Patel & Ors v London Borough of Brent

The claimants (“the Mission”) are the trustees of a religious charity who, in 1990, purchased from the defendant local authority (“the Council”) the site of the former Neasden High School (“the Site”) with a view to developing it as a temple, for which purpose they obtained planning permission (“the 1990 permission”). In connection with the 1990 planning permission the Mission entered into a section 52 agreement (“the Mission’s section 52 agreement) under which it paid a sum of £550,000 to the council in respect of certain contemplated highway works. The Mission in the end decided not to implement the 1990 permission and thus became entitled to (and obtained) the return of the £550,000. In 1992 the Mission negotiated the sale of the Site to Fairclough Homes Limited (“Fairclough”) with the benefit of a planning permission obtained by Fairclough for residential development on 17^th December 1992 (“the 1992 permission”) permitting the construction of 149 new dwellings. In connection with the 1992 planning permission the Mission entered into an agreement (“the s.106 Agreement”) with the Council pursuant to section 106 of the Town and Country Planning Act 1990 (the successor to section 52). Clause 5 of the s.106 Agreement required the deposit of £550,000 (“the Contribution Sum”) by the Mission with the Council, in similar although not identical terms to those which had been contained in the Mission’s section 52 agreement. The main question before me has been whether the Mission is entitled, in the events which have happened, to get all or part of the Contribution Sum (together with accrued interest) back from the Council.

Clause 5 of the s. 106 Agreement was in the following terms:

“5.

HIGHWAY IMPROVEMENTS PAYMENT

5.1

The Owner shall on the date hereof deposit with the Council the sum of five hundred and fifty thousand (£550,000.00) which the Council covenants with the Owner shall be solely attributable to paying for highway improvements and/or traffic management measures necessary to improve access arrangements to/from the Site comprising alterations to the junction of Neasden Lane North and Quainton Street which the Council shall use its reasonable endeavours to complete prior to the issue of the Certificate of Substantial Completion of the Highway Works and which in the opinion of the Engineer are necessary in the interests of highway safety and the free flow of traffic for improving the vehicular and pedestrian use for persons using the Site and for the general public as a result of the increased highway use caused by the Development

5.2

The Council shall place the said sum in a designated interest bearing account with interest accruing to the fund and following satisfaction of the condition precedent contained in Clause 4.1 may draw down from the account in respect of expenses properly incurred pursuant to the Council’s covenant in this sub-clause and any amount of the said sum and accrued interest remaining in the account upon completion of the Council’s highway improvements and traffic management measures shall forthwith be released and repaid to the Mission (whether or not it shall then be the Owner)

5.3

The Council shall upon the written request of the Mission at any time and from time to time deliver to the Mission statements containing full details of the sums drawn down and the manner in which they have been expended”

“The Engineer” was defined as “The Council’s Director of Engineering and Highways for the time being”. The condition precedent contained in Clause 4.1 was implementation by the Owner (i.e. the Mission or its successor in title) of the planning permission, i.e. the 1992 planning permission a draft of which was annexed to the s. 106 Agreement.

The date by which the Council thereby undertook to use its reasonable endeavours to complete the works described in Clause 5 was, in the event which happened, 21^st October 1994. But that date passed without the Council having made any apparent progress at all. By August 1999 the position appeared to be the same, and the Mission came to the conclusion that the purpose for which the £550,000 had been deposited had either ceased or failed. By letter dated 17^th August 1999 the Mission’s solicitors, Hugh Cartwright & Amin (“HCA”) demanded a return of the money. Following further correspondence between HCA and the Council over the next twelve months, the Council eventually indicated that it was about to embark on a scheme of works. In due course it did so by two phases of works (“the Council’s Works”): first a process of installing traffic lights at the junction (“signalisation”) which was completed in August 2001, and secondly a scheme of associated footpath widening and improvement which was completed in March 2003. In doing so it has used most, but not quite all, of the Contribution Sum and accrued interest. It has indicated that it is prepared to return the balance (some £75,000) but has insisted that this is by way of concession.

Three broad issues fall to be determined:

The junction with which I am concerned (“the Junction”) is that between Quainton Street and the main road (the A4088) called Neasden Lane. The Site is at the other end of Quainton Street near to the Neasden Railway Depot. To the south east of the Site the road connection to the North Circular is via Chesham Street and Village Way, to the north east of which is the Neasden Village conservation area. Neasden Lane itself also connects to the North Circular. A driver travelling north east along the North Circular wishing to go north west along Neasden Lane has the opportunity, if he is aware of it, of using Village Way Chesham Street and Quainton Street as a rat run.

Prior to the Council’s Works the Junction was an unsignalised all-moves priority junction, Neasden Lane having the priority. A vehicle emerging from Quainton Street into Neasden Lane faced a problem both in turning left to the north west or right to the south east. The left turn suffered from the difficulty of poor visibility to the right, a difficult kerb radius to the left and the need to wait for a suitable gap in the usually heavy traffic proceeding along the two north westerly lanes of Neasden Lane. The left turn presented a particular difficulty for HGVs, requiring them to occupy the second lane in performing the necessary manoeuvre. HGVs from the Railway Depot usually took the right turn. Vehicles taking the right turn had to wait for a gap in the traffic moving in both directions along Neasden Lane. This involved waiting for a gap in four lanes of traffic (two north west and two south east). Such manoeuvres were assisted by the existence of a pelican crossing just to the south east of Braemar Avenue, but at the same time hampered by the existence of a bus stop on Neasden Lane immediately opposite the Junction, and exposed to the problem of vehicles emerging from, or turning into, Braemar Avenue which joins Neasden Lane a little to the south east of the Junction. A vehicle seeking to turn right into Quainton Street had to negotiate two lanes of traffic, and (if there was a bus at the stop) would block all traffic travelling south east on Neasden Lane.

Along Neasden Lane opposite the Junction there is a variety of shops, including a Cost Cutter supermarket and, to the north west a McDonalds.

The area around the Junction had a poor accident record.

