Property update - February 2014

36 minute read
27 February 2014


Our real estate experts bring you the latest property law issues. Read their comment on these issues and take note of any action points that will help you and your organisation.

Re Game Station - the Court of Appeal has overturned the law on administrators paying rent.

Key points

  • The Court of Appeal has overturned the existing understanding of the law in relation to the liability of a tenant company's administrators to pay rent on leasehold premises.
  • The law is now that administrators are liable for the rent as an expense of the administration, calculated on a daily basis, for the period during which they use the premises for the benefit of the company. This liability is regardless of the rent due date set by the lease and of the date of the administration.
  • Landlords may want to re-visit their files where they did not claim rent from administrators who were appointed immediately after a quarter day but vacated the premises before the next quarter day.

Background

On 24 February 2014, the Court of Appeal issued its judgment in the "Game" case: Jervis & Anr v Pillar Denton Limited & Ors. The court overturned the law relating to an administrator's liability to pay rent on leasehold premises, as set out in the 2009 case of Goldacre (Offices) Ltd v Nortel Networks UK Ltd and the 2012 case of Leisure Norwich (II) Ltd and others v Luminar Lava Ignite Ltd (in administration) and others.

The Game case was brought by a consortium of landlords against the administrators of the Game companies, and also against the successor company, Game Retail Limited which had indemnified the administrators against these claims.

The administrators were appointed the day after the March quarter day in 2012, and claims brought by the landlords for unpaid rent (said, in submissions, to be around £3 million) were treated by the administrators as "normal" debts in the administration. This meant that the landlords were unlikely to be paid in any substantial amount.

The administrators' stance was based on the understanding of the law as set out in the Goldacre and Luminar cases. In both of those, albeit under different circumstances, the court at first instance had ruled that:

  • Where rent was payable in advance, this was due in full on the date stated, usually the quarter day. It was not capable of being apportioned.
  • Therefore, if the administrator was not in place and using the premises on the rent payment date, rent (if payable in advance) was not payable as an expense of the administration.
  • This would be the case even if the premises were, in fact, used from the date after the rent payment date, right down until the day before the next payment date.
  • However, if the administrators were appointed immediately before a quarter day, then they would be liable to pay, as an expense of the administration, the full amount of rent.
  • And this would be the case, even if the premises were disposed of, or at least vacated, shortly after the rent payment date.

The Game administration was a classic case of the administrators using these common law rules to avoid liability: they were appointed the day after the quarter day, and they sold the business on (to a new entity, Game Retail Limited) before the next. Therefore, neither they nor Game Retail Limited were apparently liable for the rent and other sums due under the several hundred leases, even though they used the premises throughout the relevant quarter for the benefit of the business.

In the Game case, the parties agreed the existing principles at first instance and asked for a simple ruling from the High Court on, effectively, a non-contested basis. This allowed the case to proceed to the Court of Appeal.

The Court of Appeal's judgment

In a lengthy and detailed exposition of the law, Lord Justice Lewison (with whom the other members of the court unanimously agreed) set out his reasons for overturning the Goldacre and Luminar decisions.

The common law position was largely undisputed by the parties and was accepted by the Court of Appeal: as set out in those two previous cases, any rent payable in advance fell due in full on the contractual rent payment date, and was not capable of apportionment.

Where the Court of Appeal differed from the previous decisions was in relation to the application of an overriding equitable principle known as the "salvage principle", also known as the Lundy Granite principle.

This derives from a string of 19th century cases and was described by Lord Hoffman in the 2002 case of Re Toshoku Finance Limited as a principle which permits, "on equitable grounds, the concept of a liability incurred as an expense of a liquidation to be expanded to include liabilities incurred before the liquidation in respect of property after it was obtained by the liquidator for the benefit of the insolvent estate".

Quoting Lord Hoffman, Lewison L.J. described the salvage principle as an equitable principle to treat the rent liability "as if" it were an expense of the winding up. To make use of it, the landlord would need to show why he should be preferred above other creditors in this way. For example, he could demonstrate that the tenant company was obtaining a benefit from the use of the property when the landlord was obtaining no consequent benefit for itself.

