CPA News ‐ 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 ( 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 ( 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 ( 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 ( 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  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” Cont... basis. 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  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  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  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  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  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) assumptions 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  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 granted”. 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  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  2 EGLR 233. Supermarkets Ltd) v Wolverhampton City Council ; 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  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 rd 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  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  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 purpose". 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 Cont…. claims. 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.