Statutory guidance issued by the Aberdeen City and Shire Strategic Development Planning Authority (SDPA) which seeks contributions from developments towards a Strategic Transport Fund has been found to be unlawful by the Supreme Court.

In February 2013, the SDPA produced draft supplementary planning guidance in support of its proposed strategic development plan for its area. This guidance allowed for a Strategic Transport Fund to deliver infrastructure needed because of proposed development in four strategic growth areas. In substance, the guidance required developers to enter into planning obligations under the Town and Country Planning (Scotland) Act 1997 with the SDPA to make financial contributions to the Fund. Such contributions were to be pooled and spent on required infrastructure.

Elsick Development Company (EDC), the promoter of Chapelton, a new town of over 4000 homes which is under construction south of Aberdeen City, challenged the SDPA guidance on the grounds that it breached established law and failed to comply with Scottish Government policy on planning obligations (The Circular). In particular, the guidance did not establish a direct relationship between the level of contribution sought and the impact of a development.

In the meantime, the EDC voluntarily entered into a planning obligation under s75 of the 1997 Act to contribute to the Fund in terms of the draft supplementary guidance but on the basis that no contributions would be paid if the guidance was found to be invalid.

The SDPA adopted the supplementary guidance after making an amendment advised by the Scottish Ministers to the effect that the use of any planning obligation should follow the advice in the Circular. As adopted, the supplementary guidance listed the cumulative infrastructure requirements identified by the cumulative transport appraisal (“CTA”) for the area. These requirements had been revised following criticism by the Reporter appointed by the Scottish Ministers that it had not been demonstrated that there was a clear and direct relationship between the development contributing to the Fund and the infrastructure which would be delivered.

Upon appeal by the Elsick Development Company, the Inner House of the Court of Session quashed the supplementary guidance on the basis that, notwithstanding the amendments made thereto, the obligation to contribute to the pooled Fund breached the Circular and such a planning obligation must fairly and reasonably relate to the permitted development.

The SDPA then appealed to the UK Supreme Court and argued, amongst other things, that the policy tests in the Circular were not part of the legal tests for the validity of a planning obligation.

Unanimously rejecting the appeal, the Supreme Court found that the connection between certain developments, including Chapelton, and the interventions which the pooled Strategic Transport Fund was intended to finance, was: “at best trivial”. Using a developer’s contribution on infrastructure, with which its development has no more than a trivial connection, would breach the requirements of section 75 of the Town and Country Planning (Scotland) Act 1997, which governs planning obligations.

Elaine Farquharson-Black, partner at Burness Paull, who acted for EDC in the challenge, said: “Since 2010, my client has consistently advised the SDPA that its approach is unlawful. The Guidance did not require contributions sought from a development to be fairly and reasonably related to a particular transport improvement, nor that such a payment should be used to fund an intervention that was required as a result of the development. As such, the Guidance fell foul of the established law on planning obligations.”

The Duke of Fife, representing EDC, said: “This issue has now been examined legally three times and each time found in our favour. This has not been on a mere technicality but on a fundamental and long-established principle of planning law. The whole saga has been an unfortunate waste of time and money. The SDPA should have taken notice of its own consultation exercise when many in the development industry pointed out that its approach would fail. Instead it pressed on and has now incurred far greater costs for the taxpayers of Aberdeen and Aberdeenshire than coming up with a workable scheme in the first place. Something it still has to do.

“EDC remains fully committed to investing in infrastructure that is affected by the increased traffic generated by the development of Chapelton. EDC has already invested over £1m in a new roundabout at Newtonhill; hundreds of thousands of pounds improving the A90; as well as a new park and ride at Newtonhill. As Chapelton grows, a further £12m will be spent on a new grade-separated junction on the A90. This shows that we are quite prepared to put up the necessary money to create the improvements to the public infrastructure that our development necessitates. However, we are not willing to do so for those that other developments need, which is what the SPDA was unfairly trying to make us do.

“We would now like to be able to concentrate on working with Aberdeenshire Council to continue the effort that is making Chapelton a great place to live. We are very pleased with what has already been achieved and I would urge anyone interested to come and have a look and see what makes Chapelton special.”

Lord Hodge gave the lead judgment with which the other Justices agree.

Reasons for the judgment

An approved strategic development plan is of central importance to planning decisions under the 1997 Act. Supplementary guidance deals with the provision of further information in respect of proposals set out in the plan.

Planning obligations in terms of s75 of the 1997 Act do not necessarily need to relate to a particular permitted development on the burdened land. A planning obligation may be entered into in circumstances which are not connected with any planning application. For instance, a planning authority may contract for the payment of financial contributions towards certain infrastructure necessitated by the cumulative effect of various developments, so long as the land which is subject to the obligation contributes to that cumulative effect.

However, it is not lawful to restrict the commencement of development by planning obligation until the developer undertakes to make a financial contribution towards infrastructure which is unconnected with the development of the site. If such a planning obligation were lawful, an authority could use an application to extract benefits which are unrelated to the proposed development. Moreover, it is not lawful to require contributions towards such infrastructure in a planning obligation which does not restrict the development of the site by means of a negative suspensive condition, as such a planning obligation would neither restrict nor regulate the development of the site in terms of s75.

In determining a planning application, the authority must take into consideration material provisions of the development plan and other material considerations. For a planning obligation to be material it must have some connection with the proposed development which is not trivial. If a planning obligation, which is otherwise irrelevant to the application, is sought as a policy in the development plan, the policy seeking to impose such an obligation is an irrelevant consideration for determination of the planning application.

In the instant case, the scheme established in the supplementary guidance involved the pooling of payments which were not tied to a particular development. The opt-out did not make the scheme voluntary in any real sense. The 1997 Act does not allow for such a scheme. The supplementary guidance and the planning obligations which it promotes are unlawful for two reasons.

Firstly, the use of the developer’s contribution to the pooled Fund on infrastructure with which its development has no more than a trivial connection means that the planning obligation is not imposed for a purpose related to the development and use of the burdened site as required by s75, nor did the planning obligation restrict or regulate the development within the meaning of s75.

Secondly, the planning obligation entered into by the Respondent was an irrelevant consideration in terms of a planning application because there was only a trivial connection between the development and the infrastructure intervention(s) which the proposed contribution would fund. An authority is not empowered to require a developer to enter into an obligation which would be irrelevant to an application for permission as a precondition of the grant of that permission.

The scheme was not unlawful because it did not comply with the Circular. The Circular was simply a material consideration which was required to be taken into account but not necessarily followed.