Subject to that, said Lewison L.J., the error made by the courts in the Goldacre and Luminar decisions was to fail to recognise that this was an equitable principle which therefore overrides the common law rule on the question of apportionment.

Accordingly, the correct understanding following the Game decision is that, in an administration, liability for the rent is apportioned on a daily basis according to whether the premises are being used or retained for the benefit of the company. It no longer matters which side of the quarter day that period of occupation starts or finishes.

The decision also removes the distinction between rent payable in advance, as is usually the case, and rent payable in arrears. Apportionments were always made in the case of money due in arrears, whereas it is only now that administrators will pay an apportioned amount of sums due in advance.

Further appeal

Permission to appeal further was refused, but it is anticipated that leave will be sought direct from the Supreme Court.

Points to consider

The decision brings certainty to both landlords and administrators, insofar as both will now know the rental liability that will arise in an administration. We are essentially back to where the law stood before Goldacre was decided.

No doubt, this decision will give a new lease of life to cases on what constitutes the administrators "using or retaining premises for the benefit of the company". There will, in any event, be a drop in the number of tactically-timed insolvencies.

However, as with the Goldacre decision, there could be other, more unexpected consequences. For example, will administrators - who now have judicial confirmation that "[t]he rent will be treated as accruing from day to day" - stop paying the whole quarter's rent in advance, safe in the knowledge that the statutory moratorium which kicked in on the tenant's insolvency, prevents the landlord from taking any further action? Only time will tell.

Easements - a building plot was sold for residential development. No right to lay pipes and cables etc through the seller's retained land was expressly granted, and the transfer expressly excluded any implied rights. On the face of it, therefore, the developer could not reach and connect into the mains services in the street. Could the required easements be implied?

Key points

  • When selling or buying part of an existing parcel of land - or granting or taking a lease of part - great care should be taken to ensure that all necessary rights are granted and reservations made.
  • As a fall-back position, the rules on implied easements might be of assistance, but a claimant in this position is usually put through a financial wringer in order to achieve what could have been expressly stated in the first place.

Background

Once again, the issue of whether an easement has been created on a sale off of part of a larger site, with the seller retaining the unsold land, has come before the courts.

The law generally deals more favourably with a buyer to whom not all of the necessary rights were granted, than a seller who forgets to reserve an easement in favour of the retained land. As ever, the ideal is for all such matters to be dealt with expressly in the transfer documentation, but in practice this does not always happen.

As a result, the parties either have to negotiate a revised set of grants and reservations (from a position of weakness or strength, as the case may be) or have recourse to the courts to seek a declaration of what rights can be implied.

Implied easements

There are various ways in which an easement can be implied:

  • under the rule laid down in the 1879 case of Wheeldon v Burrows;
  • under section 62 of the Law of Property Act 1925;
  • by reason of necessity; or
  • because of the common intention of the parties.

One of the most cited decisions on the question of implied easements is the 1915 House of Lords judgment in Pwllbach Colliery v. Woodman. And one of the most cited sections of the judgment is the following paragraph from Lord Parker of Waddington:

"The second class of cases in which easements may be impliedly created depends not upon the terms of the grant itself, but upon the circumstances under which the grant was made. The law will readily imply the grant or reservation of such easements as may be necessary to give effect to the common intention of the parties to a grant of real property, with reference to the manner or purposes in and for which the land granted, or some land retained by the grantor, is to be used ... But it is essential for this purpose that the parties should intend that the subject of the grant, or the land retained by the grantor, should be used in some definite and particular manner ...".

In other words, the court will look at the manner in which the land sold off or retained (as the case may be) was intended to be used. If the party claiming the easement can show there was common intention as to a definite and particular use, he will succeed if he can also show that the easement he claims is necessary to give effect to that user.

The facts of Donovan v Rana

In April 2004, Mrs Donovan put part of her property up for sale at auction. The sale was to be with the benefit of an outline planning permission for a single dwelling house, which Mrs Donovan had already obtained. Mrs Donovan would retain the rest of the property as her own home and gardens.

