Compulsory purchase – Compensation – Land Compensation Act 1961 – Industrial premises – Whether planning permission for mixed-use development to be assumed on Pointe Gourde principle – Whether assumptions confined to those required by sections 14 to 17 of 1961 Act – Lands Tribunal awarding full value of land with planning permission – Whether appropriate to award only percentage of value reflecting hope value – Appeal allowed
The respondent owned industrial premises that lay within a mixed-use area on the edge of the City of London. In 1993, public notice was given of a proposed compulsory purchase order under which the appellant would acquire the respondent’s land for the purposes of extending the London Underground system. The order was confirmed in 1997, but the appellant did not enter onto the respondent’s land until 2001, which therefore constituted the valuation date for the purpose of compensation.
The respondent contended that, in accordance with the principle in Pointe Gourde Quarrying & Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565, its compensation should be assessed on the basis that planning permission could reasonably have been expected for a mixed-use development at the valuation date in the no-scheme world. The Lands Tribunal (LT) accepted that contention and assessed compensation at £608,000 by reference to the full value of the site with planning permission for a mixed-use development. In doing so, it rejected the appellant’s submission that, in the absence of an actual planning permission, or one that had to be assumed pursuant to sections 14 to 17 of the Land Compensation Act 1961, the prospects of obtaining such permission could be reflected solely in hope value, as a percentage of the full with-permission value reflecting the probability of the permission being granted as perceived by the market in the no-scheme world. The Court of Appeal upheld the LT decision. It ruled that the judicial version of the no-scheme rule was not displaced by the 1961 Act. Moreover, if it were found on the balance of probability that planning permission would have existed at the valuation date in the no-scheme world, that probability could be converted into full value for valuation purposes, as was the case where statutory assumptions applied. The appellant appealed.
Held: The appeal was allowed.
The underlying principle of compensation for the compulsory acquisition of land was that the owner should receive full and fair compensation and a fair financial equivalent for its land. The basis of compensation was the value to the owner, not to the public authority. The prospect of exploiting the property was a relevant element in the value to the owner. Consequently, the valuation could take into account not only the present purpose to which the land was applied but also any increased value by reason of its potential and possibilities: R v Brown (1867) LR 2 QB 630 and Gajapatiraju v Revenue Divisional Officer Vizagapatam [1939] AC 302 applied. The price that the land in question might reasonably fetch on the open market at the valuation date would be expected to reflect whatever development potential the land had: Mon Tresor & Mon Desert Ltdv Ministry of Housing and Lands [2008] UKPC 31; [2008] 3 EGLR 13; [2008] 38 EG 140 applied. However, on a principled approach to valuation, a deduction had to be made to take account of the fact that that potential might not be realised, or not for a considerable time.
The Pointe Gourde principle was not a common law principle but one of statutory interpretation, designed and used to explain and amplify the expression “value” in the statutory provisions. It did not provide a basis for the court to establish an assumption that planning permission would be obtained by analogy with the specific statutory rules that created such an assumption. Nor did the authorities support such an assumption: Jelson Ltd v Blaby District Council (1977) 243 EG 47, Melwood Units Pty Ltd v Commissioner of Main Roads [1979] 2 EGLR 10; [1996] 35 EG 89, Porter v Secretary of State for Transport [1996] 3 All ER 693 and Waters v Welsh Development Agency [2004] UKHL 19; [2004] 2 EGLR 103 distinguished. It was not for the court to rewrite legislation by adding additional assumptions of planning permission. There was a difference between legitimate purposive construction and impermissible judicial legislation. It was not a permissible exercise of statutory construction for the court to depart from the normal method of valuation of land that had potential development value by adding an assumption that planning permission would be obtained. The absence of such an assumption did not produce any real anomaly compared with cases where the statutory assumptions applied.
Accordingly, in cases where none of the 1961 Act assumptions regarding planning permission applied, the approach to valuation indicated by authority in accordance with commercial common sense was that: (i) the value of the land would be the open market value; (ii) any reduction in the price that the land might be expected to fetch arising from the scheme would be disregarded; (iii) the potential of the land, including for development, would be taken into account; and (iv) the development potential would be valued in the normal way, by discounting for future uncertainties. Where the LT found on the balance of probability that planning permission would have been granted for the specified redevelopment but for the scheme of acquisition, and that the permission would have existed at the valuation date, the appropriate approach to valuation was the “hope value” basis.
Michael Barnes QC and Eian Caws (instructed by Eversheds LLP) appeared for the appellant; Nicholas Nardecchia (instructed by Lodders LLP, of Stratford upon Avon) appeared for the respondent.
Sally Dobson, barrister
