Compensation for compulsory acquisition of livestock market premises — Decision of Court of Appeal reversed by House of Lords in favour of market owners — Rule (5) in section 5 of Land Compensation Act 1961 (equivalent reinstatement basis) held to be applicable — There was no dispute that the appellants’ premises would have continued to be devoted to the purpose of a livestock market but for the compulsory acquisition and that reinstatement in some other place was bona fide intended — The dispute was as to whether there was a general demand or market for livestock auction marts — The Lands Tribunal had held that there was evidence of a latent demand which could amount to a general demand, thus negativing the application of rule (5), which required that there should be no general demand or market for the purpose for which the land in question was devoted — The Court of Appeal decided that the Lands Tribunal had answered correctly the preliminary questions raised as to the applicability of rule (5) — The basis of the Lands Tribunal’s view, accepted by the Court of Appeal, was that, although there were few transactions in livestock markets, if a mart became available for disposal there would be a demand for it unless the vendor intended to set up a competing market — Thus there was a latent demand which did not become active and apparent until the opportunity arose to make a bid, ie when land devoted to the purpose of a livestock market was offered for sale — In the opinion of the tribunal and Court of Appeal, this latent demand could be regarded as a general demand and the fact that it could be reduced or destroyed if the vendor intended to open a rival market was irrelevant — Held by the House of Lords that a latent demand in this sense was not a general demand within the meaning of rule (5) — It only manifested itself in the rare event of market premises being offered for sale and in special circumstances — Such a rare and intermittent demand did not constitute a general demand — Appeal allowed — Use of procedure by way of a preliminary hearing criticised — Two meanings of ‘land’ in rule (5) — The word ‘general’ qualifies only ‘demand’
This was an
appeal by market owners, Harrison & Hetherington Ltd, from a decision of
the Court of Appeal (reported at (1984) 272 EG 1283, [1984] 2 EGLR 30)
dismissing their appeal by case stated from a decision of the Lands Tribunal (V
G Wellings QC) on a preliminary hearing. The Lands Tribunal member held that,
on the evidence before him, rule (5) in section 5 of the Land Compensation Act
1961 was not applicable to the ascertainment of compensation for the
acquisition by Cumbria County Council of the appellants’ freehold interest in
the livestock market at Botchergate, Carlisle.
W J Glover QC
and Miss Susan Hamilton (instructed by Theodore Goddard & Co, agents for
Cartwell Mawson & Main of Carlisle) appeared on behalf of the appellants; M
F C Fitzgerald QC and G R G Roots (instructed by Sherwood & Co, agents for
the county solicitor, Cumbria County Council) represented the respondent
council.
In his speech,
LORD FRASER OF TULLYBELTON said: This appeal is concerned with the construction
of section 5 of the Land Compensation Act 1961. The appellants (‘the owners’)
were the owners of a livestock auction mart at Botchergate in Carlisle, which
was acquired from them by the respondents (‘the county council’) under an
agreement dated June 9 1980. The agreement provided that the purchase price
should be the compensation which would, on a compulsory purchase of the
subjects, have been assessed in certain specified circumstances under the Land
Compensation Act 1961. The relevant section of that Act is section 5, which
lays down six rules in accordance with which compensation in respect of any
compulsory acquisition of land is to be assessed. The question is whether the
correct basis for assessing compensation in this case is that laid down in
rules (2) and (6) (open-market valuation plus compensation for disturbance) or
rule (5) (the cost of equivalent reinstatement). The county council maintained
that rules (2) and (6) apply. The owners claim that rule (5) applies.
The President
of the Lands Tribunal made an order that there should be a preliminary hearing
to determine whether rule (5) should apply in this reference. The preliminary
hearing took place before a member of the tribunal, Mr V G Wellings QC, who
decided that compensation should not be assessed under rule (5) but under rule
(2) (and rule (6)). At the owners’ request the member stated a case for the
decision of the Court of Appeal, which on October 19 1984 dismissed the appeal.
The question now comes before your Lordships’ House on an appeal by the owners.
