Castlefield Property Ltd v National Highways Ltd

Compulsory purchase – Compensation – Injurious affection – Respondent authority compulsorily acquiring access land – Claimant acquiring property for redevelopment with benefit of statutory right to compensation – Access to development site rerouted – Respondent leaving claimant to negotiate terms of replacement access with adjoining owner – Negotiations failing – Claimant bringing claim for injurious affection of retained land – Matter referred to Upper Tribunal – Reference determined accordingly The respondent acquiring authority compulsorily acquired a parcel of land which had previously provided the sole access from the A566 to the Cheshire Lounge, a now derelict public house in the green belt adjoining junction 7 of the M56 on the southern outskirts of Manchester. The claimant acquired the property in June 2017, paying £1,232,500. It was a term of the contract of sale that the claimant acquired the benefit of the former owner’s remaining statutory rights to compensation. It also had planning permission for the redevelopment of the property as a destination bar and restaurant. In March 2017, the original access to the site, which was over a short stretch of public highway, was stopped up and a replacement access opened over neighbouring land which was by a significantly longer and less prominent route. The respondent was also entitled to acquire that neighbouring land and the respondent left the terms of any easement over the new access route to be negotiated between the claimant and the adjoining owner. The negotiations failed. The claimant had been using the new access way but the respondent conceded that the development could not reasonably have been expected to proceed until it had the certainty of a deed of easement. Therefore, it agreed to acquire the land over which the new access passed. The claimant brought a claim for injurious affection under section 7 of the Compulsory Purchase Act 1965. The claim was for £1,109,250 based on 90% of the open market value to reflect the delay in reaching agreement over the new access arrangements. The respondent valued the claim at £210,000, being 20% of that value. The matter was referred to the Upper Tribunal. Held: The reference was determined accordingly. (1) All the statutory rights to compensation enjoyed by the original owner after 10 November 2014 were expressly assigned to the claimant when the sale of the property was completed on 2 June 2017.  It was common ground that the original owner was free to sell its own interest, including in the reference land, and that its right to compensation had validly been assigned and could be pursued by the claimant. The original owner could not deal with its land so as to increase the burden of compensation on the respondent, and the claimant could not recover more in compensation than the original owner could have done. But it had not been suggested that its claim was any different from a claim which the original owner could have advanced: Dawson v Great Northern and City Railway Company [1905] 1 KB 260 considered. The parties had agreed that the open market value of the reference land itself was £25,000. The claimant was entitled to that sum pursuant to section 5(2) of the Land Compensation Act 1961, together with a statutory loss payment of £1,875 pursuant to section 33A of the Land Compensation Act 1973. The parties also agreed that the respondent should pay £90,000 towards the claimant’s pre-reference costs as compensation for disturbance under section 5(6) of the 1961 Act. (2) The main issue in the reference was the claimant’s claim under section 7 of the 1965 Act for compensation for the injurious affection caused to the property at the valuation date in November 2014. It also sought compensation for other losses unrelated to the value of the land (principally holding costs while the site remained undeveloped, and the cost of works to the new access said to be required to make it suitable for the claimant’s use and equivalent to the original access over the reference land). Section 7 of the 1965 Act conferred a right to compensation where land which had not been taken by an acquiring authority had nevertheless been adversely (or “injuriously”) affected by being severed from other land which has been taken. The assessment of that form of compensation was generally achieved by determining the value of the retained land before severance, ie, on the valuation date but disregarding the effect of the acquiring authority’s scheme, and deducting from it the value of the retained land after severance, ie, on the same date but taking into account the effect of the scheme and of the severance of the retained land from the land taken. The necessary assessment had to be carried out as at the date of entry, here 10 November 2014. (3) The guiding principle in the assessment of compensation was the principle of equivalence. The landowner whose land was taken in the public interest should receive compensation which fully and fairly reflected the loss which the owner had actually suffered, no more and no less. The correct way to undertake the valuation was to have regard to all matters that were known or anticipated at the valuation date, or which would have been known or anticipated by a reasonably prudent and properly advised purchaser. As a general rule, without an express contractual or statutory instruction to do so (and there was none in section 7) it would always be wrong to value land as if with knowledge of matters which were not known, and could not have been known, at the valuation date. (4) The claim for injurious affection and the claim for holding costs were conceptually and legally distinct, but that did not mean that in an appropriate case they could not be alternatives or that the assessment of one could not have regard to compensation provided under the other. What mattered was that the claimant was put in an equivalent position, so far as money could achieve it, to the position it would have been in if the reference land had not been taken. In this case, a 10% adjustment on the “before” valuation was appropriate to reflect the fact that easements over the new access for the benefit of the property were not available at the valuation date, resulting in a figure of £1,200,000. With a 10% adjustment for the less convenient access and 20% adjustment for the uncertainty caused by the need to negotiate an easement, the “after” value was £840,000. Consequently, the injurious affection compensation payment was £360,000. James Pereira KC (instructed by TLT LLP) appeared for the claimant; Alexander Booth KC (instructed by Gowling WLG) appeared for the respondent. Eileen O’Grady, barrister Click here to read a transcript of Castlefield Property Ltd v National Highways Ltd