The Council had, since at least 1989, regarded the Junction as being substandard and in need of improvement. The issue became a live one in 1989 in two contexts. First, in connection with an appeal against a refusal of planning permission for the residential re-development of part of Neasden Village, the substandard nature of the Junction had been identified by those opposing that particular proposal. At the inquiry a solution proposed had been the construction of a slip road to assist the left turn out of the junction coupled with the banning of a right turn. The contemplation was that the right turners would be served by a U-turn facility at the junction of Combe Road and Neasden Lane further to the north west. The second was the context of the proposed sale of the Site by the Council to the Mission and the latter’s application for planning permission to build a temple on the Site. In that context a traffic impact study had been commissioned (it is not clear whether by the Council or the Mission) from Frank Graham & Partners (“FGP”). The resulting report emphasised the inadequacy of the Junction for the proposed temple which was expected to generate attendances of 1000-1500 persons at the weekends with peak traffic flows of between 300 two way trips per hour between 5 pm and 9pm at the weekends. It recommended that, as a minimum, a left hand slip road should be constructed and the right turn banned. It also indicated that preliminary investigations of the possible introduction of a traffic signal scheme for the junction had confirmed that minimum Department of Transport technical requirements were unlikely to be met and that delays to traffic would create a problem on the main road network That was the background to the Mission’s section 52 agreement. The £550,000 had been calculated on the basis of costings (prepared in December 1989 by Mr Rankmore in the Engineering and Highways Division) for a left hand slip road albeit without any provision for a right-hand ban or concomitant U-turn facility. The agreement itself did not specify the details of what the Council had in mind.

The FGP Report also commented on the impact of a possible alternative residential development which it assumed might generate a weekday peak hour flow of 60 trips per hour, and a weekend flow of 40-50 trips per hour. It concluded

“9.5.

The development of the site for a residential land use will require the improvement of Quainton Street/Neasden Lane to give safe access to the development area from Neasden Lane”

The Council’s 1991 planning brief in connection with the Site spoke of the need for a traffic impact study in connection with any application for permission for residential development, but none was ever done. The Council’s July 1992 Transport and Policies Programme indicated hopes that an improvement to the junction might be put in hand in 1993/4. On 23^rd July 1992 Chris Rogers, the Council’s Head of Transportation recommended to the chief planning officer that Fairclough’s planning application for residential use of the Site be supported by a section 106 agreement providing for improvements to the Junction. The precise nature of the works contemplated by the Council at this stage is unclear, but it must have included the construction of a left hand slip road. It was against this background that the s. 106 Agreement was negotiated and concluded on 17^th December 1992.

This cross-heading may be misleading. What the s.106 Agreement undoubtedly required was that the Council should “use its reasonable endeavours” to complete the works by a date which was likely to occur within two years of the grant of planning permission. What one might therefore expect to see reflected in the contemporary papers would be a considered attempt by the relevant officers within the Council to identify the works required and to put them in hand within that time-scale. Nothing of the kind seems, however, to have happened.

It has not been easy to identify on whose shoulders, within the Council, the relevant responsibility lay. Partly this is the result of the fact that the period with which we are concerned was one of radical reorganisation of departmental responsibilities within the Council, in which the nomenclature of particular functions seems to have been in a state of flux and in which certain departments or sections were treated as “clients”, others as “contractors” and others yet again spun off as part of a programme of privatisation. Identifying who at any particular period was “the Engineer” for the purposes of the agreement is not an easy task. It appears to have been a Mr Mark Draper in 1992. At that stage Mr Draper was the senior engineer in what was then the Engineering and Highways Division. Thereafter the relevant person would have been the chief engineer in what was known as “Client Services”, headed by Mr Marriage, namely a Mr Sainsbury. From the mid 1990s the relevant department was “Streetcare” headed by Mr Suresh Kamash until, in about 2000, in an abandonment of the client/contractor distinction, the relevant department became Transportation headed by Mr Rankmore as Director. Mr Rankmore was thus the person whose opinion had finally to be sought when, in late 2000/early 2001, the Council decided to embark on the Council’s Works. He had, however, been involved in the question of the Junction at a much earlier stage in his capacity as a senior engineer in Engineering and Highways Division. Of the Council officers identified in this paragraph I heard evidence only from Mr Rankmore.

Following the conclusion of the s.106 Agreement and the grant of the 1992 permission nothing appears to have happened to advance the matter in any way until in March 1993 activity was stimulated by an approach to the Council (Mr Hewlett, a planning officer) by a Mr Moore the land agent acting for the owners of the land immediately to the left of the junction part of which would be required by the Council if a left hand slip road was to be constructed. This stimulated an instruction from the Area Planning Group to the Engineering and Highways Division to design a left hand slip road. Within that division the task fell to Mr Neville Senaratne under the supervision of Mr Rankmore (in whose name formal letters were written). The left hand slip road would have to bridge the canal feeder leading from the Welsh Harp reservoir. Mr Senaratne was the engineer best qualified to design bridges. He thereafter had conduct of the file until his retirement in 2002.

Mr Senaratne was perplexed by his initial instructions. The “client” was not able to tell him what the long term proposals for the junction were to be. He knew that in due course the bridge which carried Neasden Lane itself over the feeder and the river Brent would require to be strengthened. That was a process which might involve an alteration to the level of Neasden Lane at that point. He knew too that the left hand slip road which he was being asked to design would not have as its immediate concomitant a ban on the right turn and a u-turn facility further to the northwest. He felt that he needed to know the medium term proposals in both respects, since the answers to these questions would have a material impact on the design of his bridge. The parapet of the Neasden Lane bridge in any case needed to be removed in connection with the construction of the left hand slip road (to provide visibility to the right for those using it), and the surrounding levels of Neasden Lane had a potentially important impact on the degree of “hump” which he would have to design into his bridge. He got answers to none of these points. He was instructed that he should proceed on a piecemeal basis, i.e. just get on with designing the left hand slip road on the basis of things remaining as they were but with the hope that some more ambitious and comprehensive scheme might become viable in the future. He felt that he was being asked to design a cup handle without knowing the shape of the cup. But it was not an impossible task, and he was able to undertake it. There was every incentive for him to bring it to fruition since, by this stage, his division was working on a “zero budget” basis and would be “paid” on implementation of the project. On the other hand his division was not short of work. It was, however, short of staff. Most of the projects on which it was engaged had specific time constraints which had to be met. This one did not.

