Millgate Developments Ltd, R (on the application of) v Wokingham Borough Council [2011] EWHC 6 (Admin)

Case No CO/5115/2008[2011] EWHC 6 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 14 th January 2011
Before
His Honour Judge David Pearl(SITTING AS A Deputy High Court Judge)
Between
The QueenClaimantOn the application ofClaimantMillgate Developments LtdClaimantWokingham Borough CouncilDefendant
Mr John Pugh-Smith and Mr Zack Simons (instructed by Pitmans Solicitor) for ClaimantMr Guy Williams (instructed by Wokingham Borough Council) for DefendantHearing Hearing date: 6 th December 2010
JudgmentHis Honour Judge David Pearl :Introduction
[1]Millgate Developments Ltd seek judicial review of a decision taken by the Defendant Local Authority by letter dated 23rd April 2008. This letter purported both to refuse the discharge and to seek the enforcement of the terms of a Unilateral Undertaking dated 22nd March 2007 made under section 106(1) of the Town and Country Planning Act 1990.[2]Permission to seek judicial review was refused on the papers by His Honour Judge Pelling QC on 2nd September 2008. Mr Justice Cranston granted permission after an oral hearing, subsequent to a renewed application, by Order dated 16th January 2009. The Order states “Permission to proceed with the claim for Judicial Review be granted”.[3]Although I heard argument relating to whether Mr Justice Cranston sought to limit the extent of the grounds upon which he granted permission, and indeed I have had the opportunity of reading extracts from the exchanges between Counsel and Mr Justice Cranston, it is my finding that I am not limited by the terms of the Order (quoted above) to hearing submissions only on certain grounds. In consequence, I heard submissions on all of the grounds submitted by the Claimant when seeking judicial review of the 23rd April 2008 decision.[4]I have had to deal with a further preliminary point, namely whether certain Witness Statements from Consultants instructed by the Claimant and obtained subsequent to the Decision should be allowed in as evidence. I have decided to allow in this evidence, but limited to demonstrating, as the Claimant urges on me, that the 23rd April 2008 decision is open to challenge on judicial review grounds. I do not allow in the evidence in order to reopen what may be perceived as factual decisions on the merits made by the Council on 23rd April 2008.

