Frederick Powell & Son Ltd v Devon County Council

Residential building land at Cullompton, Devon, acquired for school–Part of site for which detailed planning consent granted–Claim for injurious affection to retained land by severance rejected by tribunal as not substantiated–Inability of claimant builders to continue to average costs over whole site does not depreciate value of retained land–Value of land taken derived from comparable transactions–Weight of evidence towards claimant’s valuer’s opinion of value Sir Frederick Corfield QC and E R E Caws (instructed by Riley & Co, of Blackburn) appeared for the claimant; Viscount Colville of Culross QC (instructed by the solicitor to Devon County Council) for the acquiring authority. Giving his decision, MR STRATHON said: This is a reference to determine the amount of compensation payable to Frederick Powell & Son Ltd by the Devon County Council upon the compulsory acquisition of the claimant’s freehold interest in 1.6 acres of land at Crow Bridge, Cullompton, Devon. The following facts are included in an agreed statement by the parties: (A)  General facts: (1)   The claimant is a subsidiary of the Broseley Group of Companies, one of the major housebuilding companies in the country. The claimant is principally concerned with housing development in south-west England. (2)   The acquiring authority is a local education authority and requires the subject land for the purposes of a proposed infants school. (3)   The subject land has an area of 1.6 acres and lies on the western side of Cullompton, being approximately 750 yds from the town centre. (4)   The site consists of part of an enclosure of pasture land with a moderate slope from the western corner to the north-east and south-east. There is an 8ft depression in the eastern corner of the site which has an area of 0.13-acre. To the east and south of the site there are council housing estates. (5)   Formerly a market town, Cullompton is 15 miles from Exeter by the M5 motorway and 21 miles by motorway from Taunton. (6)   The population of the town of Cullompton according to a population census carried out by the Central Information Service in 1976 was 3,750. (7)   Possession of the subject land was delivered up to the county council by agreement on April 10 1978. (8)   The appropriate date for the valuation of the subject land is April 10 1978. (B)  Chronological facts: (1)   On May 9 1972 outline planning permission for residential development was granted by Tiverton District Council in respect of, inter alia, the subject land. 198 (2)   The claimant purchased the 9-acre Brook Close Estate, including the subject land, in 1973 with the benefit of the above outline consent, contracts having been exchanged on August 23 1973. (3)   The Brook Close Estate adjoins the North Farm Estate which is being developed by the claimant for private housing; approximately 17.8 acres have been completed and sold. Of the Brook Close Estate 3 acres are reserved for public open space and approximately 6 acres, including the subject land, have the benefit of detailed planning consent for the erection of 105 dwellings together with garages, roads and sewers. (4)   On October 23 1973 the county education officer lodged an application for planning permission under the Town and Country Planning (General) Regulations 1969 for deemed planning consent for development of the subject land as an infants school. On the same day the county education officer wrote to the claimant inviting it to sell the subject land to the county council for education purposes. This was the first indication to the claimant that the county council required the subject land. (5)   The claimant replied on October 26 1973 indicating that it was not prepared to sell to the county council by agreement. (6)   A resolution to make a compulsory purchase order was made by the county council’s Estates Sub-Committee on September 13 1974, and at its meeting on October 17 1974 the county council approved the minutes of the Estates Sub-Committee. (7)   Planning permission for the school site was deemed to have been granted by the Secretary of State for the Environment by virtue of a resolution of the Education Committee of the Devon County Council on September 19 1974. (8)   The compulsory purchase order was sealed by the county council on March 13 1975 and the claimant was served with notice accordingly on March 17 1975. (9)   The claimant lodged an objection to the compulsory purchase order on March 27 1975. (10) At the time that the compulsory purchase order was made, the claimant had not formally submitted, for the approval of the local planning authority, its detailed proposals for the development of the Brook Close Estate of which the subject land is part. (11) On April 29 1975 the claimant applied to the local planning authority for