The High Court in Wet Finishing Works Ltd, R (On the Application Of) v Taunton Deane Borough Council [2017] EWHC 1837 (Admin) recently had the opportunity to consider whether local planning authorities have a duty to consult on the drafting of a section 106 agreement with non-contracting interested third parties. A limited duty was found to arise.
The case concerned a section 106 agreement entered into for the purposes of enabling the grant of a section 73 planning permission (“second s106 agreement”). The section 73 planning permission authorised the increase of the residential dwelling numbers from 84 to 90 units. A section 106 agreement was secured for the original planning permission (“first s106 agreement”).
The planning obligation in question was the requirement of the landowner to pay a Heritage Asset Contribution for the restoration of an adjacent derelict Grade II* listed building. The sum payable was identical for both s106 agreements. The owner of the heritage asset was a covenanting party to the first s106 agreement which provided a mechanism for the contribution whereby it was paid to the council who was then obligated to transfer the money to the heritage asset owner for the purposes of carrying out restoration works. The heritage asset owner provided certain covenants to the council in relation to such restoration work.
The cause of the dispute was that the second s106 agreement removed the heritage asset owner as a covenanting party. The new mechanism for the contribution was simply a payment to the council for its own use in the restoration of the heritage asset. Effectively, the heritage asset owner was cut out of the second s106 agreement. No consultation was undertaken with the heritage asset owner as to this new mechanism for the planning obligation relating to the heritage asset’s restoration.
Outside of the statutory consultation on planning applications (including s73 applications), there is no such statutory duty to consult with interested parties on proposed section 106 agreements.
The Decision
Singh J noted the common law duty of procedural fairness required of public authorities can include a legitimate expectation of consultation where there is a ‘pressing and focussed’ impact to a benefit currently being enjoyed by a party. He found that such benefit can be a contingent benefit such as in this case a planning obligation conditional upon commencement of the development.
Accordingly, Singh J determined that the council had failed to comply with the duty to act fairly by not affording the heritage asset owner an opportunity to comment on the proposed second s106 agreement.
Section 31(2A) of the Senior Courts Act 1981 provides that the Court must refuse relief (in this case the quashing of the permission) if it appears highly likely that the outcome for the applicant would not have been substantially different had the conduct complained of not occurred. Singh J found that it was not highly likely the outcome would be substantially the same once the council considered the heritage asset owner’s comments (with an open mind).
The s73 permission was therefore quashed.
Lesson: wide consultation on the drafting of section 106 agreements is not required. However, where a third party has obtained a benefit from previous agreements associated with past planning permissions then, to ensure procedural fairness, such third party should be consulted on the draft section 106 agreement to the extent it materially affect such benefit (whether arising from s73 planning applications to vary the existing permissions or fresh planning applications).