Background

[5]The Claimant, a residential developer, sought planning permission in 2006 (F/2006/8913) to develop land at Colemans Moor Lane, Woodley, near Reading in Berkshire. The proposed development is the erection of 14 dwellings.[6]The Officers’ Committee Report concluded that the proposed form of development was not appropriate to the character of the surrounding area and accordingly the application was recommended for refusal.[7]The Officers’ Committee Report stated that the proposed development would attract the following contributions in line with the Council’s Supplementary Planning Advice Note (PAN) and Policy WOS4 of the Local Plan: Highways - £53,3000; Leisure - £62,231.78p; Primary Education – total of £9,393; Secondary Education - £42,283; Libraries - £3,276. The Report went on to recommend that in the absence of a section 106 agreement, there should be a “holding reason” for refusal in respect of the trees and financial contributions.[8]By a Notification Letter dated 22nd December 2006, the Wokingham District Council refused permission for carrying out the development. One of the refusal reasons (no 2) states that:
“the proposal fails to make satisfactory provision of adequate services, amenities and infrastructure needs and consequently would have an unacceptable adverse impact upon the amenities of the area. As such the proposal is contrary to policies DP4 and T4 of the Berkshire Structure Plan and Policies WOS4, WR7, WT1, WT3 and WET7 of the Wokingham District Local Plan.”
[9]The letter provides the following “Information”, namely that refusal number 3 (which must, to make sense, be a typing error for number 2) could be overcome through the submission of an acceptable Unilateral Undertaking.[10]The Claimant appealed under section 78 of the Town and Country Planning Act 1990 against the refusal of permission. Interestingly, and of some importance, the Amplification of Grounds of Appeal deals only with the refusal of permission based on the poor layout of the site etc. It states that the second issue “will be resolved through the submission of four different undertakings”.[11]By a Decision Letter dated 9th May 2007, the appeal was allowed, in that planning permission was granted subject to conditions set out in the Formal Decision. Paragraph 13 is the only paragraph that deals with Infrastructure. It says: “The Council’s request for contributions towards highways, leisure, education and libraries are addressed by the Appellant through the submission of unilateral undertakings. However, the Council produce nothing to show that those contributions are necessary in order to satisfy the tests in Structure Plan Policy DP4, Local Plan Policy WOS4 or Circular 5/05, Planning Obligations. I therefore conclude that contributions to the provision of infrastructure are unnecessary and afford the unilateral undertakings little weight”.[12]The Undertaking which is the subject of the dispute is the one dated 22nd March 2007. It states in 2.2 that: “The obligations contained in and created by this Undertaking shall not take effect unless and until the Planning Permission shall have been granted and Commencement of Development shall have taken place”.[13]There are specific paragraphs relating to Highways, Primary School Contribution, Secondary School Contribution, Off-site Leisure Contribution, and Library Contribution. In the case of each contribution there is a requirement that the contribution be applied towards measures: “within the Borough where reasonably required by the Council in the light of the likely or actual impact upon such facilities in the Borough arising from the development”.[14]There is a further Undertaking dated 13th April 2007, which is to the same effect as the March Undertaking, except that it omits reference to Highways. The 13th April Undertaking states “it is our view that the Council have not provided justification for the highway contribution and as such it does not meet the tests under Circular 05/2005”. It was common ground between the parties that it is the March Undertaking that should be the focus of this hearing.[15]Solicitors acting on behalf of the Claimant emailed the Council on 18th October 2007 seeking confirmation that, in the light of paragraph 13 of the Decision Letter of the Inspector, the Undertakings would now be removed from the Register of Local Land Charges.[16]The reply, dated 31st December 2007, makes clear that having taken Counsel’s advice, it was the Council’s position that the Inspector’s decision did not affect the enforceability of the obligations. The email of this date states that the Unilateral Undertakings would not be removed from the Land Charges Register. By letter dated 14th January 2008, the Council required the Claimant to meet the terms of the Undertaking (by which is meant the March Undertaking) within one month of the date of the letter.[17]After further email exchanges between the parties, the Claimant’s Solicitor received a letter dated 23rd April 2008 from the Legal Division of the Defendant Borough Council which states:
“Following the advice of Counsel, the Council are advised the unilateral undertaking dated 22nd March 2007 is enforceable despite the ambiguity of the Planning Inspector’s Decision. The Council intend to enforce the obligations of this s106 unilateral undertaking and require the obligations to be fulfilled in accordance with the terms of the unilateral and more specifically payment of the contributions to be made on or before commencement of development”
.

The Grounds of Challenge

[18]The Claimant seeks to challenge the Decision Letter dated 23rd April 2008 on three grounds, namely,(i) the failure to take account of relevant considerations;(ii) that the Decision Letter took account of irrelevant considerations and was a misdirection in law; and(iii) unreasonableness. There is an additional issue, addressed in the written and oral submissions, whether section 111(1) of the Local Government Act 1972 allows a Local Authority to reimburse surplus sums paid to it by a developer pursuant to a unilateral undertaking under section 106. I shall deal with each of these matters in turn.

