Dudley Muslim Association v Dudley Metropolitan Borough Council

This is a sad story. What is ultimately at issue on this appeal is whether the dispute between the parties should be allowed to go to trial, or should be stopped at this stage. Both Master Marsh and Mr David Halpern QC, sitting as a deputy judge of the Chancery Division, thought that the dispute should be stopped at this stage. I agree with the Master and, subject to one point which does not affect the overall outcome of the case, with the judge. Accordingly for the reasons that follow I would dismiss the appeal.

The Dudley Muslim Association Ltd (“DMA”) occupy a mosque at a site in Castle Hill, Dudley. That site is inadequate for the needs of the community; and they have been trying to build a new mosque in Dudley for the last twenty years. They acquired a site for that purpose, which they eventually exchanged with the Dudley Metropolitan Borough Council (“the Council”) for the site with which we are concerned at Hall Street, Dudley. On 16 May 2003 the Council granted a 99 year lease of the Hall Street site to the DMA starting on 16 May 2003. The site did not have planning permission for the new mosque. The rent payable was a peppercorn; and the lease contained a number of covenants relating to the proposed construction of the new mosque. Clause 2 (3) (a) said that “in addition to any necessary planning and other consents” that might be required, the tenant was required to submit plans and elevations “for approval by the Council’s Director of Urban Development or other duly authorised officer.” Clause 2 (3) (b) required the development to be completed “with all practicable speed and in any event within five years from the date hereof”. Clause 2 (3) (c) said that if the development had not been completed within five years the lease would become null and void. Clause 7 of the lease gave the DMA an option to acquire the freehold. Clause 17 stated that if the option were exercised the transfer would contain a number of covenants. These included a covenant to carry out the development “to the satisfaction of the Council’s Director of Urban Development in accordance with the approved plans” and “with all practicable speed and in any event before 31 December 2008”. Another covenant to be contained in the transfer required the DMA to vacate the property and retransfer it to the Council if the development had not been completed by the due date.

The DMA submitted an application for planning permission to the Council (which was the local planning authority) in May 2003. Consideration of that application was considerably delayed. However, despite that fact, as recorded in a letter from their solicitors on 18 August 2004, the DMA decided to “press ahead with the purchase of the freehold”. At the same time the DMA asked for removal of the covenant about the time scale for development, because it needed to raise funds for the development. The Council turned down that request but in September 2004 the DMA decided to proceed anyway. Their solicitors’ letter of 7 September recorded that the DMA were “aware the Council cannot relax the covenants.” Nevertheless in October 2004 Dr Ahmed, the chair of the DMA, wrote to Mr Polychronakis (then the Council’s Director of Law and Property) drawing attention to the tightness of the timetable and asking for an extension of time until the end of 2013. Two days later the DMA’s architects also wrote to Mr Polychronakis but the extension of time that they requested was until December 2012. The Council replied in a letter headed “Subject to contract” on 21 October. The Council was willing to extend time from 16 May 2008 to 31 December 2008 which, they said, would “give your client ample time to complete the development.” Since the option clause already envisaged a long-stop date of 31 December 2008, this was in reality no extension at all. The DMA thus committed themselves to the purchase of the freehold despite the lack of planning permission and despite the Council’s refusal to concede any meaningful extension of the development timetable; and in the knowledge that the Council’s position was that it could not relax the covenants.

A transfer of the freehold was executed on 17 March 2005. It contained the development covenants envisaged by clause 17 of the lease with the long-stop date of 31 December 2008. Planning permission had still not been granted, so the maximum time for completing the development was less than four years. In the following month the Council asked the DMA to withdraw their planning application which had generated considerable political debate in Dudley. Council elections were due, and the Council did not want the application to become a political football. In a letter to Dr Ahmed of 14 April 2005 Mr Sparke (then the Council’s chief executive) referred to the development timetable and commented:

“Meeting a 2008 deadline is more difficult given the loss of some 18 months through the current planning process and I undertook to explore if the Council would be prepared to extend the deadline to 2010, if not 2012 as you desire.”

Mr Sparke and Dr Ahmed met in August of the following year. After the meeting Mr Sparke wrote on 13 September 2006. In his letter he said:

“There have been a number of delays over the last three years due to factors beyond your control and the original deadline for completing the development which was December 2008, now looks unrealistic. Accordingly, the Council accepts that a new target date needs to be set once planning permission is resolved.”

On 16 January 2007 the DMA resubmitted the application for outline planning permission. Why it took so long to resubmit the application, given that the elections had taken place in May 2005 and the DMA had carried out many studies and produced many reports in connection with the first application, has not been explained. The officers advised the committee that although the proposed development was contrary to the development plan, there were good reasons to depart from the development plan. However, although they recommended approval, at their meeting on 27 February 2007 the Development Control Committee (which consists of elected members) decided to refuse on the ground that the proposed use was contrary to the development plan. The refusal was issued in March 2007. On 5 April 2007 the DMA’s architects wrote to the council. They said that the DMA was considering an appeal and continued:

“In addition we understand from a copy of the an [sic] Andrew Sparke (Chief Executive) letter to the DMA dated the 14^th April 2005 that he was going to explore the possibility of extending the current deadline of 2008 for the land transfer to 2010 if not 2012. Could you please confirm what the present situation is.”

