CPA News - Sep 2009

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September 2009

                               Transport for London v Spirerose Ltd
                          In a unanimous decision, the House of Lords has allowed the appeal of the acquiring
                          authority in Transport for London v Spirerose Ltd ([2009] UKHL 44). The decision of
                          the House focuses attention again on the problem of ascertaining the planning status of
                          land, and the difficulties that the relevant statutory rules still present 50 years after they
                          were enacted. The Court of Appeal, in Star Energy UK Onshore Ltd v Bocardo SA
                          ([2009] EWCA Civ 579), has allowed an appeal by the oil company and given its views
                          on whether the grant of rights to drill oil in land may have a particular value to special
purchasers. The Upper Tribunal (Lands Chamber) decided in Urban Edge Group Ltd v London Underground Ltd
([2009] UKUT 103 (LC), ACQ/186/2005) that that part of the statutory code relating to planning assumptions
derived from development plans, in particular section 16, does have application to modern development plans. In
R (Sainsbury’s Supermarkets Ltd v Wolverhampton City Council ([2009] EWCA Civ 835), the Court of Appeal
considered the scope the benefits that may be considered in making a compulsory purchase order under section
226(1)(a) of the Town and Country Planning Act 1990. Finally, the Court of Appeal had to get to grips with a
procedure difficulty in Kent County Council v Union Railways (North) Ltd [2009] EWCA Civ 363; the acquiring
authority entered land without serving a notice to treat on certain claimants who alleged they held interests in the
land, interests which were put in issue by the authority.

The issues in Spirerose Ltd                                 The approach of the House of Lords
In the Spirerose case the Lands Tribunal decided            Three preliminary points are clear from the speeches.
that the claimant had proved on a balance of                First, that their lordships did not find any anomalies or
probabilities that planning permission for a                lacuna, in the complex statutory code relating to the
mixed-use development of the subject property               ascertainment of the planning status of land for
would have been granted by the valuation date: on           compensation purposes, that required to be addressed
that basis of a certainty of planning permission,
                                                            by the application of the Pointe Gourde principle, or
and the compensation was assessed at £608,000.
                                                            any other purposive principles of statutory construction.
On the basis of a “hope” for planning permission,
                                                            The House did not find that the underlying aim of fair
the Tribunal would have awarded £400,000. The
                                                            compensation was not met by the application of the
Court of Appeal decided that the tribunal was
                                                            statutory code. Second, there are several indications in
entitled to come to that conclusion, and dismissed
the appeal of the acquiring authority. The acquiring        the speeches that the Pointe Gourde principle must be

authority    appealed to the House of Lords                 regarded as having a limited role where there is a
contending that the Pointe Gourde principle, and            statutory code. Third, that it was doubtful whether the
the other reasoning of both the Tribunal and the            “loss of chance” concept, derived from tort cases in the
Court of Appeal, did not warrant the valuation of           quantification of damages, would greatly enrich the law
land on the basis that a grant of planning                  of compensation for the compulsory acquisition of land
permission was a certainty; on a finding of                 (per Lord Scott of Foscote at para 42 and Lord Walker
probability by the Tribunal, there could only be a          of Gestingthorpe at para 42).
probability of planning permission, and the
compensation should be assessed on a “hope”
                                                         CPA NEWS - SEPTEMBER 2009                                      Page 2