The auction particulars described the plot as being "a super individual building plot situated in a pleasant residential area in the sought after area of Chalk, where building plots are extremely rare". In May 2004, the transfer of the auction lot was completed to a Mr Haynes. The transfer included the following clauses:

  • A right of way, both pedestrian and vehicular, was expressly granted in favour of the building plot. This was over a strip of land on Mrs Donovan's retained land and was shown coloured blue on the plan annexed to the transfer: "the Blue Land".
  • That right of way was stated to be "for all purposes connected with the use and enjoyment of the [building plot] but not for any other purpose".
  • Mr Haynes was put under obligations to "erect ... the dwelling house to the satisfaction of the Local Authority" and to lay tarmac or a similar surface on the Blue Land before occupying the house.
  • There was an express exclusion of any other rights in favour of the building pot: "Save for any rights of way or access expressly referred to ... no rights of way or access for the benefit of the [building plot] over the transferor's retained land ... shall be deemed to be expressly or impliedly granted or reserved".
  • Along the same lines, the transfer stated that Mr Haynes and his successors in title "shall not be entitled to any right of access or light or air or other easements or rights which would restrict or interfere with the future use of the seller's retained land for building or any other purpose".

In September 2004, Mr Haynes obtained detailed planning permission for the new house. Unfortunately, his financial situation meant he could not proceed with the development, and, in September 2007, his mortgagees sold the plot to Mr and Mrs Rana, the defendants.

The Ranas started to build the house. By April 2009, they were ready to run drains and pipes etc from the house out into the street - just a few metres away - in order to connect to the mains services for drainage, water, gas, electricity and telecommunications. The most obvious route for this was to follow the line of the Blue Land. It made sense to lay all of these conduits before putting down the tarmac, as required by the transfer document, so their workmen began to dig. Mr and Mrs Donovan objected, and initially sought an injunction to stop the work; later on, they reduced their claim to one for damages for trespass. In September 2012, the Donovans' claim was dismissed by the County Court.

The judge held that it was the common intention of the parties to the original transfer that the building plot would be used to build a modern dwelling house which was a "standard property in a busy residential area ... [and] which complied with all local authority requirements". Such a property would have "modern facilities connected up to the street" and he therefore implied a right to connect through the Blue Land.

Further, the judge held that Mr and Mrs Donovan's argument that there was no express right of access was "putting the cart before the horse". Once a common intention to install utility connections was established, it followed that the "rights of access that have already been granted can be used for the purposes of putting in those connections".

The Donovans appealed, but the Court of Appeal dismissed this claim also, and upheld the County Court decision.

Vos LJ, giving the Court of Appeal's leading judgment, agreed that the terms of the right of way expressly granted in the transfer were sufficient to cover the laying (and retention) of utilities under the Blue Land. The clauses which sought to exclude any implied rights simply did not come into the picture.

Rimer LJ sounded a note of dissent. He felt unable to find that anything in the express grant of the right of way could be said to confer on Mr and Mrs Rana a right to dig up the Blue Land for the purpose of laying connections through it. Ultimately, however, he too felt able to dismiss the appeal on the basis that the exclusion clauses in the transfer were limited to excluding rights of way and access. They did not exclude all other potential types of implied rights, and therefore they did not oust an implied right to lay and maintain utility services.

Things to consider

It was - and remains - difficult to succeed in a claim for an easement to be implied by virtue of common intention. See, for example, our alert regarding the case of Walby v Walby. Much expense and uncertainty can be avoided by ensuring that all necessary rights are expressly addressed and included from the outset.

If both parties agree, a deed of rectification can be entered into instead, or perhaps a fresh deed of grant. If, however, the parties do not agree, then good neighbourly relations are likely to suffer as well.

Delays in transactions - a short but salutary tale from a High Court decision earlier this month, where the duration of liabilities under a lease was linked to the lease completion date. What happened when formal completion of the lease was delayed by almost a year after the tenant had first gone into occupation?

