An unnecessary evil

An unnecessary evil


Author: Marcus Woody

Developers may risk liability for payment of potentially onerous but unnecessary financial obligations, merely because they enter into Section 106 agreements or undertakings which omit the required exclusion clauses

This point was emphasised in the recent case of Millgate Development Ltd v Wokingham BC, in which the Court of Appeal was asked to consider the lawfulness of a council's refusal to discharge an obligation, offered at appeal; despite the Inspector being prepared to grant permission without that obligation.

The appeal concerned an application for 14 dwellings and the developer entered an unconditional obligation to pay contributions towards local infrastructure facilities, before commencing development.

No evidence was submitted as to the calculation of those contributions or the purposes for their use. The Inspector concluded that they were unnecessary and carried little weight in his decision to approve the appeal.

The development was implemented, but the contributions were never paid. The developer requested that the obligation be discharged, as it was unnecessary. The council refused, insisting on payment of the outstanding monies.

The developer challenged the council's decision on three main grounds:

  • the monies were not required (necessary) for the planning purposes stated
  • it was unlawful to refuse to discharge the obligation because it was bound by the appeal decision
  • under the adopted development plan contributions must be necessary to enable development

The court held:

  • the failure to provide for infrastructure needs was a legitimate reason for refusal, and the obligation to pay contributions to meet those needs was a legitimate planning purpose
  • the developer did not question the need for or the amounts of the contributions at the appeal, and the fact the Inspector granted permission without giving weight to the obligation did not detract from its lawfulness
  • once an obligation becomes binding, its enforceability cannot be challenged because it lacked sufficient nexus with the development when it was entered into
  • the decision to enforce a contractual obligation is not a planning decision to which the council is required to have regard to the development plan
  • the obligation was lawful and enforceable on its own terms

The decision will be a warning to developers to ensure that Section 106 agreements/undertakings contain the necessary exclusions, so that liability can be avoided if either the council, or an Inspector on appeal, considers that specific obligations are unnecessary or not required to overcome any hurdles to permission being granted.

Given the current transition in planning policy and the likelihood of more 'planning by appeal' in the foreseeable future, developers and their legal advisers should spend time considering the necessity for specific obligations, and ensuring inclusion of the required mechanism to exclude unnecessary liabilities.