On 25th October, the Supreme Court handed down its judgment in this case. It was a single judgment, given by Lord Hodge, with whom the other four Justices all agreed without giving judgments of their own. Whilst the other Justices included Lord Neuberger and Lady Hale, they did not include Lord Carnwath who is the most senior planning judge in the country. The judgment revisits and re-opens the law on what a s.106 (or s.75 of the Town and Country Planning (Scotland) Act 1997) agreement can do, and in my view proceeds on an important misunderstanding.
The problem being litigated was a requirement by Aberdeen that Elsick contribute a levy or “roof tax” which would be pooled with contributions from other developments and used to provide desirable infrastructure. However, the link between Elsick’s development and the infrastructure was de minimis or trivial.
The policy justification for demanding the contributions was to be found in three documents; a Cumulative Transport Appraisal, Strategic Development Plan and Supplementary Guidance which amended the Strategic Development Plan. The first instance Scottish Court had looked at these. The Supreme Court noted that it had found as a fact that in the un-amended CTA and SDP “many of the planned developments had no impact at all on several of the proposed infrastructure interventions. It added: “[t]his applies to both Elsick and Blackdog relative to a number of the interventions. In respect of others the impact is de minimis “. The Supreme Court also recorded that the first instance Court “also upheld Elsick’s submission that there was no rational basis for relying on [the amendments made by] the SG … to support the contention that a particular intervention was made necessary by reason of either a particular development or the cumulative effect of it along with other developments”.
What did the Supreme Court decide?
It held the s.75 agreement was unlawful for two separate reasons. It concluded:
“61 First, the requirement imposed on a developer to contribute to the pooled Fund, which is to finance the transport infrastructure needed to make acceptable all of the developments which the development plan promotes, entails the use of a developer’s contribution on infrastructure with which its development has no more than a trivial connection and thus is not imposed for a purpose in relation to the development and use of the burdened site as section 75 requires.
62 Further, the Council did not include any provision in the planning obligation restricting the development of the Elsick site until a contribution was made. Instead it resolved to grant planning permission for the development but to issue that permission only once Elsick had entered into the obligation. The planning obligation was therefore neither restricting nor regulating the development of the Elsick site and so was outside the ambit of section 75 .
63 Secondly, Tesco (above) establishes that for a planning obligation, which is to contribute funding, to be a material consideration in the decision to grant planning permission, there must be more than a trivial connection between the development and the intervention or interventions which the proposed contribution will fund. The planning obligation which Elsick entered into could not be a relevant consideration in the grant of the planning permission. In my view, it was not within the power of the planning authority to require a developer to enter into such an obligation which would be irrelevant to its application for permission as a precondition of the grant of that permission.”
This led the Supreme Court to add, with its concluding paragraph: “If planning authorities in Scotland wish to establish a local development land levy in order to facilitate development, legislation is needed to empower them to do so”.
Where did the Supreme Court go wrong?
I have no issue with paragraph 63. Indeed that is the right analysis. If a planning obligation is to be taken into account it must be a material consideration Tesco ([1995] 1 WLR 759) established that the legal threshold for materiality is that the consideration must be more than de minimis. As these considerations were de minimis in some cases and not material at all in others they could not be taken into account. The case could have been dealt with on that basis alone and achieved the same outcome.
What is wrong is to state that the test for the validity of a planning obligation is that it must have a more than trivial connection and be imposed for a planning purpose. The authority which the SC uses for this is Good v. Epping Forest, a Court of Appeal judgment, the judgment of Beldam LJ in Tesco in the Court of Appeal and the apparent approval of Lord Hoffman commenting on Good v. Epping Forest when Tesco reached the House of Lords.
Why is this wrong?
It is wrong because neither section 75 of the Scottish Act nor section 106 in England make the grant of a planning permission a prerequisite for entry into a s.75/106 agreement. Whilst it is rare for one to be entered into without an accompanying planning permission, it is perfectly possible and lawful. So in those circumstances there would be no permission to which there could be a connection or purpose, trivial, planning or otherwise. Indeed Lord Hodge recognises this at para 38 of his judgment:
“The express words of section 75 require a relationship between the planning obligation and the land to be burdened by the obligation because the obligation must in some way restrict or regulate the development or the use of that land. But those restrictions or regulation do not necessarily relate to a particular permitted development on the burdened land. A planning obligation may prohibit the development of the land in a particular way or the use of the land for particular purposes. A planning obligation may keep the burdened land free from any development and may be entered into in circumstances which are not connected with any planning application” (emphasis added).
But then he goes on to ask the question (para 42):
“[C]an a restriction or regulation of a site be imposed in the form of a negative suspensive planning obligation, analogous to the negative suspensive planning condition in the Grampian Regional Council case, for a purpose which does not relate to the development or use of the site? In particular, is it lawful by planning obligation to restrict the commencement of the development of a site until the developer undertakes to make a financial contribution towards infrastructure which is unconnected to the development of the site?”
He answers this with a firm “no” – see paragraphs 42 and 43 of the judgment.
Lord Hodge argues for his position as follows(para 44):
“A planning obligation, which required as a pre-condition for commencing development that a developer pay a financial contribution for a purpose which did not relate to the burdened land, could be said to restrict the development of the site, but it would also be unlawful. Were such a restriction lawful, a planning authority could use a planning obligation in the context of an application for planning permission to extract from a developer benefits for the community which were wholly unconnected with the proposed development, thereby undermining the obligation on the planning authority to determine the application on its merits.”