Key point

  • Whether a proposed transaction involves a lease or any other form of contract, keeping an eye on dates is crucial. If the duration of liabilities or entitlements is tied in with actual completion, a delay in completion will result in the timeframe for those liabilities or entitlements shifting as well.

Background

When negotiating heads of terms for a transaction, it is quite common for the parties to agree various matters based on the date of completion of the deal. What will be the liability period under any construction warranties, for example? When will the tenant's rent-free period start and finish? For how long after completion will the buyer be able to hold on to money retained from the seller out of the sale proceeds?

If the completion date is delayed, it might be wholly in order for the rights and obligations being created in the documentation to "shift" with the timetable. But it is something to be aware of: in certain circumstances, the commencement - and end - date of the rights and obligations might need to be revisited immediately prior to the lease or contract or warranty being entered into.

The risk of increasing, overall, the length of a period of obligation or entitlement tends to arise where the parties are already "doing" something before the formal documentation is completed. If a new building is put up, but the contractor's warranty is not given until several months later, the six or 12 year period under that warranty might inadvertently only start once the warranty is formally completed, rather than on the date when the building works finished.

In a landlord and tenant context, the tenant might have been allowed early access to the premises before the lease is completed. Does that mean that the tenant's liabilities should run from the date of access, or only from when the lease is completed? This will depend on what the parties agreed at the heads of terms stage, and the precise drafting of the ensuing documentation.

Where does the danger lurk?

The decision in the case of Xenakis and Corke v Birkett Long LLP provides an example of how easily things can go wrong. In September 2005, the landlord and tenant to a proposed letting agreed heads of terms. One of these was that the landlord would require the two directors of the new-created tenant company to give personal guarantees. Those guarantees would last for three years, and would include the usual provision that the directors could be called on to enter into a new lease of the premises in the event that the tenant company became insolvent and the lease was disclaimed. The term of years under any such new lease would be for whatever then remained of the term originally granted to the tenant.

On 19 January 2006, the tenant company - and the guarantors - executed the counterpart tenancy documentation in anticipation of completion, which was expected to take place the next day. Unfortunately, the next day came and went. Instead of completion, the news arrived from the landlord's solicitors that neither its client nor the management company had executed their part of the documentation.

It was therefore agreed that, as long as the tenant's solicitor sent across the executed counterpart documents, together with various sums that the parties had agreed would be paid at completion, the keys would be released and the tenant would be allowed into occupation; formal completion would take place in due course, once the original part documents had been signed. The tenant was duly granted access the following Monday morning, 23 January 2006.

The lease was not actually completed until 15 December 2006, some 11 months later. The tenant had been in the unit and (following some initial fit out works) trading for all that time. The term commencement date of the lease was stated to be the date of the tenant's first occupation; the rent-free period expired six months after that. However, certain other dates in the lease were tied in with the completion date of the document, rather than with the date when the keys were released.

One example of this was the duration of the guarantees given by the directors, Mr Xenakis and Mr Corke. The wording of the lease meant that the three year guarantee period started to run only as of the date of the lease. If it, too, had also been tied to the term commencement date, almost a third of the liability period would already have passed by the time the lease was completed.

By November 2008, the tenant's business wasn't doing so well - a new restaurant, launched against the backdrop of a recession. The guarantors were under the impression that their guarantees would expire in only a few months' time, ie three years after January 2006. In fact, there were still another 13 or so months to go: the guarantees weren't due to expire until December 2009.

As mentioned above, the guarantee clause included the relatively standard requirement that the landlord could require the guarantors to take a fresh lease of the premises, for whatever was the unexpired residue, if the tenant company became insolvent and the lease was disclaimed during the guarantee period.

Therefore, Messrs Xenakis and Corke had to keep the business going until the guarantee period expired, rather than allowing the restaurant to fail early on in the following year. If they had wound up the tenant company in January 2009, they would have had to accept a replacement lease - granted to them personally - for the 17 years remaining.