approval of details reserved by the outline planning permission dated May 9 1972 relating to the layout of 105 houses, garages, roads and sewers. Following a public inquiry on February 26 and 27 1976 the compulsory purchase order was confirmed by the Secretary of State on March 10 1977 with modifications. The inspector had recommended adjustment of the order boundaries to coincide with the claimant’s detailed proposals for development to achieve a more logical result and to reduce the compensation arising from severance. The Secretary of State accepted the recommendation, but was only able in law to amend the boundaries by reduction and not addition. This left the question of the addition of any extra land to be agreed between the parties. (12) The details for the development of the Brook Close Estate submitted to the Tiverton District Council as local planning authority on April 29 1975, were approved by the Secretary of State on November 29 1976 following an appeal. Blight notice served (13) On May 5 1977 the claimant served a blight notice under section 193(1) of the Town and Country Planning Act 1971. By virtue of section 196(1) of the said Act of 1971 the acquiring authority were deemed to have served a notice to treat in respect of the subject land on July 5 1977. (14) The claimant lodged a notice of reference at the Lands Tribunal on December 9 1977. (15) It is agreed that the compensation shall be assessed on the basis of the detailed planning consent dated November 29 1976 together with the claimant’s plan number 20040 dated April 1975 (ie DCC1) which shows the detailed layout of the 105 dwellings out of which the county council requires the sites of 29 dwellings. (16) At the date of being granted possession of the subject land by the claimant, ie April 10 1978, excavation work had been carried out on roads nos one and three, together with services therein, but neither of these two roads had Primary valuation 29 house plots at £3,600 per plot* £104,400 Less cost of roads nos 4 and 5 20,700 £83,700 Compensation, say £83,700 *Note by Lands Tribunal. Derived from Schedule 1 which follows. Schedule 1 *House sale prices (as at April 10 1978). 105 houses (6 types) £1,431,550 *Deduct cost of house-building (as at April 10 1978) 105 houses (the above 6 types) £808,276 Interest on building costs 3 months at 10% 20,207 Building operation profit at 5% 40,414 868,897 562,653 Interest and developers’ profit 12½ % on £1,431,550 178,944 Value of land with roads, sewers, services etc. £383,709 £383,709÷ 105 plots = £3,654 per plot                               say = £3,600 per plot *Note by Lands Tribunal: Details of sale prices and costs of all types of houses were included in the schedule. Supporting valuation I (Residual) Predicted sale prices 17 inner-terrace at £12,700 each £215,900 12 end-terrace at £13,350 each 160,200 376,100 Less developers’ profit 10% 37,610 £338,490 Building costs 17 inner-terrace at £7,146 each 121,482 12 end-terrace at £7,922 each 95,064 Cost of roads 4 and 5 20,700 237,246 Building profit 5% 11,862 Interest 3 months at 10% 5,931 255,039 83,451 Interest on site for 6 months at 10% 4,173 £79,270 Site value, say £80,000 Supporting valuation II (Before and after) Value of the estate including school site 105 house plots at £3,600 each £378,000 Less cost of roads and sewers 212,220 £165,780 Value of the estate excluding school site 76 house plots at £3,600 each 273,600 Less cost of roads and sewers 191,520 82,080 £83,700 Say  £83,000 199 Supporting valuation III (Value of the land to be acquired if separately held and excluding any sum which would be paid by the owner of the adjoining estate as a special purchaser.) 1.6 acres at £25,000 per acre £40,000 Injurious affection to remainder of land held therewith: Costs to be spread over houses to be erected: Erection and dismantling of site compounds accommodation, electricity supply, telephones, etc £4,000 Salaries during road construction (site agent, clerk, engineer) 4,500 Cost of non-productive plant required for associated works (pumps, rollers, fork-lift) 8,400 Roads, services etc 212,220 229,120 Interest at 10%–9 months 17,184 £246,304 £246,304 ÷  105 units = cost per unit £2,346 Cost on 29 houses 29 68,034 Less Savings on roads 4 and 5 £20,700 Plus Interest at 10%–9 months 1,552 Saving of overheads 1,290 23,542 44,492 Compensation £84,492 For the acquiring authority, C B Keene ARICS, assistant county estates surveyor, submitted the following valuations: Primary valuation (Ripe acreage basis) 1.6 acres at £20,000 per acre £32,000 Check valuation (Serviced plot basis) 29 plots at £1,936 per plot £56,144 Less Estimated cost of constructing roads 4 and 5 with sewers. Abnormal site costs. 