I should think they would have to. Their legal department should keep the Planning dept up to speed on any legislation or case law affecting Planning.
Law always takes precedence over policy.
Presumably if a council refused something and an applicant appealed, on the basis of Hilton they could make a claim for costs against the council, because in not applying the relevant law, the council could be taken to have acted unreasonably.
So I had a very quick look over the case mentioned, and from what I gathered from it (I'm currently working so cannot read it in full):
- the applicant originally had a 2 storey extension under PD/PP
- the applicant wanted to extend the ground floor further, but falling under PD
- it got refused by PP