Things to consider

Delays in completion can sometimes mean that things get forgotten, or missed. Often in practice, no adverse consequences will flow from the delay. However, as this case illustrates, the sheer existence of a delay can be a good reason to revisit original timelines and agreements: not necessarily for the purpose of renegotiation, but just to double-check the effects of the delay.

Once the documentation has been formally completed, the terms of the deal are set in stone unless an order for rectification is made by the court. It has to be better to spend time reviewing the situation prior to completion, than spending time - and therefore money - afterwards in trying to sort out unexpected consequences.

Construction - a chance to catch up with a couple of alerts issued by our engineering and construction colleagues this month.

In the case of Hillcrest Homes Limited v Beresford and Curbishley Limited, the Technology and Construction Court (TCC) decided that claims that had been brought in relation to negligent misstatement and misrepresentation could not be the subject of adjudication. Rather, such claims had to be brought before a court or arbitrator.

In the case of Walker Construction (UK) Limited v Quayside Homes Limited and another, the Court of Appeal was asked to consider the status of an adjudicator's decision in the period leading up to final determination. Just how "binding" is the decision during the period after that decision is first made, but before a judgment is handed down by a court or an award is made by an arbitrator? And what, if any, effect does the adjudicator's decision have upon the burden of proof in any later proceedings?

Land Registry - a bank's failure to describe precisely, in a unilateral notice registered on a borrower's title, the interest it was seeking to protect did not jeopardise the protection afforded to the bank.

Key points

  • If a third party wishes to protect an interest it has in another party's property, the title to which is registered at the Land Registry, there are two main methods of doing this: registering a unilateral notice or registering an agreed notice.
  • A unilateral notice allows the full detail of the applicant's claim to be kept confidential. However, does this confidentiality come at the price of a potential loss of priority for the applicant's interest? The Court of Appeal has said that it does not.
  • A valid unilateral notice protecting a mortgage will also protect the interests that arise under that mortgage.

Background

The 2001 Law Commission Report (Law Com No. 271) "Land registration for the 21st century: a conveyancing revolution" (the Report) led to the introduction of the Land Registration Act 2002 (LRA 2002). This replaced the 1925 version of that Act.

The fundamental objective of the title register system, as detailed in the Report, is to provide "a complete and accurate reflection of the state of the title of the land at any given time". The LRA 2002 was the legislation by which this would be achieved.

Elsewhere in the Report, the Law Commission acknowledged that one of the primary purposes behind the entry of a unilateral notice - a new device introduced by the LRA 2002 - was to preserve commercial confidentiality.

Section 35(2) of the LRA 2002 states simply that a unilateral notice must "identify who is the beneficiary of the notice". Rule 84(5) of the Land Registration Rules 2003 requires a unilateral notice to give "such details of the interest protected as the registrar considers appropriate". The Land Registry's guidance as to how the interest claimed should be described is in Practice Guide 19. This confirms that no documentation needs to be lodged in support of an application to register a unilateral notice. Of itself, this keeps the detail of the applicant's claim for a unilateral notice confidential.

This is to be contrasted with an application for an agreed notice where the document, under which the interest is claimed, must be lodged with the application. This will, then, ordinarily be a public document.

The use of a unilateral notice therefore means that the register to the land "burdened" by the notice will contain only very basic details of the interest claimed. How is this to be reconciled with the aim, stated in the Law Commission Report, of completeness?

This question was one of several considered by the Court of Appeal in the case of Bank of Scotland plc v Joseph & Others. The case is of interest because it is thought to be the first time that section 35 LRA 2002, and the content of a unilateral notice, has come before the courts.

Glossary

  • Subrogation - the ability to substitute one party for another in respect of a right or claim.
  • Unpaid Vendor's Lien - a form of equitable charge, implied by law, which gives a seller security for payment of unpaid monies.

