Abbey Healthcare case
In Abbey Healthcare (Mill Hill) Ltd v Augusta 2008
LLP [2024] UKSC 23, the Supreme Court had to decide
whether the Court of Appeal had erred in its decision that the
collateral warranty in this case was a "construction
contract" for the purposes of section 104(1) of the Housing
Grants, Construction and Regeneration Act 1996.
In this case, the contractor was appointed to build a care home
under a JCT Design and Build Contract and, in 2017, the owner
granted a long lease of the care home to Abbey Healthcare. The
following year, fire-safety defects were discovered in the care
home, which the contractor refused to put right. They were then
remedied by a different contractor but at the cost of the original
contractor. In 2020, the freeholder asked the contractor to provide
the tenant with a collateral warranty in favour of Abbey which they
eventually agreed to do. They warranty contained a covenant that
the contractor "has performed and will continue to perform
diligently its obligations under the contract".
Both the freeholder and the tenant brought adjudication proceedings in relation to the fire safety defects, and both were awarded damages and subsequently applied to the Court for summary judgment to enforce the adjudicator's awards. The contractor declined to engage with the adjudicator's decision in relation to the tenant's claim, on the basis that the collateral warranty it had provided to the tenant was not a construction contract under s. 104(1) of the Housing Grants, Construction and Regeneration Act 1996. They argued that this meant that the adjudicator therefore had no jurisdiction.
The first instance judge agreed, but this was reversed by the Court of Appeal where all the members agreed that a collateral warranty was capable of being a construction contract and a majority held that the collateral warranty in this case was such a contract. The contractor appealed against this decision.
The Supreme Court held that, rather than follow previous caselaw where a decision about the status of a collateral warranty depends on a close analysis of the words used, they would draw a dividing line between collateral warranties which merely replicate undertakings in the building contract and those which give rise to separate or distinct undertakings for the carrying out of construction operations.
This new dividing line means that:
- The collateral warranty in this case is not a construction contract.
- Most collateral warranties will not be construction contracts which, according to the Court, probably reflects Parliament's intentions in framing the 1996 Act as they did. This might cause difficulties in enforcing adjudicators' decisions in relation to collateral warranties that were decided before this judgment.
- The decision in Parkwood Leisure Ltd v Laing O'Rourke Wales and West Ltd [2013] EWHC 2665, upon which the majority of the Court of Appeal placed considerable reliance and rightly held to be indistinguishable, was wrongly decided and must be overruled.
Employers should be mindful that this case does not say that it is impossible for collateral warranties to be deemed to be construction contracts, but that in order to so qualify they must do more than merely repeat the terms of the building contract. While new standard forms are considered by the industry, this case comes as welcome clarification
The King's Speech
On 17 July 2024, the first King's Speech of the new Labour Government was read out by Rachel Reeves, the Chancellor of the Exchequer. The King's Speech was Labour's first opportunity to formally set out its legislative agenda following its victory in the general election on 5 July 2024 and as expected following the emphasis on planning within the Labour manifesto, the Chancellor confirmed that accelerating planning and development is firmly at the forefront of the Government's agenda in order to "get Britain building" and to stimulate growth. In fact, planning reform was the second topic addressed by the Chancellor in the King's Speech which provides further indication that planning reform is a priority for the new Government.
The headline announcement from a planning and development perspective was the announcement and brief synopsis of the Planning and Infrastructure Bill. The Chancellor confirmed that the Bill will seek to reform the planning system to accelerate the planning process and to speed up the delivery of major infrastructure projects, noting that "the current planning regime acts as a major brake on economic growth". The briefing notes for the King's Speech states that the Planning and Infrastructure Bill will accelerate housebuilding and infrastructure delivery by:
- streamlining the delivery process for critical infrastructure including accelerating upgrades to the national grid and boosting renewable energy, which will benefit local communities, unlock delivery of our 2030 clean power mission and net zero obligations, and secure domestic energy security;
- simplifying the consenting process for major infrastructure projects and enable relevant, new and improved National Policy Statements to come forward, establishing a review process that provides the opportunity for them to be updated every five years, giving increased certainty to developers and communities;
- further reforming compulsory purchase compensation rules to ensure that compensation paid to landowners is fair but not excessive where important social and physical infrastructure and affordable housing are being delivered;
- improving local planning decision making by modernising planning committees;
- increasing local planning authorities' capacity, to improve performance and decision making, providing a more predictable service to developers and investors; and
- using development to fund nature recovery where currently both are stalled, unlocking a win-win outcome for the economy and for nature, because we know we can do better than the status quo.