Progress on the project was on any view slow, and gives the appearance of having been unhurried. A pre-design topographical survey was not commissioned until June 1993 and it was not until July that letters were written to the statutory undertakers for an indication of whether their services would be affected by the proposed works. London Electricity responded by saying that it would cost £155,000 to move their plant in the area. This appears not to have been perceived as fatal to the project (although of a magnitude not allowed for in the December 1989 costings). Mr Senaratne was hopeful that he would be able, with cooperation from his opposite number at London Electricity, to come up with a cheaper solution to this apparent obstacle. By the end of 1993, during the latter part of which the Council had been pressed for information as to progress both by Mr Moore (in June) Fairclough (in July) and the Mission (in December), the Council’s valuation department (in the person of Mr Harris) had been tasked to negotiate the acquisition of the necessary land .

In January 1994 Mr Senaratne produced his first drawing of the left hand slip road. Mr Rankmore sought to reassure Fairclough that preliminary design work was well advanced. The Mission again enquired about progress. No concrete progress was, however, made by the Council during the remainder of 1994 save to establish that BWB had no objections in principle to the scheme and to progress, in a desultory fashion, discussions with the owner/occupiers of the land to be acquired. During the course of 1994 Mr Harris’ section was privatised and became Amey Facilities Management Services (AFM). By December 1994 Fairclough were writing with the view that the works could not be regarded as essential, and demanding, on the Mission’s behalf, the return of the £550,000. The Council was in no hurry to answer, or even acknowledge this letter, but finally did so on 10^th January 1995 when Mr Rankmore advised Fairclough that progress was delayed by the need to acquire land at the corner of the junction. At the same time he mentioned a proposal to introduce “an interim arrangement to alleviate some of the traffic problems now encountered in this area.” It seems likely that this referred to a suggestion of Mr Senaratne that some signalisation of the Junction might be considered as a temporary expedient.

There was sporadic contact between AFM and representatives of the tenants and freeholders of the land concerned during 1995, 1996 and 1997 but nothing that can be said to have had much purpose to it, and it achieved no positive result. Officials appreciated that compulsory purchase might have to be considered, but no steps were taken to progress such action. Nothing of significance was done during 1998, save that in January that year there was produced an accident analysis study of Neasden Lane by consultants Steer Davies Gleave (SDG), which had been commissioned by the Council’s Streetcare business unit in September 1997.

The SDG report concluded that improvements were necessary at the Junction in the interests of road safety. A particular concern was pedestrian safety at the Junction. Three options were presented, the recommendation being signalisation of the Junction. The left hand slip road solution was considered by them, it seems as a result of an initiative by the Highways unit of the Council, as an “add on” to the signalisation proposals. It was rejected by them as increasing, rather than ameliorating, the problems of pedestrian safety.

The production of the SDG report led to no immediate action by the Council, and the processes by which it was taking decisions at this period remain opaque to the say the least. From his standpoint, Mr Senaratne viewed the SDG report with disappointment: its focus was entirely on safety issues and did not essay the comprehensive traffic analysis which he believed was called for. By May 1999, however, it appears that the contemplation of officers was that the improvements to the Junction might take the form of a full signalisation of the Junction (including the junction with Braemar Avenue) followed at a later stage by the construction of the left hand slip road. Sufficient coherence of purpose seems to have existed in relation to the latter proposal for the Council to rehearse once again the steps previously taken to inquire of the statutory undertakers what the effect would be. The reply from London Electricity was disappointing: it was now estimating £300,000 as the costs of the works necessary to relocate its services.

Following receipt of HCA’s letter dated 17^th August 1999 (referred to in paragraph 3 above), to which the Council delayed replying until 1^st March 2000, some slightly more concerted steps were taken with a view to negotiating the necessary land acquisition but it was not until May 2000 that the Council (by Mr Senaratne) began to take preliminary steps with a view to proceeding with a CPO. Nothing, however, came of this. By October 2000 the cost of diverting the electricity services (now the domain of 24-Seven) had risen to £350,000 and Mr Senaratne’s efforts to persuade its engineers that the suggested works were unnecessary had fallen on stony ground. Eventually, under pressure from HCA, who had in the intervening period become increasingly exasperated by the Council’s refusal to respond substantively to its correspondence to the point where they had served proceedings in draft on the Council, officials met on 8^th December 2000 and agreed a way forward.

The meeting on 8^th December 2000 was attended by Richard Saunders, Mr Rankmore, Ian Chisnell and Mr Senaratne. Mr Saunders was the most senior person there, being by that stage the Council’s Director of Environmental Services. Because of the threat of legal action by the Mission, he had requested the presence of Mr Chisnell from the Council’s legal department. Mr Rankmore was there in his capacity as Head of Transportation and the person who at that date answered the description “Engineer” in the s. 106 Agreement. No minute exists of the meeting, and it remained a mystery how any of the witnesses were able in fact to assign a precise date to it. What is not in dispute is that at this meeting the decision was taken to proceed without further unnecessary delay to spend the Contribution Sum on the signalisation scheme and not to proceed with the left hand slip road proposal. Formal approval of this by the relevant committee of Council was not obtained until March, but in the meantime the necessary arrangements with contractors had been made with a view to work commencing in March. These proceedings were commenced in February 2001. On 29^th March 2001, under the pressure of the questions being asked of the Council by these proceedings, Mr Rankmore delivered himself a written opinion for the purposes of Clause 5.1 of the s.106 Agreement. This was in the following terms:

“Dear Sirs

Section 106 Agreement Dated 17 December 1992 Regarding Development at Neasden High School, Quainton Street, Neasden (“The Agreement”) Works to Neasden Lane North/Quainton Street Junction

As Director for Transportation for the Mayor and Burgesses of the London Borough of Brent (“the Council”) I am the Council’s officer fulfilling the role of the “Engineer” as defined in clause 1.9 of the Agreement.

The Highway works shown on the attached plan. DE8/9007/18/212 (“the Works”) comprise works of highway improvement and traffic management measures necessary to improve access arrangements to and from the Site (as defined in the Agreement) and comprise alterations to the junction of Neasden Lane North and Quainton Street.

In my capacity as Engineer and pursuant to Clause 5.1 of the Agreement I confirm that the Works are in my opinion necessary in the interests of highway safety and the free flow of traffic for improving vehicular and pedestrian user for persons using the Site (as defined in the Agreement) and for the general public as a result of the increased highway use caused by the Development (as defined in the Agreement).

