Case law update

Aberdeen City and Shire Strategic Development Planning Authority v Elsick Development Company Limited (Scotland) [2017] UKSC 66

In this landmark decision handed down on 25 October 2017, the Supreme Court clarifies the law governing planning obligations made under Section 75 of the Town and Country Planning (Scotland) Act 1997.

The Court finds that it is unlawful for local authorities to require financial contributions to be made towards pooled funds for infrastructure which is unconnected to the development of a particular site.

The decision will have a significant bearing on planning and the negotiation of planning obligations in Scotland.

Background

Aberdeen City and Shire Strategic Development Planning Authority (the 'Authority') sought to establish a pooled fund to facilitate significant transport infrastructure improvements, which they considered necessary to support development generally in their area. The Authority adopted Supplementary Guidance to implement a Strategic Transport Fund (the 'Fund') within its Strategic Development Plan.

Elsick Development Company Limited ('Elsick') were proposing to develop approximately 4,000 houses together with commercial, retail and community facilities at Elsick, near Stonehaven within the Authority's area. Elsick had objected to the Supplementary Guidance when a draft had been put out to consultation on the grounds that it was contrary to guidance contained in circular 3/2012, "Planning Obligations and Good Neighbour Agreements".

At the same time, Elsick entered into a Section 75 Agreement with the Authority, which included an obligation to contribute to the Fund on the condition that no contribution would be made if the Supplementary Guidance was subsequently found to be invalid.

The Authority subsequently adopted the Supplementary Guidance and Elsick appealed against the adoption to the Inner House of the Court of Session under section 238 of the 1997 Act. The appeal was allowed and the Supplementary Guidance was quashed at first instance on the grounds that it failed to comply with national policy on the use of planning obligations and a fundamental principle of planning law that a planning obligation must fairly and reasonably relate to the permitted development.

The Authority then appealed to the Supreme Court on the basis that the contents of the Circular were not part of the legal tests to determine the validity of a planning obligation, that the Inner House's approach to policy was 'unduly restrictive' and that the Circular was in fact complied with, given that the Developer had the opportunity to make mitigation contributions to infrastructure outside of the Fund as an alternative.

Judgment

In dismissing the appeal, the Supreme Court considered four fundamental questions:

1. the correct legal test as to the lawfulness of a planning condition;
2. the correct legal test as to the lawfulness of a planning obligation;
3. the role of a planning obligation in the decision to grant or refuse planning permission; and
4. the boundary between questions of legality and questions of policy.

Addressing question i), the Court noted that the 1997 Act confers a wide power on local authorities to impose such conditions 'as they think fit' on the grant of planning permission. However, such powers have long been interpreted restrictively by the courts to prevent abuse of power. Conditions must only be imposed for a planning purpose and not to achieve some ulterior object; they must 'fairly and reasonably relate to the permitted development'; and they must not be Wednesbury unreasonable (as determined in the Wednesbury test case). The Court affirmed that this three-fold test for validity, having been repeatedly approved by judges at the highest level, is an established part of planning law.

Addressing question ii), the Court noted that planning obligations are also of statutory creation and that Section 75 of the 1997 Act requires that the obligation restricts or regulates the development or use of the land to which it relates. Consideration was given to Tesco Stores Ltd v Secretary of State for the Environment (1994) 68 P & CR 219 (the 'Tesco case') (relating to planning obligations governed by the Town and Country Planning Act 1990 in England) which found that "the only tests for the validity of a planning obligation outside the express terms of section 106 [of the 1990 Act] are that it must be for a planning purpose and not Wednesbury unreasonable.

However, the Court goes on to clarify that an obligation which requires a developer to contribute towards infrastructure which is unconnected to the development of the site cannot be lawful because they would undermine the obligation on the authority to determine each application on its merits and could amount to the buying and selling of a planning permission. The Court found that "Section 75, when interpreted in its statutory context, contains an implicit limitation..namely that the restriction must serve a purpose in relation to the development or use of the burdened site. An ulterior purpose, even if it could be categorised as a planning purpose in a broad sense, will not suffice."

Addressing question iii), the Court broaches the Tesco case once more in order to address the question. Section 37(2) of the 1997 Act specifies that the planning authority must have regard to provisions within a development plan (if it is material to the application), much the same as Section 70(2) of the 1990 Act. However, in order for it to be material, it must be relevant to the development; for example, in this case, even though the Fund was part of the Strategic Development Plan, it is not a material consideration as the improvements the Fund encompassed were not in their entirety directly or cumulatively linked to the development.

Finally, addressing question iv) the Court states that 'relevant ministerial guidance which sets out national planning policy' is absolutely a material consideration for any planning authority in determining planning applications. This is applicable in both Scotland and England and Wales, and any failure to take this into consideration is unlawful.

Summary

The case establishes for the first time clear legal limitations on the use of planning obligations as means for local authorities to obtain funding for infrastructure. Such contributions must be linked directly to the development and not part of a pooled fund which is includes provisions for investment not directly related to the development. Using an obligation as a mechanism to obtain contributions to a pooled fund without establishing more than a trivial or de minimis link to the development will be unlawful. The decision is likely to have far reaching implications for local authorities and developers and will underpin the negotiation of Section 75 Agreements going forward.