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19/12/2014

Confidentiality and viability: An unhappy marriage?

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How do you balance transparency with commercial sensitivity when it comes to making financial viability assessments, asks Hugh Flanagan of Francis Taylor Building

Hugh Flanagan

Viability is a central concept in national planning policy: if a developer can prove that section 106 contributions make a development unviable, they need not be provided.

Viability as a material consideration can therefore be something of a panacea to unachievable section 106 demands. But it may come with a bitter twist – for how do you prove lack of viability if proof involves commercially sensitive information and planning decision-making is a very public process?

Two recent legal challenges have explored the extent to which members of the public can force disclosure of these financial viability assessments. The first is the Heygate Estate decision of the First-Tier Tribunal (General Regulatory Chamber) (EA 2013/0162) (May 2014). The tribunal decided that the local planning authority had to disclose to a member of the public only parts of a financial viability assessment produced by the developer in order to justify a lower than policy-compliant level of affordable housing. In particular, a bespoke development model created by the developer was held to be a ‘trade secret’, disclosure of which would be of value to the developer’s commercial competitors. It should not be disclosed. Sales values of properties, on the other hand, were not as sensitive because they would generally reflect known market values. They could be disclosed.

The second case is R (Perry) v Hackney LBC [2014] EWHC 3499 (October 2014). The authority’s decision to grant planning permission was judicially reviewed on the basis that it was unlawful for councillors to proceed on the basis of a summary only of a financial viability assessment, with the full commercially sensitive document withheld from members despite it having been provided to council officers. The challenge was dismissed: this was a lawful way to proceed, especially since the developer’s appraisal had been independently reviewed by consultants acting on behalf of the council. Importantly, however, the High Court did not determine the question of whether members of the public could force disclosure of the appraisal. That was a matter to be resolved by the Information Commissioner and potentially the tribunal, as happened in the Heygate decision.

"It will be very difficult for a developer to be sure that his commercially sensitive appraisal will not make it beyond the local planning authority into the hands of commercial rivals"

So where does this leave us? The recent case law shows us that the position is complex. Although confidential material can be withheld from the councillors making the decision (see Perry), a member of the public may still have rights to access it under Freedom of Information legislation, which rights can be enforced before the Information Commissioner or the tribunal (see Heygate). Nor can complete comfort be taken from the fact that the commissioner or tribunal may refuse disclosure of some or all of the commercially sensitive material; the problem remains that each case is likely to be fact-sensitive, so that there is little certainty on the matter. It will be very difficult for a developer to be sure that his commercially sensitive appraisal will not make it beyond the local planning authority into the hands of commercial rivals.

A third way does potentially exist. It may be possible to keep the contents of an appraisal generic – by using market costs and values, for instance, rather than the developer’s own commercially sensitive assumptions. This may not be an option on more complex developments where bespoke models are needed, but where it is possible it can neatly bypass the confidentiality minefield.

Hugh Flanagan is a barrister at Francis Taylor Building specialising in planning, environmental and public law.

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