I confirm that the Council intends to draw down from the Contribution provided pursuant to Clause 5.1 of the Agreement to fund the implementation of the Works. In accordance with the Council’s obligation pursuant to Clause 5.2 of the Agreement the Council will release and repay to you any amount of the Contribution and accrued interest then remaining in the account upon completion of the Works.”

The signalisation works involved the acquisition of a number of minor parcels of land in connection with footway widening and the construction of new parapets for the bridge. In June 2001 the Council took the decision to proceed with the project in two phases, postponing these supplementary works to a second phase. Thereafter the signalisation works themselves were rapidly achieved (by the end of August 2001). The second phase took longer to achieve, and involved in the event some recourse to CPO procedure. It was in the event completed by the end of April 2003.

There are two issues in this case which, in the Council’s submission, are said to be decisive. The first is whether the s.106 Agreement is, as a matter of law, capable of being discharged by a repudiatory breach by the Council of its obligations. The second is whether it is open to the Mission to argue that no works of improvement to the Junction were necessary “as a result of the increased highway use caused by the Development”. It is submitted on behalf of the Council that the answer to both questions can be found in the essential nature of a s. 106 agreement.

Two further points require consideration at this stage. First, the extent to which the planning context of the s.106 Agreement imports special considerations to the question of its construction and the question of its discharge by breach; and, secondly, the extent to which it is open to the Mission to challenge the opinion of the Engineer.

Section 106 as substituted by s.12(1) of the Planning and Compensation Act 1991 provides so far as is material as follows:

“(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 in this section and sections 106A and 106B 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 sued 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 any person entering into the obligation; and

(b)

against any person deriving title from that person.”

Section 106A provides as follows:

“106A Modification and discharge of planning obligations

(1)

A planning obligation may not be modified or discharged except-

(a)

by agreement between the authority by whom the obligation is enforceable and the person or persons against whom the obligation is enforceable; or

(b)

in accordance with this section and section 106B.

(2)

An agreement falling within subsection (1)(a) shall not be entered into except by an instrument executed as a deed.

(3)

A person against whom a planning obligation is enforceable may, at any time after the expiry of the relevant period, apply to the local planning authority by whom the obligation is enforceable for the obligation-

(a)

to have an effect subject to such modifications as may be specified in the application; or

(b)

to be discharged.

(4)

In subsection (3) “the relevant period” means-

(a)

such a period as may be prescribed; or

(b)

if no period is prescribed, the period of five years beginning with the date on which the obligation is entered into.

(5)

An application under subsection (3) for the modification of a planning obligation may not specify a modification imposing an obligation on any other person against whom the obligation is enforceable.

(6)

Where an application is made to an authority under subsection (3), the authority may determine-

(a)

that the planning obligation shall continue to have effect without modification;

(b)

if the obligation no longer serves a useful purpose, that it shall be discharged; or

(c)

if the obligation continues to serve a useful purpose, but would serve that purpose equally well if it had effect subject to the modifications specified in the application, that it shall have effect subject to those modifications.”

Section 106B provides:

“106B Appeals

(1)

Where a local planning authority-

(a)

fail to give notice as mentioned in section 106A(7); or

(b)

determine that a planning obligation shall continue to have effect without modification,

the applicant may appeal to the Secretary of State.”

The section then contains further provisions in relation to such appeals.

The Council’s submission is that this question is simply answered by Section 106A(1), which provides that “a planning obligation may not be modified or discharged except” in the manner there specified. The Mission’s answer to this is that it is not seeking to discharge “a planning obligation”: the only “planning obligation” undertaken by the Mission was to pay the Contribution Sum to the Council, an obligation which it discharged once and for all when it paid over the Contribution Sum.

It is plain that the relevant obligation in this case was one undertaken pursuant to s.106(1)(d), i.e. one which required “a sum or sums to be paid to the authority on a specified date or dates periodically”. Had the agreement provided that the Mission should from time to time pay sums to the Council for the purposes specified in clause 5(1) up to a maximum of £550,000, there would, it seems to me, have been no difficulty in identifying that obligation as the relevant planning obligation. The Mission could not have refused to make payments in accordance with that obligation on the ground of repudiatory breach by the Council of a contractual obligation of the Council. Its only remedy would have been to seek a discharge or modification of the obligation pursuant to s106A(3)-(6).

In my judgment the form which the section 106 Agreement in fact took does not alter this analysis. The reality is that the arrangements in fact entered into were no more than a means of providing the Council with a security for the performance by the Mission of financial obligations of exactly the kind hypothesised in the preceding paragraph. No “payment” to the Council in fact takes place until the Council draws down on the deposited contribution sum under clause 5.2. The Mission is bound to permit such a draw-down in accordance with the criteria laid down unless and until that obligation is itself discharged or modified. The relevant planning obligation is the Mission’s agreement to permit its money to be used in this way. Accordingly, on this point I agree with the Council’s submissions.

If I am right on that point the Mission’s claim that the s. 106 Agreement has been discharged by the acceptance of a repudiatory breach fails. It is therefore unnecessary to decide the interesting points of law which were argued on the alternative hypothesis: in particular as to the status of Lord Templeman’s dicta in Graham v. Pitkin [1992] 1 WLR 403, JCPC, on the extent to which mere delay may itself be repudiatory, and the question whether the relevant provisions of the s.106 Agreement can be severed from the remainder for the purposes of effecting what Mr Small described as a “local application of the doctrine of rescission”.

The Council’s submissions were that it only had power to enter into the section 106 Agreement if, as a matter of fact, works to the Junction were required in consequence of the Development; that if either Fairclough or the Mission wished to dispute that point, they should have refused to enter into the obligation; that, had that resulted in the planning application being refused, that refusal could have been appealed; and that by not taking the point at the time, the Mission must be taken to have accepted that some improvement works were (or would be) necessary as a result of the Development.