This letter was copied to Dr Ahmed among others. Mr Polychronakis replied on 8 May. He confirmed that “the deadline is currently the 31^st December 2008”. He went on to say:

“We deferred a decision on a subsequent request to extend the deadline pending the outcome of the planning application. Since the decision of the Development Control Committee was to refuse the application, we do not think that it would be appropriate to revise the timetable bearing in mind that the original decision to impose a development timetable was based on the need to avoid having a sterile and undeveloped site in an important part of Dudley Town Centre.

The Council will, of course, listen to any submission that you wish to make on this issue but, as you may know, there is already interest in the site from at least one other developer.”

Despite that letter, and without any further correspondence, the DMA pressed on with the appeal and a public inquiry took place in June 2008. The DMA were represented at the public inquiry by counsel, instructed by the Barton Wilmore Planning Partnership. In the course of the appeal, as recorded in paragraph [30] of the inspector’s decision letter of 17 July 2008, the DMA confirmed that they were not pursuing a case of estoppel and that the planning appeal was not the appropriate forum for advancing a case based on legitimate expectation. The outcome was that the appeal was allowed for reasons given in the decision letter. In essence the inspector agreed with the DMA that there were good reasons for departing from the development plan. The inspector attached conditions to the grant of permission, one of which was a requirement to seek approval for reserved matters within three years of the date of the decision letter (i.e. by 17 July 2011). The Council then applied to the Administrative Court to challenge the inspector’s decision. But the application failed on 28 July 2009.

By then, of course, the long-stop date for completion of the development had long since passed. Discussions then took place between officers of the Council and the DMA but these concerned the possible development of the existing site of the mosque and the possibility of alternative sites for the mosque. There is no allegation (and no evidence) that the question of an extension of time for completing the development of the Hall Street site formed part of those discussions; nor is there any allegation (or evidence) that at any time following the successful planning appeal the DMA asked for any further extension of time. Ultimately on 7 October 2010 the Council called upon the DMA to comply with its obligation to retransfer the site in accordance with the covenant contained in the transfer. The letter said that it was a letter before action. It recited the covenants in the transfer, stated that the development had not been completed and required the DMA to confirm that it would comply with its obligation to transfer the site. The DMA’s response dated 21 October 2010 was that the Council was not entitled to enforce the covenant. It alleged that:

“The [DMA] were prevented from complying with the said covenant by the Council itself by refusing Planning permission to the [DMA] to comply.

The [DMA] has the right to submit a full Planning application by the end of July 2011 and have every intention of doing so.”

Battle lines having been drawn the Council issued proceedings on 11 November 2010 claiming specific performance of the obligation to retransfer the land. The DMA filed a defence on 9 February 2011. It alleged that the Council had a duty to assist the DMA in obtaining planning permission; that the Council was in breach of that duty; that the Council had interfered with a number of the DMA’s rights under the ECHR; and that the Council’s decision to enforce the covenant was discrimination on grounds of faith. The DMA now accept that none of those defences has a real prospect of success and that they were rightly struck out by Deputy Master Lloyd.

Paragraph 6 of the Defence also alleged that the DMA had a legitimate expectation that they would be permitted to develop the site “within a reasonable time frame taking into account the delay in implementing the proposed development [which] was caused directly or indirectly by the [Council’s] wrongs”; and that insistence on the retransfer would breach that legitimate expectation. Not surprisingly the Council asked for Further Information about that plea. The response was that:

“In or about March 2005 the [Council’s] officers (Messrs Polychronakis and Andrew Sparke) led the [DMA] (Dr Khurshid Ahmed) to believe that the [DMA] should not be concerned with clause 2 (3) (c) of the Lease as this would be unlikely to be enforced against the [DMA] and that there was no need for the [DMA] to seek a formal variation of the clause on purchasing the freehold.”

However, at the hearing before Deputy Master Lloyd rather than relying on events in March 2005 the DMA relied on the letter from Mr Sparke dated 13 September 2006, the relevant parts of which I have quoted. That letter had not been pleaded, and nor had other arguments upon which the DMA tried to rely. The Deputy Master was clearly troubled about giving summary judgment against the DMA, although he was satisfied that the pleaded defence as it then stood did not disclose reasonable grounds for defending the claim. Thus the Deputy Master gave the DMA permission to amend their Defence; but did so by means of an “unless order”. That “unless order” required an Amended Defence to be served by 20 December 2011, failing which paragraph 6 of the Defence would be struck out. Clearly that was intended to give the DMA one last chance to plead a viable defence.

Following the service of the Amended Defence the Council applied once more to strike out the defence or, in the alternative, for summary judgment in its favour. That application succeeded before Master Marsh. The DMA’s appeal before the deputy judge proceeded on the basis that the DMA’s case was pleaded in the Amended Defence. In fact, about a week before the hearing of the appeal, the DMA had made an application to re-amend the Amended Defence. But when the Council objected that this was an attempt to avoid the consequences of the “unless order” and that the DMA would have to apply for relief against sanctions, Mr Matthias QC, on behalf of the DMA, asked the judge not to hear the application to re-amend until he had dealt with the appeal. That is the basis on which the deputy judge heard the appeal and decided it against the DMA. With the permission of Sir Stephen Sedley, the DMA now bring this second appeal. When he opened the appeal before us Mr Matthias confirmed that he did not rely on the draft Re-amended Defence for the purposes of this appeal; and that he did not allege that the Council acted in bad faith.

Paragraph 6 (h) of the Amended Defence alleges:

“In deciding to exercise the covenant to re-transfer to the Council … the Hall Street Site … the Council acted unfairly, unreasonably, in breach of the [DMA’s] legitimate expectation and by an abuse of power.”

