Equiom (Isle of Man) Ltd & Ors v London Borough of Croydon

This claim raises a challenge to the defendant’s grant of outline planning permission and conservation area consent on 5 February 2014 for a redevelopment of the Whitgift Centre and surrounding land in Croydon. The Whitgift Centre is in the Croydon Metropolitan Centre and in part of the retail core. It has in recent years begun to lose its attraction for shoppers and undoubtedly there is a need for revitalisation. Not only is the retail element to be upgraded but the redevelopment is to include leisure facilities and housing on the basis that a revitalised retail and leisure environment will attract residents to the centre of Croydon. The inclusion of housing carries with it the need to provide a percentage of affordable housing.

The first and second claimants are trustees of the land in question under what is known as the Whitgift Trust. The third and fourth claimants are their nominee companies. Since they have the main operating interest in the land which forms the Whitgift Centre largely through long leaseholds, it is clear that the proposed redevelopment can only go ahead if they agree to it or their interests in the land are the subject of compulsory purchase orders. Since it was and remains clear that they do not agree to the scheme, it was recognised that a compulsory purchase order (“CPO”) would be required. A CPO was made on 15 April 2014 and an inquiry is fixed in the New Year. As will become apparent, that is an important consideration since the main arguments put on behalf of the claimants assert that the scheme was not viable and that there was a failure by officers to provide necessary viability information to the defendant’s committee or to the claimants as objectors.

The first interested party is a major international shopping centre developer and operator. The second interested party is a retail property specialist. Each has great experience in developing and managing very substantial retail centres. In early 2013 they agreed to co-operate in bringing forward a comprehensive redevelopment of the Whitgift Centre. The proposed developer is the third interested party (CLP). The fourth interested party, which is jointly owned by the first and second, holds title to the headlease of the Whitgift Centre.

In 2012 there were pre-application discussions with officers and those were put to committee members to see what reactions and comments were made. The formal consideration of the application took place on 25 November 2013. The committee recommended that it be approved subject to a considerable number of conditions. On 5 February 2014 planning permission and conservation area consent were granted. In addition, CLP, the defendant, the third, fourth and fifth interested parties and Transport for London (“TFL”) entered into a deed of agreement pursuant to section 106 of the Town and Country Planning Act 1990. This is a substantial document but for the purposes of this claim it will only be necessary to refer to a small part of it.

Members who had been informed in 2012 of the possible proposals made a number of comments. Those included whether the scheme was deliverable and what should be the criteria for establishing the residential element and its grant including affordable housing. It was the defendant’s frequent practice in considering the viability of a scheme when viability could be in issue (as it would be in this case at least so far as the housing element was concerned) to instruct a firm known as BNP Paribas as independent advisers. In April 2013 BNP Paribas stated its opinion that the residential element of the scheme was not viable and advised that a full assessment should be carried out looking at the whole scheme rather than the residential element in isolation.

On 17 September 2013, Deloitte Real Estate (“Deloitte”) was appointed to consider the viability of the whole scheme which had been submitted. There were two elements involved. Deloitte were asked to advise on the “viability of the selected inputs and assumptions which together indicate the financial viability of the proposals in light of the information provided (confidentially where necessary) by CLP.” This was to include contributions towards affordable housing, transport and other mitigation. The second element was a separate report to advise the defendant on whether the information provided would support the case for making a CPO. TFL were concerned to ascertain the level of any section 106 contributions which could be sought to mitigate the effect of the increase in traffic movements resulting from the scheme. TFL were accordingly concerned with financial viability.

Deloitte produced a draft report dealing with the overall viability of the scheme which was issued to the Council on 6 October 2013. It made the point that it had not been provided with the level of detail which it would normally expect in carrying out a viability assessment and so it had had to make a large number of assumptions. In short, it had entered into a confidentiality agreement with CLP and so the report did not detail any of the information provided which was confidential. The view was taken that the draft report, albeit it did not detail the confidential information provided by CLP, was itself confidential so that it should not be disclosed to any objectors. It equally in these circumstances was not disclosed to the committee members but its conclusions were so far as material included in the officer’s report to the committee for the meeting on 25 November 2013.

The defendant’s Director of Planning who was responsible for the reports to the committee and who has considerable practical experience in considering major schemes has said that it is not uncommon for a development to be, as he puts it in his statement, potentially “struggling with viability or unviable on paper but for developers to still be willing to commit to certain levels and types of affordable housing and offer other planning obligations.” The status of the proposed developer is most material. If they are satisfied that movement in the market and other factors would make the scheme viable and provide for sufficient planning obligations, it is possible to trust them to deliver.

