Municipalities, be careful when carrying out an exploitation/partnership agreement!

In its decision on 27 January 2015, the Court of The Hague ruled that the municipality was in breach of its exploitation/partnership agreement with the developer. The municipality must therefore compensate damages suffered by the developer. The municipality’s defence, that it only had an obligation of best efforts and not an obligation of results, was of no avail. This verdict is important to both municipalities and developers who enter into similar agreements.

What happened, exactly?

The municipality of Goeree Overflakkee and the project developer in question (De Eylaenden) entered into an exploitation/partnership agreement in May 2009 (“the agreement”). In short, the agreement involved De Eylaenden mostly building houses in the project area. The municipality would create the necessary spatial planning base, including the establishment of a zoning plan.

The agreement stated inter alia: “To the fullest extent possible, the municipality will facilitate the establishment of all necessary amendments to the current zoning plans and the completion of all related procedures as soon as possible.”

The council then established the zoning plan and the corresponding exploitation plan. The decision establishing the zoning plan was annulled by the Administrative Division of the Council of State, as it was suspected that the local noise regulations could not be satisfied.

Amendment

The parties were in agreement that the shortcoming in the zoning plan was easy to amend. The council would be able to establish a new zoning plan which would be approved by the Administrative Division.

The council never established the new zoning plan. Research conducted by the council revealed that the project was not exploitable.

Damages

De Eylaenden claims to have suffered damages as a result, estimated at a total of EUR 3,000,000. In these proceedings, De Eylaenden therefore requests that the council be found accountable for failure to fulfill the agreement, or at least acted unlawfully towards De Eylaenden, and requests compensation for the damages suffered as a result.

The verdict

The findings of the court can be summarized as follows:

  • The shortcoming in the zoning plan was easy to amend;
  • Prior to the establishment of the zoning plan, the council was already aware of the problems that could arise regarding environmental nuisance. These issues have been recognized as such by councils a long time ago;
  • Only after establishment of the zoning plan did that council release the environmental reports on which the Administrative Division partly based its decision. It would seem that the council only then realized the seriousness of the situation;
  • The council paid insufficient attention to case law and was not even alarmed by the submitted views. It could have been deduced from the views that serious environmental nuisance was to be expected.The council unsuccesfully argued that the contract only entailed an obligation of best efforts, and not an obligation of result. It is an argument often used by councils. The Court deemed this correct on its own, but the defence did not aid the council in this case. The efforts which the council had undertaken should have also been conducted with due care. The council should have not made easily avoidable mistakes, and should be held accountable for the resulting damages suffered by De Eylaenden.
  • The Court is of the opinion that the careless decision making constitutes a culpable shortcoming by the council with respect to that which it had undertaken under the agreement with De Eylaenden.
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Nina Rijsterborgh
Advocaat
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