That allegation is then amplified by a number of sub-paragraphs which set out the chronology much as I have summarised it. The important ones, for present purposes, are the following in paragraph 6 (i):

“xviii.

On 8^th August 2006 Mr Ahmed met with Mr Sparke and further concerns about the delays in the planning process and the completion deadline imposed by the covenant. Mr Sparke gave assurances that the deadline would be revisited after planning issues had been resolved…

xix.

By a letter dated 13^th September 2006 [Mr Sparke] wrote to [Dr Ahmed] and stated [the letter is then quoted].

xx.

That letter of 13^th September provides a clear representation from the Chief Executive of the [Council], who had the actual or ostensible authority to speak on behalf of the [Council] upon which the [DMA] was entitled to rely and did rely.

xxiv.

Following the rejection of the first outline application, Mr Polychronakis wrote to the [DMA] on 8^th May 2007 stating [the letter is then summarised]. That carried the clear implication that any decision upon the extension of time under the Transfer would be dictated pending the outcome of the planning process. In consequence, if planning issues were resolved in favour of the proposed development, the extension of time requisite to carry out the development of the mosque and community facilities would be forthcoming.”

The pleading continues:

“(ii)

In the circumstances of this case it would be unfair and represent an abuse of power for the [Council] to seek to resile from the position that it had adopted and conveyed to the [DMA].

(iii)

This is both procedurally and substantively unfair

i.

The correspondence and course of dealing gives rise to the legitimate expectation that the [DMA] would be able to complete the development of the mosque notwithstanding the delays that had occurred.

ii.

Those delays had been due primarily to the actions of the [Council] and where the primary purpose of the transaction and the proposed development was to seek to see the redevelopment of the Hall Street Site for a mosque and community facilities take place within a reasonable time.

iii.

The … Council’s course of dealings towards the [DMA] together with the correspondence between the parties, when considered in context, provide a clear promise supporting legitimate expectation that the [DMA] would be permitted to carry out the development within a reasonable timescale. For the [Council] to seek to resile from that position would be unfair and represent an abuse of power.”

There is more of the same, recycling and reformulating these allegations in different ways; but adding nothing of value to the nature of the case on legitimate expectation pleaded thus far. The DMA also say that they have a defence based on abuse of power, which is not dependent on the legitimate expectation. That defence is pleaded in paragraph 6 (h) (iii) (vi) of the Amended Defence as follows:

“(vi)

Whilst the [Council], as local planning authority, has an independent statutory duty in deciding whether to grant planning permission for the proposed development of the Hall Street Site, it would be unfair, unreasonable, in breach of the [DMA’s] legitimate expectations and an abuse of power to allow it to exercise the buy-back provision in the circumstances set out above and where the [Council]:

i.

has caused substantial delay during the currency of the development period referred to in the Transfer;

ii.

has asked for a planning application to be withdrawn, for its own political reasons;

iii.

had accepted, by both its authorised officers and political leaders, that the time period would be extended by a reasonable period in order to allow the development to be carried out;

iv.

has refused planning permission, contrary to its own professional officer’s advice

v.

has deferred making decision to buy back pending the resolution of the planning appeal and thence the High Court appeal, which were both resolved in favour of the [DMA]

vi.

by exercising the buy-back clause is now seeking to prevent the prompt development of this land, meaning that the prominently located Hall Street Site would remain derelict for a longer period of time, the very consequence the covenant was intended to protect against.”

The Master granted summary judgment to the Council; essentially for two reasons. First, he was not satisfied that the letter of 13 September 2006 was of sufficient clarity to found the alleged legitimate expectation. Second, he was not satisfied that reliance on that letter had been adequately pleaded or supported by evidence. The judge disagreed with the Master on the first of those reasons, holding that it was arguable that the letter had sufficient clarity. But he agreed with the Master on the second of those reasons and thus dismissed the appeal.

Mr Matthias had three parts to his argument on legitimate expectation. First, he said that the DMA have an arguable case that the letter of 13 September 2006, seen in context, was “a clear and unambiguous representation that the Council would set a new deadline once planning permission had been finally resolved (i.e. following any appeal or further application to the court)”. Second, he said that reliance on that letter had been adequately pleaded and, in any event, even if it had not, it could and should be inferred from the agreed facts. The DMA was a charity, and it would have been irrational for it to incur the expense of a planning appeal unless it was satisfied that the deadline would be extended. Third, he said that, even if reliance was inadequately pleaded, it was an unnecessary ingredient of the defence.

By a Respondent’s Notice, Mr Morshead QC, for the Council, argued that the Master was right to hold that the letter of 13 September 2006, seen in context, was insufficiently clear to found an operative legitimate expectation; and that the judge was wrong to say that the contrary argument had real prospects of success. Second, while accepting that in some cases detrimental reliance may not be a necessary ingredient in a defence of breach of legitimate expectation, he submitted that it was necessary in a case like this one. Third, he submitted that there was no sufficient pleading or evidence of reliance.

It is common ground that, if the DMA has a valid public law challenge to the Council’s claim to enforce its contractual rights, there is no procedural bar to raising it as a defence in these proceedings: Wandsworth LBC v Winder [1985] 1 AC 461. It is also common ground that the letter of 13 September 2006 must be seen in context, although Mr Matthias and Mr Morshead disagree about what that context is. Although the case was argued below on the basis that in principle a public law defence was available, at the request of the court counsel for both parties argued that question of principle. We took the view that if the appeal were to be allowed on the narrow basis that the pleaded facts might support a public law defence, it would be a cruel kindness to allow the action to proceed to trial if, in the end, there were insuperable legal difficulties which would preclude success at trial for the DMA.