I have referred to the reports to the committee. The main report was published on 15 November 2013. An addendum report was produced on the day of the meeting. In the main report, the committee was advised that the level of 50% affordable housing contained in the strategic policy in the Croydon Local Plan was not achievable. However, the officer’s view was that “the proposed planning obligations would secure that a minimum of 15% affordable housing would be provided, that met the requirement for affordable housing set out in the Croydon Opportunity Area Planning Framework (“OAPF”) and so the scheme should not be turned down on that ground”.

The officer’s opinion was that the proposed development would bring sufficient economic, social and environmental benefits through much needed reinvigoration of the Retail Core, including the creation of significant (some 5,000) new jobs and economic investment, new homes and significant visual and public realm improvements. It would attract more people to Croydon town centre. The section 106 agreement discussions showed that contributions which were sufficient to justify the scheme going ahead could be achieved and, in the officer’s view, in the end they had been.

Deloitte’s draft report considered overall viability as it had been asked to do. In dealing with Site Assembly costs, it noted that they were more significant and a number had what one called wide variances. In addition, since the Whitgift Foundation currently benefited from 25% of the income from the Centre, it was important that arrangements with the Foundation be clarified. Deloitte’s view was that the land estimates were significant and at the upper end of the range of what might be expected.

Deloitte’s overall view, when considering all information before it and having regard to the assumptions that had had to be made where concrete information was not available, was somewhat guarded. The point was made that it was not unusual at the relevant stage for there to be a viability gap which could be overcome as time passed. There was, however, at that stage a significant deficit between scheme values and costs such that CLP’s return on income was not viable. The gap would require movements in values and costs. Any higher planning contributions (which would include affordable housing and traffic measures) would only increase the viability gap. There was scope to make significant savings in a number of areas as the scheme, which had an unusually high land assembly budget, progressed.

There has in addition been disclosed the draft report prepared by Deloitte for the CPO dated 28 March 2014. Its conclusion was that financial viability did not give rise to an impediment to the implementation of the scheme. By then Deloitte had fuller information including the section 106 agreement and the conditions imposed. Affordable housing would be limited to 15%. Thus it had become apparent that the scheme for which the outline permission was granted was, in Deloitte’s view, viable subject to the limitations on planning contributions.

It is inevitable that in considering whether planning permissions should be granted, particularly where viability may either generally or in certain respects be not only material but possibly determinative, developers may need to give confidential information which should not be generally disclosed. This information will usually be given to officers who will then have to consider what should be before the committee. That in principle confidential information need not be disclosed is clear. That has been settled in a decision of Ouseley J in R (Bedford) v London Borough of Islington [2003] Env LR 463. There are three important caveats. First, the information given to the committee by the officer must not be misleading and must properly include any information which would materially affect the decision to be made. Secondly, the committee must not receive and act on information which is not provided to would-be objectors. Thirdly, the information withheld must be confidential.

Mr Harris submits that the disclosure in this claim of the Deloitte draft reports shows that they did not in reality contain any confidential material. That had been deliberately excluded. However, what may properly be considered confidential at a particular stage of an application in a proposed development scheme may at a different and later stage not be. Ms Lieven submitted that it was reasonable to take the view that where issues were raised about the level of information given and whether the scheme could certainly go ahead confidentiality could properly be maintained. There would be sensitive negotiations needed before the final information could be put to obtain planning permission. Once permission was granted, the need for confidentiality of the draft reports was removed. I agree with Ms Lieven’s submissions in this respect.

The claimants applied to the Information Commissioner. They complain that even if it was confidential there should have been disclosure to enable them to make their objections in a focussed manner and to enable the committee to have the full picture in deciding whether to grant the applications. It is in my view important to recognise that a CPO is needed. Viability, albeit particularly material to the affordable housing element since it was limited to 15%, is not generally speaking a proper reason for refusing permission, at least where a reputable developer puts forward a scheme which he maintains he intends to pursue. If third parties are likely to be affected because land may be subject to permission which is not viable but which may have an adverse impact on them, viability will be material. In this case, since it was known that a CPO would be needed, deliverability would have to be demonstrated. Thus the claimants’ rights will be protected. In the circumstances, overall viability was not a matter to be considered in detail since it would not be a reason to refuse outline planning permission. It was, and the councillors were told it was, a matter to be taken into account in considering whether the affordable housing requirement could be met.