Facts of Bank of Scotland plc v Joseph & Ors

The facts of the case were complex. For current purposes, they can be summarised as follows:

  • A long lease of a flat was granted at a premium to a Mr Samad.
  • It was sold, on the same day, by Mr Samad to Ms Joseph.
  • Bank of Scotland plc (the Bank) provided the majority of the funds for Ms Joseph's purchase and, as security for the loan, the Bank was given a charge over the flat.
  • It transpired that Mr Samad had used the money he received from Ms Joseph to pay the developer.
  • Unknown to Ms Joseph or the Bank, Mr Samad had granted a charge over the flat to a company (the Company) to whom Mr Samad had an obligation as guarantor.
  • Mr Samad was registered at the Land Registry as the first proprietor of the lease.
  • Ms Joseph's registration as a subsequent owner did not happen for several years.
  • The Bank's registration as Ms Joseph's lender and chargee could not happen until Ms Joseph was registered as owner: its registration was, therefore, also delayed for several years.

In lieu of substantive registration of its charge over the flat, the Bank sought to protect its interest by way of a unilateral notice. The notice registered on the leasehold title (which, at this time, was still in the name of the original tenant, Mr Samad) referred to "a mortgage dated ... in favour of Bank of Scotland".

The registration of this notice at Land Registry pre-dated the registration of the charge created by Mr Samad, in favour of the Company. Under the LRA 2002, the date of registration determines which third party interest will take priority. On this basis, the Bank was first in line.

Registration of Ms Joseph as owner of the flat - and substantive registration of the Bank's charge over the flat - was not achieved until several years after the Company's charge was registered. Therefore, when the Bank wanted to take possession of the flat because Ms Joseph had defaulted under her mortgage, the Company argued that it had priority because its charge was substantively registered before the Bank's charge was.

It would seem that both Ms Joseph and the Bank were victims of a fraud perpetrated by Mr Samad. However, the fact remained that the money lent by the Bank to Ms Joseph was used to pay the developer for the original grant of the lease.

This gave the Bank a subrogated right to an unpaid vendor's lien as against the current owner of the flat, a Mr Lyons. He had bought the lease from the Company at a time when the title was still in the name of Mr Samad, and the Company had taken possession to enforce its security against Mr Samad. It was accepted between the parties that Mr Lyons' purchase from the Company had not been an arm's length transaction.

If the Bank had priority as against Mr Lyons, it could seek to enforce its lien and repossess the flat. If it did not, the Bank would be unsecured, and Mr Lyons would have acquired the flat from the Company free of the Bank's interest.

The question, therefore, was: did it matter that the unilateral notice in favour of the Bank referred only to "the mortgage"? It did not refer to any specific rights which might arise out of the mortgage, such as - on the facts of the case - the subrogated right to an unpaid vendor's lien.

The first instance decision

In the County Court, it was held that it did not matter. The right claimed by the Bank stemmed from the charge, and the unilateral notice was therefore effective also to protect any interests conferred by the charge.

Mr Lyons, who stood to lose his home, appealed. His primary contention was that the Bank should have identified precisely, in its application to register the unilateral notice, the interest being relied on in order to obtain priority.

The Court of Appeal's decision

The Court of Appeal disagreed with him, and upheld the priority awarded to the Bank: if the details provided in the application for a unilateral notice were sufficient for the purposes of the LRA 2002, then any failure by the Bank to specify more particularly the interest relied on did not make the notice ineffective to preserve priority.

The Bank still had to show that its interest was valid, as with all such notices. But once it had done that - and it had - the wording of the application for registration of the notice, and of the notice itself, did give the Bank priority.

Things to consider

In earlier property update alerts, we have mentioned how a recipient of any correspondence from Land Registry in relation to notices must act promptly. This case provides another illustration of why: the interests that can be protected by notices - and therefore lost by inaction - can be substantial (here, a mortgage).

Also, the case confirms the ability for parties to preserve priority as well as confidentiality by applying to register a unilateral notice.

Planning update - a round-up of some of this month's decisions relating to planning.

Validity of s.106 payment as enabling development

In R (on the application of Thakenham Village Action Ltd) v Horsham District Council [2014] EWHC 67 (Admin), Lindblom J considered the validity of a section 106 planning agreement which required a payment to be made by the applicant. The issue was that the payment would, however, be applied to a site not included in the application for planning permission.

