Home > News > Dispute resolution clause upheld by High Court in section 106 agreement for major development

On Friday, HHJ Eyre QC, sitting as a judge of the High Court, struck out a claim brought by two developers, Redrow Homes and Barratt Homes, for declarations in respect of the interpretation of a dispute resolution clause in a section 106 agreement entered into with Chorley Borough Council.

The case concerned development of the Royal Ordnance Site in Euxton, Chorley, a major development of over 2000 homes.  Outline planning permission was granted in 2002 subject to a section 106 Agreement providing for inter alia index linked highway mitigation payments.

A dispute arose between the parties as to the proper interpretation of the indexation provision for the mitigation payments.  The value of the dispute was circa £2 million.

The section 106 agreement provided for dispute resolution by way of expert determination “unless the circumstances of the dispute are more appropriate for resolution through the Courts”.

In order to resolve the dispute, the Council unilaterally referred the matter for expert determination pursuant to the dispute resolution clause in the section 106 agreement.  The developers objected to this reference, contending that the Council could not refer a matter for expert determination unilaterally under the dispute resolution clause, and that in any event the specific dispute on indexation was more appropriate for resolution through the courts.  The developers sought declarations to that effect, together with a declaration on the construction of the indexation provision, by way of a Part 8 claim.

The Council defended the claim on the basis that the dispute resolution clause did permit unilateral referral to expert determination, the parties having agreed this as the default process for dispute resolution, and that the circumstances of this case, involving a point of interpretation was not more appropriate for resolution by the courts than by an expert planning lawyer.  These issues were heard as preliminary issues.

In an ex tempore judgment, HHJ Eyre QC held for the Council on both issues, finding that the clear meaning of the dispute resolution clause was that a referral could be made unilaterally, thereby upholding the agreement which the parties had entered into at the time the permission was granted.  Further, in the circumstances of the case, including the substantial delay in payment resulting from the dispute and the associated need for quick, final and cost-effective resolution, the dispute was not one where it was more appropriate for determination by the courts.  Accordingly, the developers’ claim was struck out and the dispute was remitted back to the expert for determination.

Simon Pickles and Matthew Henderson appeared for the Council.

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