Section 106s and the 'technical traps' submission

May 1, 2020

John Pugh-Smith explores the inherent difficulties with the concept of the 'technical trap' in relation to s.106 agreements.

North Norfolk tends to be known more for its saltmarsh, samphire, seals and skies than as a source of planning jurisprudence. Nevertheless, in recent years the District Council has managed to add several cases to practitioner e-libraries including R (Champion) v North Norfolk District Council & Anor. [2015] UKSC 52 on the discretion of the courts not to quash planning decisions where there had been some defects in the decision-making process when dealing with a challenge based on procedural error.

Now, in a decision of Mrs Justice Thornton in Norfolk Homes Limited v North Norfolk District Council & Norfolk County Council [2020] EWHC 504 (QB) on 5 March 2020 further jurisprudence appears to be in the making. It concerns proceedings by Norfolk Homes for a declaration that residential development of its land in Holt is not bound by obligations contained in a Section 106 agreement.

As Norfolk Homes had boldly applied for summary judgment, the issue before the judge was whether the application gave rise to a short point of law which she could decide upon the presented evidence, and, whether the parties had had an adequate opportunity to address the point in argument.

Norfolk Homes submitted that the short point arose from the construction of the Section 106 Agreement which, in leading counsel’s words, were as 'plain as a pikestaff'. In short, the obligations in the Agreement were expressly tied to the implementation of an Outline Planning Permission, as readily apparent from the definitions of ‘Application’, ‘Development’ and ‘Planning Permission’, whereas the development being implemented was under a separate and independent planning permission as to which the parties chose not to include the increasingly standard clause to the effect that the s106 obligations were to remain binding.

On behalf of the District Council, it was submitted that the claim raised a cogent and novel point of law which was not apt for summary judgment. Its counsel submitted that the Supreme Court decision in Lambeth (Lambeth LBC v SSCLG [2019] UKSC 33) had made clear that a planning document, which includes a section 106 agreement, must be interpreted according to the natural and ordinary meaning of the words in their surrounding context, which includes the planning context. Accordingly, this section 106 agreement was to be construed as applying to the outline planning permission as varied. Failing that, these words were to be implied. The available evidence, namely the District Council's approval of reserved matters and the payments made under the agreement were consistent with the council's understanding that the agreement continued to apply to the varied planning permissions.

Refusing the application in favour of the District Council, Mrs Justice Thornton states:

“20. I am not persuaded that the claim gives rise to a short point of law. Some, but not all, of the issues that arise from the claim seem to me to be as follows:

To what extent are the legal principles for interpreting a section 106 agreement the same as those for interpreting any other planning document?
Should the section 106 agreement be construed in accordance with its ordinary and natural meaning; the statutory and planning context (including the subsequent section 73 permissions) (Lambeth paragraph 19) or should it be construed according to the principles of contractual interpretation set out in Arnold v Britton (in particular principle iv) that the contract should be construed according to the facts and circumstances at the time of the contract)?
To what extent is the case of Lambeth v Secretary of State relevant to the present case?
Can the Council be said to have fallen into a 'technical trap' of the sort envisaged by Court in Lambeth v Secretary of State? To what extent, if at all, should the Courts intervene to protect the Council from any 'technical trap'?
Can the case of Lambeth be said to establish the principle that developers should not be able to evade obligations by relying on technical traps.
The legal relevance, if any, of the payments made under the section 106 agreement in 2016/2017.
The legal relevance, if any, of the implications of the developer's case being inconsistent with a key planning priority for the Council (the provision of affordable housing).

21. I am not persuaded that the Council has no real prospect of successfully defending the claim given the wording of the relevant s73 permission and wider planning context and given the absence of authority directly on point in relation to some of the issues raised.

22. Mr Lockhart-Mummery urged me to grasp the nettle and determine the claim given there is no evidential complexity and the parties have had an adequate opportunity to address the legal points raised. I decline the request. The nature of the application meant there was insufficient opportunity to consider the above mentioned issues.”

While an unsurprising outcome to a summary judgment application, the Judge’s seeming acknowledgement, as part of her identification of seven issues, that the concept of the “technical trap” could be applied now to the interpretation of section 106 obligations does raise more serious concerns. Accordingly, this article seeks to explore the inherent difficulties with this concept ahead of the return of this particular case for a substantive hearing on the merits, perhaps, later this year.

