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On 5 March Thornton J refused to grant Norfolk Homes Limited summary judgment in its claim for a declaration that its residential development in Holt, Norfolk is not bound by planning obligations set out in a Section 106 Agreement. This means that the matter will now need to be determined at full trial.
To summarise the facts of the case, in 2012 North Norfolk District Council (“the Council”) granted Norfolk Homes outline planning permission for 85 dwellings. That grant of permission was subject to a Section 106 Agreement securing an affordable housing scheme and financial contributions to a local recreation ground, car parking, community centre and nature conservation.
In September 2015 the Council approved a s73 application to vary two conditions of the permission. Importantly, no deed of variation was made tying the obligations in the Section 106 Agreement to the newly granted s73 consent.
Reserved matters consent was then granted in August 2016.
Planning consultants for Norfolk Homes made payments under the Section 106 Agreement in December 2016, January 2017 and February 2017 and the pre-commencement conditions were all discharged by May 2018.
Fast forward to August 2019. Norfolk Homes wrote to the Council seeking its confirmation that the development, which had commenced under the s73 consent, was not bound by the obligations in the Section 106 Agreement. The Council declined to do so and also refused to grant a Certificate of Lawfulness in those terms.
In October 2019 Norfolk Homes issued proceedings in the High Court seeking a declaration that the development is not bound by any of the obligations contained in the Section 106 Agreement and an order requiring the Council to remove reference to the Section 106 Agreement from the Land Charges register.
It was common ground that the development had been commenced in time and under the s73 consent. The parties disputed the significance of the payments that had been made under the Section 106 Agreement, but after the grant of the s73 consent.
Norfolk Homes argued that the payments were made without prejudice and are legally irrelevant to the claim. The Council say the payments are consistent with the their understanding that the Section 106 Agreement continued to apply to the varied permissions.
Thornton J was not persuaded that the claim gives rise to a short point of law, as was submitted to her by Counsel for Norfolk Homes. The Judge listed the issues that arise from the case as follows:
- To what extent are the legal principles for interpreting a Section 106 Agreement the same as those for interpreting any other planning document?
- Should the Section 106 Agreement be construed in accordance with its ordinary and natural meaning; the statutory and planning context (including the subsequent section 73 consents) (see the judgement in the Lambeth case, paragraph 19) or should it be construed according to the principles of contractual interpretation set out in Arnold v Brittan that the contract should be construed according to the facts and circumstances at the time of the contract?
- To what extent is the case of Lambeth v Secretary of State relevant to the present case?
- Can the Council be said to have fallen into a 'technical trap' of the sort envisaged by Court in Lambeth v Secretary of State? To what extent, if at all, should the Courts intervene to protect the Council from any 'technical trap'?
- Can the case of Lambeth be said to establish the principle that developers should not be able to evade obligations by relying on technical traps.
- The legal relevance, if any, of the payments made under the section 106 agreement in 2016/2017.
- The legal relevance, if any, of the implications of the developer's case being inconsistent with a key planning priority for the Council (the provision of affordable housing).
The decision in this case when it goes to trial will be very important for all involved in planning.
The Supreme Court’s decision in Lambeth (the interpretation of a s73 consent on which the council failed to repeat the relevant conditions from the previous permission) caused a stir. That decision may be viewed as an exercise in common sense, finding for a literal meaning of the permission over the statutory code but it does leave significant room for a disagreement between applicants and Local Planning Authorities over the interpretation of permissions. However, it is important to stress that the decision was specific on its facts and in particular on the wording of the s73 consent.
Whatever the outcome in Norfolk Homes, Local Planning Authorities should always ensure that the obligations in Section 106 Agreements are tied to s73 consents, usually be a Deed of Variation. Another option is to include provisions in the Section 106 Agreement which bind the obligations to any subsequent s73 consents. The appetite to do this varies from authority to authority. However if the wording of the clause enables the Local Planning Authority to have discretion to require a Deed of Variation in circumstances when they deem it appropriate to do so, then this should give sufficient comfort to adopt this practice. After all, it is safer than running the risk of what happened in Norfolk, whatever its outcome in the courts.