City of York v Trinity One (Leeds) Ltd, Court of Appeal - Civil Division, August 29, 2018, [2018] EWCA Civ 1883

Resolution Date:August 29, 2018
Issuing Organization:Civil Division
Actores:City of York v Trinity One (Leeds) Ltd
 
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Case No: A3.2017/0768 & A3/2017/0848

Neutral Citation Number: [2018] EWCA Civ 1883

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE, CHANCERY DIVISION

Mr David Halpern, QC

HC-2015-005153

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 29/08/2018

Before:

LORD JUSTICE KITCHEN

SENIOR PRESIDENT OF TRIBUNALS

and

LORD JUSTICE HENDERSON

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Between:

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Mr Neil King QC and Mr Richard Turney (instructed by Womble Bond Dickinson UK LLP) for the Council of the City of York

Mr Paul Brown QC (instructed by Walker Morris LLP) for Trinity One (Leeds) Limited

Hearing date: 21 February 2018

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JudgmentSir Ernest Ryder, Senior President:

Introduction:

  1. These are cross appeals against the orders of David Halpern QC sitting as a deputy judge of the High Court which were made on 8 March 2017. The appeals arise out of a claim by the Council of the City of York (``the Council'') to recover a sum of money from Trinity One (Leeds) Limited (``TOL'') in lieu of the provision of affordable housing by TOL within a residential development approved by the Council. The sum fell due under an agreement made on 6 October 2003 in accordance with section 106 of the Town and Country Planning Act 1990 (``the Agreement''). There is a separate appeal to the Secretary of State under section 106BC of the 1990 Act the merits of which are not before this court but which is relied upon in the alternative by TOL to reduce or extinguish its liability.

  2. In his judgment, the judge identified two issues:

    i) Was TOL liable to pay a sum under the Agreement and, if so, how much?

    ii) If TOL's appeal under section 106BC is successful, will that take effect retrospectively so as to extinguish TOL's liability (if any)?

  3. On the first issue, the judge found that TOL was liable to the Council although not in the sum claimed. The Council obtained judgment in the sum of £553,058 together with interest in the sum of £65,533.70: in total a sum of £618,591.70. On the second issue, the judge found that TOL would ``be released from [the obligation to pay money], if and to the extent that the Secretary of State allows its appeal under section 106BC''. The judge made a declaration in accordance with his conclusion. TOL was ordered to pay 50% of the Council's costs of the claim. TOL appeals against the judge's conclusion on liability and quantum and the Council appeals against the declaration as to the effect of the section 106BC appeal to the Secretary of State. The judge granted permission to appeal the two relevant paragraphs of his order.

    Factual and procedural background:

  4. There is a detailed factual background set out at paragraphs 17 to 35 of the judgment below which I gratefully adopt. I shall highlight what follows so that this judgment can be understood.

    The Agreement:

  5. On 6 October 2003 the then-owner of land at 187 Tadcaster Road, York (``the Site'') entered into the Agreement by which a proportion of the housing to be constructed on the Site in accordance with outline planning permission granted on the same date was to be delivered as affordable housing units. In default of on-site provision, the Agreement required the owner to pay the Council commuted sums, on the sale of each of the affordable housing units on the open market.

  6. The Site was acquired by TOL in 2004. Development commenced in 2005. In September 2006 TOL advised the Council that it had discharged its obligation to offer the affordable units to registered social landlords without success, and invited the Council to propose a commuted sum which should be paid. The affordable units were subsequently sold on the open market on various dates between September 2007 and August 2014.

  7. The dispute between TOL and the Council centres on the wording of paragraphs 6.12.1 and 7.8.3 of Schedule 1 to the Agreement, which set out the method by which the commuted sums were to be calculated. Schedule 1 to the Agreement is inconsistent in its internal references to paragraphs and clauses but nothing turns on that and although there are slight variations in the wording of paragraphs 6.12.1 and 7.8.3, the core language of the paragraphs states that the commuted sum:

    ``shall be calculated on the amount of Social Housing Grant necessary to secure affordable rented homes of an equivalent type and size on another site [in a similar residential area in the City of York] which grant for the avoidance of doubt shall be calculated at normal grant levels from regional TCI tables provided on an annual basis by the Housing Corporation or such equivalent grant calculation current at the time and supported by the Housing Corporation''

    And ``Social Housing Grant'' is defined by clause 2.1.23 as:

    ``the grant that may be provided in respect of affordable housing in the Council's administrative area in accordance with Government and Housing Corporation Guidance.''