The Legislation

[19]The statutory provisions of the Town and Country Planning Act 1990 which require consideration are as follows: 106Planning obligations.(1) Any person interested in land in the area of a local planning authority may, by agreement or otherwise, enter into an obligation (referred to in this section and sections 106A and 106B as “a planning obligation”), enforceable to the extent mentioned in subsection (3)— (a) restricting the development or use of the land in any specified way; (b) requiring specified operations or activities to be carried out in, on, under or over the land; (c) requiring the land to be used in any specified way; or (d) requiring a sum or sums to be paid to the authority (or, in a case where section 2E applies, to the Greater London Authority) on a specified date or dates or periodically. (2)A planning obligation may— (a) be unconditional or subject to conditions; (b) impose any restriction or requirement mentioned in subsection (1)(a) to (c) either indefinitely or for such period or periods as may be specified; and (c) if it requires a sum or sums to be paid, require the payment of a specified amount or an amount determined in accordance with the instrument by which the obligation is entered into and, if it requires the payment of periodical sums, require them to be paid indefinitely or for a specified period. (3) Subject to subsection (4) a planning obligation is enforceable by the authority identified in accordance with subsection (9)(d)— (a) against the person entering into the obligation; and (b) against any person deriving title from that person. (4) The instrument by which a planning obligation is entered into may provide that a person shall not be bound by the obligation in respect of any period during which he no longer has an interest in the land. (5) A restriction or requirement imposed under a planning obligation is enforceable by injunction. (6) Without prejudice to subsection (5), if there is a breach of a requirement in a planning obligation to carry out any operations in, on, under or over the land to which the obligation relates, the authority by whom the obligation is enforceable may— (a) enter the land and carry out the operations; and (b) recover from the person or persons against whom the obligation is enforceable any expenses reasonably incurred by them in doing so. (7) Before an authority exercise their power under subsection (6)(a) they shall give not less than twenty-one days’ notice of their intention to do so to any person against whom the planning obligation is enforceable. (8) Any person who willfully obstructs a person acting in the exercise of a power under subsection (6)(a) shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale. (9) A planning obligation may not be entered into except by an instrument executed as a deed which— (a) states that the obligation is a planning obligation for the purposes of this section; (b) identifies the land in which the person entering into the obligation is interested; (c) identifies the person entering into the obligation and states what his interest in the land is; and (d) identifies the local planning authority by whom the obligation is enforceable and, in a case where section 2E applies, identifies the Mayor of London as an authority by whom the obligation is also enforceable. (10) A copy of any such instrument shall be given to the local planning authority so identified and, in a case where section 2E applies, to the Mayor of London. (11) A planning obligation shall be a local land charge and for the purposes of the Local Land Charges Act 1975 the authority by whom the obligation is enforceable shall be treated as the originating authority as respects such a charge. (12) Regulations may provide for the charging on the land of— (a) any sum or sums required to be paid under a planning obligation; and (b) any expenses recoverable by a local planning authority or the Mayor of London under subsection (6)(b), and this section and sections 106A and 106B shall have effect subject to any such regulations. (13) In this section “specified” means specified in the instrument by which the planning obligation is entered into and in this section and section 106A “land” has the same meaning as in the Local Land Charges Act 1975. 106AModification and discharge of planning obligations. (1) A planning obligation may not be modified or discharged except— (a) by agreement between the appropriate authority (see subsection (11)) and the person or persons against whom the obligation is enforceable; or (b) in accordance with this section and section 106B.(2) An agreement falling within subsection (1)(a) shall not be entered into except by an instrument executed as a deed.(3) A person against whom a planning obligation is enforceable may, at any time after the expiry of the relevant period, apply to the appropriate authority for the obligation— (a) to have effect subject to such modifications as may be specified in the application; or (b) to be discharged.(4) In subsection (3) “the relevant period” means— (a) such period as may be prescribed; or (b) if no period is prescribed, the period of five years beginning with the date on which the obligation is entered into.(5) An application under subsection (3) for the modification of a planning obligation may not specify a modification imposing an obligation on any other person against whom the obligation is enforceable.(6) Where an application is made to an authority under subsection (3), the authority may determine— (a) that the planning obligation shall continue to have effect without modification; (b) if the obligation no longer serves a useful purpose, that it shall be discharged; or (c) if the obligation continues to serve a useful purpose, but would serve that purpose equally well if it had effect subject to the modifications specified in the application, that it shall have effect subject to those modifications.(7) The authority shall give notice of their determination to the applicant within such period as may be prescribed.(8) Where an authority determine that a planning obligation shall have effect subject to modifications specified in the application, the obligation as modified shall be enforceable as if it had been entered into on the date on which notice of the determination was given to the applicant.(9) Regulations may make provision with respect to— (a) the form and content of applications under subsection (3); (b) the publication of notices of such applications; (c) the procedures for considering any representations made with respect to such applications; and (d) the notices to be given to applicants of determinations under subsection (6).(10) Section 84 of the Law of Property Act 1925 (power to discharge or modify restrictive covenants affecting land) does not apply to a planning obligation.(11) In this section “the appropriate authority” means— (a) the Mayor of London, in the case of any planning obligation enforceable by him; (b) in the case of any other planning obligation, the local planning authority by whom it is enforceable.(12) The Mayor of London must consult the local planning authority before exercising any function under this section.