The Chancellor also unveiled the English Devolution Bill as part of the King's Speech, explaining the intention behind the Bill is "moving power out of Westminster and back to those who know their areas best. It will give local leaders the tools they need to drive growth". The briefing notes for the King's Speech provide the following notable headline points from a planning and development perspective:
- putting a more ambitious standardised devolution framework into legislation to give local leaders greater powers over the levers of local growth. This will include enhanced powers over strategic planning, local transport networks, skills, and employment support, enabling them to create jobs and improve living standards. We will also introduce new powers and duties for local leaders to produce Local Growth Plans;
- improving and unblocking local decision making through more effective governance arrangements, ensuring mayors and Combined Authorities can get on and deliver for their areas; and
- empowering local communities with a strong new 'right to buy' for valued community assets, such as empty shops, pubs and community spaces.
The planning and development sector will undoubtedly be pleased to see that planning reform (with a view to driving development) is at the forefront of the new Labour Government's agenda. However, given we only have a few paragraphs of detail from the King's Speech at this stage, the devil will be in the detail once the respective Bills have made their way through the legislative process. In the meantime, the Government will be hoping to continue to drive change in this area via planning policy reform and a consultation on the reform of the NPPF recently closed (we note as at the date of this briefing that some minor amendments have already been made to the NPPF without consultation).
When does the use of a right of way become excessive?
Excessive use of an easement can amount to a nuisance. In some cases, the owners of the servient land can obtain an injunction to stop the excessive use. However, the caselaw surrounding this area is complicated and fact-specific. As a general rule, the construction traffic associated with new development on the dominant land is not deemed to constitute excessive user because it is time-limited (Bucknell v Alchemy Estates [2023] EWHC 683). Another rule of thumb is derived from the case of McAdams Homes Ltd v Robinson [2004] EWCA Civ 214, where the fact that the development meant a change of use of the dominant land from a bakery to two houses was deemed to be very significant and meant that the user would become excessive.
Guidance from the McAdams Homes case in the Court of Appeal
When considering if new development on the dominant land would impose an excessive user on an existing easement, consider:
- Will the new development on the dominant land lead to a radical
change in the character of that land?
- Will it mean a significant increase or change in the nature of the burden on the servient land?
Earlier this year, the County Court had to consider whether the shared use of a single track lane was excessive, in Merlin Real Estate Ltd v Balaam [2024] PLSCS 88. Here, the servient land was agricultural land farmed by the Balaam family, and the dominant land was owned by Merlin Real Estate, property developers. There were already 22 houses on the land and Merlin Real Estate was planning to almost double this number.
The parties had fallen out, with the Balaams claiming that this increase in use had become an unreasonable use of the right of way which interfered with their own use of the track, and that this situation would worsen as more development took place as planned. Part of their argument was that the lane was too narrow to allow users to pass each other in different directions, meaning vehicles had to pull onto the grass verge. They claimed that this land was in their ownership and outside the grant, so its use in this way amounted to a trepass.
In response, Merlin Real Estate applied to court for a declaration that its current use of the roadway was lawful and that they were entitled to use both the passing places and the verges at the side of the way.
The right of way was expressed as a "right in common with all other persons from time to time having the like right at all times with or without vehicles to go pass and repass". This meant that it was not limited to the properties that already existed on the land on the date of grant, or to any particular purpose or time. The Court applied the following analysis:
- Where there is no explicit limitation in the grant, full effect
had to be given to it. Subsequent users could not be considered
sufficient in themselves to reduce the generality of the grant:
White v Grand Hotel (Eastbourne) Ltd [1913] 1 Ch
113.
- The owner of a general right of way could use it not only for
the purposes of the use to which the dominant tenement was being
put at the time of the grant, but also for any other lawful
purposes to which it might later be put.
- However, the right had to be exercised in a manner least
burdensome to the servient tenement, and the right is limited to
what the servient land can physically accommodate, because that is
assumed to be what the parties had intended at the time of
grant.