  8. The commuted sum has been in issue between the parties since 2006. TOL denies that any sum falls due to the Council in accordance with the Agreement because it says that the Agreement does not provide a workable basis for calculating the sum due. The Council maintains that such a result would be perverse and invites the court to construe the relevant clauses to give practical effect to the parties' agreement.

    The sections 106BA and 106BC issue:

  9. On 24 April 2013, sections 106BA-BC of the 1990 Act came into force. On 29 April 2016, during the course of the proceedings below, TOL made an application to the Council pursuant to section 106BA to seek to release itself from the obligation to pay a commuted sum under the Agreement. The Council refused that application on 27 May 2016 and TOL appealed against that decision to the Secretary of State for Communities and Local Government in accordance with section 106BC.

  10. On 1 September 2016, TOL amended its defence to the claim in these proceedings, contending that, if its appeal under section 106BC was allowed, then it would not be liable to the Council for any sum otherwise found due under the Agreement. The point was argued at trial. The judge agreed with TOL, and the Council appeals against this part of the Order.

  11. TOL's appeal under section 106BC was heard on 25 April 2017, and dismissed by a decision letter dated 16 May 2017. However, that decision was successfully challenged by TOL in judicial review proceedings on the basis that the Inspector had made an inadvertent but material error of fact. The decision was quashed and the appeal remitted back for redetermination. A new hearing was listed for 15 March 2018. That has also been determined but the parties do not agree that this court should give any consideration to the contents of the same and it is understood that the redetermination is itself the subject of further judicial review proceedings.

    The statutory and policy background:

  12. There is a detailed review of the statutory and policy background to these appeals at paragraphs 3 to 16 of the judgment below. The relevant statutory materials are annexed to this judgment.

  13. In summary, it was Government policy at the time of the Agreement that affordable housing would be provided as part of the development of a site. This would be achieved, inter alia, by agreements made in accordance with section 106 of the 1990 Act.

  14. The Council published an Advice Note in September 2000 which set out its policy in relation to affordable housing. The Council stated that it would accept commuted payments in exceptional circumstances. At paragraph 45 of the Advice Note it was stated that the commuted sum would be based on the amount of Social Housing Grant (``SHG'') necessary to secure an affordable home of an equivalent type and size on another site. In turn, this amount was to be calculated from the regional Total Cost Indicator (``TCI'') tables provided on an annual basis by the Housing Corporation.

  15. The Housing Corporation stopped publishing the TCI tables after March 2006, by which time they were no longer used to calculate the SHG. The system changed from a calculation based on inputs to a calculation based on outputs. In April 2011, the system changed again to replace SHG by the Affordable Homes Grant which was also calculated differently.

    The judge's decision:

  16. In order to understand the judge's careful reasoning, it is helpful to identify the material that he relied upon. There were four witnesses who gave oral evidence to the court:

    i) Mr Paul Landais-Stamp who was the Council's Housing Development Manager in 2003 and had been its Housing Strategy Manager since 2005. He gave evidence of the Council's policy in relation to affordable housing and section 106 agreements. In particular he stated, among other things which were noted in the judgment, that the purpose of requiring a commuted sum was to secure enough funding to provide equivalent affordable housing on another site.

    ii) Mr Ian Geoffrey Nixon who is the managing director of TOL and an experienced property developer.

    iii) Mr Parker who was TOL's expert. He produced a calculation he made for the purpose of TOL's proceedings under section 106BC using software known as `Proval'. He accepted that the Proval calculation was not an `equivalent grant calculation'. Although there are a number of differences between the methodology for the Proval calculation and the TCI tables, his evidence was that anyone familiar with affordable housing would understand `equivalent type and size' to mean the same mix of houses and flats and the same number of bed spaces.

    iv) Mr Watson who was the Council's affordable housing expert. He produced a calculation for the commuted sum of £1,995,589. He did not use the TCI tables to come to his conclusion but instead used a different methodology. Mr Watson accepted that the Proval software produced results consistent with...

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