It is true that in a technical sense the Council is operating under statutory powers; but that is only because the Council can do nothing unless it is authorised by statute. The authorising statute in the present case is section 120 of the Local Government Act 1972, which empowers the Council to acquire land in its area. However, this case is not about the unilateral exercise by the Council of a statutory power; it is about the implementation of a commercial bargain. In substance, what we are dealing with is the enforcement of a contract willingly made by both parties with the aid of legal advice. The DMA’s defence is that the Council is not entitled to enforce the contract according to its terms. This important feature of the case gives rise to the question whether a public law defence based on legitimate expectation is, in principle, an available defence to a claim to enforce a contract. The interface between a claim arising under a contract and the principles of public law was considered by this court in Hampshire County Council v Supportway Community Services Ltd [2006] EWCA Civ 1035, [2006] LGR 836. The parties had entered into a contract for the supply of housing related support services. Under the terms of the contract the Council was required to carry out a review of the services. The review was to be carried out in accordance with directions given by the Deputy Prime Minister under section 93 of the Local Government Act 2000. Having carried out the review the Council concluded that Supportway was too expensive and terminated the contract. Supportway sought to challenge the Council’s decision on public law principles. This court held that Supportway’s remedies were confined to private law remedies. Their complaint was that the Council had not complied with the terms of the contract; and they were seeking to enforce compliance. Neuberger LJ pointed out at [37] that virtually any contract entered into by a local authority would involve performance of public administrative functions; and said at [38]:

“Thus, the mere fact that the party alleged to be in breach of contract is a public body plainly cannot, on its own, transform what would otherwise be a private law claim into a public law claim. There are, of course, circumstances where, in a contractual context, a public body is susceptible to public law remedies. However, where the claim is fundamentally contractual in nature, and involves no allegation of fraud or improper motive or the like against the public body, it would, at least in the absence of very unusual circumstances, be right, as a matter of principle, to limit a claimant to private law remedies.”

He acknowledged that a claim in public law would allow a challenge on the ground that the decision was taken in bad faith or for an improper motive. But otherwise the case would be governed by private law. As Neuberger LJ explained at [42] and [43]:

“[42] However, it cannot be right that a claimant suing a public body for breach of contract, who is dissatisfied with the remedy afforded him by private law, should be able to invoke public law simply because of his dissatisfaction, understandable though it may be. If he could do so, it would place a party who contracts with a public body in an unjustifiably more privileged position than a party who contracts with anyone else, and a public body in an unjustifiably less favourable position than any other contracting party.

[43] Equally importantly, it appears to me that it would be wrong in principle for a person who would otherwise be limited to a private law claim to be entitled to base his claim in public law merely because private law does not afford him a sufficiently attractive remedy. It is one thing to say that, because a contracting party is a public body, its actions are, in principle, susceptible to judicial review. It is quite another to say that, because a contracting party is a public body, the types of relief which may be available against it under a contract should include public law remedies, even where the basis of the claim is purely contractual in nature.”

In so saying, Neuberger LJ endorsed the observations of Lord Templeman, giving the opinion of the Privy Council in Mercury Energy Ltd v Electricity Corp of New Zealand Ltd [1994] 1 WLR 521:

“'The causes of action based on breach of statutory duty, abuse of a monopoly position and administrative impropriety are only relevant if the causes of action based on contract are rejected. If the causes of action based on contract are rejected, the other causes of action will only constitute attempts to obtain, by the declaration sought, specific performance of a non-existing contract. The exploitation and extension of remedies such as judicial review beyond their proper sphere should not be encouraged.”

Both Wilson and Mummery LJJ agreed with Neuberger LJ. Mummery LJ added at [56]:

“…in order to attract public law remedies, it would be necessary for the applicant for judicial review to establish, at the very least, a relevant and sufficient nexus between the aspect of the contractual situation of which complaint is made and an alleged unlawful exercise of relevant public law powers.”

This court returned to the subject in Krebs v NHS Commissioning Board [2014] EWCA Civ 1540 in which Longmore LJ said at [33]:

“There is, of course, a considerable body of authority, cited by the judge, to the effect that it is impermissible for parties to private law contracts made with public bodies to proceed by way of judicial review in order to improve their contractual claim.”

He also endorsed the observations of Lord Templeman that I have quoted and concluded at [39]:

“I would endorse that approach and hold that Dr Krebs is to be confined to his contractual (private law) remedies what ever they may be. If he cannot show any breach of contract by the defendant, that is the end of the matter.”

Mr Matthias said that these cases were distinguishable because the DMA were not trying to enforce a contract: they were resisting enforcement by the Council. I do not consider that that is a valid distinction because it gives rise to the imbalance (or what Mr Morshead called asymmetry) which, according to Neuberger LJ, is the rationale for confining contracting parties to private law remedies in cases about the enforcement of contracts. Mr Matthias also relied on Wandsworth LBC v Winder in which the House of Lords allowed a public law defence to be raised as a defence to a claim for rent arrears (although ultimately that defence failed: Wandsworth LBC v Winder (No 2) (1988) 20 HLR 400). However, I do not consider that Wandsworth LBC v Winder advances the case. First, in the House of Lords that case was only concerned with the procedural question: in what forum must the public law challenge be mounted? Second, the case concerned the unilateral exercise by Wandsworth of a statutory power under section 40 of the Housing Act 1980 to increase rents. Third, although the exercise of that power affected the rent payable by Mr Winder the exercise of the statutory power was a borough-wide exercise which affected all Wandsworth’s tenants. This case by contrast involves a one-off contract made between the Council and the DMA.