In support of those contentions, reliance was placed on certain observations in the speech of Lord Hoffmann in Tesco Stores Ltd –v- Secretary of State for the Environment [1995] 1 WLR 759 at pages 775-777. Those observations were relied on, if I understood the submission correctly, to support the proposition that the Council could only have lawfully sought the planning obligation if satisfied that it was, in the words of Circular 16/91, “necessary to the grant of permission”, i.e. that it had the effect of making acceptable what would otherwise have been unacceptable in planning terms. In my judgment, nothing in Lord Hoffman’s speech in fact supports that proposition. The case was concerned with the validity of a decision by the Secretary of State to reject an application for permission which had been accompanied by a planning obligation which, while related to the proposed development, was regarded by him as disproportionate, that is “unnecessary” in the sense in which that word is now being considered. The issue was whether the planning obligation was a material consideration at all for the Secretary of State, and if it was whether he had properly taken it into account. It was held that it was a material consideration and that, on the facts, it had been properly taken into account.

The case was not concerned with the validity of the planning obligation. As Lord Keith pointed out at p. 769: “…this case is not concerned with the lawfulness of Tesco’s planning obligation”. The distinction between the effect of a s. 106 agreement on the validity of a planning permission on the one hand and the lawfulness of the s. 106 agreement itself has subsequently been emphasised by the Court of Appeal in 29^thJA Pye (Oxford) –v- South Gloucestershire DC [March 2001] EWCA Civ 450 at paragraphs 22 and 25.

Of more significance to the present case are Lord Hoffmann’s observations at pages 780-781. Dealing with the submission that a s. 106 agreement would only be a material consideration if it satisfied the test of necessity, he observed:

“The test of acceptability or necessity… suffers in my view from the fatal defect that it necessarily involves an investigation by the court of the merits of the planning decision. How is the court to decide whether the effect of a planning obligation is to make the development acceptable without deciding that without that obligation it would have been unacceptable? Whether it would have been unacceptable must be a matter of planning judgement…. The criteria in Circular 16/91 are entirely appropriate to be applied by the Secretary of State as part of his assessment of the planning merits of the application. But they are quite unsuited to application by the courts.”

The word “necessary” appears twice in the clause. On the first occasion it helps to qualify the words “highway improvements and/or traffic management measures”. The Contribution Sum is only applicable to such measures as are “necessary to improve access arrangements to/from the site”. Its second appearance takes us to the mind of the Engineer and his view of what is necessary “in the interests of highway safety and the free flow of traffic for improving the vehicular and pedestrian user for persons using the site and for the general public as a result of the increased highway use cause by the Development”.

It is possible, on a literal view, to argue that different concepts of necessity are involved on each occasion. That was not, however, contended for by either party. In my judgment, the first appearance of the word is either redundant or should be seen as being explained by the second. So far as the first appearance of the word indicates anything not dealt with by the second, it is that the improvements which are posited improve access arrangements to and from the Site. So far as the second appearance of the word is concerned, the concept of necessity is a concept which requires an exercise of judgement by the Engineer. In many legal contexts, the concept of what is “necessary” is a very narrow one. Thus an easement of necessity will normally only be impliedly reserved if essential to the user of the retained land, and a term will only be implied in a contract if it is essential to give the contract business efficacy. The context here is different. In the planning context with which we are here concerned, the concept of necessity being deployed can, in my judgment, only sensibly be a reference to that which is necessary to make the grant of planning permission acceptable. That is not some absolute criterion. It is, as the passage from Lord Hoffmann’s speech quoted above makes clear, essentially a matter of planning judgement.

It was submitted on behalf of the Council that the parties must have agreed that some works of improvement were necessary “as a result of the increased highway use caused by the development”. I do not think that this follows from the wording of the clause itself. What is, however, in my judgment clear is that the question of what (if any) works were necessary in that sense was one of judgement for the Engineer. If his opinion was that permission ought not to be, or ought not to have been, granted but for some particular improvement identified by him, then the test of necessity would be satisfied. In reaching that opinion he was entitled, in my judgment, to take account of the fact that the planning officer’s recommendation to the Council had been to insist on the planning obligation before granting permission and that both Fairclough and the Mission had been prepared to undertake the obligation. Accordingly, while I do not think that the Mission is contractually precluded from arguing either that the Council’s works or any works were in fact unnecessary, its argument begins from a very unpromising starting point.

One factual assumption is implicit in the clause, but uncontroversial . That is that the Development would result in increased highway use. It is also the case that the clause contemplates that the quantum of such increased use will not be known as a matter of empirical fact at the time the judgment comes to be made. That is simply because, given the timing contemplated by the clause (with the works of improvement being completed by the time the Developer’s own highway works have been done), the judgement will have to be made well before the Development is occupied.

On behalf of the Mission Mr Small submitted that, in addition to a requirement that the Engineer’s opinion be given honestly and in good faith, the s.106 Agreement also required that it have the characteristics (i) that it should not be unreasonable: this implied that it should only be given after a proper consideration of the matter after making relevant inquiries; (ii) that it should be the product of a positive exercise of discretion; and (iii) that it should be the product of an exercise of discretion which was not fettered by preconceptions.

In support of these proposition he relied principally on the decisions of the Court of Appeal in The Product Star [1993] 1 Lloyds Reports 397 and Veba Oil Supply Trading GmbH –v- Petrograde Inc. [2001] EWCA Civ 1832, [2002] 1 AER 703) and a decision of Neuberger J. (as he then was) in Liverpool City Council –v- Walton Group [2002] 1 EGLR 149. In addition, at my request, both parties made submissions to me as to the possible impact of the line of authorities considered by the Court of Appeal in Jones –v- Sherwood Computer Services Ltd [1992] 1 WLR 277, and by Lightman J. in British Ship Builders –v- VSEL Consortium [1997] 1 Lloyds Reports 106 at 109, and referred to by the Court of Appeal in National Grid Co. plc –v- M25 Group [1999] 1 EGLR 65 at 67M.

I have considered those authorities. I resist the temptation to expound again the essential principles. I agree with Mr Small’s submission that the closest analogy for present purposes is the situation which obtained in The Product Star. That case concerned a clause in a time charter party which entitled the owners to require the charterers to load at another port if the intended loading port “be considered by the Master or the Owners in his or their discretion dangerous…”. The owners purported to invoke the provision, and the question was whether in the circumstances they had been entitled to do so.

