The word “development” means different things to different people. Section 55 of the Town and Country Planning Act 1990 defines “development” as “building, engineering, mining or other operations in, on, over or under land, or the making of any material change in the use of any buildings or other land”. Furthermore, “building operations” include demolition, rebuilding, and structural alterations of or additions to buildings, as well as other operations normally undertaken by a person carrying on business as a builder.
The question that arose in Fishbourne Developments Ltd v Stephens [2020] EWCA Civ 1704 [2020] PLSCS 228 was whether the grant of planning permission to erect a new pitched roof on an agricultural building was a “planning permission” for the purposes of an option agreement. The agreement defined a “planning application” as “any planning application made by the purchaser in respect of land which includes the property or any part thereof to obtain the planning permission” – and the all important expression “planning permission” was defined to mean “a planning permission granted by the local planning authority permitting any development of the property”.
The developer argued that the grant of the planning permission for a new roof had triggered its right to acquire the entirety of the option land, comprising 117 acres of farmland. But the High Court ruled that, on a proper interpretation of the agreement, “development” meant development that included new building, involving a change of use (although not necessarily for housing), and that “development of the property” meant development of the whole, or substantially the whole, of the option land. So the disputed permission was not a “planning permission” within the meaning of the option agreement.
The Court of Appeal has upheld the decision – despite the developer’s arguments that it should focus on the words used and be slow to reject the natural meaning of a provision simply because it appeared to be imprudent. The court ruled that the term “development” is capable of having more than one meaning and that it must weigh up the implications of rival meanings and apply commercial common sense.
The option agreement included a 30% discount to the open-market value, indicating an expectation that the developer would take steps to enhance the value of the land in order to be able to exercise the option. Whereas, if the developer were correct, the landowner would have to part with the option land in return for an option fee of £1 and at a discounted price, following the grant of a planning consent that had not increased the value of the property. This did not make commercial common sense. So the court rejected the notion that a reasonable reader, with all the relevant background available to the parties at the time, would apply the breadth and technicality of section 55 of the 1990 Act when interpreting the agreement.
Furthermore, the “planning permission” must relate to the whole or substantially the whole of the option land, despite the use of the phrase “or any part thereof” in the definition of “planning application” (which signified only that multiple planning applications for different parts were permissible in order to develop the whole). To read the provisions differently would create a disconnect between the trigger for the option and provisions in the option agreement dealing with the acquisition of the option land and its price (which referred to the whole of the option land).
Allyson Colby, property law consultant