Ground 1: Failure to take account of relevant considerations

[20]Mr Pugh-Smith submits that the Borough Council did not exercise the degree of rigour that was required before making the Decision to enforce the March undertaking. It is suggested that the Council should have ensured that there was sufficient supporting evidence that there remained full and sufficient justification for each and every part of the required contributions in terms of their necessity and their quantification. Otherwise, submits Mr Pugh-Smith, “the Council would be in receipt of money for which there was no policy justification”.[21]Mr Pugh-Smith refers to Circular 05/2005 (Planning Obligation) which states at B5: “The Secretary of State’s policy requires, amongst other factors, that planning obligations are only sought where they meet all of the following tests. The rest of the guidance in this Circular should be read in the context of these tests, which must be met by all local planning authorities in seeking planning obligations. A planning obligation must be:(i) relevant to planning;(ii) necessary to make the proposed development acceptable in planning terms;(iii) directly related to the proposed development;(iv) fairly and reasonably related in scale and kind to the proposed development; and(v) reasonable in all other respects”.[22]B6 says that: “The use of planning obligations must be governed by the fundamental principle that planning permission may not be bought or sold”.[23]B7 says that: “Planning obligations should never be used purely as a means of securing for the local community a share in the profits of development, i.e. as a means of securing a ‘betterment levy’”.[24]Finally B35 of the Circular says that: “Standard charges and formulae applied to each development should reflect the actual impacts of the development or a proportionate contribution to an affordable housing element and should comply with the general tests in this Circular on the scope of obligations. Their main purpose is to give greater certainty to developers and increase the speed of negotiations. Standard charges and formulae should not be applied in blanket form regardless of actual impacts, but there needs to be a consistent approach to their application. Whether local authorities seek a standard charge will depend upon the nature of the proposed development”.[25]I was referred also to the Berkshire Structure Plan of July 2005, the Wokingham District Local Plan of March 2004 (WDLP policy WOS4) and the Planning Advice Note (PAN) for 2006 and 2007.[26]The WDLP WOS4 states: “…by seeking a legal agreement that an appropriate level of infrastructure, services and amenities required as a consequence of, and directly related to, the development is capable of being, and will be, provided within the timescale of the proposed development in accordance with an agreed phasing programme”.[27]It is submitted by Mr Pugh-Smith on behalf of the Claimant, that the Planning Advice Notes refer to Circular 05/2005 and Policy WOS4, and that in consequence, both as a matter of law and policy, the tariff contributions are subject to the application of the tests as set out in those documents, whatever may be the tariff level in the Planning Advice Notes.[28]I have to say, notwithstanding Mr Pugh-Smith’s submission on this matter, that I agree with Mr Williams, on behalf of the Defendant, who submits that this ground of challenge does not identify any error of law.[29]In particular, I have no doubt but that the March Undertaking is enforceable in law. It was an undertaking entered into voluntarily by the Claimant, and was conditional on two events only, namely the grant of planning permission, and the commencement of the development, both of which have now of course occurred.[30]As Mr Williams submits, and I agree with him on this, there is no condition contained within the March Undertaking that the obligation should take effect only in the event of an Inspector indicating that the undertaking in question was necessary to make the development acceptable. The Inspector’s comments in paragraph 13 of his Decision refer to the weight that he attached to the Undertaking in determining the planning application. That comment is not relevant to the entirely separate question of the enforceability of the s 106 undertaking, and the decision taken by the Council to enforce the undertaking.[31]In addition to this general point of principle, there are two additional reasons why I am unable to accept Mr Pugh-Smith’s submissions on his first ground of challenge. First, it is clear that issues relating to infrastructure were not dealt with by the Inspector at all, and were resolved by the submission of the undertaking. The Inspector had reached his decision in the absence of any evidence submitted to him by the Defendant on the need for the contributions.[32]Secondly, on the evidence that I have been provided in this case, it is apparent to me that, prior to the Decision Letter, the Defendant Council conducted an investigation by its officers and thus the decision was not solely a decision based on enforceability but it was also based on whether the undertaking serves a useful planning purpose.