Financial consequences as a material consideration

The parameters or limits of material considerations seem to be a live issue at the moment. In Health & Safety Executive v. Wolverhampton City Council ([2010] EWCA Civ 892), in which judgment was given on 30 July, the Court of Appeal was concerned with the question of the materiality of an LPA’s liability to pay compensation when deciding whether or not to revoke or modify a planning permission. The potential cost to the Council of revoking or modifying the planning permission in question had been one of the factors which dissuaded the Council from taking this step, and this was one of the grounds on which that decision was challenged.

The case arose from a muddle over a planning application to erect student accommodation within the ‘danger zone’ of an LPG storage facility. In an initial response to consultation, the HSE had advised against planning permission being granted due to the proximity of the LPG facility, but the LPA had failed to follow this up as they should have done, and simply went on to grant planning permission. Had they followed the correct procedure, the HSE would have made a strong case for the refusal of planning permission on safety grounds, and the application would no doubt have been called in by the Secretary of State.

The issue was so important that the HSE could not let the matter rest, and pressed the LPA to revoke the planning permission, subsequently applying for judicial review in order to secure the quashing either of the permission itself or of the decision not to vary or revoke it. A further complication which would have prevented outright quashing of the planning permission was the fact that three out of the four accommodation blocks authorised by the permission had been completed and occupied by the time the matter came before the court, but variation of the permission so as to revoke the authorisation of the fourth block was still a legal and practical possibility.

Relief was refused at first instance (by Collins J) and the HSE then appealed to the Court of Appeal, who were unanimous in quashing the decision of the LPA not to make a revocation or modification order in respect of planning permission for the fourth accommodation block, basically because the LPA had ruled this out as a practical option without ever having given it proper consideration. However, there was a difference of opinion over the right of the LPA to take into account the financial consequences of making a revocation or modification order.

The Court was faced with two clearly conflicting judicial authorities - Alnwick DC v SSETR (2000) 79 P & CR 130, and R (Usk Valley Conservation Group) v Brecon Beacons National Park Authority [2010] EWHC 71 (Admin.) The majority view, following Usk Valley, was that where an LPA has to consider whether it is ‘expedient’ to exercise their statutory powers (for example under Sections 97, 102 or 172), the potential cost to the authority of doing so (in terms of the compensation and other costs that might become payable in that event) is a legitimate material consideration. However, the Court took the view that this does not apply to cases in which the issue of expediency does not arise, for example in a straightforward decision as to whether or not planning permission should be granted. In that case, the LPA does not have to consider whether it is ‘expedient’ to grant or refuse planning permission. It is not initiating action, but is simply responding to an application which has been made to it, and which it is bound to determine (failing which there is a ‘deemed refusal’ under s.78(2)). In that case, the LPA simply has to determine the planning application in accordance with ‘normal’ material considerations relevant to planning, as required by s.70 of the 1990 Act and s.38(6) of the 2004 Act.

The fact that Pill LJ delivered a dissenting judgment on the compensation point (while agreeing that a quashing order had to be made for other reasons) suggests that we may not have heard the last of this. Whilst an LPA clearly does not have to consider whether it is ‘expedient’ to grant or refuse planning permission, it seems to me that there is nothing in either s.70 of the 1990 Act or s.38(6) of the 2004 Act which necessarily prevents the financial consequences to the authority of making a particular decision from being a material consideration. Suppose, for example, that elected members were advised by their officers that a refusal of planning permission would very probably lead to an award of substantial costs against the Council on appeal. Might that not be a legitimate material consideration to be taken into account? I was under the impression that there was judicial authority precisely on this point which supported that proposition, but I have been unable to find the case I had in mind.

Despite the lengthy and carefully considered judgments, both by Ouseley J in Usk Valley and by Sullivan LJ in the Wolverhampton case, there continues to be uncertainty as to what can properly be taken into account as a material consideration in the determination of a planning application (as distinct from deciding on the expediency of revoking a planning permission or serving an enforcement notice).

UPDATE (July 2012). The Court of Appeal's decision has been upheld by a unanimous decision of the Supreme Court, confirming that when considering whether to revoke or modify a planning permission, a local planning authority can take into account as a material consideration the amount of any compensation which the authority might potentially be liable to pay to the landowner consequent upon that revocation or modification. The reference to the Supreme Court judgment is Health and Safety Executive v Wolverhampton City Council [2012] UKSC 34.

© MARTIN H GOODALL