The necessary starting point

What is the legal status of “S106s” for the purposes of their interpretation? As Lord Dyson MR reminds in Newham LBC v Ali [2014] EWCA Civ 676 @ para. 16 they are commercial contracts, albeit in a public law context, and enforceable through statutory powers:

“It is not in dispute that planning obligations entered into under section 106 of the 1990 Act are contractual obligations: see, for example, R (Millgate Development Limited) v Wokingham Borough Council [2011] EWCA Civ 1062, [2012] 3 EGLR 87 at para. 22(e) and Stroude v Beazer Homes Ltd [2005] EWHC 2686 (Ch), [2006] 2 P& CR 6. The mechanism for enforcement is provided by section 106(5): “[a] restriction or requirement imposed under a planning obligation is enforceable by injunction”.

Accordingly, it has been long recognised by the Courts that the normal principles of interpretation of deeds should be applied. After 20 years of consideration both by the House of Lords and the Supreme Court, most recently in Chartbrook Limited v. Persimmon Homes Limited [2009] AC 1101, Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, Arnold v Britton [2015] AC 1619 and Wood v. Capita Insurance Services Limited [2017] 2 WLR 1095, those rules of construction are clear. In short:

The primary task of the Court (and of any dispute resolver sitting in a quasi-judicial capacity) is to ascertain the objective meaning of the language in which the parties have chosen to express their agreement in its final, concluded and signed form, and, as a whole.
Evidence of negotiations and evidence of the parties’ subjective intentions are inadmissible.
Even where a corrective interpretation is invoked this is only where something has gone wrong with language of the contract as opposed to something having gone wrong with the implementation of the bargain, or the mistaken failure to exercise a power. It cannot be used, for example, to supply a whole clause which the parties have mistakenly forgotten to include.
The Courts are entitled to prefer the construction of a contractual term which is consistent with business common sense and to reject any other construction.

Given the seeming two-tier approach being suggested in the Norfolk Homes case I also draw particular attention to what Lord Neuberger stated in his speech in Arnold v Britton (@ para.20 and as endorsed by Lord Hodge in Woods v Capita @ para.11):

“ … The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed. Experience shows that it is by no means unknown for people to enter into arrangements which are ill-advised, even ignoring the benefit of wisdom of hindsight, and it is not the function of a court when interpreting an agreement to relieve a party from the consequences of his imprudence or poor advice. Accordingly, when interpreting a contract a judge should avoid re-writing it in an attempt to assist an unwise party or to penalise an astute party."

[Emphasis in bold added]

Although each S106 has the status of a public document requiring inclusion and publication on a council planning register it has still been made contractually with the relevant planning authority, and, usually after negotiations. Accordingly, the principles of interpretation remain applicable in their essential features, for example, the need to focus on the meaning of the relevant words in their documentary, factual and commercial context; the application of an objective test; and the relevance of commercial common sense (see, for example, R (Robert Hitchins Ltd) v Worcestershire County Council & Worcester City Council [2015] EWCA Civ 1060) where Lord Justice Richards cited the principles from the then most recent case, Arnold v Britton)

With regard to the “public element” within a section 106 agreement, it is not so much in the court’s approach to the meaning of words but in the range of material that it can take into account in determining that meaning where that factor needs to be borne in mind. As Lord Justice Lewison remarked, when the Lambeth case was at the Court of Appeal stage ([2018] EWCA Civ 844):

“23. …. As Lord Hodge pointed out in Trump [Trump International Golf Club Ltd v Scottish Ministers [2015] UKSC 74] at [33]:

‘There is a modern tendency in the law to break down divisions in the rules on the interpretation of different kinds of document, both private and public, and to look for more general rules on how to ascertain the meaning of words. In particular, there has been a harmonisation of the interpretation of contracts, unilateral notices, patents and also testamentary documents.’

24. Where a public document differs from cases of that kind is not so much in the court’s approach to the meaning of words, but in the range of material that it can take into account in determining that meaning, as Lord Hodge went on to explain in the same paragraph,

‘Differences in the nature of documents will influence the extent to which the court may look at the factual background to assist interpretation. Thus third parties may have an interest in a public document, such as a planning permission or a consent under section 36 of the 1989 Act, in contrast with many contracts. As a result, the shared knowledge of the applicant for permission and the drafter of the condition does not have the relevance to the process of interpretation that the shared knowledge of parties to a contract, in which there may be no third party interest, has. There is only limited scope for the use of extrinsic material in the interpretation of a public document, such as a planning permission or a section 36 consent.’

