Elsick Development Company Ltd had challenged a requirement that it make a financial contribution to Aberdeen City and Shire Strategic Development Planning Authority's (SDPA's) strategic transport fund (STF) as a condition of planning approval. The developer is planning to build 4,000 homes with accompanying commercial, retail and community facilities at Elsick, near Stonehaven.
The Supreme Court, in a unanimous judgment, ruled that the local authority was not legally entitled to require contributions to the fund.
"If planning authorities in Scotland wish to establish a local development land levy in order to facilitate development, legislation is needed to empower them to do so," said Lord Hodge, giving the judgment of the court.
Planning law expert Gary McGovern of Pinsent Masons, the law firm behind Out-Law.com, said that the judgment had been "pre-empted" to a certain extent by the Scottish government, which has indicated its intention to include a power enabling the introduction of a Scottish infrastructure levy as part of its imminent Planning Bill.
"The decision of the Supreme Court essentially follows conventional planning wisdom and to that extent was largely predictable. In this case, the impact of the development on the infrastructure for which the contributions were sought was trivial and too remote to be relevant to the development in question and form the basis of a planning obligation. This echoes many previous UK court decisions on the scope of planning obligations," he said.
However, the case was a high profile one in a financial sense, with the potential to affect both the scale of contributions developers are liable to pay from a range of developments across the authority area and to curtail the money received by the authority to invest in its strategic transport infrastructure plans, he said.
The SDPA first published plans for an STF, based on Aberdeenshire's anticipated transport infrastructure needs by 2030, in July 2011. The idea behind the STF was that all new housing, business, industrial, retail and leisure developments in the area would be expected to contribute to the fund on a 'tabulated' basis, with the funds to be placed into a ring-fenced account and made available only for the specified interventions.
The plans as drafted would have cost the Elsick Development Company up to £8 million, which the developer argued was disproportionate to the demands on local infrastructure created by its development. The Court of Session in Scotland found in favour of Elsick last May, but granted permission to appeal to the SDPA on the grounds that the case raised important questions about the lawfulness of planning conditions and obligations and the scope of a planning authority's powers.
In his lead judgment, Lord Hodge considered the scope of section 75 of the 1997 Town and Country Planning (Scotland) Act, which governs planning obligations. He said that although planning authorities had wide discretion about both the circumstances in which they were permitted to seek planning obligations and the nature of those obligations, the "express words" of that section required there to be a relationship between the obligation and the land to be burdened by that obligation.
While acknowledging that there appeared to be "much that can be said in favour" of the proposed transport funding scheme, Lord Hodge concluded that it was simply not permitted by the 1997 Act. The lower courts had already found that the connection between the Elsick development and some of the proposed transport projects was "at best trivial", and so was not "imposed for a purpose in relation to the development and use of the burdened site as section 75 requires", he said.
"In my view, it was not within the power of the planning authority to require a developer to enter into such an obligation which would be irrelevant to its application for permission as a precondition of the grant of that permission," he said.
Planning law expert Craig Connal QC of Pinsent Masons welcomed what he described as the court's "re-assertion and re-emphasis of traditional rules linking requirements with the individual scheme".
"Any weakening of its rigours runs the risk of parties – on either side – bending or trying to bend the rules by which all are otherwise compelled to play on a level playing field, especially where the stakes may be high enough to persuade parties to take a line of least resistance," he said.
"Views can legitimately differ on the merits of a regional or national infrastructure levy. Some will say it makes for certainty and cuts cost, others that it is unfair by making a developer pay for something which is nothing to do with their development at all. However, the proper place for that debate is in legislation, where the boundaries and constraints of any scheme can be debated," he said.