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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Khodari, R (on the application of) v Cedarpark Holdings Inc [2017] EWCA Civ 333 (11 May 2017)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2017/333.html
Cite as: [2017] WLR(D) 327, [2017] EWCA Civ 333, [2017] JPL 1105, [2018] WLR 584, [2018] RTR 5, [2018] 1 WLR 584

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Neutral Citation Number: [2017] EWCA Civ 333
Case Nos: C1/2015/4101, C1/2016/1493, C1/2016/1494 & CO/3358/2105

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, QUEEN'S BENCH DIVISION
PLANNING COURT
His Honour Judge Sycamore
(sitting as a Judge of the High Court)
CO/1734/2015

Royal Courts of Justice
Strand, London, WC2A 2LL
11 May 2017

B e f o r e :

LORD JUSTICE DAVIS
LORD JUSTICE LEWISON
and
LORD JUSTICE McCOMBE

____________________

Between:
THE QUEEN (on the application of KHODARI)
Appellant
- and -

ROYAL BOROUGH OF KENSINGTON AND CHELSEA COUNCIL
Respondent
- and -

CEDARPARK HOLDINGS INC
Interested Party

____________________

MR MEYRIC LEWIS (instructed by Blake Morgan LLP) for the Appellant
MR JONATHAN WILLS (instructed by Tri Borough Shared Legal Services) for the Respondent
Hearing date : 5 April 2017

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Lord Justice Lewison:

  1. 31 Egerton Gardens, in the Royal Borough of Kensington and Chelsea ("RBKC"), was built in the late 1880s in the red-brick Queen Anne Revival style. It was converted into three flats and two maisonettes in 1948 under a temporary planning permission, which was made permanent in 1962. Mr and Mrs Khodari are the leaseholders of Flat 4. On 23 March 2015 RBKC granted planning permission for the conversion of the building from 5 flats to 8. The approved conversion consists of internal works only. There is considerable pressure on parking in the borough, and RBKC required the additional three units to be "permit free"; that is to say that it required the developer to enter into an obligation that no one who occupied the additional units would apply for a resident's parking permit. It also required the developer to agree to pay a one-off monitoring fee designed to enable RBKC to police the "no permit" obligations. A second and alternative application was made for planning permission for the reconfiguration of the building from 5 flats in their existing form to 5 flats of different sizes. Permission for that development was granted on 5 June 2016. Since there was no increase in the number of dwellings no obligations about parking were involved. If either development goes ahead, Mr and Mrs Khodari's lease is liable to be terminated under a redevelopment break clause and they will lose their home. Understandably, therefore, they object to both developments.
  2. They challenge the grant of the planning permissions on two essential grounds:
  3. i) RBKC failed to have regard to the fact that 31 Egerton Gardens either was or should have been identified as an undesignated heritage asset, and failed to take into account the fact that the development would destroy important interior features of the building.

    ii) In the case of the first planning permission the purported imposition of the obligation not to apply for resident's parking permits was outside RBKC's statutory powers.