                                                                 granted on a balance of probability, namely, “a reasonable
The approach of the House of Lords
                                                      …..Cont    prospect”, “the prospects … would have been good”, “strong
                                                                 likelihood … [of] consent”, and a “good chance”. Lord
Lord Walker reviewed the decisions leading up to Pointe
                                                                 Collins concluded that these formulations were no basis for
Gourde Quarrying and Transport Co Ltd v Sub-Intendent of
                                                                 any suggestion that the Tribunal found that permission would
Crown Lands [1947] AC 565 and those since. He considered
                                                                 certainly have been granted (para 98). He therefore said that
the statutory scheme for planning assumptions in the 1961
                                                                 on the basis of the statutory provisions, and of authority, that
Act before concluding that the Pointe Gourde principle’s
                                                                 (a) the value of land is     the open market value, (b) any
vigour was now channelled and restrained by a much more
                                                                 depression in price which the land might be expected to
complex statutory scheme. He did not exclude the possibility
                                                                 fetch caused by the scheme is to be disregarded, (c) the
that the Pointe Gourde principle can have application where
                                                                 valuation must take into account the potential of the land,
there is some lacuna in the legislation, but only where the
                                                                 including its potential for development, and (d) the
underlying aim of fair compensation is not met by applying
                                                                 development potential must be valued in the normal way, by
the terms of the 1961 Act (para 36). But he considered that
                                                                 discounting future uncertainties. He said that if these
the Court of Appeal was wrong to decide that just because an
                                                                 propositions are right, they provide the answer to the issue on
owner was unable to take advantage of any statutory
                                                                 appeal: a valuation on a “hope value” basis was the
assumption (whether under section 16 or under a certificate
                                                                 appropriate one.
of alternative development issued under section 17) there was
an anomaly to be remedied. As Parliament had enacted a           In considering the way that the Court of Appeal had dealt
complex statutory code, it was not for the Courts to remedy      with the case, Lord Collins said that the decisions in Jelson
that code in accordance with its perception of what was fair.    Ltd v Blaby District Council [1977] 1 WLR 1020 and
He accepted that the case did not fall within any of the         Melwood Units Pty Ltd v Commissioner for Main Roads
statutory assumptions. But he concluded that the decision of     [1979] AC 426 (PC), that but for the road scheme in each
a local planning authority on an application for planning        case, permission would actually have been obtained, were no
permission was not predictable with certainty, and the           authority for the proposition that that the grant of planning
decision that permission would have been granted was             permission is to be assumed once it is shown that it would
wrong.                                                           probably have been granted. Lord Collins then considered
                                                                 Porter v Secretary of State [1996] 1 EGLR 10, and the
Lord Neuberger of Abbotsbury did not consider that it was
                                                                 arguments about loss of a chance, and said that that decision
right to invoke the Pointe Gourde principle, or any other
                                                                 was consistent with his view as to the prospect of planning
principle developed by the courts, for the purpose of adding a
                                                                 permission where there is no statutory planning assumption;
wholly   new    assumption     to   the   statutory   planning
                                                                 he observed that Porter concerned the effect on the retained
assumptions, especially if inconsistent with one or more ex-
                                                                 land of the claimant, and a claim under section 7 of the
press statutory assumptions.
                                                                 Compulsory Purchase Act 1965, and he did not think it was
Lord Collins of Mapesbury, with whom the rest of the House       helpful in the valuation exercise under rule (2) of section 5 to
agreed, identified the findings of the Tribunal, and the         approach the question of compensation through the loss of
various ways it expressed that planning permission would be      chance approach in cases for negligence.
Page 3

Finally, Lord Collins observed that the right approach to the      One point in the decision is of general interest; the
basis of the Pointe Gourde principle was that it was one of        acquiring    authority   argued    that   section   16(2)   had
statutory interpretation, mainly designed and used to amplify      application only where the “current development plan” was
the expression “value”; he relied on Lord Pearson in Rugby         one prepared under the Town and Country Planning Acts
Joint Water Board v Shaw-Fox [1973] AC 202 at 213-215.             1947 and 1962, but had no application to a unitary
Lord Collins noted that the 1961 Act dealt with the present        development prepared under the Town and Country
case by providing not only for the section 17 procedure, but       Planning Act 1990. That was because the reference to “an
also by providing in section 14(3) that even if the statutory      area shown in the current development plan as an area
assumptions do not apply, nothing in those provisions shall        allocated primarily for a use specified in the plan” is one
be construed as requiring it to be assumed that planning           couched in the language of the 1947 Act, which provided
permission would necessarily be refused; that enabled              expressly for such allocations, and the 1990 Act employs
development to be taken into account. He saw no real anom-         different language. It should be added that subsection (1)
aly in the dates relevant to a section 17 application and the      also contains references to defined sites of a more specific
valuation date (1993 and 2002); he said the anomaly only           character.
arose on the facts of the case, and he saw much in the
                                                                   The Tribunal rejected the acquiring authority’s contention
submission that the date of publication of the notice of the
                                                                   for a number of reasons. First, because the definition of
making of the compulsory purchase order, the section 17
                                                                   development plans, in the 1961 Act, has been modified to
date, was a rational choice as that was the date when valuable
                                                                   take account of the second and third generation of
development rights were taken from the owner.              Lord
                                                                   development plans introduced by the 1990 Act and the
Neuberger also agreed with that point.
                                                                   Planning and Compensation Act 2004. Second, although
                                                                   later modifications were made to other parts of section 16,
Urban Edge: statutory planning
                                                                   the fact that no modifications were made to sub-sections (1)
                                                                   and (2) reinforces the impression that it was not thought
This decision of the Upper Tribunal (Lands Chamber)                necessary to alter references to defined sites in those two
concerned land adjoining the land that was the subject of the      sub-sections. Third, defining sites and allocating areas were
decisions in Spirerose : see above. The Tribunal determined a      not terms defined by the 1947 Act or the 1961 Act so as to
number of preliminary issues concerning the planning status        confine their meaning to definitions and allocations made
of the site; the claimant advanced a number of potential           by first generation plans; they do not cease to have meaning
development options. Relevant to these options was section         outside the context of the first generation plans, and indeed
16(2) of the Land Compensation Act 1961. This provides that        that there may be what is referred to as allocation under the
if the relevant land or any part of it consists of or forms part   1990 and 2004 Acts is clear from PPG12 and the 2004
of an area shown in the current development plan as an area        Regulations. On the facts, and on consideration of the rele-
allocated primarily for a use specified in the plan, it shall be   vant policies in the unitary development plan, the Tribunal
assumed that planning permission would be granted for any          decided that the reference land was not allocated for the
development which is: (a) development for the purposes of          uses argued for by the claimant.
that use, and (b) development for which planning permission
might reasonably have been expected to be granted.
Page 4

