Monthly Archives: December 2015

Secretary of State’s screening direction invalidated planning permission

The prohibition against granting planning permission for the kind of development which has to be subject to an environmental impact assessment, without consideration of the required environmental information, is contained within Regulation 3(4) of the Town and Country Planning (Environmental Impact Assessment) Regulations 2011 (“The 2011 Regulations”):

“3(4) the relevant planning authority or the Secretary of State or an Inspector shall not grant planning permission or subsequent consent pursuant to an application to which this Regulation applies unless they have first taken the environmental information into consideration, and they shall state in their decision that they have done so.”

In the High Court case of Roskilly, R (On the Application Of) v Cornwall Council And Others [2015] the Council had hastily commissioned, and adopted, a screening opinion which had concluded that there were not likely to be significant environmental effects such as to warrant the preparation of an environmental impact assessment. The claimant disagreed and soon after the publication of the officer’s report, but prior to the committee meeting, their solicitors wrote to the National Planning Casework Unit urgently requesting a screening direction from the Secretary of State in respect of the proposed development.

The Secretary of State made a screening direction but the planning committee had resolved to grant the planning permission.

The issue was whether Regulation 3(4)’s prohibition of grant of planning permission applies where a development has been negatively screened for an environmental impact assessment requirement by a planning authority, but is susceptible to a screening direction by the Secretary of State at a time when planning permission is granted. Was the planning permission rendered unlawful by the issuing of that positive screening direction after the planning consent had been issued?

The court said the planning permission was rendered unlawful by the subsequent issuing of the Secretary of State’s positive screening direction.

The prohibition contained in 2011 Regulation 3(4) is a matter for determination by the court on the basis of the material available at the time when the court comes to consider that question. Also the 2011 Regulations did not suggest that the Secretary of State’s jurisdiction to direct that the development is environmental impact assessment development, under 2011 Regulation 4(3), comes to an end on the grant of planning permission. Thirdly the Master Legislation, EU Directive 2011/92/EU, as amended by Directive 2014/52/EU, and the 2011 Regulations, prescribed a process whereby whereby an application to the Secretary of State was to arrive at a definitive determination as to whether or not a project was in truth development required to be subject to an environmental impact assessment and this could not be excluded.

Had it been necessary to do so the court would also have been minded to conclude, on Wednesbury principles, that no reasonable planning authority, knowing that there was an outstanding request of the Secretary of State to make a determination on a screening direction, at the time when they formed a resolution to grant planning permission, would proceed to grant planning permission without knowing the outcome of that screening direction process.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Service charge wording too narrow to cover costs of suing defaulting tenants.

Does the language of a service charge provision in a lease permit the landlord to recover money which it has spent in contesting legal proceedings against the leaseholders of flats in a residential building?

In Arnold v Britton [2015] Lord Neuberger of the Supreme Court said “the court should not “bring within the general words of a service charge clause anything which does not clearly belong there”.

In the Upper Tribunal (Lands Chamber) case of Geyfords Ltd v O’Sullivan & Ors [2015] paragraph 6 of the service charge covered:

“All other expenses (if any) incurred by the Lessors or their managing agents in and about the maintenance and proper and convenient management and running of the Development”.

The tribunal said “management” may sometimes include obtaining professional advice, including legal advice, and in some circumstances it might involve litigation. E.g. the assistance of the court may be required because the leases of flats are unclear, so the outcome of the proceedings is of concern to both the landlord and to every leaseholder.

It could be said “running” suggests a focus on more day to day or mechanical activities, while “management” is more long term or strategic, but it was neither informative or helpful to dissect the language in that way. It might be said as well that both management and running, when used of a building and its immediate environment, are concerned with the condition of the building and activities there, and that the expression taken as a whole is inappropriate to refer to litigation over the liabilities of tenants to their landlord. Such litigation was concerned with enforcing personal rights and obligations rather than with the physical fabric of the building. The qualifying words “proper and convenient”, might also be thought to be words of limitation, suggesting expenditure which is routine rather than exceptional.