  4. The first of these challenges, which relates to both planning permissions, failed before HHJ Sycamore in the Planning Court; but the second, which relates only to the first planning permission, succeeded. He therefore quashed the grant of the first planning permission. RBKC now appeal against that order. Mr Khodari appeals against the judge's refusal to quash the second permission.
  5. While the planning applications were under consideration Mr and Mrs Khodari instructed architects to assess the quality of 31 Egerton Gardens, and also applied to English Heritage (now Historic England) to have the building listed. Mr and Mrs Khodari's architects, Ettwein Bridges, prepared a comprehensive history and report not only on 31 Egerton Gardens itself, but also on the Henry Smith's Charity and Thurloe Estates of which it formed part. They concluded that 31 Egerton Gardens was a heritage asset which was "also designatable according to the criteria and guidance issued by DCMS and English Heritage".
  6. However, English Heritage disagreed. Their assessment was that 31 Egerton Gardens stood out from its immediate environs in terms of its decorative and architectural sophistication. It was a bespoke design, used higher quality materials and had more lavish ornament than its neighbours. This was originally matched in the interior, but because of the subsequent conversion the original scheme "no longer survives in anything like its original state." They drew attention to the panelled billiard room, the stair hall, stained glass and other interior features. Although the building was a better than average example of its type it was neither innovative nor the work of even a moderately well-known architect. They recommended against listing, largely because the architectural quality of the building was not high enough to outweigh the loss of so much of the interior. They did however comment that the building was "of some architectural quality and strong local interest (in particular, given the treatment of its façade and surviving original interiors)".
  7. The officer's report to RBKC's planning committee informed members that the building was not individually recognised as a heritage asset, but was a heritage asset as being part of a conservation area. It pointed out that the only works involved were internal works which, of themselves, would not require planning permission. The case officer, who had visited the building, considered that the heritage significance of the building was its external appearance rather than its interior. The overall assessment was that the proposals would not alter the external appearance of the building, thereby preserving the character and appearance of the conservation area.
  8. Mr Lewis, appearing for Mr and Mrs Khodari, says that this was an error of law. He argues that RBKC ought to have considered whether 31 Egerton Gardens was a "non-designated" heritage asset; that is to say one that is not a listed building or part of a conservation area.
  9. A "Heritage asset" is defined in the glossary to the National Planning Policy Framework ("NPPF") as follows:
  10. "Heritage asset: A building, monument, site, place, area or landscape identified as having a degree of significance meriting consideration in planning decisions, because of its heritage interest. Heritage asset includes designated heritage assets and assets identified by the local planning authority (including local listing)."
  11. A "Designated heritage asset" is also defined by the glossary:
  12. "Designated heritage asset: A World Heritage Site, Scheduled Monument, Listed Building, Protected Wreck Site, Registered Park and Garden, Registered Battlefield or Conservation Area designated under the relevant legislation."
  13. 31 Egerton Gardens is not, individually, a designated heritage asset as defined because it is not a listed building. In a narrow sense, 31 Egerton Gardens is not a non-designated heritage asset either because it has not been "identified" as such by RBKC. It does not, therefore, fall within the definition in the glossary. That was the basis on which the judge decided to reject this challenge. However, Mr Lewis says that this is not the end of the matter.
  14. He has drawn our attention to paragraph 039 of the National Planning Practice Guidance ("NPPG") on Conserving and Enhancing the Historic Environment. That says:
  15. "Local planning authorities may identify non-designated heritage assets. These are buildings, monuments, sites, places, areas or landscapes identified as having a degree of significance meriting consideration in planning decisions but which are not formally designated heritage assets. In some areas, local authorities identify some non-designated heritage assets as 'locally listed'.
    A substantial majority of buildings have little or no heritage significance and thus do not constitute heritage assets. Only a minority have enough heritage interest for their significance to be a material consideration in the planning process." (Emphasis added)
  16. This statement is framed as a power rather than a duty. However, paragraph 41 of the same document says:
  17. "When considering development proposals, local planning authorities should establish if any potential non-designated heritage asset meets the definition in the National Planning Policy Framework at an early stage in the process. Ideally, in the case of buildings, their significance should be judged against published criteria, which may be generated as part of the process of producing a local list." (Emphasis added)
  18. Mr Lewis accepts that policy guidance on its own cannot change the law, so as to impose a legal duty on a local planning authority. However, he argues that paragraph 41, being part of government policy, identifies a material consideration to which a local planning authority must have regard in making planning decisions. If, as he says, RBKC failed to have regard to that paragraph and its recommendation then their decision to grant planning permission was unlawful.