[33]In particular, I am satisfied on the facts of this case that the Defendant sought full justification from its officers in the form of written statements to justify the need for the various contributions as a result of the development. The witness statement of Laurel Isaacs dated 17th June 2008 exhibits a copy of all of the statements produced by the Council’s officers to justify the need for the various contributions as a result of the development. These statements make reference, in particular, to the Planning Advice Note and the Policy WOS4 of the Wokingham District Local Plan. I do not consider that those documents are in any way in conflict with the Circular 05/2005.[34]Accordingly, the Defendant concluded that the undertaking did still serve a useful planning purpose and, in so concluding, it took account of the relevant documents, namely the Planning Advice Note and WOS4 of the Wokingham District Local Plan. I agree with Mr Williams when he submits, both in his skeleton argument and in his oral submissions, that this conclusion was unquestionably a conclusion that the Defendant was entitled to reach.[35]Criticisms made by the Claimant of the process, as developed in some detail by the Witness Statements from Consultants instructed by the Claimant, is in my view no more than an attempt to reopen the merits of the decision. I have read the witness statements and none of these statements even begin to identify that the Defendant ignored consideration of the documents that they were required to consider. All that the witness statements of the Consultants show is that there is another view of the precise amounts which might be sought if a fresh application for a modification of the March Undertaking were made.[36]My conclusion on this aspect of the Claimant’s case is supported by the case law, although none of the cases that I have been referred to deal with the precise set of circumstances as in this case where an application is made to discharge the unilateral undertaking in the light of the inspector’s remarks. Nonetheless, the case law demonstrate the approach that should be applied by a local authority when considering such an application by a developer and therefore are of relevance.[37]The question that a Local Planning Authority must ask itself when considering a request under section 106A(1)(a) is set out by Sullivan J in The Queen on the application of Batchelor Enterprises Ltd v North Dorset District Council [2003] EWHC 3006 (Admin) as follows: “Does the obligation still serve a useful planning purpose? Since the court in judicial review proceedings may not substitute its own answer to that question for that of the local planning authority, the question in relation to an application for judicial review in respect of a local authority’s decision under section 106A(1)(a) is whether a reasonable local planning authority could have concluded that the obligation still served a useful planning purpose”.[38]Mr Williams relied both on the general principle as set out in that case, and also on the decision of Richards J in R (on the application of the Garden and Leisure Group Ltd) v North Somerset Council [2003] EWHC 1605 (Admin),in support of the proposition that an application does not require that the obligation continues to serve its original purpose. The test is whether the obligation serves ‘any useful planning purpose’.[39]It was common ground in the Garden and Leisure Group Ltd case that: “the question whether the statutory test is met must be decided by reference to the entirety of the modifications specified in the application. It is an all or nothing decision. It is not open to the authority to decide that the obligation shall have effect subject to only some of the proposed modifications. If the authority considers that some of the proposed modifications are acceptable but others are unacceptable, it can of course invite the applicant to submit an amended application or a new application containing only the acceptable modifications; but in the absence of an amended or new application it must determine that the obligation shall continue to have effect without modification”.[40]This approach is in my view applicable to the situation as here where a developer seeks discharge from the terms of a unilateral undertaking. It would be totally illogical if s 106A applications for modification in the context of bilateral agreements were governed by one set of requirements, and s 106A requests for discharge of a unilateral undertaking as in this case were governed by another set of requirements. The considerations for the local authority in both situations must be the same. The Defendant in this case took account of all relevant material, and in consequence the first ground for challenge must fail. Ground 2: Irrelevant consideration/ misdirection in law.[41]Mr Pugh-Smith submits this ground of challenge in the following way in the Skeleton Argument: “The Council through its express reliance upon and publication of extracts from Counsel’s advice, sought to rely upon the case of Tesco Stores Ltd v Secretary of State for the Environment [1995] 2 All ER 636as authority for the proposition that once an undertaking has become binding its enforcement is determined solely by the provisions of the undertaking itself and not by the degree of nexus with the proposed development”.[42]It is suggested by Mr Pugh-Smith that the primary issue before the House of Lords in Tesco was the extent to which a tendered planning obligation could be a material consideration in the determination of a planning application, and that it was not determinative of the issues raised by this claim.

