Hospital trusts, section 106 requests and CIL compliance

November 11, 2022

Later this year at a hearing in the High Court in London, an issue involving local authorities and developers on whether section 106 requests from hospital trusts are CIL compliant will be litigated. It is expected that the decision will shed some light on an important issue for public authorities and private developers alike, writes Clare Sinnott.

The key parties to this litigation are Harborough District Council (‘the District Council’), the University Hospitals of Leicester NHS Trust (‘the Trust’) and Leicestershire County Council (‘the County Council’).

The County Council, in its capacity as both developer and majority landowner, applied to the District Council for planning permission to develop a site east of Lutterworth in the south of Leicestershire known as Lutterworth East. The application was a hybrid one and comprised an outline application for up to 2,750 dwellings, business/industrial/storage/distribution uses, two primary schools, neighbourhood centre, public open space, greenspace and other associated infrastructure and a full application for the development of a spine road. The site was formally allocated as a Strategic Development Area in the District Council’s Local Plan.

During the consideration of the planning application the University Hospitals of Leicester NHS Trust (‘the Trust’) sought a section 106 financial contribution towards the additional cost of providing NHS services to residents of the proposed development. Its position was that, whilst in the long term these costs would be covered through social security contributions and other state funding, due to the way the Trust receives funding there would be a gap in the short to medium term and the Trust therefore requested that the gap in funding be covered by a section 106 planning obligation.

Regulation 122(2) of the Community Infrastructure Levy Regulations 2010 provides that a planning obligation may constitute a reason for granting planning permission only if the obligation satisfies three requirements namely that it is:

“(a) necessary to make the development acceptable in planning terms;

(b) directly related to the development; and

Having considered the Trust’s various representations, the District Council decided that the requested contribution did not meet the regulation 122 tests. Following several years of negotiations and the completion of a section 106 agreement securing contributions towards inter alia, affordable housing, education, highways, and community facilities (leisure, sports, medical and policing) the County Council was granted planning permission in May 2022 by the District Council.

The Trust applied for judicial review of the District Council’s decision to grant planning permission on the following four grounds:

Ground 1: Failure to take into account a material consideration, namely the adverse impacts on the health of the community served by the Trust as a direct result of the increased population generated by the proposed development absent any financial contribution to mitigate those impacts.
Ground 2: Failure to take into account a material consideration, namely the short and long-term impacts of the proposed development and the gap in the Trust’s funding because its funding model does not take into account local housing needs, projections, allocations, planning permissions or housing supply.
Ground 3: The District Council took into account an irrelevant and/or immaterial consideration, namely that the adverse impacts were not due to the proposed development but due to the Trust’s funding model.
Ground 4: Failure to take into account a material consideration, namely the further detailed evidence provided to demonstrate the adverse impacts and the need for mitigation and/or to the failure or refusal to take that evidence back before members of the Planning Committee or disseminate that environmental information to the public prior to final determination.

In response the County Council, as First Interested Party, agreed with the stance of the District Council, and said that all four grounds were unarguable for the following reasons:

Ground 1: The District Council did take account the purported adverse impacts on the health of the community that would result if the County Council were not required to provide gap funding to the Trust but concluded that the Trust’s case on this issue had not been made out. The District Council noted that the Trust had not established when any such impacts would arise or how extensive any such impacts would be. The District Council concluded that any health impact should not arise or should be very substantially ameliorated given that the Trust could and should alter its funding arrangements in order to meet the costs of any additional patients seeking treatment whilst residing at dwellings as part of the development. Accordingly, even if these health impacts were a material consideration in planning terms, there is no basis for claiming that the District Council acted unlawfully: the District Council would be required to take the consideration into account (which it did), but it would not be compelled to agree with the Trust on the merits (which it did not).
Ground 2: The District Council did consider whether refusing the Trust’s contribution request would have an adverse effect on patients and it concluded, on the basis of the evidence before it, that it would not. Even if human healthcare impacts were a material planning consideration, the District Council would be required only to take them into account (which it did), but not to agree with the Trust on the merits (which it did not).
Ground 3: The question of whether any adverse impact would be caused by the development or by the Trust is more than a relevant consideration: it is a restatement of the regulation 122 test. The District Council rejected the Trust’s case on this issue on its merits and concluded that if the Trust has the option of entering into a contractual arrangement that would give rise to no gap in funding, then the effective cause of any gap which does arise must be the Trust itself. In such circumstances, it cannot be necessary within the meaning of the regulation 122 test, to require the County Council to make a section 106 contribution designed to fill any funding gap.
Ground 4: In reaching the decision the District Council took the whole of the Trust’s case in the round and rejected it on its merits.

Whilst permission was refused on the papers on 3 August 2022 by Mr Justice Dove, it was subsequently granted following an oral hearing before Sir Ross Cranston sitting as a Deputy High Court Judge on 25 August 2022 and the matter has been set down for a two-day hearing on 7 and 8 December 2022. This is an opportunity for the High Court decision in R (HFAG Ltd) v Buckinghamshire Council [2022] EWHC 523 (Admin) to be tested.

The County Council in its capacity as applicant and majority landowner is in a rather unique position. It is the First Interested Party in the claim and is playing an active part in the proceedings.

Clare Sinnott acts for Leicestershire County Council and has instructed Zack Simons and Isabella Buono both of Landmark Chambers.