- The grant itself was not clear about whether the grass verges were included or not. If they were not, it is possible that they could be deemed to be included by reason of an implied easement of necessity, because without a right to pass each other along the roadway, the right to use it as expressly granted could not be reasonably exercised: Carpenter v Calico Quays [2011] EWHC 96 and Lea v Ward [2017] EWHC 2231 (Ch). Alternatively, it is possible that a prescriptive right could have arisen as a result of the verges being used in this way for 20 years or more.
The Court decided that the use of the roadway by Merlin Real Estate and the residents on their land did not unreasonably interfere with the Balaams' use of the roadway on their land, and did not consider that the addition of the proposed new dwellings would change this conclusion. As for the grass verges, although there was an old plan which appeared to show that the Balaams owned them, the Court held that the parties had behaved as if Merlin Real Estate and its predecessor in title owned them on their side of the track, meaning that there was at least a prescriptive right to use them. The Court therefore granted the declaration requested by Merlin Real Estate.
This decision will be welcomed by developers building out estates where accessways are outside their ownership. For those granting rights of way, it is a useful reminder of the need to be very specific in the terms of the grant.
New RICs protocol on rights to light
4.1 Why is the Rights of Light Protocol Required?
Rights of Light disputes can be complex, long-running and extremely costly. A new RICS Protocol for Disputes relating to Rights of Light (the "Protocol") aims to provide a process to enable developers of property which may infringe rights of light (the "Developer") and owners believing their rights of light may be infringed (the "Adjoining Owner") to constructively engage in such potential disputes early, with a view to promoting swift and cost-effective resolution.
The Protocol is not binding and may not be appropriate in all scenarios. It assumes that the Developer will have engaged a suitably qualified rights of light surveyor and/or solicitor to advise on its position prior to embarking on the steps in the Protocol. Nevertheless, the Protocol provides a helpful roadmap of 'best practice' in the majority of rights of light disputes. The main benefit is its encouragement for parties to manage potential disputes proactively, providing useful guidance on the information to be exchanged from the outset, suggested timeframes for any response, and the appropriate stages for experts and advisors to hold without prejudice discussions to seek to resolve the issues.
4.2 What does it provide?
The Protocol is designed to be as straightforward as possible, setting out just three stages of engagement. Whilst in most cases the stages in the Protocol will be initiated by the Developer, there is also guidance for scenarios in which an Adjoining Owner has not received any communications from a Developer and may wish to initiate the steps in the Protocol itself.
Stage 1: Introductory Letter and Initial Response
This provides a process for the Developer to set out, in writing, key information in relation to its proposed development in an Introductory Letter, together with supporting information. This includes copies of plans for the development or a link to the relevant planning application. The Introductory Letter confirms the further information the Developer requires in order to ascertain the extent of any potential infringement of the Adjoining Owner's right of light (including, for example, an inspection of the Adjoining Owner's property). The Developer is also encouraged to undertake that it will pay the Adjoining Owner's reasonable surveyor's fees.
A response to the Introductory Letter setting out the recipient's position should be provided within 21 days of receipt.
Stage 2: Exchange of information
This stage sets out a process for exchanging information sufficient for parties to identify whether the loss of light caused by the proposed development will constitute an actionable nuisance by the Adjoining Owner. It provides that the Developer will arrange an inspection of the Adjoining Owner's property. Within c.14 days of the inspection, the Developer's technical loss of light analysis should be provided to the Adjoining Owner.
The Protocol then envisages that parties will request the further information necessary to assess whether there is a claim for infringement of rights of light and, if so, the extent or quantum of such claim. The information required will vary on a case-by-case basis. It may include copies of the title deeds and information of tenancies of the Adjoining Owner's property, to the extent these are not available at the Land Registry. Requests for further information should ideally be responded to within 14 days of receipt.
Stage 3: Dispute resolution
The final stage provides for the parties' advisors to meet on a without prejudice basis to seek to narrow the issues in dispute. The Protocol encourages parties' surveyors to attend an initial meeting and to agree, at the very least, the technical level of any loss of light on a traditional Waldram basis and a book value amount in respect of that loss. The surveyors are also encouraged to consider the extent to which other technical methodologies may be relevant. This is a useful development. Disputes about the appropriate rights of light methodology for each case are one of the main issues that can obstruct settlement, and can substantially increase the costs of pursuing rights of light claims in court.
