Compensation – Statutory wayleave – Overhead electricity line – Contract for sale of part of respondent’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 – Compensation assessed by reference to purchase price under lost sale contract rather than lesser market value of land at valuation date – Whether such loss falling outside scope of compensation – Appeal dismissed
The respondent owned a 19.5-acre parcel of land to the south of Leighton Buzzard, which, along with other surrounding land, was indicated for residential development in the local plan for the area. The respondent’s land was crossed by a 400kV overhead electricity line, which had been constructed and retained pursuant to a terminable wayleave granted to the appellant compensating authority in 1964. In a development brief approved by the local planning authority in 2006, the land 27m to either side of the overhead line, forming a 54m-wide strip of the respondent’s land, was the subject of alternative proposals depending on whether the line was removed or retained; if the line were removed, the strip would be suitable for residential development but if it were retained, no such development would be possible.9
In July 2007, the respondent contracted to sell the whole of its land to developers under two contracts. The first related to the strip and was conditional on the removal of the overhead line; the purchase price was more than £5.3m, 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, was unconditional and related to the rest of the respondent’s land. Planning permission for the development of the land was granted in December 2007, subject to conditions that dealt with the strip in terms that largely reflected its treatment in the development brief.16
In 2008, the respondent served notice on the appellant terminating the wayleave and requiring the removal of the overhead line. The appellant applied successfully to the secretary of state for a necessary wayleave to retain the line, pursuant to para 6 of Schedule 4 to the Electricity Act 1989. A 15-year wayleave was accordingly granted in June 2010, which was therefore 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.24
The respondent contended that it was entitled to compensation of £5.829m, based on the indexed 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 now possible by reason of the conditions in the planning permission. Allowing the claim, the Upper Tribunal held that compensation under para 7 was not limited to depreciation in the value of the land and that, where the sale contract was conditional on the removal of the overhead line, the grant of the wayleave had caused the loss of the contract price: see [2013] UKUT 005 (LC); [2013] PLSCS 85. The appellant appealed. It contended that the loss under sale contract for the strip was a purely personal contractual loss falling entirely outside the scope of compensation.
Held: The appeal was dismissed.
The word “land”, as used in para 7(1) of Schedule 4 to the Electricity Act 1989, had the broad meaning set out in Schedule 1 to the Interpretation Act 1978 so as to encompass any estate, interest, easement, servitude or right in or over land. Compensation for the grant of a statutory wayleave was to be quantified, as at the date of grant of the wayleave, in accordance with the “principle of equivalence” applied in relation to other statutory provisions for compensation for the compulsory acquisition of private property or of a right over such property.
The principle of equivalence was that a claimant should receive compensation for losses fairly attributable to the taking of his land, but not to any greater amount. The three conditions of causation, remoteness and reasonableness had to be met in order for a loss to be recoverable, comparably with the assessment of damages at common law by reference to the restitutionary principle: Horn v Sunderland Corporation [1941] 2 KB 26 and Director of Buildings and Lands (Hong Kong) v Shun Fung Ironworks Ltd [1995] 2 AC 111; [1995] 1 EGLR 19; [1995] 19 EG 147 applied.
Nothing in the terms of para 7, interpreted in the light of the principle of equivalence, suggested that compensation for the loss of contractual rights caused by the grant of a wayleave fell outside the scope of the compensation afforded by the 1989 Act. The right to compensation under para 7(1) was conferred in the most general terms, as a right to “compensation in respect of the grant”. The only limitation was that the loss for which compensation was claimed had to be suffered by the claimant in its capacity as owner or occupier of the land, rather than in some wholly unrelated capacity. Para 7 differed in that regard from the statutory provisions for compulsory purchase, under which the available categories of compensation were compensation for the value to the owner of the land taken and compensation for injurious affection to land retained. In a wayleave case there was in reality no land taken or other land retained because, in sharp contrast to compulsory purchase, no land or interest in land previously vested in the owner was compulsorily acquired at all; while a wayleave was itself an interest in land, it came into existence for the first time by virtue of the grant.
Compensation under para 7(1) did not depend on showing that the grant of the wayleave had some effect on the land itself, as a necessary link in the chain of causation between the grant and the suffering of financial loss. It made no difference, in terms of a proper identification of the scope of compensation, that the owner had, in advance of the grant of the wayleave, already conditionally turned its interest into money by contracting to sell it at a future date for a formula price if no wayleave were granted. The grant of the wayleave still prohibited the owner from realising a development value for the land and compensation was, in principle, available. Compensation was to be quantified by reference to the value of the relevant land to the owner, rather than its objective market value: Welford v EDF Energy Networks (LPN) plc [2007] EWCA Civ 293; [2007] 2 P&CR 15; [2007] 2 EGLR 1; [2007] 24 EG 170 applied.
The Upper Tribunal’s had been entitled to conclude that fair “compensation in respect of the grant” of the wayleave under para 7(1) should represent the loss of the price that would otherwise have been payable under the contract for the sale of the strip. That loss had been caused by the grant of the wayleave, since it was the grant of the wayleave that had caused the sale contract to fall away. The loss of the contract price was not too remote since the loss of those contractual rights was the direct result of the grant of the wayleave. Compensation quantified by reference to the contract price gave no more, and no less, to the respondent than its loss, regardless of whether the development value of the strip had risen or fallen between the dates of the contract and the grant of the wayleave. The whole of the contract price was payable because the residual value of the strip, subject to the wayleave, was nominal. The Upper Tribunal’s analysis was a straightforward application of the language of para 7(1), interpreted in accordance with the principle of equivalence.
Robin Purchas QC and Rupert Reed (instructed by Berwin Leighton Paisner LLP) appeared for the appellant; David Elvin QC and Katie Helmore (instructed by Gosschalks, of Hull) appeared for the respondent.
Sally Dobson, barrister