  19. I do not accept this submission. It is true that RBKC did not explicitly consider whether 31 Egerton Gardens should be formally identified as a non-designated heritage asset, but in substance RBKC considered the merits of its interior. Moreover, underlying this point is the proposition that whether an asset has the requisite "degree of significance" to satisfy the definition of "heritage asset" is a value judgment. In the case of a designated heritage asset the decision whether an asset has sufficient significance to be, say, entered on the register of listed buildings will be made by a national body: in the case of listed buildings in England by Historic England (formerly English Heritage). Whether any particular asset has sufficient significance to merit consideration in planning decisions is likewise a question of planning judgment. In the case of a non-designated heritage asset that judgment is that of the local planning authority. In the planning appeal relating to the Cross Keys, 1 Lawrence Street SW3 5NB (APP/K5600/A/12/2172342) on which Mr Lewis relied RBKC had identified the Cross Keys as a non-designated heritage asset. Since that building had in fact been identified, that decision takes the case no further.
  20. In the case of the first application the material placed before the planning committee included the assessment made by English Heritage, and a summary of the objections received. The background documents were available to be read on line by members of the committee. The first of the summarised objections asserted that 31 Egerton Gardens had been recognised by English Heritage as a heritage asset. The response quoted English Heritage's observations about the interior and commented:
  21. "The building is not therefore individually recognised as a heritage asset, but is a heritage asset as part of the conservation area."
  22. The comment is put in the passive voice, which Mr Lewis said meant that the comment was merely repeating English Heritage's decision not to list it. I do not agree. The response differentiated between a listed building on the one hand, and the more general expression "heritage asset" on the other. I read this comment as being RBKC's planning judgment. The third objection asserted that the council had not entered the building to understand its heritage significance. The response was:
  23. "The case officer has visited the application site and entered some of the individual flats. In terms of this application the heritage significance of the building is its external appearance and the contribution it makes to the conservation area, and not its interior."
  24. This, as it seems to me, was also an expression of the planning judgment of the officer which expressly considered the heritage significance of the building. The officer's overall judgment was that the proposals involved no alterations to the external appearance of 31 Egerton Gardens, and so would preserve the character of the conservation area. That was also a planning judgment that RBKC was entitled to make.
  25. When the matter came before the planning committee itself Mr Khodari and his architect made oral representations. Among the points that they made was that the building had "beautiful internal features which deserved protection;" and that the building "had not been designated as a heritage asset by the borough and a conservation officer should visit the property and the application delayed to enable an assessment to be made". The developer's architect responded by reading out the English Heritage assessment. The only recorded question from a member of the committee was about the internal stained glass windows. The question of the interior of the building was thus squarely before the committee and indeed was the main focus of debate.
  26. One of the curiosities about the second application was that the development concerned did not require planning permission. Why the developer chose to apply for planning permission is to some extent mysterious. Nevertheless, RBKC considered the application. Once again the heritage significance of the building was considered in the officer's report, although in terms rather more terse than in the first application. In the committee debate Mr Khodari and his architect again made representations. Among the points that they made was that "the building had local significance and it should have been listed by the Council as a heritage asset". The developer's architect's response was that it had not been "locally listed". Again, therefore, the heritage significance of the building was squarely before the committee. This challenge fails on the facts.
  27. Internal alterations to unlisted buildings are excluded from the statutory definition of "development": Town and Country Planning Act 1990 s 55 (2) (a). Since 31 Egerton Gardens is not listed, the internal alterations comprised in both proposals fall outside the definition of development. However, Mr Lewis argues that the loss of the internal features was nevertheless a material consideration which RBKC failed to consider.
  28. I would accept that the loss of internal features is capable of being a material consideration even though those features could be removed without the need for planning permission where that loss is an integral part of development that does require planning permission. However, the officers' report on the first application summarised a number of objections to the proposed development which emphasised the harm that would be caused by removal of the internal features. The officer's report did not say that these objections were irrelevant. Rather it explained why either the loss was not significant or that there was a countervailing benefit to RBKC in increasing the housing stock. That, too, is a question of planning judgment. As far as the second application is concerned, since there was no need for planning permission, it is difficult to see how the loss of internal features could have been given any significant weight if, indeed, that loss was capable of amounting to a material consideration. This challenge also fails on the facts.