A list of the matters that are resolved and remain unagreed between the surveyors should be provided within 14 days of any meeting.
To the extent that the unagreed matters cannot be resolved, the Protocol provides for parties to issue a formal Letter of Claim, followed by a further without prejudice discussion between parties' solicitors. More traditional methods of alternative dispute resolution, including mediation and expert determination, are encouraged at this stage.
4.3 Impact of the Protocol on Developers and Adjoining Owners
As is clear from the range of rights of light disputes that have been heard by the court in recent years there is no 'one size fits all' approach to rights of light cases. In some instances, particularly urgent cases, the timelines set out in the Protocol will not be appropriate. Nonetheless, the Protocol provides much-needed guidance on the steps that parties should take prior to issuing proceedings in most claims. It is also promising that parties are encouraged to take expert advice early. Whilst this will involve costs from the outset, early specialist advice can vastly improve the prospects of swift resolution, preventing the delays and further costs of long-running litigation.
It is worth noting that the Protocol aims to be compatible with most rights of light insurance policies. However, all Developers with rights of light insurance should ensure that they review their policy wording carefully before embarking on the Protocol, to avoid any deviation from the policy terms.
Biodiversity net gain update
It is now over 6 months since the majority of new planning permissions started to fall within scope of the new 'Biodiversity net gain' ("BNG") requirements. Since 12 February this year, most new planning permissions have been subject to a pre-commencement condition requiring a 'biodiversity gain plan' for the proposed development. Most developments fall within scope of the BNG requirements, however there are a few notable exceptions:
'Nationally Significant Infrastructure Projects', which are expected to be subject to a BNG requirement from 2025; Developments which do not impact priority habitats and affect less than 25 square metres of habitat or 5m of linear habitat like hedgerows; and Householder applications and self-build applications.
To summarise, biodiversity gain in this context means the new development must exceed the pre-development biodiversity value of the onsite habitat by at least 10%, leaving the environment in a measurably better position than it was in pre-development. Biodiversity gain is measured using the Government's biodiversity metric, which calculates how many units a habitat contains before development takes place and how many units are needed to replace the units of habitat lost and to achieve 10% BNG through the creation or enhancement of habitat. The formula takes into account a range of factors including the habitat's size, type, condition, and strategic significance.
The 10% BNG requirement can be delivered on-site, off-site, or through the purchase of 'biodiversity credits', or via a combination of these. There is a hierarchy, with on-site value being the preferred option where possible. Failing that, off-site options should be explored next followed by the use of credits as a last resort. The associated habitat, or enhancement, must then be maintained for at least 30 years following the completion of the development with this obligation being secured by legally binding mechanisms such as a conservation covenant.
Natural England recently published an update, reflecting on the implementation of the BNG initiative into the planning process and according to Natural England, landowners have found that BNG has been a catalyst for developing their vision and a new approach to land management. Natural England further noted that "some developers are telling us that following the biodiversity gain hierarchy has already changed the way they choose sites, and how they approach their designs for the benefit of people and nature." It was also acknowledged that the BNG initiative has stimulated the creation of a new market and associated activity to link developers and providers of off-site BNG solutions, with nearly 500 sites being advertised online as ready or nearly ready to be registered on the biodiversity gain site register.
Although Natural England has reported a broadly positive outlook for the BNG initiative over the course of its first 6 months post-implementation, it is too early to tell whether the impact of the initiative on the planning sector and prospective developers is positive overall. The trailblazing nature of the BNG initiative means there is a lack of comparative initiatives in other jurisdictions, however the concern for developers and the broader real estate industry is that the significant BNG-related changes have been introduced to a planning system which is already creaking under the weight of expectations. As outlined above following the King's Speech in July, the new Labour Government will be hoping the get the Planning and Infrastructure Bill and the English Devolution Bill through Parliament soon in order to accelerate the planning system. In the meantime, developers should look to frontload the consideration of BNG requirements such as submitting the Biodiversity Gain Plan pre-commencement of the development in order to reduce the scope for unexpected delays in the condition being discharged and, consequently, starting on site.
We hope you've found this collection of updates interesting. Please contact us if you'd like to discuss any of them.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.