Law Changed By Statute

October 23rd, 2018 by James Goudie KC

City of York Council v SoS for CLG (2018) EWHC 2699 (Admin) is the latest in a long line of cases going back to, at least, Victorian times, where the law is changed by statute and a disagreement then arises about the impact of the change on the legal position of the parties. Section 16 of the Interpretation Act 1978 (the 1978 Act) may bear on the issue.

A property developer (Trinity), applied to the claimant local planning authority in April 2016 to modify its obligation to pay a commuted sum in lieu of an “affordable housing obligation” in a Section 106 Agreement. The application was made the day before the repeal of statutory provisions enabling Trinity to do so. After the repeal took effect, the Council refused the application. Trinity then appealed to the SoS. He allowed the appeal, and lowered the amount Trinity had to pay to the Council.

The Council said the repeal extinguished Trinity’s right to apply to modify its payment obligation under the Section 106 Agreement and its right to appeal against the Council’s refusal to modify it; therefore its determination of the application and the subsequent appeal were both invalid. The SoS and Trinity say that would be unjust and that Section 16 of the 1978 Act fortunately provides otherwise.

The main issue before Kerr J was whether the SoS had power to entertain and determine the appeal, or whether the determination was a nullity. Many cases were cited to him in the course of argument. The cases go back to the 19th century and include many decided under the (not materially different in effect) predecessor to the 1978 Act, the Interpretation Act 1889. It was not necessary to go through all the cases in the Judgment, since it was common ground that in cases where preservation of rights after repeal is asserted, under what is now Section 16(1)(c) of the 1978 Act, the applicable principles are as follows. The right relied on must be an “acquired” or “accrued” right, in the words of Section 16(1)(c). A mere hope or expectation of acquiring a right is insufficient. An entitlement, however, even if inchoate or contingent, suffices. The fact that further steps may still be necessary to prove that the entitlement existed before repeal, or to prove its true extent, does not preclude it being regarded as a right. Whether or not there is an acquired right depends upon whether at the date of repeal the claimant has an entitlement (at least contingent) to money or other certain benefit receivable by him, provided only that he takes all appropriate steps by way of notices and/or claims thereafter. It may be that a right has been given but that in respect of it some investigation or legal proceeding is necessary. The right is then unaffected or preserved. It will be preserved even if a process of quantification is necessary. But there is a manifest distinction between an investigation in respect of a right and an investigation which is to decide whether some right should or should not be given.

The applicable principles may be stated as follows:-

(1)           The mere abstract right to take advantage of a statutory enactment, if ‘right’ it can properly be called, is not a ‘right acquired’ or a ‘right accrued’ within the meaning of Section 38(2)(c) of the Act of 1889.

(2)           Even if a person has taken steps to put statutory machinery in motion, the statutory proceedings may only by the date of repeal have reached the stage when he has a hope or expectation of acquiring a right. In such a case it almost goes without saying that there is no right ‘acquired’ or ‘accrued’.

(3)           Where statutory machinery has been set in motion and the statute is afterwards repealed, there may be a right ‘acquired’ or ‘accrued’ under the statute, although at the date of repeal further steps are still necessary to prove that the right did in fact exist at the date of repeal and even to prove the measure of the obligation incurred. A right can at any rate in certain circumstances be a ‘right acquired’ although it may at the date of repeal still be of a contingent nature.

Kerr J said, at paragraph 31:-

“In each case, the nature and effect of the repealed statutory provisions must be considered, together with the factual position in which the claiming party stands as at the date of the repeal.”

In each case, the nature and effect of the repealed statutory provisions must be considered, together with the factual position in which the claiming party stands as at the date of the repeal.”

Kerr J came to the clear conclusion that the submissions of the SoS and Trinity were to be preferred to those of the Council.  It was artificial and wrong to characterise the pre-repeal “right” of the developer under the repealed provisions as merely a hope of persuading a decision maker to exercise discretion in its favour. That is not what Section 106BA(3)(a) of the TCPA says. It mandates an outcome in favour of the developer if the exercise of economic judgment leads to the conclusion that the development is not economically viable as it stands. Evaluation and assessment of the factual position and the exercise of judgment on the issue of economic viability are not the same thing as exercising a discretion. The true nature of the developer’s right up to 30 April 2016 was that it was an inchoate right to require a statutory interference with its prior contractual obligation, so as to modify or discharge it, contingent upon persuading the local authority (or on appeal, the Inspector) that the development would not otherwise be economically viable.

Kerr J did not think that the developer’s right existed before repeal irrespective of whether an application was made by it. The making of an application before repeal was an essential step that had to be taken in order to create and establish the contingent right to modification or discharge of the developer’s contractual obligation. Once that step was taken, the contingent right existed.

The present case falls within the third proposition above, and not within the first or second propositions. At the date of repeal, a further step was required to prove that the right existed and to prove the measure of the obligation incurred, that is to say, in the present context, the amount by which the affordable housing obligation must be reduced to make the development economically viable.

Kerr J further said:-

“53.      … it is the activity of carrying out the development works that must be economically viable or not, as the case may be. … I cannot accept … that economic viability is necessarily established by successful completion of the physical works. No express words in the statute so provide. Nor does the scheme of the provisions require that proposition to be read into them.

  1. I think the words “not economically viable” should be given their ordinary meaning. To apply the test may require economic judgment to be exercised, but I do not think the words bear any technical meaning. The statutory language does not preclude an assessment of economic viability merely because the works have been completed. And I have great difficulty with the proposition that a completed development is economically viable even though it be a white elephant doomed to decay because of a crash in the property market a week after completion of the building works.
  2. Furthermore, all parties agree that under Section 106BA and, on appeal, Section 106BC, the economic viability test must be applied as at the date of the initial determination or appeal. Whether the works have been completed by then may be a matter of chance. …
  3. In some cases, including this one, the issue of economic viability may be not much more than an arithmetical exercise. …
  4. In other cases, the development may be incomplete, or it may be completely built but unsold or only partly sold. The issue of economic viability is a matter of economic judgment when applied to likely receipts from future sales, just as it is when applied to likely future build (and other) costs. The market may change over time and must be assessed as at the date of the decision. I can see no good reason why future build costs should qualify for assessment but future sales receipts should not.”

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