  29. I would therefore dismiss Mr Khodari's appeals.
  30. As mentioned, Mr Khodari's challenge to the requirement that the new residential units be "permit free" succeeded in the court below. RBKC appeals against that part of the judge's order. The requirements in issue were contained in Schedule 2 to a deed made between the owners and lessees of 31 Egerton Gardens and RBKC. In essence they were (a) a covenant not to apply for parking permits for the additional units, nor knowingly to permit any owner or occupier of the permit free units to do so; and to surrender any permit issued in respect of those units; (b) to notify prospective owners or occupiers of the additional units that they would not be entitled to apply for parking permits and (c) to include a covenant in any lease of the additional units preventing the lessee from applying for a parking permit and entitling RBKC to enforce that obligation as a third party. In addition there was an obligation to pay a one-off "monitoring fee" of £500 on execution of the agreement. We were told that the payment has been made.
  31. The rationale for the requirements is to be found in RBKC's local development plan document. That says that because of pressure on parking in the borough, which is subject to a single Controlled Parking Zone, permit free agreements will be required for all new additional residential development.
  32. The deed containing the requirements purported to be made under section 111 of the Local Government Act 1972, section 106 of the Town and Country Planning Act 1990, section 16 of the Greater London Council (General Powers) Act 1974, section 2 of the Local Government Act 2000 "and all other powers so enabling". The argument concentrated on section 106 and section 16.
  33. Section 106 provides so far as material:
  34. "(1) Any person interested in land in the area of a local planning authority may, by agreement or otherwise, enter into an obligation (referred to … as "a planning obligation"), enforceable to the extent mentioned in subsection (3)—
    (a) restricting the development or use of the land in any specified way;
    (b) requiring specified operations or activities to be carried out in, on, under or over the land;
    (c) requiring the land to be used in any specified way; or
    (d) requiring a sum or sums to be paid to the authority … on a specified date or dates or periodically.
    (3) Subject to subsection (4) a planning obligation is enforceable by the authority identified in accordance with subsection (9)(d)—
    (a) against the person entering into the obligation; and
    (b) against any person deriving title from that person.
    (4) The instrument by which a planning obligation is entered into may provide that a person shall not be bound by the obligation in respect of any period during which he no longer has an interest in the land."
  35. Section 16 provides so far as material:
  36. "(1) Every undertaking given to a local authority by the owner of any legal estate in land and every agreement made between a local authority and any such owner being an undertaking or agreement—
    (a) given or made under seal in connection with the land; and
    (b) expressed to be given or made in pursuance of this section;
    shall be enforceable not only against the owner joining in the undertaking or agreement but also against the successors in title of any owner so joining and any person claiming through or under them."
  37. The judge considered the scope of the power under section 106, but did not refer to section 16.
  38. Achieving permit free residential development is important to local authorities, not just in London, but in other major towns and cities. Whether section 106 is apt for this purpose has been considered by Belinda Bucknall QC in Westminster CC v Secretary of State for Communities and Local Government [2013] EWHC 690 (Admin). That was a case in which a developer, Mr Vok, wished to convert a garage into residential accommodation. In order to meet objections based on increased parking he proffered a unilateral undertaking under section 106 which, in effect, provided for permit free accommodation. By the time that the challenge came to court the Secretary of State had conceded that the unilateral undertaking was not a valid planning obligation: see [21]. The deputy judge accepted that concession as being correct and went on to explain why. Her reasoning on this topic was brief. She said at [22]:
  39. "The unilateral undertaking entered into by Mr Vok does not meet the requirements of any of sub-paragraphs (1)(a)-(d). In the result it does not have the characteristics required for a planning obligation. In the further result it is not enforceable as provided by sub-paragraphs (3) and (5) and, because it is not a planning obligation but a purely personal undertaking by Mr Vok which does not run with the land, is not capable of being registered as a local land charge within the scope of sub-paragraph (11)."
  40. This decision remains unreported and perhaps that is the reason why it seems to have been to some extent ignored in practice. Undertakings or conditions to like effect appear to have been thought to overcome objections to residential development in some decisions of planning inspectors: G E Properties (Wales) Ltd v Swansea City Council [2014] PAD 55; Bains v Hounslow LBC [2016] PAD 33.
