In Loxleigh Investments Limited v Dartford Borough Council [2019] EWHC 1274 (Ch), the Council applied to the High Court for summary judgment against Loxleigh in respect of the payment of overage pursuant to a transfer of land by Dartford Borough Council to Loxleigh.
Facts
In September 2012 Dartford Borough Council obtained outline planning permission for the construction of five detached houses on land which it owned. The outline planning permission was conditional on a number of reserved matters being satisfied, such as, “the approval of details of the layout, scale and appearance of the building(s)“.
In March 2013 the Council sold the land to property developer, Loxleigh, with the benefit of the outline planning permission. The transfer included an overage obligation for Loxleigh to make an additional payment if “any detailed Planning Permission” was granted for the construction of a residential or commercial unit with a gross internal area exceeding 3,000 square feet. The overage applied for a period of five years from the date of the transfer.
On 10 October 2013 Loxleigh was granted approval of the reserved matters set out in the outline planning permission and on 1 September 2015 it was granted approval to vary the reserved matters. Loxleigh obtained planning permission to construct four houses in excess of 3,000 square feet.
In 2018 Loxleigh completed the four houses and the Council requested payment of the overage sum. Loxleigh denied that any overage was payable contending that no “Planning Permission” was granted during the overage period, only the approval of the reserved matters and conditions.
Discussion
The Council argued that the grant of outline planning permission, combined with the subsequent approvals of reserved matters in 2013 and 2015, constituted “detailed Planning Permission” and therefore triggered Loxleigh’s liability to make the additional payments asserting that:
- although the expression “detailed planning permission” is not defined in any relevant legislation, it can be used to describe either full planning permission or planning permission obtained following the approval of reserved matters in an outline planning permission, as set out in leading legal textbooks and case law; and
- the inclusion of the word “any” before “detailed Planning Permission” clearly indicated that it was the intention of the parties to include both a full planning permission for a different development, or an approval of the reserved matters in respect of the original outline planning permission.
Loxleigh’s position was that detailed planning permission had not been granted and therefore no overage was payable. Loxleigh’s main arguments were:
- case law suggests that liability to pay overage is limited to the happening of unpredictable future events and in this case, as outline planning permission had already been granted at the time the transfer was entered into, approval of reserved matters was predictable and no overage was payable;
- the courts had, in the past, adopted a strict approach to construction of overage payments; and
- within legislation there is a difference between the term “planning permission”, and the approval of reserved matters or permission for non-material changes as there are specific formalities and requirements needed to obtain planning permission.
Decision
The Court ruled in favour of the Council and agreed that the term “detailed planning permission” can be, and is, used to describe approvals of reserved matters pursuant to outline planning permission. The Court also held that the word “any” included more than one type of detailed planning permission.
The Court did not agree with Loxleigh’s argument that in order for the additional payment to become due, an unpredictable event needed to occur. The Court considered that while this may happen in some cases, it was not a requirement and the parties had not chosen to contract on those terms. The Court also disagreed that a strict approach needed to be taken to the construction of overage provisions and considered that the approach in the other relevant cases had been to consider the ordinary meaning of the relevant provisions and to apply orthodox principles of construction.
The Court determined that Loxleigh had no real prospect of successfully defending the local authority’s counterclaim and as a result the matter should not go to a full trial.
In consequence, if the other terms of the overage obligation in the transfer were satisfied Loxleigh would be required to pay the overage sum as “detailed Planning Permission” had been granted.
Comment
This case highlights the risks involved in adopting contract terms and definitions which are not themselves defined in legislation or case law. The local authority was assisted in this case by the fact that the transfer distinguished, in its definition of “Composite Permission“, between an outline and a detailed planning permission.
Another example may be where a number of reserved matter applications need to be made. In such a case the parties need to consider at what stage that outline planning permission satisfies any overage conditions.
Overage obligations and other terms in commercial agreements can be both complicated and contentious. Wherever terms and definitions may be open to different interpretation by the parties, it is imperative that any potential conflicts are ironed out when drafting the documents.