But this is not right. The reason the planning authority could not demand that, is that it would not be a material consideration.
The better position was expressed by Lord Keith in Tesco:
“An offered planning obligation which has nothing to do with the proposed development, apart from the fact that it is offered by the developer, will plainly not be a material consideration and could be regarded only as an attempt to buy planning permission. If it has some connection with the proposed development which is not de minimis, then regard must be had to it.”
So Lord Keith clearly contemplates valid planning obligations which are not material considerations. Whilst we are considering Lord Keith’s judgment, it is worth noting that Lord Hoffman agreed with it, as did all the other members of the House of Lords.
But Lord Hoffman does not actually support Lord Hodge’s argument. Whilst Lord Hodge sets out the following sentence from Lord Hoffman:
“The vires of planning obligations depends entirely upon the terms of section 106 . This does not require that the planning obligation should relate to any particular development. As the Court of Appeal held in Good v. Epping Forest District Council [1994] 1 W.L.R. 376 , the only tests for the validity of a planning obligation outside the express terms of section 106 are that it must be for a planning purpose and not Wednesbury unreasonable”
he omits these statements which surround it:
“First, the Newbury case was concerned with the validity of a condition and there is a temptation to regard a planning obligation as analogous to a condition. But section 70(2) does not apply to planning obligations. The vires of planning obligations depends entirely upon the terms of section 106 . This does not require that the planning obligation should relate to any particular development.”
“Of course it is normal for a planning obligation to be undertaken or offered in connection with an application for planning permission and to be expressed as conditional upon the grant of that permission. But once the condition has been satisfied, the planning obligation becomes binding and cannot be challenged by the developer or his successor in title on the ground that it lacked a sufficient nexus with the proposed development.”
“Thirdly, while Newbury is a convenient judicial paraphrase of the effect of section 70(2), it cannot be substituted for the words of the statute. The principal questions in a case like this must always be whether the planning obligation was a “material consideration” and whether the planning authority had regard to it.”
We see from Lord Hoffman’s analysis that a planning obligation cannot be challenged once the precondition – grant of permission for example – is met. He says it “cannot be challenged by the developer or his successor in title on the ground that it lacked a sufficient nexus with the proposed development”. That means that the obligation is valid despite any failure to pass the Newbury tests. They are simply a paraphrase of s.70(2) which is of course the requirement to have regard only to material considerations, the development plan and (today) local finance considerations, in each case, so far as material.
Lord Hodge relies heavily on Newbury and his first section is on the tests for the validity of conditions.
We perhaps need to take into account that s.75 of the Scottish Act is in different terms than the English s.106.
The relevant part of s. 75 read as follows:
“75 Planning obligations
(1) A person may, in respect of land in the district of a planning authority—
(a) by agreement with that authority, or
(b) unilaterally,
enter into an obligation (referred to in this section and in sections 75A to 75C as a “planning obligation”) restricting or regulating the development or use of the land, either permanently or during such period as may be specified in the instrument by which the obligation is entered into (referred to in this section and in those sections as the “relevant instrument”).
(2) Without prejudice to the generality of subsection (1), the reference in that subsection to restricting or regulating the development or use of land includes—
(a) requiring operations or activities specified in the relevant instrument to be carried out in, on, under or over the land, or
(b) requiring the land to be used in a way so specified.
(3) A planning obligation may—
(a) be unconditional or subject to conditions,
(b) require the payment—
(i) of a specified amount or an amount determined in accordance with the relevant instrument, or
(ii) of periodical sums either indefinitely or for such period as may be specified in that instrument, and …”
Whereas in England s.106 allows planning obligations (a) to restrict the development or use of the land in any specified way;(b) to require specified operations or activities; (c) to require use in any specified way; or; (d) to require the payment of money.
The difference is that in England there are four available functions for a planning obligation. In Scotland there are only three. To achieve the fourth, payment of money, in Scotland there must be a planning obligation meeting one of the first three functions, to which the payment of money can then be added.
The Supreme Court confirmed that s.75(1) means that to be a planning obligation the promise must restrict or regulate the development or use of the land, and that a mere promise to pay, which did not also restrict or regulate the development would not qualify. So a simple promise to pay on a particular day is not in itself a planning obligation in Scotland. To turn it into a planning obligation, there must be a restriction, such as “no development shall take place until the sum of £x has been paid to the planning authority”. (The legislation also contemplates a planning obligation “regulating” the development, though what that might be is difficult to conceive, at least for this issue.)
So the Supreme Court was able to conclude that the promise to pay was not a planning obligation at all because it did not restrict or regulate the development – see para 62 of Lord Hodge’s judgment. This would have been sufficient to dispose of the case. But the wording of s.75 should not have driven the Supreme Court to hold that planning obligations must always have a more than trivial connection with the development.
Why is this important? After all, it is unusual for a planning obligation to be entered into without an accompanying planning permission. It is important because that is a possibility. It is important because it is sensible to have the right understanding of the law, or further misunderstandings may arise. It is important because there are already many misunderstandings about planning obligations arising from loose language. And it is important because of the final paragraph of the Supreme Court’s decision where they state that:
“If planning authorities in Scotland wish to establish a local development land levy in order to facilitate development, legislation is needed to empower them to do so”
That is not correct. And it is unfortunate because drawing on that, it is being said that a development levy cannot be done under section 106/75. Of course it is easier with a specific power. But the constraint on a local development levy is that it must be a material consideration for the decision whether or not to grant planning permission. If it is, it seems to me that s.75 can be used to secure it.
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