In the course of his judgment, Leggatt LJ (with whom Balcombe and Mann LJJ agreed) said this:

“ For the purposes of judicial review the Court is concerned to judge whether a decision-making body has exceeded its powers, and in this context whether a particular decision is so perverse that no reasonable body, properly directing itself as to the applicable law, could have reached such a decision. But the exercise of judicial control of administrative action is an analogy which must be applied with caution to the assessment of whether a contractual discretion has been properly exercised. The essential question always is whether the relevant power has been abused. Where A and B contract with each other to confer a discretion on A, that does not render B subject to A’s uninhibited whim. In my judgment, the authorities show that not only must the discretion be exercised honestly and in good faith, but, having regard to the provisions of the contract by which it is conferred, it must not be exercised arbitrarily, capriciously or unreasonably. That entails a proper consideration of the matter after making any necessary inquiries. To these principles, little is added by the concept of fairness: it does no more than describe the result achieved by their application.”

It is clear from other passages in the judgment that the words “unreasonably” and “capriciously” were being used interchangeably: see the passages at p. 403 column 2, 405 column 2, 406 column 2, 407 column 1. It is also clear that the test applied by the trial judge (Judge Diamond QC), namely whether “there was a sufficient degree of danger… that a reasonable owner, informed of the relevant facts, could reasonably have considered reaching the port to be dangerous” was regarded as applying “a more objective standard than [is] appropriate”: see Leggatt LJ at p. 407 column 2.

The case is not, in my judgment, authority for the proposition that the owner’s opinion would have been set at nought simply because the charterer was able to identify some relevant factor which had been omitted from the owner’s consideration or some irrelevant factor which had been included. The question whether there was some or any evidence upon which a reasonable owner could form the opinion which he did is different in kind from the question whether, in forming the opinion he did, the owner had ignored relevant factors or taken into account irrelevant factors.

In my judgment, the authorities do not warrant the broad proposition advanced by Mr Small. The Mission can only challenge the Engineer’s opinion if it can be shown either that it was not his bona fide opinion, or that he mis-construed the criteria which he was applying, or that there was simply no evidence available which could have enabled a competent engineer to form the opinion formed by Mr Rankmore.

The Mission’s attack on Mr Rankmore’s opinion was supported by the expert evidence of Mr Hedley Walker M.Sc., B.Sc., MCIT, M.H.I.T., a director of Symonds Group Ltd. The Council in turn led expert evidence from Mr David Bird B.Sc, CEng, MICE, a director of Savell Bird & Axon, transport consultants.

The specific criticisms advanced by Mr Walker can be summarised as follows:

In cross-examination, Mr Walker maintained his stance on those individual criticisms. So far as Mr Bird differed from him on relevant matters of fact and opinion in relation to them, my findings are as follows: as to (iii), Mr Walker’s figures were based on snapshot traffic counts which he accepted had to be treated with caution. He also accepted that the FGP estimates were based on then commonly accepted figures. As to (iv), it was common ground that there had been some decrease in the Neasden Lane traffic. However, Mr Bird maintained (and I accept) that the amount of Neasden Lane traffic at all relevant dates was sufficient to characterise the Junction as having in traffic terms “zero capacity”. It therefore remained sub-standard despite the reduction in traffic on Neasden Lane. As to (vii), this proposal, while providing some improvement in terms of pedestrian safety, would not have provided much in the way of improvement from the point of view of those using Quainton Street.

What Mr Walker did, however, accept was that the Council’s Works had improved the Junction, and that the improvements could be described as “desirable” from the point of view of the general public and “beneficial” from the point of view of the occupants of the Development; but he strongly resisted the suggestion that they could be described as “necessary” as a result of the Development, or that any engineer could have formed an opinion that they were without doing quantitative studies. I found Mr Walker’s insistence on distinguishing what was “desirable” from what was (merely) “beneficial” unpersuasive. If the improvements were desirable from the point of view of the general public they must equally have been so for the occupants of the development. Indeed, since the improvements benefited those using Quainton Street, either in vehicles wishing to turn onto Neasden Lane (or from Neasden Lane into Quainton Street) or as pedestrians wishing to cross to the shops and services on the other side of Neasden Lane (in each case in conditions of greater ease and safety than before) rather than vehicles passing and re-passing along Neasden Lane, the occupants of the Development were inevitably part of the section of the public (users of Quainton Street) most benefited by the improvements.

It was chiefly on Mr Walker’s insistence that the improvements could not be described as “necessary” as a result of the Development that Mr Bird disagreed with him. Mr Bird’s view was that, although a quantitative analysis would have been preferable in order to establish the point, it was perfectly possible for a professional engineer with a good local knowledge of the area to come to the conclusion in 2001 that the Development had had, and was continuing to have, an adverse effect on the Junction. Pressed with the argument that the lapse of 8 years made it impossible, in the absence of quantitative analysis, to know whether other factors during that period might have altered the degree of impact of the Development on the Junction, he disagreed. It was perfectly possible to make the judgement both in 1993 and in 2000/2001 that the Junction provided, in traffic terms, zero capacity for traffic emerging from Quainton Street into Neasden Lane. It was self-evident that the Development would have increased the amount of this traffic and thus had an impact on the already unsatisfactory situation. There was therefore, in his opinion, no difficulty in describing the Council’s Works as necessary in the light of, or as a result of, the Development. That was so even if other intervening factors (such as, for example, increased use of Quainton Street as a rat run) had also contributed to the need to make improvements.

While I would not dissent from Mr Walker’s view that an engineer would need to do quantitative analysis before being reasonably confident in a conclusion that in 2001 the increased use of the Junction as a result of the Development justified the improvement of the Junction which he accepted was effected by the Council’s Works, that is not the same as saying that an opinion formed without doing such an analysis is so unsupportable as to qualify it as unreasonable or capricious. The failure to do the quantitative analysis might be a factor supporting the suggestion that the opinion had been formed unreasonably (as did the failure by the owners in The Product Star to make inquiries) but does not inevitably lead to the conclusion that it was in fact an unreasonable opinion. In my judgment there was material on which Mr Rankmore could form the opinion which he expressed in the letter dated 29^th March 2001. He had 22 years of highway experience with the Council and a good local knowledge of the area. There was no dispute that the Development must have increased the total number of pedestrians and vehicles using the Junction. There was no suggestion that this level of increased user significantly changed in the period 1994-2000. The traffic and pedestrian counts in the agreed experts’ statement appear in fact to show an increase of 7% coming out of the Junction at peak hours from the Development. The reasoning that (1) the Junction was sub-standard and unsatisfactory (2) the Development would cause/had caused additional pressure on the Junction and (3) the works of improvement were necessary as a result of that increased pressure is essentially what underlay that opinion. If it was, or would have been, sufficient reasoning in 1992/3, there was, in my judgment, nothing to show that it had ceased to be such in March 2001.

