was not development on a virgin site. It would not cause any significant harm.
39.	I can deal with this ground shortly. There is no merit in it. The inspector had made clear findings (see paragraphs 10 and 12) of conflict with paragraphs 3 (ii) and 3 (iii) of Annex A to PPS7. In themselves those findings were of harm to the countryside and in the case of paragraph 3 (ii) that was expressed as significant. The inspector was under no obligation to set out those findings again in paragraph 13. She was entitled to expect the informed reader to look at the decision letter as a whole. The Applicant therefore knew that any further application would have to comply with those tests. In my judgment it cannot be said that the Applicant has suffered any prejudice. It follows that her reasons were adequate for the issue in contention. This ground also fails.