24,130 £32,014 been completed. No building works had begun within the boundaries of the subject land. House-building operations had started on land held therewith. Mr Hughes Brackett FRICS gave evidence on behalf of the claimant: he submitted a primary and three supporting valuations, the primary valuation of £83,000 being the amount of compensation claimed. The amount is the sum of two heads of claim (a) the value of the land taken and (b) injurious affection to the land held therewith. The valuations, which are rearranged for ease of reference, are set out above. As has been said, the claim includes compensation for injurious affection to the retained 4.40 acres of building land by severance from the 1.60 acres of land taken. It was submitted by Sir Frederick Corfield for the claimant that it is fundamental in this case that injurious affection is suffered. The reason for such a claim is described by Mr Brackett to be that a smaller number of 76 houses are left to cover the overheads, which virtually remain the same as for 105 houses. Evidence about injurious affection Before dealing with the submitted valuations, I will consider the evidence about injurious affection for which the amount of compensation is not separately identified in Mr Brackett’s primary valuation or in supporting valuations I and II; Mr Brackett regards supporting valuation III as a check and in his view it is not the most reliable method of assessing the loss. In his opinion injurious affection is there, it is severe and it is difficult to assess. Each house has to bear its share of development costs, being the actual cost of the house itself and its share of common costs over the whole estate of six acres. Mr Brackett considers that it is misleading to suggest that the reference land, which on the approved layout would be developed at higher density and at less cost per unit, would have subsidised the remainder of the estate on which the infrastructure costs are heavier. The claim is made only for the reduction in the value of the 4.40 acres severed; it is not a claim, Mr Brackett says, for loss of profits on development of a building site, a proposition which was not approved in Wimpey & Co v Middlesex CC [1938] 3 All ER 781. The retained land has to be developed in accordance with the approved layout. The planning process took two years and any attempt to revise the pattern would result in loss of time and money. The value approach to this item is to be found in paragraph 5 of the preface to Mr Brackett’s valuation. It is as follows: In practical terms the most reliable method of calculating the compensation is to value the land taken as part of the estate from which it is being severed, or to value the estate as a whole and as a diminished part, the difference representing the loss to the landowner. The Primary Valuation is on the basis of the land being taken as part of the whole estate and supports the total amount claimed, namely £83,000 both in respect of land taken and injurious affection due to severance. Any division of this figure is really arbitrary, but in order to meet the statutory requirement an attempt has been made in Supporting Valuation III in which the value of the land taken and the injurious affection are separately calculated. The result shows a higher figure than that claimed, but this does not invalidate the principal claim. Before turning to Mr Keene’s evidence I should refer to Sir Frederick Corfield’s submission that Wimpey is to be distinguished, since it concerned acquisition of the whole ownership. However, Mr Brackett firmly expresses his valuation of injurious affection as depreciation in the value of the land retained. I was also referred by a submission by Lord Colville to D McEwing & Sons Ltd v Renfrew County Council (1959) 11 P & CR 306. Mr Keene’s approach to the claim is to endeavour to identify the actual injurious affection suffered. His first conclusion is that cost of the roads on the retained land is high, much higher per unit than the cost of roads on the reference land. In his experience injury suffered is usually clearly identifiable as a direct consequence of the acquisition of land. But in the instant case it is his view that every metre of road and services on the land retained is put to useful purpose and service; no money is thrown away. The acquisition has not created the need for additional lengths of roads; Road no 1 is required for its full length through the estate for development and the value of the land acquired takes into account its access to that road. High costs of the retained land are inherent in that land and no higher costs are imposed by acquisition of the reference land. In criticism of Mr Brackett’s averaging of costs, Mr Keene’s view is that averaging is an accounting transfer of profits from the more profitable development of the reference land to the high infrastructure cost of the retained land. Mr Keene is unable to identify any injurious affection suffered by severance of the land retained. ‘Costs to be spread over houses’ The only valuation in which injurious affection is the subject of separate assessment is Mr Brackett’s supporting valuation III, where items feature under the heading ‘injurious affection to remainder of land held therewith.’  