Mr Small, on behalf of the Mission, argued that the opinion simply could not have been either a genuine or reasonable one since, had the Council ever considered signalisation of the Junction to have been necessary in consequence of the Development, it would have embarked on such a scheme at the time: the fact that it did not so embark demonstrated that the Council’s Works cannot have been, or have been thought to be, necessary at the time. I do not consider that the failure by the Council to produce and implement a scheme of signalisation at an earlier date is directly relevant to the question of the contractual validity of the opinion formed by Mr Rankmore in 2000/2001. There is no evidence which positively supports the thesis that the need to improve the Junction as a result of the Development was not a constant throughout the period. The Council’s action (or inaction) in the early part of the period is attributable to the dogged (and largely unexamined) belief held by the relevant officers that the way in which the necessary improvement could be effected was by the creation of the left-hand slip road. Failure by the Council to appreciate the obstacles to achieving that aim, coupled with sheer administrative slackness, prevented any serous attention being given to the possibility of signalisation until after the receipt of the SDG report. By that time a signalisation solution had (as the ethos of the SDG report itself demonstrates) become a more palatable idea than once it would have been: in the early 1990s the emphasis in transport policy (at least in the minds of some officers) had been on the preservation of free traffic flow rather than on the convenience and safety of pedestrians. By the end of the period the emphasis had shifted decisively to considerations of safety. One cannot infer from the fact that the Council did not focus on signalisation in 1993 that a subsequent decision to implement signalisation as a means of effecting a necessary improvement to the Junction must have been unreasonable, capricious, or otherwise flawed.

Mr Small submitted that “the real reason” why the Council eventually did the signalisation works was because of the pressure being put on it by the Mission. In the sense that it was this pressure which precipitated the meeting between the relevant officials which eventually agreed on that course of action this is no doubt true. I think that it was also true that it was only this pressure which finally caused the Council to appreciate that the left-hand slip road was no longer a practical possibility and that the only viable solution was the signalisation suggested by the SDG report. It is extremely surprising that no minutes exist of the critical meeting at which the officers concerned had this epiphany. I have no doubt, however, having heard his evidence that when Mr Rankmore confirmed to that meeting that he could give the relevant opinion in relation to the Council’s Works he was acting entirely in good faith in doing so. He approached the matter on the basis that officers would have recommended that permission for the Development be refused if (in his words) “it meant that occupants of the Development would be using this sub-standard junction”. Coming from that direction it was entirely reasonable to conclude that (as was common ground) the Council’s Works would have the effect of improving the Junction. Taking the view which I have taken as to the meaning to be given to the words “necessary [etc]…..as a result of…[etc]” Mr Rankmore’s approach cannot, in my judgment, be characterised either as lacking in good faith, or as being unreasonable or capricious.

The question of the extent of the Junction raises an issue of quite a different kind. The Mission’s case here assumes that the Engineer’s opinion was a reasonable one but contends that the Council’s Works, while including relevant improvements to the Junction, in fact went further. The point arises because the Council’s Works involved the signalisation not only of the junction of Quainton Street with Neasden Lane, but also the junction of Braemar Avenue with Neasden Lane.

The words which require to be interpreted are

“highway improvements and/or traffic management measures necessary to improve access arrangements to/from the Site comprising alterations to the junction of Neasden Lane North and Quainton Street”

It was accepted by Mr Walker giving expert evidence on behalf of the Mission, and by Mr Small in his submissions, that these words did not import some precise geographical limit on the area in which the relevant improvements could be made. It was thus accepted, for example, that the costs of moving the bus stop to a point further up Neasden Lane were proper costs associated with the improvements to the Junction. Mr Walker however opined that the junction of Quainton Street and Neasden Lane could have been signalised without at the same time signalising that between Braemar Avenue and Neasden Lane. He accepted that the effect of signalising the former but not the latter would have given rise to traffic management problems (both for traffic turning right into Braemar Avenue, for right turning traffic emerging from Braemar Avenue, and for traffic turning right out of Quainton Street) as well as not curing the problems associated with the existing pelican crossing to the east of Braemar Avenue). However, he considered that these problems could have been met by an alternative scheme which would not have required the signalisation of Braemar Avenue. He agreed that from a traffic management point of view the problems had in fact been met more satisfactorily by the Council’s Works than they would have been by his alternative scheme.

Mr Bird, in addition to identifying the four matters which made the Council’s Works a more satisfactory solution than that advanced by Mr Walker, gave it as his opinion that the two junctions should in highway terms be viewed as one staggered junction. I did not find this latter point persuasive. As I understood the expert evidence, to the extent that the concept of a “staggered junction” is a term of art it is only applicable in a situation where traffic typically moves from one arm of the stagger along the other. There was no evidence of any flows of traffic across Neasden Lane of this character. Moreover, as Mr Bird’s own use of language in his report demonstrates it is perfectly possible, without doing any violence to language whatsoever, to describe the two junctions as two separate junctions.

In my judgment, once it is accepted that signalisation of the Quainton Street junction was a necessary improvement, and that “best practice” required that scheme of signalisation to extend also to the Braemar Avenue junction, the signalisation of the latter can properly be seen as part of the alterations to the former within the meaning of the clause, and Mr Rankmore was entitled so to certify them.

A number of items of expenditure by the Council were challenged by the Mission as having been incorrectly debited to the Contribution Sum even if, contrary to the Mission’s case, the Council’s Works came within the clause. By the end of the trial these had reduced to two, namely whether an item described as “maintenance charge” in connection with the installation of the traffic lights was properly spent, and whether a 20% contractor’s overhead was properly charged by the Council. Because of the stage at which these claims were introduced, it was agreed that the latter point would have to be dealt with by an inquiry. So far as the former point was concerned I was satisfied by the evidence of Mr Williams on behalf of the Council that the “maintenance charge” was a standard component of Transport for London’s charge for the installation of new traffic lights, and can therefore be regarded as part of the costs of the improvements.