  41. The deputy judge did not explain why she thought that the undertaking had none of the characteristics required for a planning obligation. Nevertheless, it seems to me that her overall conclusion was right. The references in section 106 to "the land" must mean land in which the person making the agreement is interested. Although "the land" in question may be land other than that covered by the planning permission, provided that there is a direct relationship between the two, the person entering into the section 106 agreement must still have an interest in that land. On the facts of this case the only land so identified is 31 Egerton Gardens. The powers given by section 106 are powers to restrict the use of "the land" or to require "the land" to be used in a specified way. The difficulty with fitting the parking permit requirements into these powers is that the use which RBKC seeks to prevent is not use of any particular flat in 31 Egerton Gardens, but use of the highway for parking. Moreover an application for a parking permit (if it cannot be made on-line) can no doubt be made by post in a letter posted from anywhere or by personal application at the town hall. It does not have to be made within 31 Egerton Gardens itself. None of this seems to me to be use of 31 Egerton Gardens. Nor do I accept that provisions about how flats are marketed regulates the use of the flats themselves. The imposition of a covenant in any lease of a flat takes the case no further, because the subject-matter of the covenant is not the use of the flat.
  42. The deputy judge's distinction between a personal obligation and a land obligation is also borne out by a consideration of the history of this kind of power. Its origins lie in section 34 of the Town and Country Planning Act 1932 which first empowered local authorities to enter into such agreements. The power of enforcement was described thus:
  43. "shall have power to enforce the agreement against persons deriving title under him in the like manner and to the like extent as if the authority were possessed of, or interested in, adjacent land and as if the agreement had been entered into for the benefit of that adjacent land."
  44. This model of enforcement, which created the fiction that the authority owned adjoining land for the benefit of which the agreement was made, built on the traditional requirements of equity for the enforcement of a restrictive covenant. This mechanism for enforcement carried through into section 25 of the Town and Country Planning Act 1947 and thence via section 37 of the Town and Country Planning Act 1962 into section 52 of the Town and Country Planning Act 1971 subsection (2) of which provided:
  45. "An agreement made under this section with any person interested in land may be enforced by the local planning authority against persons deriving title under that person in respect of that land, as if the local planning authority were possessed of adjacent land and as if the agreement had been expressed to be made for the benefit of such land."
  46. When section 106 of the Town and Country Planning Act 1990 was originally enacted it followed the same formula. As the Lands Tribunal explained in Re Martin's Application (1987) 53 P & CR 146:
  47. "the restriction is intended in every way to operate as a true restrictive covenant as established by well-known equitable principles."
  48. The same is true of other statutory provisions, such as section 609 of the Housing Act 1985, which use the same drafting technique: Cantrell v Wycombe District Council [2008] EWCA Civ 866, [2009] PTSR 96.
  49. One of the characteristics of a covenant that could be enforced through this mechanism was that the covenant had to control the use of the land itself and not simply control a party to the agreement, even if that control indirectly restricted the use of the land: Gray and Gray on Land Law (5th ed) para 3.4.21, Re Nisbet and Potts' Contract [1903] 1 Ch 391. The current formulation originates with the Planning and Compensation Act 1991. It appears that no substantial change to the nature of the obligations was intended when the formulation was changed: see Jeremy Rowan-Robinson Planning decisions and planning agreements [1994] Conv 31, quoting the Minister in the House of Lords. Because the remodelled section 106 encompasses positive obligations and the payment of money, the incorporation of the rules for the enforcement of restrictive covenants was no longer appropriate. This is borne out by the statutory wording. Although the statutory fiction that the planning authority owns adjacent land has disappeared from the legislation, it still requires the obligation to restrict the use of the land itself.
  50. In my judgment, therefore, the judge was right to reject reliance on section 106 to validate the obligations dealing with parking permits. Since I have concluded that those obligations were not capable of being planning obligations, it also follows that they were not required to comply with regulation 122 of the Community Infrastructure Regulations 2010.
  51. If, as I think, section 106 is not the answer to the obligations about parking permits, what about section 16? As I have said the judge did not consider this section. This may well be because it did not feature in RBKC's grounds of resistance, although it was drawn to his attention in oral argument. Mr Lewis had two principal arguments against the application of section 16. First, he said that section 106 is the "governing" or "overarching" provision for the imposition of planning obligations. The planning legislation is intended to be a complete code, and it is wrong to allow other statutory powers to be invoked in order to repair perceived defects in that code. Although Mr Lewis referred to the decision of the House of Lords in Pioneer Aggregates (UK) Ltd v Secretary of State for the Environment [1985] AC 132, 140H-141C in support of his submission, in my judgment that