Proceedings to enforce the obligation of an individual leaseholder to make a payment to the landlord did not naturally fall within the scope of “management and running”.

The parties to a lease were unlikely to think such general words were enough to show an intention that any money lost by the landlord in litigating against tenants should be recharged to all the tenants in the building. In the Court of Appeal case of Sella House Ltd v Mears [1989] Taylor LJ said he would “”require to see a clause in clear and unambiguous terms” before being persuaded the parties had intended that a tenant who paid his rent and service charges would be obliged to subsidise the landlord’s costs of proceedings against his fellow tenants who were defaulters”.

Accordingly paragraph 6 was less clear than was to be expected if the cost of litigation against defaulting leaseholders had been intended to be recovered as costs and expenses of “proper and convenient management and running of the Development”.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

VAT: residential and non-residential building not zero rated when sold as houses

Section 35, Value Added Tax Act 1994 (“VATA”) confers a right on a DIY builder to claim a refund of VAT on goods used and the services of certain contractors used in carrying out a ‘residential conversion’.

A ‘residential conversion’ is defined for the purposes of section 35 in section 35(1D) VATA. ‘Works constitute a residential conversion to the extent that they consist in the conversion of a non-residential building or a non-residential part of a building into a building designed as a dwelling or number of dwellings’.

There the words ‘to the extent that’ introduce the concept of works qualifying as a residential conversion even if what is converted includes a residential part of a building. In such a case Note (10) to Group 5, Schedule 8 (as applied by section 35(4) VATA) provides for an apportionment of the total VAT incurred to ascertain the amount which can be claimed under section 35.

The amount which can be reclaimed will be the amount of VAT attributable to the works carried out in converting the non-residential part of the original building (Note (10)(b) and (iii)).

In the First-tier Tribunal (Tax) case of DM & DD MacPherson v Revenue & Customs [2015], the building had comprised ground floor village shop, office and ancillary storage accommodation with ground and first floor living areas. The appellant property developers had hoped their disposal of the two semi detached houses, which resulted from the conversion, would be zero-rated under item 1(b), Group 5, Schedule 8, of VATA as ‘the first grant by a person converting a non-residential building or a non-residential part of a building into a building designed as a dwelling or number of dwellings thereby facilitating a total input tax recovery as opposed to a partial refund of VAT incurred on the building works.

However item 1(b), Group 5, Schedule 8, VATA does not apply when the subject of the conversion is a building which contains one or more residential parts as well as one or more non-residential parts.

When interpreting item 1(b), to see whether a person is converting (or has converted) ‘a non-residential building or a non-residential part of a building into a building designed as a dwelling or number of dwellings’, one has to examine the conversion actually carried out. In MacPherson the building (taken as a whole) was not a non-residential building within the definition in Note (7) because it was designed for use as a dwelling by virtue of the living accommodation contained within it.

It may be that if one divided up the building it would be found to contain a residential part and a non-residential part, all the same it would be incorrect to describe the conversion works here as the conversion of the non-residential part of the building – the entire property was being converted. So the property developer had not converted a non-residential building or non-residential part of a building and the conversion did not qualify to be zero-rated, because it fell outside item 1(b), as not being ‘the simple conversion of a non-residential part of a building but the conversion of that part plus a residential part’.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Were claimants “persons aggrieved” under Section 288 of the Planning Act?

Under Section 288(1)(b) of the Town and Country Planning Act 1990 (“the 1990 Act”) “any person [who] is aggrieved” by a decision on appeal under s.78 of the 1990 Act may make a Section 288 application challenging the decision in court. The leading authority on the meaning of “person aggrieved” under Section 288(1)(b) is the decision of the Supreme Court in Walton v Scottish Ministers [2013].

In Crawford-Brunt & Anor v Secretary of State for Communities & Local Government & Anor [2015] the Claimants said that as owners of properties adjoining the appeal site the Claimants had a sufficient personal interest in the outcome of the appeal. Accordingly they should both be treated as “aggrieved persons” within the meaning of Section 288(1)(b).