It is, of course, necessary to appreciate exactly what the dispute is about. Here there is a contract whose terms are perfectly clear. If the development had not been completed by 31 December 2008 the DMA were bound to transfer the Hall Street site back to the Council. As Mr Morshead said, although at its inception this was a conditional obligation, once 31 December 2008 came and went it became unconditional. It required no exercise of discretionary or statutory power by the Council to bring that unconditional obligation into being. It was simply a consequence of the terms of the contract that the parties had agreed. The essence of the DMA’s case is that the legal effect of that contractual obligation has been suspended. The private law of contract provides defences of this kind, which usually go under the labels of waiver or promissory estoppel. That, in substance, is the defence that the DMA wish to put forward. This is therefore, in my judgment, a purely contractual dispute. There may well be cases in which a true public law defence vitiates a contractual claim. Suppose that a public authority takes a decision to enforce a contract and that the decision is made in bad faith. In the exercise of its supervisory jurisdiction the court may well quash the decision. But all that means is that the public authority is free to take the decision again; and if it reaches the same decision in good faith, the contract will be enforceable. The contract itself is unaffected. Here, by contrast, the essence of the DMA’s case is that the contract cannot be enforced at all until the DMA has had a reasonable time in which to complete the development for which it now has planning permission. In other words the DMA’s case is that the legal effect of the contract has changed.

In my judgment, in the circumstances of this case, there is no public law defence available to the DMA based on legitimate expectation or a general appeal to abuse of power. If the DMA cannot assert a variation of the contract or a promissory estoppel, which they do not attempt to do, the contract is enforceable according to its terms.

But even if either of those defences were to be asserted there is a further obstacle in the DMA’s way. Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 provides:

“(1)

A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.

…

(5)

… nothing in this section affects the creation or operation of resulting, implied or constructive trusts.”

The starting point is that the DMA’s obligation to transfer the Hall Street site to the Council in the event of non-completion of the development by the contractual deadline is a contract for the disposition of an interest in land. Although Mr Matthias tried to characterise it as no more than a covenant, that is an unarguable contention. It is an executory (and initially conditional) promise to transfer the freehold to the council in exchange for a stipulated sum of money. So the obligation to transfer is in principle within the ambit of section 2.

It is clear that any variation of a contract that falls within the ambit of section 2 must itself comply with the required formalities of that section: McCausland v Duncan Lawrie Ltd [1997] 1 WLR 38. That case left open the possibility that estoppel might outflank the section, although it would be surprising if one could do by promissory estoppel what one could not do by informal contract. A subsequent decision of this court held that an allegation of an estoppel by convention could not outflank the section: Godden v Merthyr Tydfil Housing Association (1997) 74 P & CR D1. In Yaxley v Gotts [2000] Ch 162 this court held that a claim based on proprietary estoppel could be maintained despite section 2 (1) because such a claim fell within the exception in section 2 (5). Whether that is still the law may be doubtful, because of the observations of Lord Scott in Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55, [2008] 1 WLR 1752 at [29]. Although those observations were obiter, Lords Hoffmann, Brown and Mance agreed with Lord Scott’s speech. I will assume, for the purposes of argument, that a claim in proprietary estoppel is capable of outflanking section 2. But that is because it falls within an express exception which is itself part of section 2. Where a defence is raised based on promissory estoppel there is no question of a constructive trust of land arising. And in the circumstances of this case, where the DMA already own the land, there is no relevant property which is capable of being held on trust for the DMA. Unless a case falls within section 2 (5), to admit a defence based on promissory estoppel would be effectively to repeal the section by judicial legislation: compare Actionstrength Ltd v International Glass Engineering [2003] UKHL 17, [2003] 2 AC 541. The point of principle that Lord Scott made in Cobbe v Yeoman’s Row Management Ltd at [29] was:

“The proposition that an owner of land can be estopped from asserting that an agreement is void for want of compliance with the requirements of section 2 is, in my opinion, unacceptable. The assertion is no more than the statute provides. Equity can surely not contradict the statute.”

In my judgment, therefore, even if the DMA had been able to plead and prove a defence of promissory estoppel it would not have overcome the problem arising under section 2 (1) of the 1989 Act. In this respect I agree with the judgment of Nugee J in MP Kemp Ltd v Bullen Developments Ltd [2014] EWHC 2009 (Ch) at [123].

Quite apart from these legal objections, in my judgment the claim based on legitimate expectation also fails on the facts. The DMA do not rely on some general statement of the Council’s policy addressed to the world at large. They rely on what they say is a specific promise given to them alone.

The distinction between the two was clearly drawn by Sedley LJ in R (Begbie) v Secretary of State for Education and Employment [2000] 1 WLR 1115, 1133:

“I have no difficulty with the proposition that in cases where government has made known how it intends to exercise powers which affect the public at large it may be held to its word irrespective of whether the applicant had been relying specifically upon it. The legitimate expectation in such a case is that government will behave towards its citizens as it says it will. But where the basis of the claim is, as it is here, that a pupil-specific discretion should be exercised in certain pupil's favour, I find it difficult to see how a person who has not clearly understood and accepted a representation of the decision-maker to that effect can be said to have such an expectation at all. A hope no doubt, but not an expectation.”

