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High court rules Local Authorities can enforce a unilateral undertaking

The High court has ruled that local authorities can enforce a unilateral undertaking  (a legal obligation to which the council is not a party), even when the unilateral undertaking has been ruled unnecessary by a planning inspector on appeal

The drafting of the unilateral undertaking is key, if this is to be avoided.

In Millgate Developments Ltd, R v Wokingham Borough Council EWHC 6 (Admin), the High Court held that the enforcement by the Council of a ‘unilateral undertaking’ to pay planning contributions was not unreasonable despite a planning inspector giving the undertaking little weight in reaching a decision. 

Background

Planning obligations

Planning obligations enable a local planning authority (LPA) to secure, or a developer to offer, restrictions upon the use of the land or the operation of the development or to make financial contributions towards local facilities and infrastructure.

Planning obligations evolved to address the issues that were considered a barrier to the grant of planning permission and to solve problems that could not be addressed through the use of planning conditions. For example, where planning permission would otherwise be refused due to inadequate basic infrastructure, planning obligations would govern the terms by which the developer agreed to improve the infrastructure, making the development acceptable from a planning perspective.

In this way, planning obligations address the impact of the development and oblige the developer to take steps to make the planning application acceptable to an LPA.

Planning obligations are currently contained in either a:

  • Bilateral agreement entered into between an LPA and a landowner or developer under section 106 of the Town and Country Planning Act 1990 (TCPA 1990) (known as a "section 106 agreement").
  • Unilateral undertaking made by the landowner or developer alone.

It is more usual for planning obligations to be negotiated between a landowner or developer and an LPA. However, where a landowner or developer feels that the negotiations are becoming unnecessarily protracted or that unreasonable demands are being made by an LPA, it may offer a unilateral undertaking without the co-operation of an LPA.

A unilateral undertaking is often offered at a planning appeal. By offering planning obligations, the developer hopes to overcome some or all of the objections to the proposed development and obtain the planning permission sought.

The unilateral undertaking should be relevant to planning issues and directly related to the needs created by the development proposal.

Where a local planning authority refuses planning permission, a unilateral undertaking is frequently given under section 106 of the Town and Country Planning Act 1990 to overcome the reasons for refusal.

Importance of this recent decision in the High court

This recent case in the High court emphasises the binding nature of a unilateral undertaking, even though the parties giving the undertaking to the local council  won their appeal, and the Inspector said that the document, and the obligations contained within it were not persuasive to him in granting planning permission, which had previously been refused by the local council. The contributions amounted to approximately £170,500 to overcome one of the Council's reasons for refusal.

Facts

Millgate Developments Ltd (Millgate) applied to Wokingham Borough Council (Council) for planning permission for 14 houses. Permission was refused as the Council considered the proposed development was not appropriate to the character of the surrounding area.

One of the reasons for refusal was that "the proposal failed to make satisfactory provision of adequate services, amenities and infrastructure needs and would have an adverse impact on the amenities of the area". The Council advised that this reason for refusal could be overcome by submitting an acceptable unilateral undertaking and calculated that the proposal would require a financial contribution of approximately £170,500.

Millgate appealed to the Secretary of State against the decision, and provided a unilateral undertaking to pay the contribution requested by the Council. The undertaking would not take effect until planning permission had been granted and commencement of development had taken place.

The planning appeal was allowed. However, the planning inspector stated, in the decision letter, that:

"The Council's request for contributions towards highways, leisure, education and libraries are addressed by the Appellant through the submission of unilateral undertakings. However, the Council provided nothing to show that those contributions are necessary in order to satisfy the tests in Structure Plan Policy DP4, Local Plan Policy WOS4 or Circular 5/05 Planning Obligations. I therefore conclude that contributions to the provision of infrastructure are unnecessary and afford the unilateral undertaking little weight."

On the basis of the planning inspector's comments, Millgate asked the Council to discharge the unilateral undertaking under section 106A of the TCPA 1990. The Council declined stating that the inspector's opinion did not affect the enforceability of the undertaking and required Millgate to comply with the undertaking. Millgate applied to the High court for a judicial review of the decision to enforce the undertaking.

Decision

The High Court dismissed Millgate’s application, which meant that the council could go ahead and demand the financial contributions from Millgate.

Why was the Council’s right to demand the contributions found to be lawful? Millgate entered into the undertaking voluntarily and it was conditional on only two events (both of which had occurred), the:

  • Grant of planning permission.
  • Commencement of development.

The undertaking did not provide that it should only take effect if the inspector found an undertaking necessary to make the development acceptable.

Surplus monies can be returned to the developer or landowner

Unilateral undertakings are entered into by the developer or landowner and as the LPA is not a party to the undertaking, there is no explicit provision for the LPA to repay any surplus sums. Millgate argued that it was unreasonable for the Council to take enforcement action where there was no legal obligation "to account or to repay".

The court held that the powers under section 111 of the Local Government Act 1972 (LGA) enabled the refund of any surplus money, after the Council has exercised its function of mitigating the effects of the development, as this was incidental to its planning functions. 

Comment

Although the planning inspector considered the unilateral undertaking was not needed and granted planning permission, Millgate was still held liable to comply with the undertaking.

When submitting undertakings on appeal, it would seem sensible to include a pre-condition that the undertaking should only take effect if a planning inspector decides the undertaking necessary to make the development acceptable. It may also be worth considering submitting a draft undertaking that is only executed following the request of an inspector.

This appears to be the first case to consider whether section 111(1) of the LGA 1972 allows an LPA to reimburse surplus sums paid to it by the developer pursuant to a unilateral undertaking.

By Nick Sanders