Lord Hoffmann said in Tesco:

[43]“Buying and selling planning permissions 61. This reluctance of the English courts to enter into questions of planning judgment means that they cannot intervene in cases in which there is sufficient connection between the development and a planning obligation to make it a material consideration but the obligation appears disproportionate to the external costs of the development. Plymouth, 67 P.& C.R. 78, was such a case, leading to concern among academic writers and Steyn L.J. in the present case that the court was condoning the sale of planning permissions to the highest bidder. My Lords, to describe a planning decision as a bargain and sale is a vivid metaphor. But I venture to suggest that such a metaphor (and I could myself have used the more emotive term "auction" rather than "competition" to describe the process of decision-making process in Plymouth) is an uncertain guide to the legality of a grant or refusal of planning permission. It is easy enough to apply in a clear case in which the planning authority has demanded or taken account of benefits which are quite unconnected with the proposed development. But in such a case the phrase merely adds colour to the statutory duty to have regard only to material considerations. In cases in which there is a sufficient connection, the application of the metaphor or its relevance to the legality of the planning decision may be highly debatable. I have already explained how in a case of competition such as Plymouth, in which it is contemplated that the grant of permission to one developer will be a reason for refusing it to another, it may be perfectly rational to choose the proposal which offers the greatest public benefit in terms of both the development itself and related external benefits. Or take the present case, which is in some respects the converse of Plymouth. Tarmac say that Tesco's offer to pay £6.6 million to build the West End Link was a blatant attempt to buy the planning permission. Although it is true that Witney Bridge is a notorious bottleneck and the town very congested, the construction of a superstore would make the congestion only marginally worse than if the site had been developed under its existing permission for offices. Therefore an offer to pay for the whole road was wholly disproportionate and it would be quite unfair if Tarmac was disadvantaged because it was unwilling to match this offer. The Secretary of State in substance accepted this argument. His policy, even in cases of competition for a site, is obviously defensible on the ground that although it may not maximise the benefit for Witney, it does produce fairness between developers. 62. Tesco, on the other hand, say that nothing was further from their minds than to try to buy the planning permission. They made the offer because the local planning authority had said that in its view, no superstore should be allowed unless the West End Link was built. Tesco say that this seemed a sensible attitude because although it was true that the development would add only marginally to the congestion which would have existed if offices had been built, this was an unrealistic comparison. In practice it was most unlikely that anyone would build offices in that part of Witney in the foreseeable future. The fact was that the development would make the existing traffic problems a good deal worse. In an ideal world it would have been fairer if the highway authority had paid for most of the road and Tesco only for a proportion which reflected the benefit to its development. But the highway authority had made it clear that it had no money for the West End Link. So there was no point in Tesco offering anything less than the whole cost. Why should this be regarded as an improper attempt to buy the planning permission? The result of the Secretary of State's decision is that Witney will still get a superstore but no relief road. Why should that be in the public interest? 63. I think that Tesco's argument is also a perfectly respectable one. But the choice between a policy which emphasises the presumption in favour of development and fairness between developers, such as guided the Secretary of State in this case, and a policy of attempting to obtain the maximum legitimate public benefit, which was pursued by the local planning authority in Plymouth, lies within the area of discretion which Parliament has entrusted to planning authorities. It is not a choice which should be imposed upon them by the courts”.[44]The Defendant was entitled to take account of this legal principle, which in my view of the law is a principle which covers a wider area of factual situations than simply the extent to which a tendered planning obligation could be a material consideration in the determination of a planning application. The final paragraph quoted above from Lord Hoffmann’s speech makes the position entirely clear.[45]Thus it was not a misdirection in law in the sense that reliance on Tesco was an irrelevant consideration. Having read Counsel’s advice, it is clear to me that Tesco is relied upon for the principle that the enforceability of an undertaking does not depend upon the degree of nexus with the development, but upon the provisions of the undertaking. Ground 3: Unreasonableness.[46]The third Ground of Claim is that no reasonable planning authority would have sought to enforce the March undertaking. I have to say that I can find no merit whatsoever in this challenge. Mr Williams is correct in his submission that the Claimant has submitted no evidence that the development would have no impact, indeed a possible new s106 undertaking has been submitted by the Claimant for consideration. The precise amount of the contribution that may be reasonably required to mitigate the development is an entirely different question, and not one that is before this Court. What is before this Court is the challenge to the enforcement of the March undertaking. Given that the undertaking is enforceable, I am unable to understand how it can be argued that seeking to enforce the undertaking is Wednesbury unreasonable.[47]In many ways, this challenge faces the obstacle that is faced in all planning challenges as identified in The Queen on the Application of Newsmith Stainless Ltd v Secretary of State for Environment, Transport and The Regions [2001] EWHC Admin 74. When dealing with planning inspector’s decisions, Sullivan J said in that case that the threshold of Wednesbury unreasonableness is a difficult obstacle for an applicant to surmount. It is my view that it is an equally difficult obstacle in a challenge to a local authority’s decision in a case such as the present one. The Claimant does not even begin to surmount the obstacle.[48]When the choice facing the Defendant was between upholding the undertaking and discharging the undertaking, it was a wholly reasonable decision on the facts of this case to uphold the undertaking.