Bocardo: again
Although the decision of the High Court in Bocardo SA v            Against that interpretation of the compensation entitlement,
Star Energy UK Onshore Ltd and another [2008] EWHC                 and bearing in mind that the Court was concerned with
1756 was concerned with the assessment of damages for a            hypothesising what should have happened, Peter Smith J
trespass, Peter Smith J made some important points about the       formed the view that the hypothetical negotiations would
application of the “one more bid” argument in relation to the      have been as follows (paragraph 85):
compensation payable under section 8(2) of the Mines
                                                                   “ It seems to me that the negotiations that would have taken
(Working Facilities and Support) Act 1966. As explained in
                                                                   place [at the relevant date] when access rights would have
the November 2008 Newsletter, this case involved the
                                                                   been negotiated would have been on the following basis.
extraction of oil from land in Surrey. Oil belongs to the
                                                                   First it would be against the background of the fact that
Crown, but even where a person has a licence to search for
                                                                   either party could go to Court to fix the compensation.
and extract it, that person must obtain access rights under the
                                                                   Second the parties would be faced with a negotiation against
1966 Act, as applied by the Petroleum Acts 1934-98.
                                                                   the background of the Ryder decision and its criticism in the
Section 8(2) of the 1966 Act provides for compensation             Mercury decision. Third the negotiations would therefore be
which:                                                             to achieve the compensation that ought to have been
                                                                   negotiated at the start in accordance with the provisions of
         “… shall be assessed by the court on the
         basis of what would be fair and reasonable                section 8 (2). Thus there would be a grant of ancillary rights;
         between a willing grantor and a willing
                                                                   there is no negotiation on a ransom basis as such. It seems to
         grantee, having regard to the conditions
         subject to which the right is or is to be                 me that the parties would face the position much like in the
                                                                   Markham Colliery scenario. Star Onshore has the oil;
Peter Gibson J, in BP Petroleum Developments Limited v             Bocardo has the control over the access rights to unlock the
Ryder [1987] 2 EGLR 233, said that the assessment of               oil. However if Bocardo negotiate unreasonably (in my view
compensation under section 8(2) was consistent with the            this extends to asserting a ransom value or take it or leave it
judicial interpretation given to the compulsory purchase           figure) Star Onshore can take them to Court. Thus there
legislation, and that the basis was the depreciation in value of   would be agreed a sale between a willing grantor and a
the affected land, but with a small addition to represent the      willing grantee at a reasonable price. I have no doubt
special value to the party seeking rights. At the first instance   Bocardo's opening gambit will be 12.5% [of the value of oil
hearing of Bocardo, Peter Smith J considered Peter Gibson          at the well head].
J was wrong in Ryder. On the 1966 Act, Peter Smith J
                                                                   Peter Smith J’s decision was appealed to the Court of
concluded (paragraph 112):
                                                                   Appeal. Although this case was essentially a claim for
                        “… the Act contemplated a                  damages for a trespass, the parties agreed that the measure of
                       bargain to be struck reasonably             damages recoverable would be defined by reference to
                       between the grantor and grantee
                       representing their respective               section   8(2)   of   the   1966   Act:   “compensation     or
                       interests namely access rights              consideration” for the grant of an “ancillary right” to enter
                       and ownership of the minerals
                       …”                                          the underground strata within Bocardo’s land to drill and
                                                                   place pipelines to extract petroleum. In deciding that section
                                                                   8(2) should be construed, so far as words allow, in a manner
Page 5

