Worcester council fails in High Court wrangle over s106 cash

Worcestershire County Council has failed in a High Court bid to ensure it received two thirds of a near £1 million contribution to road improvements as a condition to planning permission for the redevelopment of a former hospital site at Worcester.

Worcester (pic Elliott Brown via Flickr)
Worcester (pic Elliott Brown via Flickr)

A judge sitting in Birmingham ruled that the developer had, from September this year, the benefit of two duplicate permissions for the site, one requiring the transport contribution, and one not - and that it was free to choose which of the two it was pursuing.

As a result, the county council - which already received the first instalment before the second permission was granted - has no right to claim the second and third instalments, the judge ruled.

Mr Justice Hickinbottom said that developer Robert Hitchins applied to build 200 homes on the site in June 2012, but as a condition of granting permission, the council sought a £1 million transport contribution by way of a section 106 agreement.

This, the judge said, resulted in an "impasse", with the developer insisting that no such contribution was appropriate.

He said: "The claimant was in a challenging commercial position. The property crash precipitated by the financial crisis in the late 2000s had caused a significant reduction in the value of the land held by the claimant for the purposes of future development, such that the valuation of its assets was close to the amount of the bank loans that those assets secured. If the loans became undersecured, then that would be a potentially calamitous breach of the claimant’s covenants with the bank. The claimant was consequently very anxious to obtain planning permission for the site – and sell it on – quickly."

As a result, he said that the claimant began "commercial horsetrading", initially offering £250,000 as a transport contribution.

It ultimately raised its offer to £4,530 per house, which would be over £900,000 in total, to be paid in three equal instalments as development targets were met.

The council accepted that offer in December 2012, and then outline planning permission was granted and a section 106 agreement was entered into in January 2013.

In March 2013, Robert Hitchins sold its entire interest in the site to BDW Trading Limited for just over £7.2 million.

As part of the agreement, Robert Hitchins submitted a second planning application, identical for the first save for there being no obligation to make a transport contribution.

The council failed to determine the application in time, and Robert Hitchins appealed.

In August 2013 the council indicated that it would have refused planning permission because the proposed development would have a severe impact on the transport network, but a planning inspector allowed the appeal and granted permission in January.

He found that the impact on the traffic network would not be severe.

Meanwhile, reserved matters had been approved in respect of the first permission in May 2013, with consent for 181 homes. The development was begun in October 2013, and by the time of the hearing last month, 63 were occupied and a further 21 completed. Reserved matters and a different section 106 agreement were both approved for the second permission in September.

The county council failed in a High Court challenge to the inspector's grant of the second permission, and in these proceedings Robert Hitchins has now successfully avoided having to pay any more of the transport contribution.

The judge said that the second and third instalments only became due on occupation of 50 per cent and 75 per cent of the houses respectively, an event which had not yet occurred.

Robert Hitchins successfully argued that, where more than one planning permission is in force for the same land, a developer may choose which planning permission to implement.

Upholding that claim, the judge said: "I consider that, as a matter of law, the developer was, after the reserved matters approval perfected the second planning permission, able to elect to continue and complete the development under the second planning permission rather than the first planning permission.

And he found that, as a matter of fact, BDW has elected to proceed with the development under the second planning permission.

Rejecting the council's argument that he should use his discretion not to grant Robert Hitchins relief, the judge said that, despite it selling the land, it had a real interest in the issues raised in the case because it remained liable for any transport contributions due under the first planning permission.

R on the Application of Robert Hitchins Limited v Worcestershire County Council. Case Number: CO/1130/2014

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