Mr Harris submits that the committee was misled by not having information that Deloitte had considered that the scheme was not at that stage viable. They were informed in the officer’s report that the target of 50% affordable housing was not achievable: only 15% would, it was said, be secured by the proposed planning obligations. At least 10% was to be provided on site and 5% off site. 15% was the minimum sought to be secured by the OAPF. This together with, so far as transport matters were concerned, contributions to mitigate sufficed, in the officer’s view to justify permission bearing in mind the regeneration benefits of the scheme. That was clearly a planning judgment that could properly be reached and which cannot be impugned unless the claimants are correct in their submissions that the information given to the committee was not as full as it ought to have been.

Mr Harris submits that the committee and so the claimants should have been shown the draft report and that the claimants were unfairly deprived of the opportunity to raise fuller and more focussed objections. He relies in relation to fairness on the fact that this was an Aarhus application. This was not an issue in the Bedford case. In Aarhus cases, there is a guarantee of a right of access to information and public participation in the decision-making process. In addition, there must be access to justice in environmental matters. These requirements do not override a proper reliance on confidentiality to justify non-disclosure of particular information and there is no breach provided that the decision-maker is not given information not disclosed to an objector and is not misled.

Mr Harris relied in particular on Articles 6.3 and 6.4 of Directive 2011/92/EU on assessment of certain projects on the environment. These provide, so far as material, that there must be direct access to environmental information and that the public concerned (which must include objectors such as the claimants) must be given early and effective opportunities to participate in the environmental decision-making procedures. That was an argument based on whether the Deloitte report could properly be regarded as dealing with environmental matters. I need not determine that and shall assume that it did. But in my view, having regard to the need to maintain confidentiality the claimants were not prejudiced or deprived of a proper opportunity to make relevant objections. In the circumstances, I do not think that reliance on Aarhus advances the claim.

The claimants have been able to make their objections to the proposals and will be able to challenge the CPO. They will then have all information properly available. Their remedy on disclosure of confidential information lies with the Information Commissioner, but it is difficult to see that what is regarded as still truly confidential will be material. The viability of the scheme will be tested on the information available at the CPO inquiry. However, it is not necessary to go further than that. In my view, the claimants have not in the circumstances suffered any prejudice from non-disclosure nor has the committee been misled or not given proper information in reaching the decision to grant the applications made.

Mr Harris sought in addition to rely on a failure to disclose a financial appraisal of the scheme. I do not see that this extends beyond the Deloitte reports and in any event much of the basic material is likely to be properly regarded as confidential. But even if that is not so, the same points arise and are in my view fatal to the attempt to argue that the non-disclosure of the Deloitte report prejudiced the claimants and made it impossible for the committee to reach a proper decision.

Ground 3 in the claim focuses on affordable housing. It is submitted that there was a failure correctly to understand and so to apply important requirements that there should always be an endeavour to ensure a maximum of affordable housing (up to 50%) and that there must be a review mechanism built in to ensure that a maximum is achieved as the development progresses. Policy 3.12 of the Mayor’s London Plan specifies that a reasonable amount of affordable housing should be sought and negotiations should take into account inter alia viability and the implications of phased development including provisions for reappraising viability prior to implementation.

Policy 2.4 of the Croydon Plan provides:-

“The council will apply the following criteria on a site specific basis to… affordable housing in the borough:

(a)

Negotiate to achieve up to 50% affordable housing provision on sites with ten or more units on the basis set out in Table 4.1”

Table 4.1 requires within the Croydon Opportunity Area 15% for the first three years post adoption and thereafter to be reviewed every three years in the Croydon Monitoring Report via a dynamic viability model set out in Table 4.2. This contains figures I do not need to refer to. Paragraph 4.7 provides:-

