City of York v Trinity One (Leeds) Ltd

Contractual wording should be given its ordinary meaning, but a court may resolve an unforeseen event where the parties’ intention is clear and a literal reading would defeat the bargain. That narrow approach does not permit the court to rewrite an ill-advised agreement or substitute a preferable bargain.

Where a planning agreement requires a commuted sum for affordable housing and its specified calculation method becomes obsolete, the payment obligation may remain enforceable if the agreement’s structure and purpose show that payment was intended. The court may adopt the closest workable equivalent to the agreed calculation.

Sections 106BA and 106BC of the Town and Country Planning Act 1990 can operate retrospectively on accrued rights where their statutory purpose and practical effect establish a contrary Parliamentary intention.

The Council sought payment from Trinity One (Leeds) Ltd under a 2003 section 106 agreement requiring affordable housing or commuted sums. The agreed calculation referred to Social Housing Grant and Housing Corporation tables, which later ceased to operate.

The High Court held that a commuted sum remained payable and awarded £553,058 plus interest. It also declared that a successful appeal under sections 106BA and 106BC of the Town and Country Planning Act 1990 would release Trinity One from the obligation, including an accrued obligation. Both parties appealed.

The Court of Appeal considered whether the agreement could be construed to preserve the payment bargain and whether the statutory modification scheme could affect accrued liabilities.

1. Both appeals dismissed. The High Court’s judgment and declaration were upheld.
2. The agreement created a primary obligation to pay a commuted sum where affordable housing was not provided. The subsequent abolition of Social Housing Grant created uncertainty about quantification, not about the principle of payment. A construction under which nothing was payable would defeat the agreement’s underlying purpose.
3. Applying the principles in Arnold v Britton [2015] UKSC 36, Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900 and Wood v Capita Insurance Services Ltd [2017] AC 1173, the court was entitled, in this unusual case, to give effect to the parties’ clear intention following an unforeseen change in the funding system. The court did not use commercial common sense to rewrite a bad bargain. It identified the closest practical equivalent to the amount that would have been payable under the former Social Housing Grant regime.
4. The Proval calculation was a reasonable equivalent. It was accepted to produce a result consistent with the former Total Cost Indicator tables and produced £553,508, within the range contemplated by the developer’s evidence. The judge was therefore entitled to use it as the basis for the commuted sum.
5. Sections 106BA and 106BC of the Town and Country Planning Act 1990 affect accrued rights. The presumption against retrospectivity is directed to unfair alteration of the law applicable to past events, but the statutory purpose and practical effect may establish a contrary intention. The statutory scheme prioritises economic viability and facilitating development over the pre-existing public interest in enforcing affordable housing obligations.
6. The words “is or is to be” in section 106BA(13), and the future-tense wording elsewhere, were not decisive alone. Read with the statutory purpose, the scheme could discharge or modify obligations even where liability had already accrued, regardless of whether accrual occurred before or after the provisions commenced.

• Court of Appeal (Civil Division): [2018] EWCA Civ 1883. Both cross-appeals were dismissed.
• High Court of Justice, Chancery Division: On 8 March 2017, David Halpern QC held that a commuted sum was payable and declared that a successful statutory appeal could release Trinity One from the obligation, including an accrued obligation.