Here a planning inspector had allowed an appeal against the refusal by Waverley Borough Council to grant outline planning permission. This was an application pursuant to Section 288 challenging the decision of the inspector.

The Planning Court said the words “person aggrieved” in Section 288(1)(b) must be interpreted in accordance with Walton.

In Walton Lord Reed said:

“That persons will ordinarily be regarded as aggrieved if they made objections or representations as part of the procedure which preceded the decision challenged, and their complaint is that the decision was not properly made……

That there are circumstances in which a person who has not participated in the process may none the less be ‘aggrieved’: where for example an inadequate description of the development in the application and advertisement could have misled him so that he did not object or take part in the inquiry…

Ordinarily, however, it will be relevant to consider whether the applicant stated his objection at the appropriate stage of the statutory procedure, since that procedure is designed to allow objections to be made and a decision then to be reached within a reasonable time, as intended by Parliament.”

The Planning Court held that the Claimants were not “aggrieved persons”, as they had not hitherto actively participated in the appeal process.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Can a Landlord recoup defence costs and damages from own breaches?

Can a landlord recoup damages and legal costs arising from it’s own breach of covenant through a service charge?

In the Upper Tribunal (Lands Chamber) case of Fairbairn v Etal Court Maintenance Ltd [2015] one of the services the landlord could recharge under the service charge was doing “all other acts and things for the proper management administration and maintenance of the blocks of flats as the Lessor in its sole discretion shall think fit.”

The Tribunal said such a general charging provision was, in principle, wide enough to cover the costs of legal advice or even, where appropriate, of litigation.

However a sum paid to meet a successful damages claim for breach of covenant is not expenditure on the proper management and administration of the buildings.

Also, the legal work here was not so much advice on whether repair work was within the landlord’s covenant. It was rather defending the landlord’s failure of compliance.

In short, the steps required of the landlord resulted from the landlord breaching it’s own obligations under the lease.

The landlord’s repairing covenant required it to maintain the unlet parts of the buildings, including their foundations and structure, in good and substantial repair and condition.

It was precisely because the proper management and administration of the building had been neglected, for however short, that proceedings were commenced by the tenant. So the damages and legal costs were not recoverable through the service charge.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Failure to serve Pay Less Notice did not prevent final account being challenged for all time

In Paice & Anor v MJ Harding (t/a MJ Harding Contractors) [2015] the contractor argued that:

1. if an employer wishes to pay less than the sum stated in the contractor’s account under clause 8.12 of the building contract, which incorporated the JCT Intermediate Form 2011 edition, it must issue a “Pay Less Notice”.

2. So the employer could only set aside the adjudicator’s decision to award the sum stated in the contractor’s clause 8.12 account in subsequent litigation by showing that its Pay Less Notice was validly served in time.

3. So if the employer failed to to serve a valid Pay Less Notice in time, it would deprive the employer of the right to challenge the contractor’s account.

The High Court pointed out that this would apply for all time even if the contractor had seriously overvalued his account and that the contractor would thereby obtain a windfall that the employer could never recover.

That would subject interim certificates to a more draconian regime than that which applies to the Final Certificate.

In the case of Final Certificates, if the employer commences adjudication or litigation within 28 days of it being issued, it ceases to be conclusive in respect of the matters raised in the litigation or adjudication (clause 1.9).

The High Court said that what would be due under clause 8.12.5 would be the “… amount properly due in respect of the account”.

In this case the adjudicator had not determined what was “properly due”.

He had decided that, in the absence of a valid Pay Less Notice, the employer had to pay the amount stated in the contractor’s account within 28 days.

The Court of Appeal has now backed the High Court. They said the employer could challenge the valuation arrived at on the contractor’s final payment application by applying for a further adjudication even though they had failed to issue a proper payment or Pay Less Notice.

The court said the employer’s failure to serve a Pay Less Notice had limited consequences. These were mainly that the employer had to pay the total shown on the contractor’s account and dispute the figures later. The employer had paid that amount, as the previous adjudicator had ordered. The employer could now proceed to adjudication in order to ascertain the true value of the contractor’s claims and of the employer’s counter-claims. So the High Court Judge had got this right.