case is dealing with a different point. What it says is that the court should not introduce principles of private law into the planning code unless it is necessary to do so. In the overall context of planning I can see no objection to a local authority invoking other statutory powers to supplement those given by the Town and Country Planning Act 1990 itself. An agreement made under section 278 of the Highways Act 1980 is the most obvious and familiar example. The long title of the Greater London Council (General Powers) Act 1974 says in terms that its purpose is to confer "further powers" on certain authorities, and the preamble records that one of the purposes for which those powers are conferred is "traffic management". Mr Lewis' second objection was that section 16 only applied to Greater London. The planning system is a national system and it would be wrong for different powers to exist in different parts of England and Wales. However, there is no doubt that different planning provisions do apply to Greater London of which the best-known example is the use of residential premises as temporary sleeping accommodation which, subject to certain conditions, is deemed to be a material change of use: Greater London Council (General Powers) Act 1973 s 25. I do not therefore accept this argument either. In my judgment if the obligations about parking permits fall within section 16 they will be legally valid.
  52. Mr Wills may or may not be right that this leaves local authorities outside Greater London without the ability to permit the creation of new residential units on terms that no residents' parking permits will be issued in relation to those units. Whether powers exist under other statutes was not explored during the hearing. However, I observe that in R (AS Property Investments Ltd) v Hounslow LBC [2008] EWHC 1631 (Admin) the developer was unwilling to enter into a planning obligation preventing the grant of parking permits to residents of new flats; but the solution was found by the exclusion of each new flat from the schedule of streets in the statutory instrument that created the Controlled Parking Zone. Sullivan J upheld that solution.
  53. The requirement of section 16 is that the agreement must be made "in connection with the land". Thus it is not a requirement of section 16 that the agreement regulates the use of the land itself. The phrase "in connection with" is one of wide meaning. There is, in my judgment, a "connection" between use of the three additional units for residential purposes and the potential for the grant of additional parking permits, not least because a qualification for a parking permit is residence within the borough. Accordingly I consider that there is a sufficient connection between the requirements imposed by the deed and the proposed development. Mr Lewis did not argue the contrary.
  54. That leaves the obligation to pay a monitoring fee. Since this was a one-off payment to be made on execution of the deed (and it was in fact paid) there can be no question of its being enforced against successors in title of the original parties to the deed. In a sense, therefore, section 106 is irrelevant. However, since section 106 (1) (d) expressly authorises an obligation to pay money, the obligation to pay the monitoring fee falls within the literal scope of the section. This potentially brings into play regulation 122. But that regulation, as Mr Wills submitted, does not prescribe what may or may not be included in a section 106 agreement. Rather, it says that a planning obligation may "only constitute a reason for granting planning permission" if it satisfies certain tests. So the first question must be: was an agreement to pay the monitoring fee a reason for granting permission?
  55. The officer's report to the committee referred to the need for "a legal agreement preventing future residents from applying for parking permits." It said nothing about a monitoring fee. The formal recommendation to the committee was:
  56. "To grant planning permission on the satisfactory completion of an agreement to secure the additional units are parking permit free and with the conditions listed in Section 8 of this report."
  57. The listed conditions are not relevant to this point. Thus the formal recommendation also said nothing about a monitoring fee. Nor was it mentioned in the committee debate at the end of which the committee resolved to adopt the recommendation. I do not think it is possible to infer from this material that the payment of a monitoring fee was "a reason for granting planning permission". It follows that regulation 122 presents no obstacle to the monitoring fee.
  58. It may be said that if the "permit free" obligations fall outside the scope of section 106 (as in my judgment they do) the obligation to pay the monitoring fee, which is ancillary to those obligations, cannot survive as a free-standing obligation under section 106. But if that objection is a good one (and Mr Lewis did not argue that it was) then because there is no need to enforce it against successors in title to the original parties, its validity depends simply on RBKC's power to contract for its payment. As Mr Wills submitted, the original parties to the deed are bound by it as a matter of contract. RBKC's power to enter into such a contract is validated either by section 111 of the Local Government Act 1972 ("a local authority shall have power to do any thing … which is calculated to facilitate, or is conducive or incidental to, the discharge of any of their functions") or by section 1 (1) of the Localism Act 2011 ("a local authority has power to do anything that individuals generally may do").
  59. I would therefore allow RBKC's cross-appeal.
  60. Lord Justice McCombe:

  61. I agree.
  62. Lord Justice Davis:

  63. I also agree.


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