The High Court in R (Mansfield District Council) v Secretary of State for Housing, Communities and Local Government [2018] EWHC 1794 (Admin) has recently considered the appropriate legal test for applications to discharge existing s106 planning obligations and, in particular, the approach of such test in circumstances where the public works towards which the financial contribution was required have been completed prior to the due date for payment.
Legislation
Section 106A of the Town and Country Planning Act 1990 enables two methods of modifying or discharging a planning obligation, namely:
- by agreement pursuant to s106A(1)(a); or
- by the application of a liable person to the enforcing local planning authority after 5 years from the date of the planning obligation pursuant to s106A(1)(b).
If an application for modification or discharge of a planning application is made to the local planning authority then they may determine in accordance with s106A(6):
(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 modifications specified in the application, that it shall have effect subject to those modifications.
Section 106B provides a right of appeal to the Secretary of State in the event of the local planning authority failing to determine the application or determine that the planning obligation shall continue to have effect without modification.
Facts
Planning permission was first granted by the council for the subject development in September 1998, conditional upon specific highway works. The council agreed to carry out such highway works provided the developer contributed 75% (i.e. £459,346.85) towards the costs of such works. Such contribution was secured as a planning obligation by way of a s106 agreement.
The original development was not commenced and, subsequently in December 2008, a further planning permission was granted. The developer entered into a s106 agreement, replacing the previous s106 agreement and securing payment of the financial contribution towards the highway works for the same sum.
In April 2010, the developer obtained a further planning permission (on appeal) for a larger development scheme. Again, the developer entered into a s106 agreement replacing the previous s106 agreement and securing payment of the financial contribution towards the highway works for the same sum.
In July 2016, the developer applied to the council for a discharge of the s106 agreement. Between April 2010 and July 2016, the highway works were completed and £160,000 had been paid by the developer pursuant to the terms of the agreement. The balance was payable at a later date and was the remaining planning obligation the subject of the application for its discharge.
The application for discharge of the planning obligation was not determined by the council, and so the developer appealed to the Secretary of State. The appointed inspector allowed the appeal finding that, as the planning obligation related to a historic financial agreement for which such highway works were now complete, such contribution was not necessary to make the residential development acceptable. Therefore, the planning obligation no longer continued to serve a useful purpose.
The council sought judicial review of the inspector’s decision.
Decision
The High Court agreed with the council that the inspector had made an error in law by failing to identify the purpose of the planning obligation and then to consider whether it served ‘any’ useful purpose as opposed to just any useful ‘planning’ purpose. Accordingly, the court quashed the decision of the inspector.
In particular, the court confirmed that the proper test to be considered when deciding an application under s106A(1)(b) involves the following four questions:
- what is the current obligation?;
- what purpose does it fulfil (i.e. planning or non-planning purpose)?;
- is it a useful purpose? and if so;
- would the obligation serve that purpose equally well if it had effect subject to the proposed modification (if applicable)?
The court found that the inspector satisfied the first question but did not expressly consider the second question (that is, what purpose the planning obligation served). As such, the inspector was then unable to answer the third question as to whether such purpose was useful. In any event, the court found that the inspector made an error in law in her assessment of the third question, in that she wrongly only considered whether there was any useful ‘planning’ purpose.
Accordingly, the court concluded that, had the inspector correctly considered the second question, then ‘she would have been bound to conclude that that purpose was to enable the Council to recover some of the costs of the original highway works which had been carried out by the Council in connection with the 2010 application and agreement. Releasing the Appellant from that obligation would undermine that purpose’.
Lesson: It is a high bar for a successful application for the discharge of an existing planning obligation. Rightly, such obligation may no longer serve a useful planning purpose at the time of the application in reference to the three (3) tests in paragraph 56 of the revised NPPF. However, it may still serve a useful ‘non-planning’ purpose. This could reasonably include the recovery of costs associated with completed public works originally agreed and arising from a planning permission.