So whilst the employer must comply with the adjudicator’s decision in the meantime by paying the sum ordered, it remains open to the employer to initiate further adjudication or litigation to decide what sum is properly due in respect of the contractor’s account.

Clearly the employer will want to avoid this drain on cash flow by serving the Pay Less Notice in time, especially if there are doubts as to the continuing solvency of the contractor when it comes to refunding the over payment.

This case helps in respect of final account payments. Here, a failure to serve a payment or Pay Less Notice will not usually prevent an employer from later challenging the true value of the work through adjudication or court proceedings.

The Court of Appeal has left the position in regard to interim payments less clear.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Developments affecting Listed Buildings: challenger bore onus of proof

Section 66(1) of the Planning (Listed Buildings and Conservation Areas) Act 1990 (“the Listed Buildings Act”) provides as follows:

“In considering whether to grant planning permission for development which affects a listed building or its setting, the local planning authority or, as the case may be, the Secretary of State shall have special regard to the desirability of preserving the building or its setting or any features of special architectural or historic interest which it possesses.”

In Jones v Mordue & Anor [2015] the Deputy Judge of the High Court interpreted this to mean that there is an onus on a decision-maker positively to demonstrate by the reasons given that considerable weight has been given to the desirability of preserving the setting of the particular listed buildings. Hence, the deputy judge found that failure to comply with the duty in section 66(1) of the Listed Buildings Act was established, because the Inspector had failed positively to show in his reasons that he had referred to and applied that section.
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However the Court of Appeal ruled that that inverted the normal burden of proof which the statute placed on the person challenging the decision which was to show that the decision maker had not given the appropriate weight under section 66(1).

In fact there were strong indications that the planning inspector had section 66(1) of the Listed Buildings Act factors in mind and that the section had been complied with.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Insufficient reasons given to forego Environmental Impact Assessment

In developments for which pre planning Environmental Impact Assessments (“EIAs”) are not necessarily mandatory, ‘Screening’ is a procedure used to determine whether a proposed project is likely to have significant effects on the environment such as to require an EIA (“EIA” development”).

In England regulation 4 (7) of the Town and Country Planning (Environmental Impact Assessment) Regulations 2011 provides that where a local planning authority adopts a screening opinion:

“…that opinion … shall be accompanied by a written statement giving clearly and precisely the full reasons for that conclusion.”

In Wales the Town and Country Planning (Environmental Impact Assessment) (England and Wales) Regulations 1999 continue to apply until 16 May 2017. The obligation to give reasons under regulation 4(6) of the 1999 Regulations only applies where the local planning authority adopts a screening opinion to the effect that “the development is EIA development.”

So currently in Wales, the Regulations require reasons to be given if the planning authority decides that the proposed development is EIA development, but those Regulations do not require reasons to be given if it is decided that the proposal is not EIA development.

However, whatever the position under UK Law, there is a duty to give reasons for a screening opinion that no EIA is required as a matter of EU law. That results from the decision of the European Court of Justice in (Case C-75/08) R (Mellor) v Secretary of State for Communities and Local Government [2010] which was a decision on Directive 85/337.

In the Court of Appeal Welsh wind farm Case of Jedwell v DH & Anor [2015] planning permission was challenged because the Council’s screening opinion gave no apparent consideration to whether an EIA would be required based on the development’s cumulative impact with other existing and proposed developments. The Council’s screening opinion did not inform the reader as to how the Council reached their screening opinion that no EIA was required.

The court agreed that what the Council said in the screening decision was simply the statement of a conclusion. It contained no reasoning. A reader of the opinion would not ascertain why it had arrived at it. It was inadequately reasoned.

The Council should have demonstrated that it had “actually determined” whether an EIA assessment was needed in accordance with the law.

For that it needed to demonstrate that it had applied its own mind to the relevant questions.