The letter relied on is one of a series of communications between the DMA and the Council. As with any series of communications which are said to give rise to legal rights and obligations one cannot cherry pick those parts of the series which favour only one side. The communications must be looked at as a whole. An equally significant communication (if not more significant) is the exchange of correspondence between the DMA’s architects and the Council immediately before the planning appeal was launched.

I begin with the letter of 13 September 2006 on which the DMA rely. Even that letter has its own context. First, the original development timetable that was envisaged was five years; and that at a time when no planning application had yet been made. Second, when the DMA decided to acquire the freehold in the summer of 2004 they were told in terms that the Council could not relax the development timetable. Third, in April 2005 Mr Sparke had already turned down a request that the development timetable be extended beyond 2010. Fourth, when Mr Sparke wrote his letter of 13 September 2006 officers were supportive of the scheme, and the planning committee had not dropped the bombshell of refusal contrary to its own officers’ advice. Against that background it is difficult to see how Mr Sparke’s letter could reasonably have been understood as contemplating an entirely open-ended timetable. In addition the text of the letter said that the Council accepted that “a new target date needs to be set” once planning permission is resolved. Mr Matthias would have us read that as if it said that the Council would set a new target date. But it does not. The setting of a new target date is expressed in the passive voice. The setting of a new target date would have required a variation of the contract; and that could only have been done by mutual agreement, not by the Council’s unilateral decision. It was open to either party to propose a new target date; but the DMA took no initiative to open discussions.

Next, and most important, is the exchange of correspondence in April and May 2007. By this time, to the surprise of both the DMA and, no doubt, the officers of the Council, planning permission had been refused. Understandably, before incurring the time and cost of an appeal the DMA wanted to find out what the Council’s position was. That is why the DMA’s architects asked the Council to “confirm” the current position. Mr Polychronakis’ response was unequivocal. First, he said that the current deadline was 31 December 2008, which it was. Clearly, then the DMA could not have legitimately thought that it had already been extended. Second, he said that the Council had “deferred a decision on a subsequent request” for an extension. Mr Matthias accepted that that was a reference to Mr Sparke’s letter of 13 September 2006. Third, he said that the decision had been deferred pending the outcome of the planning application. The outcome of the application was now known: the Council had refused permission. It was for that reason that Mr Polychronakis said that the Council did not think it appropriate to extend the deadline. In short, the letter said (to my mind unequivocally) that the request for an extension of the deadline had now been refused. Mr Matthias argued that Mr Polychronakis’ letter did not supersede the assurance that had been given by Mr Sparke. But that is inconsistent with his acceptance that Mr Polychronakis referred to Mr Sparke’s letter in his own letter as a prelude to conveying the Council’s decision to refuse to extend the deadline. Mr Matthias also argued that Mr Polychronakis’ letter implicitly represented that if a planning appeal were to succeed, the Council would extend the deadline. I find it impossible to derive that from what the letter says. It is in my judgment no more than wishful thinking. To a reasonable reader the letter conveys only one message: the request to extend the deadline has been refused. The only glimmer of hope was that the letter said that the Council would listen to submissions, but that comes nowhere near to an assurance that in the event of a successful appeal the deadline would be extended. Moreover, despite that invitation to make submissions, the DMA never did.

Accordingly, in my judgment, even if Mr Sparke’s letter of 13 September 2006 could have created a legitimate expectation in the mind of the DMA (and I do not think that it could have), it could not legitimately have created the expectation that the DMA now rely on; and any such expectation cannot have survived Mr Polychronakis’ letter of 8 May 2007, written at a time before the expense of the planning appeal had been incurred.

In my judgment, therefore, the defence of breach of legitimate expectation falls on the facts at the first fence.

The DMA assert that they have a separate defence based on an alleged abuse of power which, they say, is independent of the claim based on legitimate expectation. Their first complaint is that the judge did not allow them to argue this point which was raised by draft amended grounds of appeal dated 27 January 2014, about a week before the hearing of the appeal. The judge took the view, wrongly says Mr Matthias, that this point had not been argued before the Master with the consequence that, as the judge put it at [38.4]:

“… if I allowed this amendment to the grounds of appeal I would be permitting DMA to advance a case that was not argued before the Master.”

Mr Matthias argued that the judge was wrong in saying that the point had not been argued before the Master; and that, even if it had not been argued, the judge was wrong in principle in the way that he approached the question of amendment even if the amendment in question raised new points. It is not entirely clear whether the perceived failure to argue the point before the Master was in fact the judge’s reason for refusing to allow the amendments. At [40] he said:

“However, for the reasons given above, I have concluded that the proposed amendments are not properly arguable…”

When I first read that paragraph I had thought that the judge’s reason for refusing to allow the amendments was not based on procedural grounds, but was based on his perception of the legal merits of the new grounds. But Mr Matthias persuaded me that, if not determinative, the procedural points played an important part in the judge’s decision on the question of amendment. The allegation of abuse of power is pleaded in the Amended Defence. It merited a few paragraphs in the skeleton argument prepared on behalf of the Council for the hearing before the Master; and the Master made findings on that argument in two paragraphs of his judgment. In my judgment the judge was mistaken in his appreciation that the point had not been argued before the Master. Moreover the amendment to the grounds of appeal did not raise any new point beyond those which had been pleaded in the Amended Defence. Thus no new facts were alleged, and, since there had not as yet been any trial, the raising of a new point of law on an appeal against an order for summary judgment is not the same as attempting to raise a new point of law after trial, which might have affected the course of evidence at trial. In my judgment the judge took too hard a line over the question of amendment in the context of an application for summary judgment. In my judgment, we should allow the appeal against the judge’s refusal to allow the application to amend the grounds of appeal, and consider the pleaded case of abuse of power on its merits.

