Town and Country Planning Act 1990 – Respondents granting planning permission to rival parties for development on site – Resolution to exercise section 226(1)(a) compulsory purchase powers in favour of one party – Whether entitled to take into account prospect that development of CPO site would cross-subsidise other development – Appeal allowed
The ownership of a potential development site was divided between the appellant, which held most of the land, the second respondent, which owned much of the remainder, and the first respondent council, which were also the local planning authority. Both the appellant and the second respondent submitted planning applications for a mixed-use development on the site. The first respondents resolved to grant outline permission for each application. Thereafter, they resolved in principle to make a compulsory purchase order (CPO), under section 226 of the Town and Country Planning Act 1990, to facilitate the second respondent’s scheme. They considered that either scheme would bring appreciable planning benefits and improve the social, economic and environmental well-being of the city, as required by section 226(1A). In choosing the second respondent’s scheme, they took into account the fact that its development of the CPO site would cross-fund the development of a second site, also owned by the second respondent, which would otherwise be financially unviable.
On an application for judicial review of that decision, the appellant contended that the first respondents had not been entitled to take into account the benefits of developing the second site. Dismissing the claim, the trial judge held that: (i) those benefits did not fall for consideration under section 226(1A) because that provision dealt only with benefits that flowed from the redevelopment of the CPO site; but (ii) they were none the less considerations material to the exercise of the CPO power under section 226(1)(a): see [2009] EWHC 134 (Admin); [2009] JPL 1354. The Court of Appeal dismissed the appellant’s appeal against that decision on the wider ground that the benefits of developing the second site did fall for consideration under section 226(1A). It held that that provision required the planning authority to consider the extent to which redevelopment of a CPO site would achieve economic, social or environmental “well-being” benefits to a wider area, including the likelihood that it would act as a catalyst for redevelopment of another site: see [2009] EWCA Civ 835; [2009] 44 EG 210. The appellant appealed to the Supreme Court.
Held (Lord Phillips and Lord Hope dissenting): The appeal was allowed.
The relevant principles derived from the case law in the planning context were: (i) the question of what constituted a material consideration was a question of law, but the weight to be given to such a consideration was a matter for the decision-maker; (ii) financial viability might be material if it related to the development; (iii) the financial dependency of one part of a composite development on another could be a relevant consideration, in so far as the proposed development would finance other relevant planning benefits; and (iv) off-site benefits that were related to or connected with the development would be material: Tesco Stores Ltd v Secretary of State for the Environment [1995] 2 EGLR 147; [1995] 27 EG 154 applied; R v Westminster City Council, ex parte Monahan [1989] 1 PLR 36 and R v Plymouth City Council, ex parte Plymouth & South Devon Co-operative Society [1993] 2 EGLR 206; [1993] 36 EG 135 considered. Given the similar context, there was no reason why similar principles should not apply to compulsory acquisition for development purposes, provided that it was recognised that because of the serious invasion of proprietary rights involved in compulsory acquisition, a strict approach to the application of those principles would be required. There had to be a real, rather remote connection between the off-site benefits and the development for which the compulsory acquisition was made.
The only connection between the proposed developments on the CPO site and the second site was that the appellant had agreed to develop the second site if it acquired the CPO site. Although the commercial effect would be that the financial deficiency incurred by the second respondent on the second site would be “cross-subsidised” by the development of the CPO site, it was for the second respondent to decided how it funded any loss or presented any lower return from its development of the second site. The development of the CPO site would not, in any legally relevant sense, contribute to the well-being benefits flowing from the development of the second site. Section 226(1A) did not allow an authority to take into account a commitment by the developer of a site, part of which was to be the subject of a CPO, to secure the development, redevelopment or improvement of another, unconnected site so as to achieve further well-being benefits for the area. Accordingly, the benefits of the development of the second site could not be taken into account when considering the section 226(1A) well-being benefits flowing from the CPO site.
Nor could those benefits be taken into account as “material considerations” relevant to the exercise of the first respondents’ powers under section 226(1)(a). Only relevant matters could be taken into account and, for the reasons above, the claimed financial connection between the two sites was not such as to amount to a relevant matter. Although the financial viability of a proposed development might be a highly material matter, such that the need for a cross-subsidy to finance the development of the CPO site would be relevant, it did not follow that a cross-subsidy from a CPO site to another site was a material consideration. It was irrelevant that a conditional agreement for sale linked the obligation to carry out works on the second site. Although the power of compulsory purchase could be used to assemble a site for a preferred developer, that did not mean that a local authority could take into account unconnected benefits in deciding whether property should be compulsorily acquired for the purpose of disposing of it to a preferred developer. The first respondents could not deprive the appellant of its property by compulsory acquisition so as to derive from its disposal benefits that were wholly unconnected with the acquisition of the property: Standard Commercial Property Services Ltd v Glasgow City Council (No 2) [2006] UKHL 50; 2007 SC (HL) 33 considered.
An order would be made declaring that the opportunity for redevelopment of the second site was not a lawful consideration in deciding whether to make a CPO in respect of the CPO site.
Christopher Lockhart-Mummery QC, Eian Caws and Charles Banner (instructed by CMS Cameron McKenna LLP) appeared for the appellant; Neil King QC and Guy Williams (instructed by Wragge & Co LLP, of Birmingham) appeared for the first respondents; Christopher Katkowski QC and Scott Lyness (instructed by Ashurst LLP) appeared for the second respondent.
Sally Dobson, barrister