The Local Government Act issue (“clawback”)

[49]I turn finally to the issues relating to recoupment (“clawback”). The Claimant submits that the Defendant acted unreasonably in embarking on an enforcement exercise in a situation where it is submitted that there is no legal obligation to account or to repay. It is argued that in a unilateral undertaking, there can be no reimbursement.[50]The key provision is s 111(1) of the Local Government Act 1972 which states as follows:
“Subsidiary powers of local authorities. (1) Without prejudice to any powers exercisable apart from this section but subject to the provisions of this Act and any other enactment passed before or after this Act, a local authority shall have power to do anything (whether or not involving the expenditure, borrowing or lending of money or the acquisition or disposal of any property or rights) which is calculated to facilitate, or is conducive or incidental to, the discharge of any of their functions.”
[51]I am told by Mr Pugh-Smith that the question whether s 111(1) of the Local Government Act 1972 allows a local authority to reimburse surplus sums paid to it by a developer pursuant to a unilateral undertaking under s 106 of the Town and Country Planning Act 1972 is a question which has not yet been answered by the Courts.Mr Pugh-Smith submits that s 111 codifies common law subsidiary powers, and it does not create any new powers. Accordingly, there is no power to introduce an ex post facto power to reimburse. This he submits is an attempt at modification which can only be achieved under s 106A(1)(a) by agreement which has not been requested by the Defendant in this case. He submits that the Defendant’s attempt to introduce what he refers to as an ex post facto power to reimburse is not an exercise of a s 111 incidental power but an attempt at modification.[52]In considering this issue, I have had the benefit of a recent decision in Hampshire County Council v Beazer Homes Ltd [2010] EWHC 3095 (QB). This was a case where a s 106 bilateral agreement was in issue and where the defendant in that case had paid sums to the claimant as a “contribution” towards traffic management measures and highway improvements. The defendant argued that parts of the expenditure had not been reasonably incurred, explained or justified. Swift J decided that the s 106 agreement in that case did not give rise to the creation of a trust (as it had in Patel v Brent LBC [2005] EWCA Civ 644) because there was no suggestion that the plaintiff ‘deposited’ the specified sum. In Hampshire, the s 106 agreement referred to the requirement that the defendant should ‘pay contributions’ towards the relevant works.[53]Likewise, in this case it is submitted by the Claimant that as the undertaking is a ‘contribution’, there is no explicit provision for the repayment of surplus sums.[54]Hampshire was concerned primarily with detailed consideration of the clauses of the s 106 agreement in that case. One aspect related to the meaning of “account” and whether it included a requirement to explain and justify the expenditure. “Issue 3: What is the meaning of "account" in Clause 4.16.2(A)? In particular, does it include a requirement to explain and justify the expenditure incurred? The defendant's case83. The defendant contended that the duty imposed on the claimant by Clause 4.16.2(A) to "account" to the defendant "for the cost of the alternative schemes" clearly meant more than a duty simply to provide information from which it would be possible arithmetically to ascertain the sums spent on the relevant works.84. Mr Phillips submitted that the term "account" should be interpreted as including a requirement to "explain" and "justify" the decision-making process and works which gave rise to the relevant expenditure. This would, he said, include providing an explanation as to why one scheme (e.g. the construction of a roundabout at a junction) had been undertaken in preference to other possible schemes (e.g. the installation of traffic lights at the same site). The duty to account would also, he said, include the provision of documents (such as Committee reports and consultants' reports) which had contributed to the decision-making process. He argued, in relation to the alternative schemes to be carried out in the event that the Fleet Inner Relief Road scheme did not go ahead, that - given that there had been no agreement or detailed negotiation between the parties about possible alternative schemes - it was clear that the parties must have intended that information explaining and justifying the decision to undertake the schemes would be provided. If no such explanation or justification were provided, the defendant would have no means of knowing whether the claimant's expenditure of its financial contributions had been reasonably (in either the common law or the Wednesbury sense) and properly incurred. Nor would it know whether it had any grounds for lodging a dispute to be determined by the appointed expert. The claimant's case85. For the claimant, Mr Village submitted that the requirement to "account" should not be taken as including a duty to provide a detailed explanation and justification of the claimant's decisions as to what work to carry out and how to do the work. Nor, he argued, should the word "account" be interpreted to mean that the claimant was required to establish that the expenditure was incurred reasonably (in the common law sense) and properly. He said that such an interpretation would go far beyond that which would have been understood by a reasonable person in the parties' position at the time of the making of the Agreement. The claimant would not have agreed to such a requirement, which would have been inconsistent with the extent of its public law duties. Discussion and conclusions86. Clearly, a duty to account for the costs of certain works must include a duty to provide information stating what sums have been spent, for what purpose, when and by whom. The question is whether the duty goes further than that and extends to the provision of information designed to explain and justify to a developer's satisfaction the various decisions taken as to what work to undertake and how to undertake it.87. In my judgment, the phrase "account for … the costs" does not oblige a local authority in the claimant's position to disclose information designed to explain the reasons why the various decisions underlying the works were taken and to justify those decisions. The words must be viewed in context. Here, the relevant context is that the claimant is not required to establish – as I have found – that its expenditure of the defendant's contributions was reasonably (in the common law sense) and properly incurred. It follows therefore that there can be no requirement to provide information aimed at establishing that fact. If it had been intended by the parties that such additional information would be provided, the Agreement should have made express provision for it.88. The provision of information stating what sums have been spent, for what purpose, when and by whom, especially when accompanied by documents evidencing the claimant's expenditure as reasonably required by the defendant pursuant to Clause 4.16.2(C), would or should suffice to enable a developer to satisfy itself that its contributions have been spent for the purposes specified and otherwise in accordance with the claimant's public law duties. The Agreement does not require the claimant to provide more.” The defendant's case The claimant's case