The relevant parts of the draft amended Grounds of Appeal say:

“(3)

Furthermore, in deciding to refuse to set a new and realistic target date for the completion of the proposed development, despite planning permission having been resolved in the [DMA’s] favour, and to seek to enforce the “stipulated date” of 31^st December 2008 by its letter of 7^th October 2010, the [Council] was abusing its powers by making an irrational and unreasonable decision and/or acting in a manner which was conspicuously unfair to the [DMA].

(4)

The Master further erred in finding … that there was no basis upon which the DMA could make out a separate case based on an abuse of power and that it could not be said that the Council had acted in a manner which was conspicuously unfair.”

The first point that I must make is that this is another way of seeking to inject public law defences into what is in essence a private law claim; and I have already concluded that that is impermissible in the circumstances of this case. But, nevertheless, in deference to the sustained argument that we heard, I will address the argument on its merits. It is now clear that a citizen can rely on an allegation of abuse of power to impugn a decision by a public authority even if there has been no clear representation which created a legitimate expectation. Simon Brown LJ made this point clearly in R (Unilever) v Commissioners of Inland Revenue [1996] STC 681:

“But to confine all fairness challenges rigidly within the MFK formulation—requiring in every case an unambiguous and unqualified representation as a starting point—would to my mind impose an unwarranted fetter upon the broader principle operating in this field: the central Wednesbury principle …that an administrative decision is unlawful if 'so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it'…. The flexibility necessarily inherent in that guiding principle should not be sacrificed on the altar of legal certainty.

'Unfairness amounting to an abuse of power' as envisaged in Preston and the other Revenue cases is unlawful not because it involves conduct such as would offend some equivalent private law principle, not principally indeed because it breaches a legitimate expectation that some different substantive decision will be taken, but rather because either it is illogical or immoral or both for a public authority to act with conspicuous unfairness and in that sense abuse its power. As Lord Donaldson MR said in R v ITC, ex p TSW: 'The test in public law is fairness, not an adaptation of the law of contract or estoppel'.

In short, I regard the MFK category of legitimate expectation as essentially but a head of Wednesbury unreasonableness, not necessarily exhaustive of the grounds upon which a successful substantive unfairness challenge may be based.”

Despite the width of these observations, fairness and reasonableness are objective concepts, otherwise there would be no more than palm tree justice: R (Begbie) v Secretary of State for Education and Employment at 1130 B-C (Laws LJ). Abuse of power is not a freestanding ground on which a court can act in the absence of unlawful action on the part of the public authority in question: MM (Zimbabwe) v Secretary of State for the Home Department [2012] EWCA Civ 135 at [18] (Hughes LJ). As Carnwath LJ put it in Secretary of State for the Home Department v R (S) [2007] EWCA Civ 546 (approved by the Supreme Court in R (TN Afghanistan)) v Secretary of State for the Home Department [2015] UKSC 40 [2015] 1 WLR 3083), the proper sphere of the court is illegality.

Mr Matthias accepts that, in exercising its powers as planning authority (both before and after the appeal), the Council had done nothing unlawful. That is not a promising start to an allegation of abuse of power.

Where it is alleged that a public authority is abusing its powers it is necessary to inquire: what is the power that is being abused? In many cases what is in question is the exercise of a statutory power, and the question will be whether the power is being exercised for the purposes contemplated by the statute and proportionately on the facts of the individual case. A power of this nature is one conferred upon a public body and is capable of exercise without the consent of the citizens who are affected by its exercise. It is for that reason that the law will intervene to protect the citizen against the abuse of that unilateral power. But in this case we are dealing with contractual rights and obligations. I do not think that it can usually be an abuse of power to exercise contractual rights freely conferred, even if the result may appear to be a harsh one. By the same token what is “unfair” or “conspicuously unfair” will depend on the context. As Lord Hoffmann said (in a very different context) in O’Neill v Phillips [1999] 1 WLR 1092, 1098:

“Although fairness is a notion which can be applied to all kinds of activities its content will depend upon the context in which it is being used. Conduct which is perfectly fair between competing businessmen may not be fair between members of a family. In some sports it may require, at best, observance of the rules, in others (“it's not cricket”) it may be unfair in some circumstances to take advantage of them. All is said to be fair in love and war. So the context and background are very important.”

Once again the context here is a commercial contract entered into by two parties with the benefit of legal advice. It is not usually unfair to hold parties to the terms of the contract that they have agreed. As I have said the law of contract has developed mechanisms, such as the principle of promissory estoppel, which preclude a person from relying on his strict legal rights where certain conditions are fulfilled. These mechanisms exist in private law; but they are not relied on in this case, and play no part in the pleaded defence. One of the hallmarks of a bilateral contract is its mutuality. Whatever rights the Council has, they are rights that the DMA have granted to it. In my judgment the defence of abuse of power, even if available, would also fail on the facts.

