Developers buying open land beware – Statutory trust does not bite the dust!

Comment on R (on the application of Day) v Shropshire Council [2023] UKSC 8

A recent decision of the Supreme Court confirms the consequences of a local authority’s failure to comply with statutory notification requirements. This failure meant that an open space acquired from the local authority by a developer, who had planning permission to develop it, was subject to a statutory trust. As a result the planning permission was quashed and the developer was left with land that could not be developed.

This case therefore highlights the risk that councils may not have taken the necessary steps before proceeding with the sale of open land.

Summary of facts

In 2017, Shrewsbury Town Council sold a parcel of land to CSE Developments (Shropshire) Limited (“CSE”). This land was the subject of a statutory trust, benefitting the public by granting them access to, and use of the land for recreational purposes.

Section 123(2A) of the Local Government Act 1972 (“LGA 1972”) provides that should a council wish to dispose of land subject to a statutory trust they must:

• Give notice of their intention to do so for two consecutive weeks in a newspaper that circulates locally
• Consider any objections to the proposed disposal that may be made to them.

If at this stage the council proceeds with the disposal of the land, section 123(2B) of the LGA 1972 states that, by virtue of that disposal, the land shall be freed from the trust.

In this case, the local authority were unaware that the parcel of land in question was subject to a statutory trust and so disposed of it, without complying with the above sections of the LGA 1972. Planning permission was granted to build residential housing. After which a local resident, Dr Day, brought judicial review proceedings to challenge the grant of planning permission, after unearthing the existence of the statutory trust.

The decisions of the lower courts

High Court:

– Dismissed Dr Day’s application on the basis that even if the statutory trust had survived the sale, it was not enforceable against CSE.

Court of Appeal:

– Differing from the High Court in their reasoning, instead dismissed Dr Day’s appeal on the basis that the statutory trust was extinguished upon the sale of the land.

The Supreme Court’s decision

Shropshire Council relied upon section 128(2)(a) of the LGA 1972, which states that a disposal of land that would have been subject to the advertisement requirement shall not be invalid if said requirement has not been complied with. Further, section 128(2)(b) states that the purchaser of the land shall not be concerned to see or enquire whether such an advertisement requirement has been complied with.

Shropshire Council also argued that section 128(2) itself brings the rights the public enjoy under a statutory trust to an end. They suggested that it would be misleading for a local authority to sell a buyer a parcel of land that the public still had access to (access which may preclude the buyer from making its intended use of the land), all whilst suggesting that the buyer need not be concerned to enquire as to its status.

The Supreme Court disagreed and allowed Dr Day’s appeal, raising the issue of the proper construction of the statutory provisions. They acknowledged that there was a tension in this case, as it was likely that the purchaser developer may have paid a price for the land that reflected development potential which could no longer be realised. However, if Shropshire Council was correct and the trust did not survive, then the public would not be able to find out about and object to the sale of the land, something it was clearly intended the legislation should enable them to do.

In seeking to resolve this tension, the court concluded that:

– “Courts have always taken a very strict approach to powers of local authorities to sell recreation grounds and open spaces. Courts have always refused to allow public rights to be overridden by general or vaguely worded powers in a statue.”

– “Parliament could have been in no doubt when drafting the 1972 Act that very clear words indeed were needed in order for a power to sell land to be effective to end the public’s rights under a statutory trust.”

Based on the above, the court decided that section 128(2)(b) was not sufficiently clear as to extinguish the statutory trust and that such a trust can only be extinguished if the local authority have advertised their intention to sell.

Why is this case important – particularly for developers?

The Supreme Court focused on the fact that Shrewsbury Town Council did not do the necessary research into their archives and that it would be “all to the good” if local authorities did the required due diligence before selling land and granting planning permission.

What was not mentioned is the lack of a statutory requirement for purchasers to take any responsibility in this regard.

This case therefore serves as a warning that local authorities may not always meet the necessary statutory requirements before proceeding with a sale. The court has confirmed that ignorance is not a defence and nor will it stop the court from protecting a statutory trust. It is therefore imperative to carefully consider your due diligence or you could be left with land that is subject to public rights.