This case involved a claim by a local planning authority to enforce an obligation in a section 106 agreement to pay a commuted sum in lieu of affordable housing. There were two central issues:
(a) the extent to which, in circumstances where the contractual mechanism for calculating the commuted sum was no longer operable, the agreement could still be enforced. The Defendant, Trinity One, argued that it was not liable to pay the commuted sums since the mechanism for their calculation referred to a social housing grant funding calculation which no longer existed at the time the obligation to make the payments was triggered, and there was no equivalent grant calculation available.
(b) whether an application (under section 106BA of the Town and Country Planning Act) to modify a section 106 obligation could retrospectively affect an accrued right to the commuted sum. Trinity One argued that any liability which would otherwise accrue was contingent upon the outcome of its outstanding appeal under s 106BC Town and Country Planning Act 1990. The Council argued that any success under s 106BC would not have retrospective effect on sums which the Court found due.
In the High Court, the Deputy Judge found that, whilst there was no equivalent grant calculation available at the time the sums fell due, the underlying purpose of the agreement was to secure the payment of commuted sums and that in those circumstances the parties would have intended to substitute whatever would produce the nearest equivalent figure. To interpret the agreement otherwise would flout business common sense. The Deputy Judge had before him a calculation based on the cancelled grant funding calculation, and doing his best on the evidence before him he used this as the basis for his decision. Accordingly, the Defendant was ordered to pay the sum of £553,058 plus interest.
However, the Deputy Judge also found that s 106BA and 106BC TCPA 1990 were capable of having retrospective effect, and accordingly that the Defendant should be released from the obligation to pay if and to the extent that the Secretary of State allows its appeal under section 106BC. Trinity One’s subsequent appeal under section 106BC was partially successful, and reduced the amount payable to £171,700.
Both parties appealed from the High Court’s decision, but both appeals were dismissed.
On the first issue, Sir Ernest Ryder (with whom Kitchen and Henderson LJJ agreed) concluded that it would defeat the underlying purpose of the agreement if the clause concerning the calculation of the commuted sum were unenforceable due to lack of certainty. The intention was that Trinity One should pay a sum of money to the Council if it did not provide affordable housing and – although it was a departure from the literal words of the contract – the only sensible solution was for the court to award a sum which was equivalent to the amount of money which would have been payable had the contractual formula remained in being. The best the court could do was to work out a “roughly equivalent figure for that sum”, which is what the Deputy Judge had done.
On the second issue, Sir Ernest Ryder noted that section 106BA and BC were “complicated provisions” and that it was “difficult to identify the precise intentions of Parliament as respects the issue before this court”. However, the provisions identified a “new public interest” which out-weighed the pre-existing public interest in the provision of affordable housing. Section 106BA(3) applied to agreements entered into before and after the 2013 amendments and was in terms an interference with pre-existing rights. Economic non-viability could occur before or after liability had been triggered, with the consequence that the concept could not be taken to apply only to the parts of the development which had not been completed. Sections 106BA and 106BC therefore did affect accrued rights.
Paul Brown QC acted for Trinity One.
A copy of the judgment can be found here.