The claimant action group applied for judicial review of the Council's grant of planning permission for the redevelopment of part of a mushroom farm into an estate of 146 residential units. The farm had operated for many years from two large sites within a village. The business was failing and it was proposed to consolidate the operations onto one of the sites. The other site would then be turned into a residential estate.

The action group's claim was that the Council had failed to assess properly whether the residential development proposal required an environmental impact assessment (EIA). If it went ahead, the residential development would be contrary to the Development Plan, and the screening opinion of the Council - which stated that an EIA was not required - failed to address the nature, size and location of the residential development.

The action group also alleged that the planning agreement, which required a payment from the residential developer to part-fund the relocation of the mushroom farm to the second site, was an attempt to buy permission for the residential development.

The claim for judicial review was refused. The court held that:

  • The Council had considered the two developments separately, but had also noted that - together - they were a comprehensive scheme.
  • The screening opinion had to be read in the context of the letter requesting it. The letter had provided all the information needed by the Council.
  • A payment provided in relation to one site, in order to enable another development to proceed, could be a material consideration in the determination of a planning application, but only where there was sufficient connection between the two sites.

In this case, the aim of securing the mushroom farm in the village, and the jobs it produced, was a proper planning consideration. The Council's approach to the residential site as development enabling the farm business was legitimate - R (on the application of Sainsbury's Supermarkets Ltd) v Wolverhampton City Council [2010] considered.

Power to decline a planning application

For some years, local planning authorities have had the power to decline to determine a planning application where the applicant has made a previous similar application in relation to the same land: section 70A of the Town and Country Planning Act 1990.

Guidance, issued at the time the power was introduced, stated that authorities should use the power only where they believed the applicant was trying to wear down resistance and opposition to the application: paragraph 8, Circular 08/2005. However, where a subsequent application was genuinely trying to address issues on which a previous refusal was based, the authority should determine the later application.

In R (on the application of Skillcrown Homes Ltd) v Dartford Borough Council [2014], Skillcrown applied for judicial review of the Council's decision to decline to determine an application.

In September 2010, Skillcrown applied for permission to build eight houses. Following a refusal, it appealed. A planning inspector granted permission in 2011, but that permission was quashed and the decision remitted back to the Secretary of State. Another inspector refused the appeal in 2012 on the basis that the development was not sustainable.

Skillcrown made a fresh application in April 2013. The authority considered that it was very similar to the original, with the only differences being a revised planning statement and a survey. The authority therefore refused to consider the application.

Skillcrown made an application for judicial review of that refusal, making three allegations of irrationality against the authority. Singh J dismissed two of the grounds, but found that the authority had erred on the third: they had failed to take into account paragraph 8 of the guidance. He acknowledged that the authority was not bound to follow it, but held that it was a material consideration. To which end, if the authority did not want to follow the guidance, they must set out reasons for that decision.

The Court added that authorities should remember that Parliament had conferred a power that was discretionary. Even where the pre-conditions for the exercise of the power were satisfied, an authority was not obliged to exercise the power; but it could choose to do so.

Listed Buildings - statutory power to consider preservation of setting

When determining planning applications affecting a listed building, planning authorities must have special regard to the desirability of preserving that building, or its setting, or any features of special architectural or historic interest: section 66(1) of the Planning (Listed Buildings and Conservation Areas) Act 1991.

In North Norfolk District Council v Secretary of State for Communities and Local Government [2014] EWHC 279 (Admin), the Council applied to quash the decision of an inspector, appointed by the Secretary of State on appeal. The inspector granted permission for a wind turbine in the vicinity of a number of listed buildings. The principal ground of appeal was that the inspector had failed to carry out the duty in s.66(1).

The court found that the inspector's decision letter had carried out a balancing exercise, weighing the harm to the significance of heritage assets against the benefits from the development. However, that exercise did not discharge the s.66(1) duty requiring "special regard" to be given. Because it was not possible to know, from the contents of the decision letter, whether the decision would have been different had the inspector had given "special regard" to the setting of the listed buildings, the grant of permission would be quashed.


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