25. But having regard to the more limited range of material that can be taken into account in ascertaining the meaning of words in a public document, the ultimate question is still the same, namely:

‘… what a reasonable reader would understand the words to mean when reading the condition in the context of the other conditions and of the consent as a whole. This is an objective exercise in which the court will have regard to the natural and ordinary meaning of the relevant words, the overall purpose of the consent, any other conditions which cast light on the purpose of the relevant words, and common sense.’

26. Agreeing with Lord Hodge, Lord Carnwath said at [66]:

‘I do not think it is right to regard the process of interpreting a planning permission as differing materially from that appropriate to other legal documents.’

[Emphasis in bold added].

Furthermore, regarding the scope of the Court’s powers Lord Justice Lewison advised as follows:

“56. In the contractual context, a corrective interpretation cannot be used to supply a whole clause which the parties have mistakenly forgotten to include: Cherry Tree Investments Ltd v Landmain Ltd [2012] EWCA Civ 736; [2013] Ch 305 at [131] and [144]. As the quotation from Lord Hoffmann demonstrates, a corrective interpretation can only be invoked where something has gone wrong with the language of the contract, as opposed to something having gone wrong with the implementation of the bargain, or the mistaken failure to exercise a power: Honda Motor Europe Ltd v Powell [2014] EWCA Civ 437; [2014] Pens L.R. 255. Although the Decision Notice probably did not achieve the result that Lambeth wanted it to achieve, I do not consider that it can be said that the result is arbitrary or irrational. Nor, in my judgment, has anything gone wrong with the language of the Decision Notice. What went wrong was Lambeth's failure to exercise a power that it had under the Act.”

[Emphasis in bold added]

The Lambeth context

So, where do matters of interpretation of S106s now stand since Lambeth in the Supreme Court?

First, the scope of the single judgment by Lord Carnwath was specifically upon the question of interpreting planning permissions by the use of implied conditions i.e. implying words into a public document such as a planning permission. Furthermore, it was one of those cases which was highly fact-specific. Indeed, Lambeth’s decision notice had undoubtedly been poorly drafted. It is also notable that the decision of the Supreme Court did not overtly overturn established case law or otherwise break new ground, as had seemingly arisen from Trump and only rejected the approach taken by the lower courts in respect to the interpretation of the actual wording used in the decision notice in question. Accordingly, it determined that a reasonable reader would have read the section 73 consent as being a simple variation of the original permission and, implicitly, subject to the conditions attached to that permission.

Secondly, what was the technical trap that, if any, was being considered? Giving the sole judgment, Lord Carnwath uses this term, once, and only under the heading “The Court of Appeal’s reasoning”, and, in the following descriptive context:

“20. … Having set out the planning history and the terms of the section 73, Lewison LJ (paras 19-22) identified what he saw as the problem. While he acknowledged that it was “clear what Lambeth meant to do in a very broad sense”, he said:

“But that is not the question. The question is: what did Lambeth in fact do? The application was an application for the variation of a condition attached to the 2010 permission …

… the technical trap, into which it is said that Lambeth fell, is that approval of an application under section 73 requires the grant of a fresh planning permission, rather than merely a variation of an existing one …

It follows from this that the decision notice must be read as a free-standing grant of planning permission. However, it failed to repeat any of the conditions imposed on the previous planning permissions and, more importantly, failed to express the new description of the use as a condition, rather than as a limited description of the permitted use …”

[Emphasis in bold added]

Therefore, whether as a turn of phrase or term of art it was actually describing only how the Court of Appeal viewed the process by which this Section 73 determination came to be outworked by the relevant local planning authority.

Should there be a “technical trap” argument?

Settled case law and resulting judicial guidance has been clear from somewhile as to what is the status of a section 73 determination. Indeed, in Lambeth (@ para.9) Lord Carnwath sets out those well-established principles starting with Pye v Secretary of State for the Environment, Transport and the Regions [1998] 3 PLR 72 in which Mr Justice Sullivan (as he then was) remarked:

“While section 73 applications are commonly referred to as applications to ‘amend’ the conditions attached to a planning permission, a decision under section 73(2) leaves the original planning permission intact and un-amended. That is so whether the decision is to grant planning permission unconditionally or subject to different conditions under paragraph (a), or to refuse the application under paragraph (b), because planning permission should be granted subject to the same conditions”

In the former case, the applicant may choose whether to implement the original planning permission or the new planning permission; in the latter case, he is still free to implement the original planning permission. Thus, it is not possible to ‘go back on the original planning permission’ under The original planning permission comprises not merely the description of the development in the operative part of the planning permission ... but also the conditions subject to which the development was permitted to be carried out ...”

