Town and country planning – Affordable housing – Section 106 agreement – Appeals arising out of claim by appellant council to recover money from respondent in lieu of affordable housing within residential development – Sum falling due under section 106 agreement – Whether judge wrongly interpreting agreement – Whether judge erring in finding that sections 106BA and 106BC of Town and Country Planning Act 1990 Act applied to accrued rights to recover commuted sums – Appeals dismissed
In October 2003, the then-owner of land at 187 Tadcaster Road, York entered into a section 106 agreement by which a proportion of the housing to be constructed in accordance with outline planning permission was to be affordable housing. In default of on-site provision, the owner was required to pay the appellant local authority commuted sums, on the sale of each of the affordable housing units on the open market, by reference to the amount of social housing grant (SHG) necessary to secure affordable rented homes of equivalent type and size on another site in a similar residential area. The respondent advised the appellant that it had offered the affordable units to registered social landlords without success, and invited the appellant to propose a commuted sum to be paid. By that time, the SHG regime was no longer in place and the parties were unable to agree how the commuted sum should be calculated.
The respondent denied that any sum was payable under the agreement because it did not provide a workable basis for calculating the sum due and invited the court to construe the relevant clauses to give practical effect to the parties’ agreement. In 2013, sections 106BA-BC of the Town and Country Planning Act 1990 Act came into force. The respondent applied to the appellant pursuant to section 106BA to be released from the obligation to pay a commuted sum under the agreement. The appellant refused and the issue was the subject of an ongoing appeal.
The court held that, on a true construction of the section 106 agreement, a commuted payment was payable because the parties must have intended that the respondent was expected either to provide affordable housing or pay a commuted sum in lieu. The agreement was intended to provide a method of calculation which produced a sum as close as possible to the figure that would have been payable if SHG still existed. However, the court found that section 106BA had retrospective effect so that the respondent would be released from that liability if its appeal under section 106BC was allowed.
The appellant appealed, contending that the judge erred in finding that sections 106BA and 106BC of the 1990 Act applied to accrued rights to recover commuted sums under the agreement. The respondent cross-appealed, contending that the judge wrongly interpreted the wording of the agreement and substituted another test for that which the parties had chosen.
Held: The appeals were dismissed.
(1) The judge’s interpretation of the agreement was correct. The intention of the parties was that a commuted sum should be paid. That intention was translated by the parties into the primary obligation to pay a commuted sum as set out in the agreement. The respondent said that planning permission would not have been granted without the commitment of the respondent’s predecessor to pay a commuted sum. In addition, the sum of money was originally capable of quantification; it was only subsequent events that led to the uncertainty which related only to quantification not the principle of payment. It would defeat the underlying purpose of the agreement if the clause were unenforceable due to lack of certainty. The parties’ intention was that the respondent should pay a sum of money to the appellant if it did not provide affordable housing. The quantification of that sum was equivalent to the amount of money which would have been provided had the social housing grant remained in being. Although that was a departure from the literal words of the contract, it was the only sensible solution to the problem posed by the abolition of the SHG on which the clause was premised. The clause provided that the developer should pay enough money to enable the appellant to provide equivalent affordable housing: the best the court could do was work out a roughly equivalent figure for that sum. That was the bargain to which the parties should be held. The decision of the judge gave effect to the intention of the parties and the respondent’s appeal would be dismissed: Arnold v Britton [2015] UKSC 36; [2015] EGLR 53 applied.
(2) Parliament was presumed not to have intended to alter the law applicable to past events and transactions in a manner which was unfair to those concerned, unless a contrary intention appeared. The statutory scheme provided a purpose for the modification and discharge provisions in section 106BA which was silent about the effect upon accrued rights of that process. The modification of the planning obligation looked forward but said nothing about accrued rights. The purpose of sections 106BA and 106BC was to address section 106 agreements which were “an obstacle to house building”, and focused upon “stalled schemes”. Affordable housing obligations could arise part way through a development. It would be consistent with the purpose if such an obligation could be discharged or modified in order for the development to continue. The way in which sections 106BA and 106BC worked to achieve that purpose was that the developer made an application to the appellant and then to the secretary of state. The developer had to submit evidence that the development had become not economically viable due to the affordable housing requirement. The appellant and the secretary of state would then determine whether the development was economically viable on the basis of the evidence and determine what actions were to follow if it was not. There was thus a new public interest which outweighed the pre-existing public interest in the provision of affordable housing. By introducing sections 106BA and 106BC, Parliament interfered with and removed the right of local authorities to enforce or insist upon section 106 affordable housing agreements even where the local authority would not have granted planning permission without that agreement. The interference with pre-existing rights applied to agreements entered into before and after the amendments and had retrospective effect. The pre-condition of economic non-viability mitigated the risk of unfairness to the appellant.
Neil King QC and Richard Turney (instructed by Womble Bond Dickinson UK LLP) appeared for the appellant; Paul Brown QC (instructed by Walker Morris LLP) appeared for the respondent
Eileen O’Grady, barrister
Click here to read a transcript of City of York Council v Trinity One (Leeds) Ltd
