Supreme Court Rules Against Pooled Planning Obligations: Implications from Aberdeen City and Shire v Elsick Development Company Limited

Introduction

The case of Aberdeen City and Shire Strategic Development Planning Authority v. Elsick Development Company Limited (Scotland) ([2017] UKSC 66) represents a pivotal moment in UK planning law. This comprehensive judgment by the United Kingdom Supreme Court addresses the legality of planning authorities imposing pooled financial contributions from developers to fund infrastructure. The central issue revolves around whether such pooled schemes align with existing planning legislation, particularly the guidelines outlined in the Scottish Ministers' Circular 3/2012.

Summary of the Judgment

The Supreme Court dismissed the appeal brought forward by the Aberdeen City and Shire Strategic Development Planning Authority (the Authority), thereby upholding the decision of the Inner House of the Court of Session. The Court determined that the Authority's Strategic Development Plan (SDP), which mandated developers to contribute to a pooled Strategic Transport Fund for infrastructure improvements, was unlawful. The key reasons include:

The pooled contributions were not sufficiently related to the individual impacts of each development, violating the Scottish Ministers' Circular 3/2012.
The planning obligations did not directly restrict or regulate the specific development in question, making them ultra vires.
The pooling mechanism failed to demonstrate a clear, direct relationship between each developer's contribution and the infrastructure funded.

As a result, the Court emphasized that planning obligations must be directly connected to the individual development's impact, rather than being part of a general pooled fund.

Analysis

Precedents Cited

The judgment extensively referenced several landmark cases to elucidate the boundaries of lawful planning obligations:

Good v Epping Forest District Council [1994] 1 WLR 376: Established that planning obligations must serve a legitimate planning purpose and not extend beyond what can be achieved through planning conditions.
Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759: Affirmed that planning obligations must have a more than trivial connection to the development to be considered a material consideration.
Grampian Regional Council v Secretary of State for Scotland and City of Aberdeen District Council [1984] SC (HL) 58: Validated the imposition of conditions that are reasonably related to the development.
City of Edinburgh Council v Secretary of State for Scotland [1998] SC (HL) 33: Highlighted the presumption that development plans govern planning decisions unless material considerations dictate otherwise.

Legal Reasoning

The Supreme Court's reasoning centered on the interpretation of section 75 of the Town and Country Planning (Scotland) Act 1997, which governs planning obligations. The Court stressed that for a planning obligation to be lawful:

Direct Connection: The obligation must directly relate to the specific development or its immediate impacts.
Proportionality: The scale and kind of the obligation must be reasonably related to the development's impact.
Compliance with Guidance: Obligations must adhere to national or ministerial guidance, such as the Circular 3/2012, ensuring fairness and necessity.

In this case, the pooled fund required contributions from developers irrespective of their individual project's impact, diluting the direct connection necessary for lawful obligations. This overarching approach was deemed disproportionate and contrary to established planning principles.

Impact

This judgment has profound implications for future planning practices in Scotland and potentially across the UK:

Shift Towards Individual Obligations: Planning authorities must ensure that financial contributions are directly tied to each development's specific impact.
Limitation on Pooled Funds: Generalized pools for infrastructure funding are likely to be scrutinized and potentially invalidated unless a clear, direct connection can be established.
Legislative Changes: Authorities may seek legislative reforms to authorize more flexible frameworks for infrastructure funding, akin to the Community Infrastructure Levy in England and Wales.
Enhanced Compliance: There will be increased emphasis on adhering to national guidance to avoid future legal challenges.

Complex Concepts Simplified

Planning Obligations

Planning obligations are agreements between developers and planning authorities that require developers to undertake certain actions or provide financial contributions to support infrastructure or community facilities. These obligations must directly relate to the development's impact.

Pooled Funds

Pooled funds refer to a collective pool where multiple developers contribute financially. These funds are then used to address broader infrastructure needs. However, for such pooling to be lawful, each contribution must be directly linked to the individual developer's impact.

Material Consideration

A material consideration is any factor that the planning authority must take into account when deciding whether to grant planning permission. For an obligation to be material, it must have a substantial connection to the development.

Circular 3/2012

Circular 3/2012 provides guidance to Scottish planning authorities on assessing the validity of planning obligations. It outlines specific tests to ensure obligations are necessary, serve a planning purpose, and are reasonably related to the development.

Conclusion

The Supreme Court's decision in Aberdeen City and Shire Strategic Development Planning Authority v. Elsick Development Company Limited underscores the necessity for planning obligations to maintain a direct and proportional relationship with individual developments. Pooled financial contributions, unless meticulously linked to each project's impact, fall outside lawful planning practices. This judgment reinforces the boundaries of planning authorities' powers, ensuring that developers are not unduly burdened with generalized obligations that lack specificity and direct relevance.

Moving forward, planning authorities must reevaluate their strategies for funding infrastructure, potentially advocating for legislative changes to facilitate more flexible and lawful funding mechanisms. Developers, on the other hand, can seek greater clarity and fairness in obligations imposed upon them, fostering a more balanced and legally compliant planning environment.