The Council’s reliance on the views of consultees was misplaced especially as most of the consulting took place after the screening opinion was adopted.

Did the planning officer consider that there was no cumulative impact?

Did she consider that there was some cumulative impact but that it was unlikely to be significant?

Was a neighbouring proposed scheme considered, or was it ignored or played down on the basis that no application had been made for that scheme yet?

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Tenant not entitled to refund of unused prepayments under lease break clause

A “break clause” in a lease permits the tenant to terminate the lease on a date (“the break date”) prior to the last day of the term. In the same clause the landlord may well demand compensation, often in the form of a “break premium”, whose payment is made a pre-condition of a “break” under the break clause.

Where the break clause requires a break premium but says nothing about an apportionment of the rent, which the lease requires the tenant to pay in advance, can the court imply a term which requires the landlord to refund that part of the advance payment of rent which relates to the period (“the broken period”) after the break date, because by that time the lease would have terminated?

In Marks And Spencer Plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd & Anor [2014] M&S operated the break clause and paid the reverse premium and sued the landlord to recover rent and charges for the broken period.

There was no express term which entitled the tenant to be repaid any sum by way of basic rent, car parking fee, insurance or service charge that the tenant had paid over and above what was attributable to the period prior to the break date.

The issue was whether a term was to be implied into the break clause that the tenant could claim back that proportion of the rent paid on the last quarter day which related to the broken period?

As the rent was reserved “proportionately for any part of year” and the quarterly payments were “installments”, the High Court had accepted the tenant’s view that that term should be implied.

The Court of Appeal accepted that the words “proportionately for any part of a year” in the rent clause might, at first sight, be read as meaning that there should be an implied term for repayment of the rent for the broken period once the break premium had been paid and termination had taken place.

However, those words were only applicable to a payment of rent for a broken period within the original term of the lease. So they did not apply where on the last quarter day there had been no certainty as to whether termination would take place on the break date.

Worse still the court said a party seeking to establish an implied term must show, not simply, that the term could be a part of the agreement but that a term would be part of the agreement.

The starting point was that, if there was no express term, none should be implied because if the parties had intended that a particular term should apply to their relationship they would have included a term to that effect, rather than left it to implication.

In such a case the usual inference is that nothing is to happen. If the parties had intended something to happen, the document would have said so.

An unexpressed term might be implied if, and only if, the court finds that the parties must have intended that term to form part of their contract. It is not enough for the court to find that such a term would have been adopted by the parties as reasonable men had it been suggested to them. It had to be a term that went without saying, a term necessary to give business efficacy to the contract.

To be implied it had to be a term which, though tacit, formed part of the contract which the parties made for themselves.

However, the fact that an agreement could work without the implied term did not rule it out being an implied term.

That would be to overlook the court’s approach to interpretation which was to seek the parties’ common aim in entering into the agreement.

A term may also be implied if it was necessary to achieve the parties’ objective in entering into the agreement, even if it was not necessary to the workings of the agreement.

It would have been obvious to the parties before they signed up to the lease that there was a possibility that rent would have to be paid on the last quarter day in full for a period which went beyond the break date. They could therefore have made some provision for this case but had not done so.

Furthermore, the presence of other clauses in the break clause dealing with the consequences of termination showed that there must have had some discussions about what was to happen on the exercise of the break clause.

That was not to say that those provisions were inconsistent with there being an implied term. But they did show that the parties could easily have added to clause 8.5 words requiring the lessor to repay any rent (or other charges) paid for the broken period.

When all the circumstances were considered, it was right to infer that the parties proceeded on the basis that the loss from a payment of rent for the broken period should lie where it fell. Thus no term for repayment was to be implied.

M&S appealed to the Supreme Court. However the Supreme Court found there to be a ‘clear, general understanding that neither the common law nor statute apportion rent payable in advance on a time basis’.

The Supreme Court could not imply any intention on the part of a landlord and tenant for the tenant to be refunded an apportioned part of the rent paid in advance.

This blog has been posted out of general interest it does not replace the need for bespoke legal advice in individual cases.