Clause 5.1 of the s. 106 Agreement provided for the Council to use “its reasonable endeavours to complete [the works of improvement and traffic management measures] prior to the issue of the Certificate of Substantial Completion of the Highway Works”. That certificate was issued on 21^st October 1994. The Mission’s case is that, those works not having been completed by that date, there remained an obligation on the Council to continue using its reasonable endeavours to complete the works thereafter such a term being implied as a matter of business efficacy.

For the Council it was argued that the only obligation on the Council was the express obligation to use reasonable endeavours to complete the works before 21^st October 1994: there was no reason to imply any other term since (a) the Mission had a remedy under s. 106A in the event of delay by the Council and (b) the Mission was in any event protected by the fact that the Contribution Sum was to be held in a designated interest bearing account. It was also submitted that on the evidence it was clear that the Council would not have agreed to a term such as that relied upon.

So far as the evidence was concerned I was not persuaded that there had been any relevant discussion about the time within which the Council was committing itself to act, and was unwilling to draw any conclusions from the manuscript alterations and deletions appearing on a draft of the s.106 Agreement. In fact, so far as the left hand slip road was concerned, I am satisfied that whoever agreed the express term on behalf of the Council can have had no idea of the probable time scale of that project (which Mr Senaratne estimated as being of the order of four years). I also accept the argument on behalf of the Mission that, in order to give business efficacy to the agreement, it is necessary to imply a term that the Council would continue to use its reasonable endeavours after 21^st October 1994 to complete the works within a reasonable time. It is simply a nonsense to suggest that the Council was under an obligation until that date but thereafter was at liberty simply to sit on the money until either it chose to do something or the Mission made an application to discharge the planning obligation under s. 106A. Even the most unofficious of bystanders would, it seems to me, have roused himself to protest that that cannot have been intended.

The obligations (both express and implied) to use reasonable endeavours to complete the works necessarily includes, in my judgment, an obligation to identify them.

The Mission argued that the reasons why the Council’s Works had taken over 10 years to complete had largely been the misconceived and unfocused pursuit of the left hand slip road proposal.

Had the Council in fact been able to proceed with the project for the creation of a left hand slip road, I have some doubt whether it could ever have been the subject of an appropriate opinion from the Engineer. There is much force in the argument that, taken by itself, it would have done little to improve the Junction from the point of view of occupiers of the development. As the SDG report observed, it exacerbated problems of pedestrian safety. It would have done nothing for traffic turning right into Quainton Street, and little for traffic turning right out of Quainton Street (except, by filtering off the left turners, by enabling the right turners to get more quickly to the point at which they would be faced with the difficult manoeuvre). The only real beneficiaries would be HGVs turning left out of Quainton Street. I think that it might have been difficult for the Engineer to form the view that it was an improvement rendered necessary by the increased highway use as a result of the Development.

The Council seems never to have addressed itself to the rationale for the left hand slip road (with a right turn still permitted) in any objective manner, or indeed at all. Mr Senaratne was simply charged with the duty of progressing it, and given no indication of any time constraints applicable to the task. The project ran into the sands for two reasons. First, the costs of effecting the works necessary to satisfy the requirements of the statutory undertakers appeared prohibitively high, both in July 1993 and, six years later, in 1999. Secondly, there were difficulties in reaching agreement with the adjoining landowners for the necessary land acquisition. There was an extraordinary delay both in initiating and in progressing the negotiations over the land acquisition. It appears to have taken the Council’s valuation department/AFM until early 1995 even to identify those with an interest in the relevant land. With hindsight it can be seen that the whole project was, given the financial constraints on the Council, impractical from the outset.

In my judgment the express obligation required the Council properly to address the question of what works were necessary in sufficient time to complete those works by October 1994. Given a provisional view by the Council that the left hand slip road was the answer, the financial viability of that scheme should have been addressed at an early stage. That implied starting discussions with the statutory undertakers and negotiations with those interested in the land to be acquired as soon as reasonably practicable. Had such an approach been adopted, the position in fact reached by January 1995 (when Mr Senaratne appears to have considered that the only short term solution was a signalisation scheme of some sort) could and in my judgment should have been reached by the end of 1993 at the latest. I can see no reason why the necessary studies should not then have been commissioned, and the signalisation solution eventually identified by the SDG report arrived at by October 1994. None of this would have required supererogatory effort on the Council’s part. All that was required was a reasonably purposeful approach, something that was strikingly lacking until pressure from the Mission looked likely to blossom into litigation in 1999. On this footing, allowing for a generous period for commissioning and completing the works, they should in my judgment have been completed by the end of 1996.

It was urged on behalf of the Council that it had been reasonable to pursue the left hand slip road solution. I do not quarrel with that proposition provided that it is borne in mind that reasonable endeavours had to be made to provide the solution by October 1994. It was also urged that the land acquisition difficulties could not have been anticipated at the outset. That may be true, but their nature would have become much more quickly apparent had negotiations with the owners commenced at an early stage and been pursued with purpose. Ironically the cost of complying with the statutory undertakers’ requirements had to some extent been anticipated (see the Supplementary Report for the Development Control sub-Committee dated 2^nd September 1992) but its implications in relation to the s.106 Agreement were simply never properly addressed. The Council also sought support for the reasonableness of its actions from Mr Walker’s acknowledgment in evidence that it had been reasonable to wait for the outcome of the SDG report before deciding on a course of action. That overlooks the fact that the Council had not commissioned that report until the autumn of 1997. It should have addressed itself to the problem at a much earlier date. It was also submitted on behalf of the Council that it was under no duty to prioritise the works to the detriment of other schemes for which, as highway authority, it had responsibility, and that it could not be blamed if staff shortages held up progress. I do not agree. The Council had undertaken an unqualified obligation to use reasonable endeavours to complete these works, and is not in my judgment entitled to pray in aid its own organisational inadequacies as an excuse for non-compliance.

Accordingly, in my judgment the Mission is entitled to an inquiry as to what (if any) damage has been caused to it as a result of the Council’s Works not having been completed by the end of 1996. I understand that there is agreement on the principal components of the calculation which requires to be made as a result of this finding.