                                                                  CPO: benefit to additional site
which is consistent with the statutory and case law regime        The wide powers of compulsory acquisition, in section 226,
establishing the principles for compensation when there is        subsections (1)(a) and (1A), of the Town and Country
compulsory acquisition of land, the Court of Appeal rejected      Planning Act 1990, were in issue in R (Sainsbury’s
Peter Smith J’s criticisms of BP v Ryder [1987] 2 EGLR 233.       Supermarkets Ltd) v Wolverhampton City Council [2009];
It then purported to apply the compensation principles by         section 226(1A) provides that the power to make a CPO
accepting that the exploitation of the petroleum licence in the   should   not     be    exercised   unless   the     development,
specified area was the “scheme” for the purposes of the           redevelopment or improvement is likely to contribute to
valuation of what is fair and reasonable between willing          achieving      the    promotion    of   economic,     social   or
grantor and wiling grantee. The Court of Appeal concluded         environmental well-being of their area. The background to
that any additional value in the right that arose solely by       the case were two rival schemes, one supported by Sains-
virtue of the scheme and the use to which the right would be      bury’s, the other by Tesco; Tesco owned certain land at a
put in pursuance of the scheme had to be disregarded. On that     further site (the RHS site), as well as part of the proposed
basis the compensation was £82.50, consisting of £50, the         main site. The Council, who relied on an internal report
standard compensation paid for a deep tunnel, an additional       which, in looking to well-being benefits for the purposes of
50% because Star Energy was a special purchaser, and an           section 226(1A), had considered the benefits resulting from
additional 10% as required under section 3(2)(b) of the 1966      the redevelopment of the RHS site, resolved to make a CPO
Act.                                                              that involved the taking of land from Sainsbury’s. There was
                                                                  a prospect that the development of the main site would result
What the Court of Appeal failed to consider was that, absent
                                                                  in a cross-subsidy that would benefit the RHS site.
the scheme, the exploitation of the petroleum licence,
                                                                  Sainsbury’s application for judicial review of the Council’s
Bocardo’s land had a pre-existent value to any party wanting
                                                                  decision, on the ground that it was unlawful for the Council
to acquire rights to exploit petroleum. The analogy is found
                                                                  to consider the benefits to the RHS site, not the subject of the
in the old reservoir cases; although statutory powers might be
                                                                  proposed CPO, was dismissed.
required to build reservoirs and exploit the water resources,
the land required for that purpose might still have an            In dismissing Sainsbury’s appeal, the Court of Appeal held
additional value in the absence of the statutory powers for       that a planning authority, considering exercising its
reservoir purposes: see Ossalinsky (Countess) v Manchester        compulsory purchase powers, could have regard to wider
Corpn (1883) (unreported but the judgment printed in              benefits deriving from the redevelopment of a site not within
Balfour and Brown, The Law of Compensation, 2ed at p 659.         the proposed development itself. In order to fall within s.226
A more modern, and simpler, analogy is where a piece of           (A), the benefits had to flow from the redevelopment of the
land has a pre-existent value to provide an access to other       main site. The likelihood of the redevelopment of a site
land. The scheme of the acquiring authority must be               leading, whether because of cross-subsidy or for any other
disregarded, but that does not require the disregard of any       reason, to the development or redevelopment of other sites, in
value for access purposes that would exist in the absence of      the authority’s area, was precisely the kind of wider benefit
the scheme: see Mann LJ in Batchelor v Kent County Council        that section 226(1A) required the authority to consider. As
(1989) 59 P&CR 357 and p 361, and referred to by Lord             the Court observed, there were sufficient safeguards in the
Nicholls in Waters v Welsh Development Agency [2004]              procedures for the making of a CPO to prevent an “auction”
UKHL 19 at para 65.                                               of benefits to secure a CPO.
Page 6

