Aberdeen City and Shire Strategic Development Planning Authority v Elsick Development Company Limited (Scotland) [2017] UKSC 66

Elsick challenged a planning authority's supplementary guidance requiring developers to contribute to a pooled Strategic Transport Fund for infrastructure across Aberdeen. The Supreme Court held the scheme unlawful, as contributions bore only trivial connection to individual developments, exceeding statutory powers under section 75 of the 1997 Act.

Facts

The Aberdeen City and Shire Strategic Development Planning Authority (the Authority) prepared a strategic development plan anticipating significant growth in the Aberdeen area, which would require substantial transport infrastructure investment. The North-East of Scotland Transport Partnership (Nestrans) commissioned a Cumulative Transport Appraisal (CTA) identifying £86.6m of further infrastructure required to mitigate the cumulative impact of planned development.

To finance this, the Authority adopted supplementary guidance (SG) establishing a Strategic Transport Fund (the Fund). Developers in four strategic growth areas were required to contribute fixed sums per residential unit (between £1,350 and £3,148) or comparable sums for non-residential developments, with contributions pooled and applied to specified transport interventions.

Elsick Development Ltd proposed a 4,000-home development near Stonehaven and entered into a section 75 planning obligation with Aberdeenshire Council to contribute to the Fund, conditional on the SG’s validity. Elsick objected to the SG, contending the required contributions were disproportionate to its development’s actual impact on the relevant infrastructure. The First Division of the Inner House quashed the SG, finding many planned developments, including Elsick, had no or only trivial impact on several of the proposed interventions.

Issues

The central issue was the lawfulness of the planning obligation Elsick entered into pursuant to the SG. This required the court to determine:

• The correct legal test for the lawfulness of a planning condition;
• The correct legal test for the lawfulness of a planning obligation under section 75 of the Town and Country Planning (Scotland) Act 1997;
• The role of a planning obligation in deciding whether to grant planning permission; and
• The boundary between questions of legality and matters of planning policy.

Arguments

Appellant (the Authority)

The Authority argued that the policy tests in Circular 3/2012 were not legal tests for the validity of planning obligations; that the Inner House had taken an unduly restrictive approach to policy; and that the SG complied substantially with the Circular because developers could opt to mitigate cumulative impact outside the Fund (paragraph 5.4 of the SG).

Respondent (Elsick)

Elsick contended that contributions to the Fund were out of all proportion to the demands its development would make on the infrastructure to be funded, and that the pooled-fund mechanism failed to satisfy the requirement that planning obligations fairly and reasonably relate in scale and kind to the proposed development.

Judgment

Lord Hodge, with whom the other Justices agreed, dismissed the appeal.

Planning conditions

The court reaffirmed the three established constraints on planning conditions: they must serve a planning purpose; fairly and reasonably relate to the permitted development; and not be Wednesbury unreasonable.

Planning obligations under section 75

A planning obligation must restrict or regulate the development or use of the burdened land. Lord Hodge accepted, following Good v Epping Forest District Council [1994] 1 WLR 376 and Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759, that a planning obligation need not relate to a permitted development and that the only constraints outside the section’s express terms are that it serves a planning purpose and is not Wednesbury unreasonable.

However, the court identified an implicit statutory limitation: where a planning obligation requires a financial contribution as a precondition for development, the restriction must serve a purpose in relation to the development or use of the burdened site. A planning obligation imposing financial contributions for purposes unconnected with the burdened land would either fall outside section 75 (because it would neither restrict nor regulate development) or, if framed as a negative suspensive obligation, be ultra vires and Wednesbury unreasonable, as it would effectively permit the buying and selling of planning permission.

Materiality in planning decisions

Following Tesco, for a planning obligation to be a material consideration in determining a planning application, it must have a connection with the proposed development that is more than trivial (de minimis). Inclusion of a contribution policy in the development plan does not transform an otherwise irrelevant obligation into a material one; section 37(2) requires regard to the development plan only so far as material to the application.

Application to the SG and Elsick’s obligation

The court found the scheme unlawful for two reasons:

• The Fund pooled contributions to finance infrastructure with which individual developments, including Elsick’s, had only a trivial connection. The contributions were therefore not imposed for a purpose related to the development or use of the burdened site, as section 75 requires.
• The planning obligation Elsick entered into did not restrict or regulate development of the Elsick site (there was no negative suspensive condition tied to payment), placing it outside the ambit of section 75. Further, because the connection between Elsick’s development and the funded interventions was trivial, the obligation could not be a material consideration in the grant of permission under Tesco, and the Authority lacked power to require it as a precondition of permission.

The court rejected the contention that paragraph 5.4 of the SG made the scheme voluntary, observing that a developer would face such a daunting alternative assessment that effectively no planning permission would issue without contributing to the Fund. Equally, the inserted statement that planning obligations would follow the Circular was no safeguard given the inconsistency with the scheme’s structure.

Implications

The decision clarifies the legal boundaries of planning obligations under section 75 of the 1997 Act. While planning obligations are not subject to the same requirement as planning conditions to fairly and reasonably relate to a permitted development, they must still restrict or regulate the use of the burdened land, and where they impose financial contributions, those contributions must relate to the development or use of that land. Pooled contribution schemes which require developers to fund infrastructure bearing only trivial connection to their own developments fall outside the statutory power.

The judgment confirms the Tesco threshold: a financial planning obligation will only be a material consideration in granting permission where it has a more than trivial connection with the proposed development. A development plan policy cannot transform an irrelevant obligation into a material consideration.

Lord Hodge acknowledged the policy attractions of such pooled schemes, comparing them to the community infrastructure levy introduced in England and Wales by Part 11 of the Planning Act 2008, but concluded unambiguously that Scottish planning authorities require fresh legislation to establish a local development land levy of this kind. The decision is therefore of considerable practical importance to Scottish planning authorities, developers, and those advising them, signalling that any future tariff-based pooled funding arrangement must await legislative authorisation.

Verdict: The appeal was dismissed. The Supreme Court upheld the Inner House’s decision quashing the supplementary guidance, holding that the Strategic Transport Fund scheme and the planning obligations it promoted were unlawful as outside the powers conferred by section 75 of the Town and Country Planning (Scotland) Act 1997.

Source: Aberdeen City and Shire Strategic Development Planning Authority v Elsick Development Company Limited (Scotland) [2017] UKSC 66