Discussion and conclusions

[55]Although Hampshire deals with a very different factual situation to the present case, and is of course concerned with a detailed interpretation of the s 106 obligation in that case, it illustrates the proposition that a local authority in performing its responsibilities is under a duty to comply with public law duties.[56]The Defendant submits that it is within the powers of the Council under s 111 to refund any surplus. Mr Williams argues that a payment to the Claimant, after it has exercised its function of mitigating the effects of the development, is incidental to its planning functions, and therefore covered by s 111. It is not a modification of the s 106 undertaking.[57]I have to say that I am in entire agreement with Mr Williams. The cases cited by Mr Pugh-Smith in support of his approach, Hazell v Hammersmith and Fulham London Borough Council [1992] 2 AC 1 and R v Richmond upon Thames London Borough Council ex parte McCarthy & Stone (Developments) Ltd [1992] 2 AC 48, in so far as they are both concerned with swap transactions in the former case and charging for pre-application planning advice in the latter case both deal with very different factual situations to the present set of circumstances.

Lord Lowry said in ex parte McCarthy and Stone: “There is yet a further point, to which I have alreadyadverted. As the Court of Appeal have said (p. 1302H), the power to give pre-application advice is neither a duty nor a discretionary express power, but is a subsidiary power arising by virtue of section 111(1) (which has codified the common law), because it is calculated to facilitate, or is conducive or incidental to, the discharge of one of the Council's functions. To charge for the exercise of that power is, at best, incidental to the incidental and not incidental to the discharge of the functions”.

[59]I have no doubt but that the power to refund part of a s 106 undertaking is “calculated to facilitate, or is conducive or incidental to, the discharge of their functions”. It is a subsidiary power arising by virtue of s 111(1).[60]Accordingly, the fact that there is a power to refund is further justification for the conclusion that the decision of the Defendant to enforce the undertaking cannot be classified as irrational or unreasonable. Indeed, the Defendant is acting wholly reasonably in expending such sums as it regards as necessary to mitigate the development. It is not required to expend the maximum amounts undertaken to be paid by the Claimant, and as I understand it will not do so. Indeed, the second witness statement of Ms Isaacs says specifically that, in the event of any payment over and above the amount reasonably required to mitigate the impact of the development, this fact will be recorded on a database and the overpayment repaid to the Claimant.[61]On this issue therefore I conclude if there is a credit after moneys have been applied in accordance with the terms of the undertaking, this can be refunded under s 111 Local Government Act 1972, and consequently, the fact that there will be a credit, cannot render the decision to uphold rather than discharge that obligation unlawful.[62]I dismiss the claim in its entirety.