This passage was approved by the Court of Appeal in Powergen United Kingdom plc v Leicester City Council [2000] JPL 1037, para 28, per Schiemann LJ”

Lord Carnwath also endorsed Mr Justice Sullivan's recommendations in Reid v Secretary of State for Transport [2002] EWHC 2174 that local planning authorities should, as good practice, restate all the conditions to which the new planning permission will be subject and not left to the process of cross-referencing.

Indeed, even for the distracted planning officer the MHCLG’s national Planning Policy Guidance (Paragraph: 040 Reference ID: 21a-040-20190723) makes clear:

“The original planning permission will continue to exist whatever the outcome of the application under section 73. … For the purposes of clarity, decision notices for the grant of planning permission under section 73 should set out all the conditions imposed on the new planning permission, and restate the conditions imposed on earlier permissions that continue to have effect.”

Likewise, current Welsh Government advice in its Circular: The Use of Planning Conditions for Development Management advises in similar terms.

Therefore, the procedural position is clear with regard to Section 73 determinations and should provide no “wriggle room”.

Nonetheless, should the planning oversights by local authorities be judged more leniently by the Courts, given the potentially adverse effects on the wider public interest, for example, the loss of affordable housing or new sports facilities, when it comes to S106s?

In the Norfolk Homes case, the limited facts given in the judgment reveal that the parties had chosen, for undisclosed reasons, not to include the increasingly standard clause to the effect that the planning obligations within the original Section 106 Agreement were to remain binding. Consequently, the council should be absolved from the legal consequences of an undoubted oversight.

However, as with all local authorities, the council retained ‘custody and control’ of the contents of the initial and the subsequent Section 73 decision notices, and, the requirement for any related S106 variations, substitute or continuation of relevant planning obligations.

Secondly, both Parliament and the Courts have taken a consistently “hard edged” approach towards the application and enforceability of S106s. This is well charted. Even during the more indulgent days of the 1990s Lord Hoffmann still remarked in Tesco Stores Limited v SOSE [1995] 1 WLR 759 @ 779 as follows:

“ … once the condition has been satisfied, the planning obligation becomes binding and cannot be challenged by the developer or his successor in title on the ground that it lacked a sufficient nexus with the proposed development.”

Despite the ability to apply for modification or discharge after five years under Section 106A such cases as R (Millgate Developments v Wokingham BC [2011] EWCA Civ 1062 and R (Mansfield DC) v SSHCLG [2018] EWHC 1794 (Admin) demonstrate that the Courts will continue to uphold local authorities’ demands that the developer should be held to the planning obligations, it contracted to discharge even if circumstances have subsequently changed.

Accordingly, why should there be a change of judicial direction now? Despite the effects of financial austerity on local government budgets, the drafting of S106s is one area where the legal costs of preparation are usually borne largely if not exclusively by the applicant. Equally, while many authorities may now have to use shared or out-sourced legal services the same quality of provision, dating back to the principles enshrined by the House of Lords in the seminal case of Hedley Byrne & Co Ltd v Heller & Partner Ltd [1964] AC 465, should apply despite the lack (or paucity) of remuneration. Surely, it would now drive the proverbial “coach and horses” through the applicable principles were a two-tiered” approach now to be taken?

Concluding remarks

While the strangest of justified changes can happen these days in the interests of expediency, even in North Norfolk, it is to be hoped that in a post-pandemic world well-established principles of construction and interpretation of S106s will not be one casualty. If otherwise, then the planning world as we now know it will be forever changed and not necessarily for the better.

John Pugh-Smith FSA FCIArb practises as a barrister from 39 Essex Chambers. He can be contacted This email address is being protected from spambots. You need JavaScript enabled to view it. or by telephone at 020 7832 1111.

John is also a member of the RICS President’s appointment panel. He has acted as an arbitrator, independent expert and dispute facilitator on a variety of references concerning the interpretation of section 106 and development agreement.