Acquisition procedure
Entitled Union Railways (North) Limited and another v Kent       These two points were appealed
County Council (3        June 2008 – ACQ/212/2005) in the        to the Court of Appeal: see Kent
Lands Tribunal, this case concerned two schemes, part of the     County      Council   v    Union
Channel Tunnel Rail Link, promoted by the claimant railway       Railways (North) Ltd [2009]
companies, and a highway scheme promoted by the County           EWCA Civ 363. Carnwath LJJ,
Council, as acquiring authority. The claimants claimed           gave the only judgment. He
substantial disturbance compensation; they contended that        found it unnecessary to resolve
the highway scheme delayed certain works related to the          the first of the two issues as one
construction of the rail link. The two schemes were              of general law, or to look beyond the facts of this case. He
inter-linked. Although it had entered certain land in which      said that the test under section 5 is what is "required" for the
the railway companies alleged that they had interests, the       scheme, and in determining what was required the authority
County Council had not served any notices to treat on the        had to act reasonably. The area of land needed was settled by
railway companies. In a preliminary issue, as to whether the     the Council's acquisition of the Blue Circle land, being land
Lands Tribunal had any jurisdiction to determine the             in which the claimants alleged they had interests.
compensation claims, it was held, inter alia, that:
                                                                 He said that there could be no serious dispute that it needed
    By reason of section 5 of the Compulsory Purchase Act        also to acquire or secure the release of any options to
    1965, the acquiring authority must give notice to treat to   purchase owned by third parties. Otherwise there would be
    every person with an interest in the land that they take.    nothing to stop the third parties at any time exercising their
    They have no power to avoid paying compensation to a         options to acquire the land, and then suing for trespass, thus
    person with such an interest by not giving him notice to     bringing to a halt the construction or operation of the road, to
    treat; and                                                   a halt. In other words, as in Oppenheimer v Minister of
                                                                 Transport [1942] 1 KB 242, they have exercised their choice
    If the acquiring authority have failed to serve notice to
                                                                 by acquiring the freehold, and must be taken at the same time
    treat on a person with an interest in land that has been
                                                                 to have acquired the claimant's option to purchase it "because
    taken, he can claim compensation under section 10 of the
                                                                 otherwise (their) purchase of the freehold would not serve its
    Compulsory Purchase Act 1965 and make reference to
    the Tribunal accordingly. Neither section 1 of the Land
    Compensation Act 1961 nor section 22 of the
    Compulsory Purchase Act 1965 provided jurisdiction to
    the Lands Tribunal to determine any compensation
Page 7

Acquisition procedure                                              Postscript
                                                       ...Cont     Carnwath LJ reminds us that the Lands Tribunal is no more;
In respect of the second issue, Carnwath LJ, after a review of     since the 1st June, we have the Upper Tribunal (Lands
the relevant case law, decided that the claimants were entitled    Chamber), but known as the Lands Tribunal. Both the
to initiate section 22 of the 1965 Act, and this provided a        jurisdiction and membership of the Lands Tribunal have now
sufficient basis for the Tribunal to deal with the matter.         gone to the Upper Tribunal. The legal members are now
However, he said that the essential question in his mind was       known as judges, and the President of the Lands Tribunal,
whether the Council's action has resulted in a compulsory          George Bartlett QC, is the Chamber President.
taking of compensatable interests of the Company. If it were
found at a remitted hearing that the Company did have
compensatable interests, in the form of, or analogous to,
options to purchase over the land compulsorily acquired for
the road, then (as in Oppenheimer) Carnwath LJ thought it
was difficult to see realistically how one could avoid the
conclusion that they also were "taken" in pursuance of the
statutory powers. If that is the conclusion, then, he said, they
are in principle entitled to statutory compensation.

But, left to himself, he would have preferred to avoid relying
on detailed analysis of sections 22 or 10, still less of their
predecessors and the sometimes confusing case-law derived
from them. Such arguments seemed to Carnwath LJ to fall
into the trap of subordinating substance to procedure. In the
modern law, he would have been inclined to the view that
section 1 of the 1961 Act provides ample authority for
referring any genuine claim for statutory compensation to the
Lands Tribunal, whether it concerns entitlement or amount.
He noted also that the Lands Tribunal's jurisdiction is
expected shortly to be transferred to a new "Lands Chamber"
in the Upper Tribunal, under the Tribunals, Courts and
Enforcement Act 2007. When this happens the Chamber will,
in appropriate cases, be able to call on the expertise of High
Court judges to assist in the determination of complex issues
of title, such as appear to arise in this case.

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