Compensation – Statutory wayleave – Overhead electricity line – Contract for sale of part of claimant’s land conditional on removal of overhead electricity line – Compensating authority obtaining statutory wayleave for retention of line – Compensation payable under para 7 of Schedule 7 to Electricity Act 1989 – Whether to be assessed by reference to purchase price under lost sale contract or lesser market value of land at valuation date – Claim allowed
The claimant owned a 19.5-acre parcel of land, which, along with other surrounding land, was indicated for residential development in the local plan for the area. The claimant’s land was crossed by a 400kV overhead electricity line, which had been constructed and retained pursuant to a terminable wayleave granted to the compensating authority in 1964. In a development brief approved by the local planning authority in September 2006, alternative proposals were put forward to deal with a 54m strip of the claimant’s land, covering 27m to either side of the overhead line, depending on whether the line was removed or retained; removal was the preferred option. In July 2007, the claimant entered into two contracts to sell its land to developers. One contract concerned the strip and was conditional on the removal of the line; the purchase price was more than £5m, plus VAT, plus RPI indexation between the contract date and payment. The second contract, at a price of nearly £20.5m, plus VAT and indexation, related to the rest of the claimant’s land and was not conditional on the removal of the line. Planning permission for the development of the land was granted in December 2007, subject to conditions that dealt with the strip either with or without the line.
In 2008, the claimant served notice on the compensating authority terminating the wayleave and requiring the removal of the overhead line. The authority then applied successfully to the secretary of state for a necessary wayleave to retain the line under para 6 of Schedule 4 to the Electricity Act 1989.
A 15-year wayleave was granted in June 2010; that was the relevant valuation date for assessing the compensation payable to the claimant under para 7 of Schedule 4. By then, owing to a substantial drop in residential land values, the value of the strip with the line removed had fallen to £3.195m. The claimant contended that it was entitled to compensation of £5.83m, based not on the current market value but on the indexed sale price under the lost sale contract for the strip. It submitted that the land was now worth nothing with the line in place since no development was possible under the terms of the planning permission.
Held: The claim was allowed.
(1) The compensation payable “in respect of the grant” of the wayleave, under para 7(1) of Schedule 4 to the 1989 Act, covered both the value of the wayleave and compensation for any consequential reduction in the value of the land. Para 7(1) covered compensation for diminution in the value of the land while para 7(2) covered compensation for disturbance; the overall compensation payable under the whole of para 7 was to be assessed on the general principles applicable to the payment of compensation for compulsory acquisition: Welford v EDF Energy Networks (LPN) plc [2006] 3 EGLR 165 (Lands Tribunal); approved by the Court of Appeal at [2007] EWCA Civ 293; [2007] 2 P&CR 15; [2007] 2 EGLR 1; [2007] 24 EG 170.
(2) The sale contract for the strip had created not merely personal rights but an interest in land. The contract had been properly registered and there was no reason why the vendor’s interest was not assignable. The contract was in the nature of a contract for the sale of land subject to a condition subsequent. Since all that was required to make the contract price payable was the removal of the overhead line, it was the grant of the wayleave that had caused the claimant to be deprived of that sum. Moreover, since para 7(1) provided for compensation for the occupier as well as the owner, that tended to suggest that the basis of compensation was not limited to depreciation in the value of the land and that, accordingly, there was no reason to disregard the sale contract even if it did only confer personal rights, provided the loss satisfied the requirements of causation, remoteness and reasonableness.
(3) The loss arising from the inability to perform the contract for the sale of the strip was not too remote. Since the claimant was entitled to receive the contract price when the line was removed, that price represented the value of the land to the claimant. The ending of the contract and the loss of the purchase price was the direct result of the grant of the wayleave.
(4) No purchaser would buy the strip for the contract price at the valuation date, although an arbitrageur might buy it at a lower price in order to make a profit by completing the sale to the purchaser. Conventional analysis would categorise the difference between the arbitrageur’s price and the market value of the land with the line retained as representing the injurious affection suffered by the land by reason of the grant of the wayleave, while the difference between the contract price and the arbitrageur’s price would be a loss suffered by the claimant that did not arise from the value of the land; that loss was commonly included within the term “disturbance”. Both types of loss were recoverable under para 7. Compensation was therefore properly to be assessed as the difference between the contract price as at the valuation date and the value that the land in fact had at that date.
(5) On the evidence, the value of the strip in the real world consisted of its value for some form of recreational or paddock use in the immediate future, plus any hope value that it might have that some profitable development might be allowed when the wayleave terminated in 15 years’ time. A purchaser of the strip would expect to incur the cost of complying with conditions in the 2007 planning permission requiring the laying out and maintenance of the land. Those costs should therefore be set off against the amount that the purchaser would attach to the hope of development in 15 years’ time. The value of the land in the real world, before allowing for the costs of complying with the conditions, was £210,000, comprising £60,000 for paddock use and £150,000 hope value. The cost of complying with the conditions was more than that amount and would exceed £250,000. Overall, the market value of the land at the valuation date should be assessed at £1. The claimant was entitled to recover the £5.83m claimed as the difference between the contract price for the sale of the strip and its value in the real world at the valuation date.
(6) The claimant’s loss should not be regarded as self-induced on the ground that it flowed from the nature of the contractual arrangements into which the claimant had entered for the sale of its land in two parts. There was no evidence that the claimant had acted unreasonably in entering into those contracts on the terms that it had. The contracts were justifiable for commercial reasons as the means of achieving an early sale of the rest of the claimant’s land, plus a sale of the strip in the hoped-for event of the line being removed. Recovery was not rendered unreasonable, or the chain of causation broken, by the claimant’s actions in that regard.
Sally Dobson, barrister
