Tesco Stores Ltd v Secretary of State for the Environment & Ors

Factual and Procedural Background

Three developers each sought planning permission from the local planning authority to construct a retail food superstore in The Town. Company A promoted “Site A,” while Company B promoted “Site B.” A third developer’s site is irrelevant to the present proceedings. A prior Local Plan inquiry had identified severe traffic congestion caused by the single bridge over The River and had proposed a new relief road (“The Relief Road”) west of The Town. The Local Plan Inspector indicated that only one superstore should be approved and expressed a preference for Site A. She also observed that funding for The Relief Road was unlikely to come from the highway authority and that a major developer contribution might be sought.

The local planning authority failed to determine Company B’s application within the statutory period, prompting an appeal to the Defendant (the Secretary of State). The Defendant then “called in” Company A’s application so that both proposals would be decided together at a single inquiry.

An Inspector conducted the inquiry in 1992. She concluded that although both sites would slightly worsen traffic, the effect was less than 10 per cent over traffic generated by an existing office permission. She held that a requirement for full private funding of The Relief Road was not “fairly and reasonably related” to the development, yet she regarded Company A’s unilateral offer to fund the £6.6 million road as a “perfectly proper” negotiation outcome. On balance she recommended granting permission for Site A and rejecting Site B.

On 28 July 1992 (during the inquiry) Company A executed a planning obligation under section 106 of the Town and Country Planning Act 1990, promising to pay £6.6 million for The Relief Road if its planning permission were granted.

Contrary to the Inspector’s recommendation, the Defendant’s decision letter of 16 April 1993 allowed Company B’s appeal (Site B) and refused permission for Site A. The Defendant considered that the funding offer was not a proper ground for preferring Site A and that on conventional planning merits Site B was slightly superior.

Company A sought to quash the decision under section 288 of the 1990 Act. A deputy High Court judge set the decision aside on the basis that the Defendant had treated the funding offer as immaterial. The Court of Appeal (per Judge Bingham M.R., Judge Beldam L.J. and Judge Steyn L.J.) reinstated the Defendant’s decision. Company A appealed to the House of Lords, limited solely to the status and weight of its £6.6 million offer.

Legal Issues Presented

1. Whether Company A’s unilateral section 106 obligation to fund The Relief Road was a “material consideration” under section 70(2) of the Town and Country Planning Act 1990.
2. If material, whether the Defendant lawfully exercised his discretion in giving the obligation little or no weight when deciding between the rival superstore proposals.

Arguments of the Parties

Appellant’s (Company A’s) Arguments

• The section 106 obligation was plainly a material consideration because it directly addressed acknowledged traffic problems.
• The Defendant unlawfully excluded, or failed properly to consider, that material factor by applying an impermissible “necessity” test derived from departmental Circular 16/91.
• Under Newbury and related authority, the correct test is whether the obligation fairly and reasonably relates to the development, not whether it is strictly necessary.

Defendant’s Arguments

• The Defendant did not treat the offer as immaterial; he assessed it but reasonably attributed negligible weight in accordance with national policy (Circular 16/91).
• Circular 16/91 lawfully guides decision-makers to accept planning obligations only when needed to make the development acceptable and proportionate to its impacts.
• The traffic impact was minimal, the relationship between the development and the full cost of The Relief Road was “tenuous,” and it would be unreasonable to require even a partial contribution.

Company B’s Arguments

• The funding promise was not a material consideration at all because the superstore was acceptable without it; treating it otherwise would amount to purchasing planning permission.
• Accepting the offer would unfairly disadvantage developers who declined to make disproportionate payments.

Table of Precedents Cited

Court's Reasoning and Analysis

The House accepted that the status of a consideration (material or immaterial) is a matter of law, while the weight to be accorded is a matter of planning judgment reviewable only on Wednesbury grounds. It examined:

• Statutory framework. Sections 70 and 106 of the 1990 Act require regard to “any other material considerations”; planning obligations may lawfully extend to payments of money.
• Departmental policy. Circular 16/91 advises that obligations should be sought only where related and necessary to the grant of permission and proportionate in scale. The Circular is policy guidance, not law, but the Defendant is entitled to apply it consistently.
• Decision letter. Parsing paragraphs 7–8, the House found that the Defendant expressly evaluated the relationship between the development and The Relief Road, labelled it “tenuous,” concluded that full funding was disproportionate, and stated that even a partial contribution would be unreasonable. He therefore treated the offer as relevant but gave it minimal weight.
• No misdirection. Nothing in the letter suggested the Defendant believed he was legally barred from considering the offer; rather, he discounted it on planning merits consistent with national policy.
• No irrationality. Given the minimal additional traffic attributable to either proposal and the distance between the sites and The Relief Road, the conclusion that the obligation carried little planning weight was not irrational.

Holding and Implications

APPEAL DISMISSED. The House of Lords upheld the Court of Appeal and reinstated the Defendant’s decision granting permission to Company B (Site B) and refusing Company A (Site A).

Implications: The ruling confirms that:

• Developers’ financial or infrastructure offers may be material considerations, but decision-makers remain free to accord them whatever weight they deem reasonable.
• Applying national policy (Circular 16/91) to discount obligations that are not necessary or proportionate does not constitute a failure to consider a material factor.
• The decision reinforces the distinction between materiality (a legal question) and weight (a discretionary planning judgment), preserving the wide discretion of planning authorities and the Defendant in determining competing applications.