Local authority – Legitimate expectation – Development – Appellant purchasing land from respondent local authority on terms requiring re-transfer to respondents in event that proposed development of new mosque not completed by longstop date – Delays occurring in consideration of planning application for that development – Development not carried out by longstop date – Whether respondents entitled to call for re-transfer of land – Whether appellant having legitimate expectation of extension to timetable for development – Appeal dismissed
The appellant association sought to build a new mosque in Dudley to replace its existing premises. In May 2003, they took a lease of a new site from the respondent council together with an option to acquire the freehold on terms that included a covenant to carry out the mosque development with all practicable speed and in any event before 31 December 2008, failing which the appellant could would be required to vacate the property and re-transfer it to the respondents. At the time when the lease was granted, planning permission had not yet been granted for the proposed mosque.
In late 2004, the appellant committed itself to acquiring the freehold of the site pursuant to the option, notwithstanding that consideration of its planning application had been delayed and the respondents had indicated their unwillingness to extend the timetable under the covenant. The transfer of the freehold was executed in March 2005 with the covenant in unamended form, requiring completion of the development by a longstop date of 31 December 2008.
At the request of the respondents, the appellant withdrew its planning application in 2005 while council elections took place. In September 2006, an officer of the respondents wrote to the appellant indicating that, since the development had been delayed due to factors beyond the appellant’s control, a new target date for completion of the development needed to be set “once planning permission is resolved”.
The appellant resubmitted its planning application in January 2007 but the respondents refused planning permission. Permission was granted by a planning inspector on appeal but there was insufficient time to complete the development by the longstop date.
The respondents brought a claim against the appellant for specific performance of the obligation to re-transfer the site pursuant to the covenant. In its defence, the appellant contended that the decision to insist on a re-transfer was in breach of a legitimate expectation created by the September 2006 letter, or was otherwise an abuse of power. The respondents’ application to strike out the defence, as having no real prospect of success, was allowed by a master and by a judge on appeal. The appellant brought a second appeal.
Held: The appeal was dismissed.
If the appellant had a valid public law challenge to the respondents’ claim to enforce their contractual rights, there would be no procedural bar to raising it as a defence to the respondents’ proceedings: Wandsworth London Borough Council v Winder [1985] AC 461 applied. However, no such public law challenge was available on the facts of the case. Although the respondents were acting under statutory powers, namely the power conferred on them by section 120 of the Local Government Act 1972 to acquire land in their area, the case was not about the unilateral exercise by the respondents of a statutory power but was instead about the implementation of a commercial bargain. In substance, the case concerned the enforcement of a contract willingly made by both parties with the aid of legal advice. A public law defence based on legitimate expectation was not available as a defence to a claim to enforce a contract. In the absence of bad faith or an improper motive, the case would be governed by private law: Hampshire County Council v Supportways Community Services Ltd [2006] EWCA Civ 1035; [2006] LGR 836 and Krebs v NHS Commissioning Board [2014] EWCA Civ 1540 applied.
The terms of the contract between the appellant and the respondents were clear. If the development had not been completed by 31 December 2008, the appellant was bound to transfer the site back to the respondents. Although that obligation was conditional at its inception, it became unconditional once the longstop date passed. No exercise of discretionary or statutory power by the respondents was required to bring that unconditional obligation into being; it was simply a consequence of the terms of the contract that the parties had agreed. The essence of the appellant’s case was that the legal effect of that contractual obligation has been suspended and that the contract could not be enforced until the appellant had been given a reasonable time in which to complete the development for which it now had planning permission. Under the private law of contract, any such defence would go under the label of waiver or promissory estoppel, but the appellant was advancing no such case. In any event, since the relevant contractual obligation involved the transfer of an interest in land, any such variation of the contract would be invalid for failure to comply with the formality requirements of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.
(2) Accordingly, in the circumstances of the case, there was no public law defence available to the appellant based on legitimate expectation or a general appeal to abuse of power. In any event, no such defences would have been available on the facts. The letter of September 2006 was insufficient to found a legitimate expectation. The appellant could not cherry pick; the letter had to be viewed in the context of the communications between the parties as a whole, including both earlier and later correspondence in which the respondents had refused any extension of the timetable for development. Further, the September 2006 letter merely stated that a new target date would need to be set once planning permission was resolved. That would necessarily involve a variation of the contract by mutual agreement and could not be done unilaterally by the respondents. It was open to either party to propose a new target date but the appellant had taken no initiative to open discussions on the subject.
Although a citizen could rely on an allegation of abuse of power to impugn a decision by a public authority even where there had been no clear representation creating a legitimate expectation, there had been no abuse on the facts of the case. It would not usually be an abuse of power to exercise contractual rights freely conferred, even if the result might appear to be a harsh one. A finding of abuse of power depended on unfairness, and it was not usually unfair to hold parties to the terms of the contract that they had agreed. The respondents could not be said to have exercised their powers for the improper purpose of circumventing the grant of planning permission by the inspector. While the respondents were bound by the decision of the planning inspector in their capacity as planning authority, in their capacity as landowner they were entitled to enforce the contractual rights granted to them by the appellant. Even if they did so because they took the view that the site was unsuitable for a mosque, that would not have tainted their decision: R (on the application of Molinaro) v Kensington and Chelsea Royal London Borough Council [2001] EWHC Admin 896, [2002] LGR 336 applied.
David Matthias QC and Isabella Tarfur (instructed by The Wilkes Partnership LLP, of Birmingham) appeared for the appellant; Timothy Morshead QC and Galina Ward (instructed by Sharpe Pritchard LLP) appeared for the respondents.
Sally Dobson, barrister
Click here to read transcript: Dudley Muslim Association v Dudley Metropolitan Borough Council
