Hampshire County Council v Beazer Homes Ltd

In a carefully negotiated, detailed agreement, a term is implied only where it is necessary to give business efficacy and so obvious that it goes without saying. Reasonableness alone is insufficient. A public authority exercising contractual discretion remains subject to public law limits, including good faith, proper purpose and Wednesbury reasonableness, but is not thereby subject to wider common law standards of expenditure unless the contract provides for them. A planning contribution does not create a private trust merely because it is paid for specified works. An obligation to account for costs ordinarily requires information about sums spent, purpose, timing and payee, not an explanation or justification of the authority’s underlying decisions. Where a contribution is confined to completed works, an unexpended balance may be refundable by implication. “Expended” may include sums legally committed but not yet paid.

This was a CPR Part 8 claim by Hampshire County Council for declarations concerning the interpretation and effect of a section 106 agreement made under the Town and Country Planning Act 1990 in relation to a large residential development at Fleet. Beazer Homes Ltd brought a counterclaim for declarations.

The agreement required contributions towards traffic measures and Cove Road improvements, and towards the Fleet Inner Relief Road or alternative transport schemes. The parties disputed whether expenditure had to be reasonable and proper in the common law sense, whether the contributions were held on trust, the scope of the duty to account, whether further terms should be implied, the meaning of “expended”, and the jurisdiction of an appointed expert.

1. Implied terms. The agreement had been carefully negotiated and drafted by experts. The applicable test was necessity, not mere reasonableness. A term could be implied only if necessary to give business efficacy and so obvious that it went without saying. The proposed term requiring expenditure to be reasonable and proper in the common law sense was uncertain, wider than the Council’s public law duties, and unnecessary. It was refused.
2. Public law limits. The Council’s contractual discretion remained subject to good faith, proper purpose and Wednesbury reasonableness. Those limits did not impose an objective industry standard or permit review merely because expenditure might appear excessive.
3. Trust. The contributions were paid to a public authority in the public interest, were not placed in a separate account, and were mixed with the Council’s general funds. No private trust arose. The arrangement was distinguishable from Patel v Mayor and Burgesses of the London Borough of Brent [2005] EWCA Civ 644. Even if fiduciary duties existed, they would extend no further than the Council’s public law duties.
4. Accounting and implied terms. “Account for the costs” required information stating what had been spent, for what purpose, when and by whom, together with supporting evidence reasonably required under clause 4.16.2(C). It did not require explanation or justification of the decisions underlying the works. No term requiring an account was implied into clause 4.14. A term requiring refund of any unexpended balance under clause 4.14 was implied because, once the specified works were complete, the contribution could not be retained for unrelated or indefinite future purposes. A corresponding term requiring evidence of expenditure was also implied.
5. Sanction and expenditure. No term was implied into clause 4.16 requiring refund of sums for which the Council had not supplied a sufficient account or evidence. Existing contractual and public law remedies were adequate. “Expended” in clause 4.16.2(B) included sums which the Council was legally obliged to pay at the relevant date, even if payment had not yet been made.
6. Expert. The appointed expert had no jurisdiction to decide whether expenditure was reasonable or proper in the common law sense. The expert’s role was confined to disputes concerning compliance with the express terms of the agreement.