Local authority wins High Court dispute with developers over operation of overage mechanism

A local authority has won a High Court battle with a consortium of developers over the interpretation of an overage provision in a s.106 agreement, it has been reported.

The case of Morris Homes Ltd & Ors v Cheshire West and Chester Council, concerned a major housing development in Cheshire.

Kings Chambers said the developers and Cheshire West and Chester Council had entered into a planning obligation pursuant to s.106 Town and Country Planning Act 1990.

The planning obligation included an overage mechanism, requiring the developers to pay a portion of their profits to the local authority.

The developers contended that certain profits should be left out of the calculation, namely, revenue from ground rents and from selling freehold reversions, as well as the capitalised value of retained freehold reversions.

The parties had previously submitted their dispute on the interpretation of the provision to an adjudication by an independent expert, who had found in favour of Cheshire West and Chester on this issue.

The developers later commenced a claim in the High Court, seeking a declaration that the expert’s decision was not binding, and that it was wrong in law.

At the end of the trial on 17 October His Honour Judge Pearce, sitting as a Judge of the High Court, accepted the local authority’s case on contractual interpretation, and found that the disputed sums should be included in the overage calculation.

Jonathan Wright of Kings Chambers represented Cheshire West and Chester throughout the High Court proceedings, securing a successful dismissal of the developers’ claim at trial, together with an award of costs.