A recent case concerning unilateral undertakings made under section 106 of the Town and Country Planning Act 1990 has yet again brought into consideration the contributions that local planning authorities request from developers on grant of planning permission, and unilateral undertakings submitted on appeal.

In the case of R (on the application of Millgate Developments Ltd) v Wokingham Borough Council [2011] All ER (D) 109 (Jan), the High Court held that the enforcement of an undertaking to pay contributions to Wokingham Borough Council was not unreasonable because the undertaking had been entered into voluntarily, and the Inspector's comments in his decision did not affect its enforceability. Further, it was held there was an ability for the Council to repay contributions to the developer made under a unilateral undertaking using powers under section 111 of the Local Government Act 1972.

The proposal and the Council's requirements

Millgate Developments Limited applied to the Council for permission to build 14 new homes. The Council considered the proposal inappropriate to the character of the area and permission was refused. The reasons included the fact that Millgate had failed to provide financial contributions to local services, amenities and infrastructure. Millgate appealed and provided a unilateral undertaking to pay the contributions requested by the Council. The undertaking was conditional on grant of permission and commencement of the development. Millgate did not dispute the required contributions nor make any submissions as to their merit.

The Inspector allowed the appeal but noted that the Council had failed to show that the contributions were necessary in order to satisfy the Structure and Local Plan Policy and Circular 5/95. He concluded that they were unnecessary and had accorded them little weight when making his decision. In light of this, Millgate requested that the Council discharge the unilateral undertaking. The Council refused to do so, stating that the opinion of the Inspector did not affect the enforceability of the undertaking. Millgate applied for a judicial review of the decision to enforce the undertaking.

Lawful to enforce the undertaking

The application was dismissed. The High Court held that the enforcement of the undertaking was lawful and the Inspector's comments were unconnected to its enforceability. The undertaking was voluntary and only conditional on the grant of permission and the commencement of development, not the Inspector's approval. The Council was reasonable in its decision not to discharge the undertaking as it considered that it served a useful planning purpose, which was the correct question to ask. It was further held that any monies that were over and above those needed for the infrastructure could be returned to Millgate, as this was conducive to the discharge of the Council's public functions and within its powers under section 111 of the Local Government Act 1972. As the monies could be returned, the Council was not unreasonable in taking enforcement action, as the appellant had argued.

Unilateral v bilateral undertakings

There are two interesting points raised by this case. Unilateral undertakings have, since their introduction, been used for expediency, or as a way of circumventing a disagreement with the Council as to the amount or nature of the contributions required. They are often prepared in the hope that an Inspector will grant permission on appeal taking into account the 'voluntary' offer to provide the contributions. Of course, one of the main disadvantages of a unilateral versus a bilateral agreement is that there are no obligations upon the Council to use the monies in a specific way. This particular point is discussed further below.

In the Millgate judgment, much was made of the fact that the undertaking was entered into willingly, with no submissions by Millgate as to necessity, and that its enforcement was a separate issue to the contributions themselves. Judge David Pearl, sitting as a deputy judge, stated at paragraph 30 that "there is no condition...that the obligation should take effect only in the event of an Inspector indicating that the obligation in question was necessary to make the development acceptable." This seems to suggest that it would be possible for an undertaking made under section 106 to also be conditional on the Inspector agreeing with the requirements for the contributions or indeed the amounts of the contributions.

The point was made by the judge in Millgate, that it is not for the Court to decide on the amounts of contributions, nor intervene where they seem disproportionate, provided there is sufficient connection with the development to make it a material consideration. A developer must therefore ensure that when entering into a unilateral undertaking it is sure that what the Council is requesting is necessary and lawful and that the amounts are evidenced in some way. If they do not, the courts will not assist them at a later date. Likewise, if an undertaking is made conditional on approval by the Inspector, Councils must ensure that they have a robust and transparent policy basis for what they request or they may find that they get nothing.

The other point of interest is that when Millgate submitted it was unreasonable for the Council to take enforcement action in a situation where there was no legal obligation to 'account or repay'. It was argued that there could be no reimbursement of contributions that were unexpended. Section 111 of the Local Government Act 1972 allows a local authority to do anything which is calculated to facilitate or is conducive or incidental to the discharge of its functions. Pearl J agreed that the powers under this section enabled the refund of any surplus amount after the Council has exercised its public law duty of mitigating the effect of the development, as this is incidental to its planning functions. The fact that there is a power to refund was found to be further justification that the enforcement of the undertaking was not unreasonable.

What is this decision likely to mean?

Following this case, we may therefore see many more conditional unilateral undertakings submitted on appeal, or possibly drafts that are only executed by the developer following the request of the planning inspector. This would at least give the developer comfort that the amounts he was providing to the Council were correct and fair. Further, from the Council's point of view, it must ensure that its policies are robust or face the potential financial consequences of them not being so. The correct approach of course is for both sides to lead evidence at the appeal to justify their position in relation to the appropriateness of the developer contribution proposed.

What will be interesting to see is whether unspent monies will be returned to the developer. Although the Council has the power to do this, in exercise of its public function, this is certainly not a requirement akin to the clawback provisions commonly found in bilateral section 106 agreements. Millgate made the point that it was the first case to consider whether it is possible for the Council to reimburse surplus sums using its powers enshrined in the Local Government Act 1972. We may see more disputes if the Council cannot account or show that it has spent all the money for those purposes proposed in its policy documents.

To read the decision in R on the application of Millgate Developments Ltd) v Wokingham Borough Council click here.