Money matters

Ned Westaway looks at the issue of wider benefits as material considerations in compulsory purchase and planning decisions.

Material or immaterial considerations represent a minefield for local planning authorities tasked with making planning decisions. Two recent cases have considered the circumstances in which an LPA can take into account wider economic circumstances.

In R (on the application of Sainsbury's Supermarkets Ltd) v Wolverhampton City Council [2010] UKSC 20; [2010] 2 W.L.R. 1173, the Supreme Court (7 Justices) held by a majority of 4-3 that the decision to make a compulsory purchase order under section 226 of the Town and Country Planning Act 1990 unlawfully took into account a cross-subsidy to a “wholly unconnected” site.

In Health and Safety Executive v Wolverhampton City Council [2010] EWCA Civ 892; [2010] N.P.C. 91 the Court of Appeal (Longmore and Sullivan LJJ, Pill LJ dissenting) held that in deciding whether to revoke or modify a planning permission under section 97 of the 1990 Act, the Council was entitled to consider the effect on its own finances of having to pay compensation to the disappointed developer.

In both cases Wolverhampton City Council was acting in the wider economic interest, in Sainsbury’s that course of action was outlawed, in HSE it was sanctioned.

The decision in Sainsbury’s

The land in question was owned 14% by Tesco and 86% by rival Sainsbury’s. Both supermarkets obtained planning permission for similar developments over the whole site, and the Council decided to exercise its CPO powers on Tesco’s behalf (despite its owning far less of the site). The “decisive” factor was Tesco’s offer to finance the much-needed and otherwise unviable redevelopment of a second dilapidated site, about 800m away, in consideration for developing the first.

The majority (Lord Walker of Gestingthorpe, Baroness Hale of Richmond, Lord Mance and Lord Collins of Mapesbury JJSC) held that was unlawful. Section 226(1)(a) provides that an LPA can make a CPO if it considers that the acquisition will “facilitate the carrying out of development, re-development or improvement on or in relation to the land” (emphasis added). There is a direct analogy with the interpretation of material considerations when deciding whether to grant planning permission under section 70(2) – that is: a consideration is “material” if it relates to some extent to the development (Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 W.L.R. 759). In fact the argument is stronger in the CPO context as compulsory acquisition of property should only be permitted where there is express authorisation by Parliament. Lord Walker said: “The answer is simply that it is not the right way for a local authority to make a decision as to the exercise of its power of compulsory purchase, any more than it could choose a new chief executive, from a short list of apparently equally well qualified candidates, by holding a closed auction for the office.”

To paraphrase: it is not permissible to buy a CPO.

The minority (Lord Phillips of Worth Matravers and Lord Hope of Craighead), in favouring Tesco, adopted a different twofold approach:

1. The decision to exercise compulsory acquisition powers one way or the other was made without regard to the wider benefits of redeveloping the second site;
2. The decision under challenge was an answer to a second question: to which of the rival supermarkets to dispose of the land?

Under section 233 (disposition of land), the Council were entitled, if not obliged, to consider wider financial benefits.

Practical conclusions from Sainsbury’s

• A developer need only show a more than de minimis connection between two sites – Tesco’s difficulty was that they had not demonstrated this. (This is perhaps surprising – in fact Lord Brown in his dissenting judgment assumed that there was sufficient connection – given the proximity of the sites and the fact that redevelopment of the second site was to include a health clinic).
• Financial viability remains a material consideration where development proposed for a CPO site requires cross-subsidy from elsewhere.
• Where an LPA makes a chain of decisions under section 226 and section 233, it must be careful to distinguish the rationales and reasoning behind each of them as wider financial considerations can only be borne into account in relation to the latter decision. Arguably had the Council deliberately and clearly separated its decision making process, the reasoning of the minority would have prevailed. The important point, to adopt Baroness Hale’s analogy, is that the cart (disposition of the land under section 233) cannot be allowed to guide the horses (the compulsory acquisition of land to be disposed).

The decision in HSE

The Council refused to exercise its power under section 97 of the 1990 Act to revoke or modify planning permission granted for four blocks of student accommodation located just 95 metres from a liquefied petroleum gas facility. Three of the blocks had already been constructed, but the fourth and closest to the LPG facility had not.

The Court of Appeal held that the Council, having consulted the HSE, must in the circumstances consider exercising its power to revoke the permission for the fourth block. The majority held that the Council could take into account the requirement to pay compensation under section 107.

Section 97 authorises an LPA to revoke or modify a planning permission if they consider it expedient, having regard to the development plan and to “any other material considerations”. Sullivan LJ agreed that “material considerations” in section 97 must be consistent with the meaning in other parts of the Act (at paragraph 46 – ie it must relate to the development). However he distinguished the position as follows:

• The decision to revoke (etc.) planning permission is initiated by the LPA and in considering whether it is “expedient” to make the order the LPA must be expected to be familiar with the content of the 1990 Act as a whole.
• As the 1990 Act provides an explicit statutory framework for compensation in section 107: “it must be inferred … that Parliament expected that a local planning authority would have regard to its liability to pay compensation under one part of the Act when deciding whether or not to exercise power under another part of the Act”.

Pill LJ dissented, adopting the approach of Richards J (as he then was) in Alnwick District Council v SSETR (2000) 79 P. & C.R. 130, who held that under section 97 “payment of compensation enters the picture only after a decision to revoke or modify has been taken”. Pill LJ said that this reflected an important philosophy behind the modern planning regime that “the development value of land, over and above the value attributable to existing use of the land, should be taken into public ownership”; it would be both inconsistent with the primacy of the development plan and unfair on individual landowners were the availability of public finances for compensation to be a material factor in deciding whether to revoke (etc.) a planning permission.

Practical conclusions from HSE

• HSE leaves the law on the materiality of compensation (for decisions under sections 97, 102 and, possibly, 172 of the 1990 Act) somewhat uncertain; as Longmore LJ noted, the matter “divides the acknowledged experts”. In light of the clear division of judicial opinion, permission to appeal to the Supreme Court has been granted.
• Sullivan LJ’s distinction is conceptually difficult: it depends on a category of statutory consideration that is relevant though not “material” as defined in the 1990 Act; also, it is not an approach that the courts took in relation to section 106 agreements, despite section 106 being part of the statutory code (R v Plymouth City Council ex parte Plymouth and South Devon Cooperative Society (1994) 67 P. & C.R. 78). (In relation to the materiality of section 106 agreements, regulation 122 of the Community Infrastructure Levy Regulations 2010 must now be borne in mind.)
• LPAs may therefore wish to be cautious about proceeding on the basis of the majority approach in HSE. Were an LPA to adopt such an approach, two points at least are clear:

1. The desire to avoid paying compensation should not be the “sole factor” (per Sullivan LJ at paragraph 58).
2. The LPA should set out clearly “why it is expedient for that sum not to be paid in circumstances in which modification or revocation [etc.] might otherwise be appropriate” (per Longmore LJ at paragraph 67).

Ned Westaway is a barrister at Francis Taylor Building (www.ftb.eu.com). He can be contacted by email at This email address is being protected from spambots. You need JavaScript enabled to view it.. This article was first published in the FTB Local Government Newsletter. The newsletter contains short and practically focussed items sent quarterly by e-mail to busy local authority practitioners and is written by FTB’s specialist local government team. To subscribe to the FTB Newsletter, please e-mail This email address is being protected from spambots. You need JavaScript enabled to view it..