“Within Croydon Opportunity Area a different approach to delivering affordable housing is required in order to stimulate development, growth and create a new and sustainable residential community. An appraisal of development sites within the Croydon opportunity Area has found that in current market conditions a requirement for 10% affordable homes on site will be viable for most sites. Development in the Opportunity Area is likely to be of a larger scale than that elsewhere in the borough with a longer period of time between granting of permission and completion of the development. During that time the market could have changed significantly to the extent that a higher percentage of affordable homes would be viable and should be captured. A review mechanism will be used to do this and to ensure that development in Croydon Opportunity Area is not effectively subsidised compared with development elsewhere. This will ensure that if higher development values are realised at an agreed stage of the development than those at the time of granting permission, a commuted sum will be payable to cover the cost of providing affordable housing on another site in the borough. In addition, the time for pre-application negotiations on sites within the Croydon Opportunity Area is likely to be longer than on sites elsewhere in the borough. For this reason the minimum on-site provision will be reviewed every three years from adoption of the plan rather than annually. Providing affordable housing on donor sites elsewhere in the borough is preferred if, at the time of application, it would be viable to supply more than the minimum requirement on site and it is agreed with the council and a Registered Provider that a donor site is the preferable mechanism for delivering more affordable homes.”

This Mr Harris submits requires a review mechanism particularly where, as in this case, a minimum of affordable housing is all that is provided. In the addendum report, it was said that the council was satisfied that a 15% requirement without a review mechanism was viable and appropriate in this case. The planning officer in his statement says that Table 4.1 did not require a review mechanism in all cases but indicated how it would operate if applied. Mr Harris submits that is an error and that a review mechanism is always required.

The council’s non-statutory guidance notes that where an expectation of a minimum requirement for affordable housing is not met for viability reasons, a review mechanism shall be included. The purpose of the review was to provide flexibility. However, if it was clear that a scheme was desirable because of the benefits it would produce albeit it could not achieve more than the minimum affordable housing required, there is nothing in the plan which in my view requires a review mechanism. The advice to the council does not in my view misunderstand the requirements of the plan and the decision that there should not be a review mechanism was a proper exercise of planning judgment. It is also noted that the mayor, who could have called in the application, was satisfied that it was not flawed.

The section 106 agreement contained provisions relating to the Residential Development. It required that the developer use reasonable endeavours to identify and enter into contracts with a Residential Partner for delivery of all the dwellings and in discharging its reasonable endeavours obligation the developer must within 6 months submit a Residential Marketing Strategy to the council for approval. (Part 4 paragraph 1.1). Paragraph 1.2 provides:-

“the obligation in paragraph 1.1… to use reasonable endeavours shall not have been discharged if the Councils written approval of the Residential Marketing Strategy has not been approved.”

Mr Harris submitted that an obligation to use reasonable endeavours was not sufficiently positive. However, the strategy would have to include the affordable housing which was agreed by the developer and paragraph 1.2 means that the obligation to use reasonable endeavours is sufficiently strong.

In ground 4 of the claim, Mr Harris submitted that the conclusion in paragraph 8.37 of the report to the committee was erroneous. In this paragraph, it was said that the requirement referred to in paragraph 24 of the NPPF was that “local planning authorities should apply a sequential test to planning applications for main town centre uses that are not in an existing centre and are not in accordance with an up-to-date local plan”. Town centres are defined in the NPPF to include the primary shopping area and areas predominantly occupied by main town centre uses within or adjacent to the primary shopping area.

The Whitgift centre forms a substantial part of the primary shopping area in Croydon centre. What is known as Centrale on the other side of the High Street and an area to the south of North End is the whole of the primary shopping area. Policy SH3 in the Croydon Plan of July 2006 requires a sequential approach to be adopted where the floorspace of an application exceeds 200 square metres. Paragraph 12-22 of the narrative requires retail proposals to locate as first choice within the primary shopping area of existing centres. The OAPF in paragraph 1.10 ‘strongly supports the potential for a renewed and improved retail offer in particular a comprehensive redevelopment and renewal approach to much of the Retail Core would offer residents, visitors, shoppers and employees a significant retail destination for both South London and the South-east of England…’ Paragraphs 4.21 to 4.32 deal with the Retail Core. I do not need to cite the relevant passages. Suffice it to say it requires a redevelopment to achieve the necessary regeneration of the whole retail core but recognises that an incremental development process is likely but it should ensure that both Centrale and Whitgift shopping centres will mutually complement each other.

The argument in favour of a sequential approach is based on the site being edge of centre. It is developed in the skeleton argument. It is however entirely artificial. The Whitgift Centre lies within the designated primary shopping area and within the Croydon Metropolitan Centre. Thus it was in my view entirely proper to regard the development as being in accordance with the relevant planning policy. To require in the circumstances an application of a sequential test would have been an entirely futile exercise and in any event could have made no difference to the outcome. This was a comprehensive scheme and it made no difference whether it was to be regarded as such or as part of an incremental development.

In the circumstances I dismiss the claim.