Southampton City Council v Hallyard Ltd

A contractual obligation to apply money towards affordable housing is not, without more, a positive obligation to provide affordable housing or a restriction on development. A later planning agreement does not supersede or qualify an earlier agreement unless the instruments so provide. Such an obligation may fall within Town and Country Planning Act 1990, section 106, because it can indirectly secure the provision of affordable housing. However, section 106(9) requires the instrument to state the obligor’s interest in the relevant land. Failure to do so prevents the obligation from being a planning obligation and removes the statutory mechanism for enforcement against successors in title.

The City Council sought declarations concerning three agreements relating to the development of sites at Custom House and St Mary’s, Southampton. The Custom House agreement required Cindan to use a payment towards additional affordable housing or repay it to the Council. Cindan later transferred the St Mary’s site to Hallyard, which granted a charge to AIB. The Council contended that the Custom House obligations bound Hallyard and AIB under section 106 of the Town and Country Planning Act 1990. The central issues were the construction of the agreements, whether the obligations were planning obligations, and the effect of the agreement’s failure to state Cindan’s interest in the St Mary’s site.

1. The Custom House agreement did not impose on Cindan or Hallyard a positive obligation to provide affordable housing on the St Mary’s site beyond the 16 or 17 units required by the later Cindan and Hallyard agreements. Nor did it restrict development or use of the site in the absence of that additional provision.
2. The relevant Custom House obligations controlled the use of the money received from Barratts. They prevented its use except towards additional affordable housing units over and above the required 25 per cent, and provided for repayment to the Council if the specified conditions were not satisfied. They did not themselves require the money to be spent.
3. The Cindan and Hallyard agreements did not supersede or qualify the Custom House agreement. The obligations could operate concurrently. As ordinary contractual obligations, they did not bind successors in title merely because Cindan was defined to include successors.
4. The obligations were capable in principle of falling within section 106(1) of the Town and Country Planning Act 1990. The obligation to pay or repay money was capable of satisfying section 106(1)(d), and the statutory reference to money “to be paid” was not confined to the usual case where the developer first pays money to the planning authority. The obligations also served an indirect planning purpose by seeking to secure additional affordable housing.
5. Section 106(9)(c) was not satisfied. The Custom House agreement identified Cindan and referred to its connection with the St Mary’s site, but did not state what Cindan’s interest in that land was. The statutory language, read with sections 106(1), (3), (4), (9), (11) and (12), indicated that the covenantor was required to have a proprietary interest, or at least that the relevant right or interest had to be stated.
6. Because the formal requirement was not met, the obligations imposed on Cindan were not planning obligations. The Council therefore could not rely on section 106(3) to enforce them against Hallyard or AIB. The judge left open any separate claim, including a possible Quistclose trust argument or claims concerning interference with Cindan’s contractual obligations.
7. The suggested issue whether a mortgagee or other person deriving title could be liable for a payment obligation under section 106(3) was left undecided because it had not been argued and did not arise.

First-instance decision. No prior appellate decision was stated in the judgment.