They are described as ‘costs to be spread over houses to be erected’ and I will consider them seriatim: 1. Erection and dismantling of site compounds accommo-dation, electricity supply, telephones etc. £4,000 C D Morgan, a director of the claimant’s company, said that the compound came into use in December 1977/January 1978 as road construction was started. The cost of erection and dismantling would be the same for development of 105 units as of 76 units; the loss of the land taken rendered the retained land less profitable.200 2. Salaries during road construction (site agent, clerk, engineer) £4,500 This item covers the part of the salaries not included in the bill of quantities for road construction, but charged to house building. If 105 houses were built the cost per unit for this item would be reduced. 3. Cost of non-productive plant required for associated works (pumps, rollers, forklift) £8,400 Much of this plant, required for housebuilding, is hired at a weekly rate of approximately £120. The saving of hire for plant not required for construction on 29 units on the reference land is estimated by Mr Brackett to be £1,290, an amount which can be seen in his valuation as ‘saving of overheads.’  The balance of the cost, £7,110, is spread over 105 units and thus a proportion is borne by the reference land. 4. Roads, services etc £212,220 This amount comprises the actual and estimated cost of roads and services for the 105 units on the whole estate of 6.0 acres. The equivalent cost per unit is £2,021; the estimated saving on roads nos 4 and 5, which would have been built to serve 29 units on the reference land, appears in Mr Brackett’s valuation at £20,700 at £714 per unit. I accept Mr Keene’s view that, subject to the allowances made in respect of savings, the development of the retained 4.4 acres requires the expenditure of the four items of costs. The acquisition of the reference land does not render the expenditure abortive. The consequence of the acquisition is that the claimants are denied the development of 1.6 acres at costs which are lower than those which prevail on the retained land. Mr Brackett does not regard supporting valuation III as the most reliable method of assessing the loss which is claimed, but it is only this valuation which defines the substance of the claim for injurious affection separately from the valuation of the land taken. The inability of the claimant, by reason of the acquisition, to continue a practice of averaging costs over the 6.0 acres of ownership does not in my judgment depreciate the value of the 4.4 acres of retained land, as is the contention of Mr Brackett. It is not in issue that the value of the land taken is to be assessed on the basis that roads, sewers and all services are available at its boundary, so that it reflects the benefit of actual and anticipated expenditure which contributes to its ripeness for development. I have come to the conclusion that the evidence does not support the claim that the value of the 4.4 acres of retained land is depreciated by severance by the acquisition of the reference land. My finding is not affected by the agreement of the parties during the hearing that the costs of roads and services which appear in the submitted valuations, and which are reproduced in this decision, required amendment. The agreed amendments are: for the whole of the 6.0 acres, £212,220 to £210,456; for the 1.6 acres of land taken £20,700 to £32,300; and for the 4.4 acres retained £191,520 to £178,156. The acquiring authority says that the effect of the amendments would be to reduce the amount of Mr Brackett’s supporting valuation III from £85,782 to £72,780. The primary and supporting valuations I and II would be similarly affected. I turn to the value of the land taken. I again refer to para 5 of the ‘Basis of Valuation’ which prefaces Mr Brackett’s valuations and in particular the statement that ‘The primary valuation is on the basis of the land being taken as part of the whole estate and supports the total amount claimed, namely £83,000 both in respect of land taken and injurious affection due to severance.’  