Developer must pay damages following contract dispute
Published: 9 August 2017
A developer who failed to co-operate in seeking additional planning permission for a proposed tower block has been ordered to pay damages to the company selling the site.
The seller had obtained planning permission to construct a
34-storey tower on a large site. The grant was subject to a “Section 106 Agreement”,
under which the seller had assumed affordable housing obligations.
The seller hoped to obtain enhanced planning permission for
extra storeys to the tower.
The sale agreement therefore obliged it to make a further
planning application by a certain date and stipulated that, if granted, the buyer
would be required to pay extra to the seller.
The seller was required to submit its "draft
application" for the buyer's consent before applying for enhanced
permission, but that consent was subject to a tight timetable and was not to be
The buyer failed to give consent despite two requests.
The local authority nevertheless resolved to grant enhanced
permission, subject to the buyer entering into a revised Section 106 Agreement
containing increased affordable housing obligations. The buyer refused, so the
enhanced permission was never granted.
The seller took legal action to recover the extra money to
which it would have been entitled had the planning permission been granted.
The buyer argued that the first request for consent had been
invalid because it was not sufficiently formal, and the second because of the
absence of essential viability appraisals. It also said that the seller had
deliberately failed to inform and consult about developments, which was a
precondition of the agreement.
The High Court found in favour of the seller. It said the
concerns the buyer claimed to have had about the planning applications were not
only unjustified, but had also not been genuinely or reasonably held. Its
refusal of consent had therefore been unreasonable.
Please contact Matthew Sigsworth in our Dispute Resolution
Team if you would like more information about the issues raised in this article
or any aspect of contract law and litigation.