In the course of his oral address Mr Matthias began to develop an argument based on an allegation that the Council had decided to operate the “buy-back” clause in the transfer for an improper purpose. This was based on a report to the Council’s cabinet dated 22 September 2010 which was discussed at the meeting of the cabinet which resolved to exercise the Council’s contractual rights under the transfer. I have not mentioned this report in the narrative of events or the argument based on an allegation of improper purpose in summarising Mr Matthias’ submissions because:

In fact it (and the argument that the Council exercised its contractual right for an improper purpose) only features in the draft Re-amended Defence, which Mr Matthias (no doubt for understandable reasons) deliberately decided not to press before the judge. Moreover, in opening the appeal, Mr Matthias said that he was not relying on the draft Re-Amended Defence. Nevertheless, in the course of his oral address Mr Matthias applied for permission to re-amend the Amended Defence. We allowed him to make the application, saying that we would decide whether to grant it in our substantive judgment.

In essence the point that Mr Matthias wishes to take is that, in the report of 22 September, it is said that:

“… the Council’s position remains that we do not feel Hall Street is an appropriate location for the proposed development and we will, indeed are, continuing to work pro-actively with representatives of the Dudley Mosque to identify an alternative site.”

The argument is that the Council was seeking to go behind the decision of the planning inspector (and the Administrative Court upholding the inspector) that planning permission was justified. It was seeking to uphold its own planning judgment rather than accepting defeat. This, it is said, was an illegitimate reason for exercising the contractual rights contained in the transfer.

The procedural history that I have described is a serious obstacle to the grant of permission to re-amend. But I think that we also need to consider the merits of the point. That said, a late amendment needs to carry a greater prospect of success than an early one. As Rix LJ pointed out in Savings & Investment Bank Ltd (in liquidation) v Fincken [2003] EWCA Civ 1630, [2004] 1 WLR 667 at [76]:

“After all, if any pleading whether by amendment or not, cannot meet the test of some real prospect of success, it is in danger of being struck out. In my judgment, however, the proper rule or guideline calls for a sliding scale: the later the amendment, the more it may require to commend it.”

The Council has had a dual capacity in this case: as planning authority and as land owner. That dual capacity has been contractually recognised from the outset. Clause 2 (3) (a) of the lease required plans to be approved by the Council’s Director of Urban Development, in addition to obtaining planning permission. The decision whether or not to grant planning permission would be for the Development Control Committee (composed of elected members). On the other hand the approval of plans under the terms of the lease would be the decision of a council officer. The same requirement for approval by the Council’s Director of Urban Development was repeated in the transfer. Of course, in its capacity as planning authority the Council was bound by the decision of the planning inspector. But the nub of the complaint is that the Council, in its capacity as landowner, is similarly bound. I do not consider that that follows. In this respect, the facts of this case bear a striking resemblance to those in R (Molinaro) v Kensington and Chelsea RBC [2001] EWHC Admin 896, [2002] LGR 336. Mr Molinaro took a lease from the council which restricted the use of the property to that of a retail delicatessen. He was entitled to change the use with the council’s consent. If the proposed use fell within the council’s Neighbourhood Use Policy consent could not be unreasonably withheld, but, if it fell outside that Policy, then there was no contractual restriction on the giving or withholding of consent. Mr Molinaro began to use the property as a restaurant without the council’s consent and without obtaining planning permission. The council served an enforcement notice against which Mr Molinaro appealed. His appeal succeeded before a planning inspector, and the council’s application for judicial review of that decision failed. Following his success on the planning front, Mr Molinaro applied for consent to a change of use. The council refused consent, and Mr Molinaro sought to challenge that refusal on public law grounds. Elias J held that the council was entitled to refuse consent in its capacity as landlord in order to protect its own planning objectives, even though the inspector had taken a different view of the planning merits. The question of abuse of power was plainly discussed in the course of the case, because Elias J referred to it at [56] and [69]. Mr Matthias did not suggest that the decision was wrong; and in my judgment it was right on the facts of that case. I do not need to consider the extent to which Elias J’s wider observations on the availability of public law defences require qualification in the light of the decisions of this court in Hampshire County Council and Krebs. In my judgment the Council in its capacity as land owner was entitled to enforce the contractual rights granted to it by the DMA; and even if it did so because it took the view that the Hall Street site was unsuitable as a mosque that would not have tainted its decision.

In my judgment the proposed re-amendment is not strong enough to overcome the procedural objections to a late amendment in the light of the tactical decisions taken thus far not to rely on the proposed re-amendment. I would therefore refuse permission to re-amend.

The reason that persuaded Sir Stephen Sedley to grant permission for this second appeal was his perception that there was a point of principle at issue: namely whether it was necessary to plead and prove reliance on a legitimate expectation of a substantive benefit created by a public authority. As Mr Morshead rightly said, none of the DMA’s grounds of appeal raise this issue; and the judge’s judgment says in terms at [33] that Mr Matthias accepted that “he needed to show detrimental reliance”. This might have been a case in which a Respondent’s statement under PD52C para 19 would have been useful. Be that as it may, in my judgment the point that attracted Sir Stephen does not arise.

Accordingly, although I would discharge the judge’s order refusing permission to amend the Grounds of Appeal, I would otherwise dismiss the appeal.

I add by way of postscript that at an earlier stage in the story the Council was prepared to consider the use of compulsory powers of acquisition in order to acquire an alternative site for the mosque. But those powers could not be exercised unless and until the DMA gave up possession of the Hall Street site. There was therefore an impasse. Mr Morshead told us on instructions that the offer to consider the use of compulsory powers of acquisition had not been withdrawn. It is to be hoped that further co-operation between the parties will result in the identification and acquisition of an alternative site on which the new mosque can be built.

I agree.

I also agree.