The primary valuation, at £3,600 per plot, is derived from Schedule 1, which itself is a valuation, on the residual method, of the whole estate of 6.0 acres with roads, sewers and services. Mr Brackett himself says that any division of the primary valuation is really arbitrary and Mr Keene is unable to suggest an apportionment. Supporting valuation I is a residual valuation using the data in Schedule 1 as to the costs of construction and sale prices of 29 houses which, but for the compulsory purchase, it was proposed to build on the reference land. Supporting valuation II, which is on the ‘before-and-after’ method, also takes the plot value of £3,600 from Schedule 1 as the basis for both ‘before’ and ‘after’ values. Supporting valuations I and II both attract the similar criticism that they are said by Mr Brackett to include injurious affection in respect of depreciation in the value of the land retained whereas I have found that such a claim has not been substantiated. I find the primary valuation and supporting valuations I and II do not assist in determining the value of the land taken. Much has been said in evidence about the residual method of valuation, but in the light of my finding further examination of its use in the instant case is unnecessary. Comparable transactions There is, however, other evidence on which the parties rely for support, namely transactions of the sales of parcels of land which I inspected accompanied by Mr Brackett and Mr Keene. The 100-mile tour of inspection of eight sites extended from Cullompton in the north to Silverlands (the south-western outskirts of Exeter) and from Crediton in the west to Colyton in the east. Three of the comparables were cited by both surveyors, another by Mr Brackett and four others by Mr Keene. I will now examine this evidence. In his supporting valuation III, Mr Brackett values the reference land of 1.6 acres at £25,000 per acre = £40,000. He says it is the value of the land if separately held and excluding any sum which would be paid by the owner of the adjoining estate as a special purchaser. This exclusion is on account of Mr Brackett’s understanding that section 5 rule (3) of the Land Compensation Act 1961 would be brought into play; but both Sir Frederick Corfield and Lord Colville considered that the rule is not applicable on the facts of the instant case. Mr Brackett says that his valuation of £25,000 per acre is derived exclusively from the comparable transactions. In his primary valuation Mr Keene values the reference land of 1.6 acres at £20,000 per acre = £32,000; he relies for support of this value on the comparables. The eight transactions comprise one sale by public auction, one sale by public tender, two sales by private treaty and five purchases by local authorities. They span a period from March 1976 to July 1978 (three months after the date of valuation). Sale prices per acre adjusted by Mr Keene by addition for abnormal on-site and off-site costs vary from £34,580 to £15,084. The smallest site is 1.04 acres and the largest 14.10 acres. Planning densities of dwellings per acre vary from 15 to 7.23 to the acre by comparison with 18.2 for the reference land. Mr Brackett made further adjustments to the sale prices for the value difference between the dates of sale and the date of valuation. The percentage increases vary between 50% and 23% and a decrease of 12 1/2% in respect of the post-valuation date sale. For these adjustments Mr Brackett relied on two sales by the claimant by compulsory purchase procedure at Sidmouth which demonstrated an increase in price of 50% between August 1976 and April 1978, a difference which accorded with his general experience. Award On a review of all the evidence, which was confirmed by my inspections, I accept that the Sidmouth difference of levels of values should not be applied to all the transactions, but I do not accept Mr Keene’s contention that prices remained stable throughout the relevant period. I also consider that Cullompton is not entirely beyond the influence of the higher land values that prevail in the area around Exeter. I have come to the conclusion that the weight of evidence is towards Mr Brackett’s opinion of value and I determine the value of the reference land at April 10 1978 to be £24,000 per acre. The amount of compensation is therefore £38,400, being 1.6 acres at £24,000 per acre. 201 The acquiring authority will pay the claimant £38,400 compensation for the compulsory purchase of the freehold interest of 1.6 acres of land at Cullompton. The authority will also pay to the claimant a surveyor’s fee on Scale 5 of the Scales of Charges of the Royal Institution of Chartered Surveyors and legal costs properly incurred from the date of the notice to treat to the date of the notice of reference. Having opened the sealed offer of compensation lodged by the acquiring authority, I find the amount thereof exceeds the amount of my award. The acquiring authority will pay the costs of the claimant of this reference up to the date of the sealed offer and the claimant will pay the costs of the acquiring authority as from that date, such costs, if not agreed, to be taxed by the Registrar of the Lands Tribunal on the High Court Scale.