I must record
my opinion, which I understand is shared by all your Lordships who heard the
appeal, that the procedure by way of a preliminary hearing was not an
appropriate or convenient procedure in this case. Rule (5) provides that in the
circumstances therein specified ‘the compensation may, if the Lands
Tribunal is satisfied that reinstatement in some other place is bona fide
intended’ be assessed on the basis of the reasonable cost of equivalent
reinstatement (emphasis added). The tribunal, therefore, has a discretion
whether to apply rule (5) or not, but the discretion cannot be exercised until
matters which were not dealt with at the preliminary hearing have been
determined. In particular, before the tribunal could exercise its discretion
properly, it would require to know what constitutes equivalent reinstatement
and its cost, and to compare the amount of compensation assessed under rules
(2) and (6) on the one hand and under rule (5) on the other hand. If the
member’s decision had been in favour of the owners, it could only have been
provisional. In the events that happened his decision was against the owners,
but he added the following observation:
It becomes
unnecessary for me to decide the question of discretion. However, leaving aside
possibly the commercial value of Botchergate Enterprise, I should make it plain
that I have heard nothing which persuades me, if the matter arose, that
discretion ought to be exercised against the claimants.
That
observation would no doubt have been of great weight with the tribunal if it
had been necessary for it to exercise the discretion, but it would not have
been binding upon the tribunal at a subsequent hearing on the merits, and its
provisional nature demonstrates the unsuitability of the procedure by reference
on a preliminary point of law. The member states, in his interim decision, that
counsel for the parties were critical of the course which the preliminary
hearing took
made to him for the preliminary hearing to be terminated or a substantive
hearing substituted. A further consideration of convenience is that a
considerable amount of oral evidence was led at the preliminary hearing before
the member, which took four days. It transversed some of the ground that would
have been covered in a substantive hearing on the merits, and it seems to me
very doubtful whether a division of the hearing into a preliminary part and a
substantive part is convenient. It would, in my opinion, have been better if
the matter which was dealt with as a preliminary question had been included in
an inquiry on the whole merits.
Section 5 of
the Land Compensation Act 1961 provides:
5.
Compensation in respect of any compulsory acquisition shall be assessed in
accordance with the following rules: (1) No allowance shall be made on account
of the acquisition being compulsory: (2) The value of land shall, subject as
hereinafter provided, be taken to be the amount which the land if sold in the
open market by a willing seller might be expected to realise: (3) The special
suitability or adaptability of the land for any purpose shall not be taken into
account if that purpose is a purpose to which it could be applied only in
pursuance of statutory powers, or for which there is no market apart from the
special needs of a particular purchaser or the requirements of any authority
possessing compulsory purchase powers: (4) Where the value of the land is
increased by reason of the use thereof or of any premises thereon in a manner
which could be restrained by any court, or is contrary to law, or is
detrimental to the health of the occupants of the premises or to the public
health, the amount of that increase shall not be taken into account: (5) Where
land is, and but for the compulsory acquisition would continue to be, devoted to
a purpose of such a nature that there is no general demand or market for land
for that purpose, the compensation may, if the Lands Tribunal is satisfied that
reinstatement in some other place is bona fide intended, be assessed on the
basis of the reasonable cost of equivalent reinstatement: (6) The provisions of
rule (2) shall not affect the assessment of compensation for disturbance or any
other matter not directly based on the value of land: and the following
provisions of this Part of this Act shall have effect with respect to the
assessment.
Rule (2)
applies where the value of the land being compulsorily acquired can be fairly
assessed by reference to the open market. The obvious example is where there is
in existence an open market for comparable land used for the purpose for which
the land being compulsorily acquired is used. But it may have to be applied
even where no such open market exists, if no other rule is applicable. Rule (5)
applies to certain cases where there is no open market in land devoted to the
purpose to which the subject land is devoted, but only if reinstatement in some
other place is bona fide intended. If reinstatement is not bona fide intended,
rule (5) will not apply, and rule (2) will have to be applied, even though
there is no open market by reference to which compensation can be assessed. No
doubt rule (2) is the rule which is most commonly applied and which applies to
cases where no other rule is applicable. In that sense it is the general rule,
but it does not prevail over another rule which is applicable.
With regard to
rule (5) the following general comments fall to be made. Their relevance will
appear from what follows. First, the word ‘land’, where it first occurs in rule
(5), refers to the land which is the subject of compensation. One of the
conditions for rule (5) to be applicable is that that land is ‘devoted to a
purpose’ of a particular kind. Second, the purpose must be ‘of such a nature
that there is no general demand or market for land for that purpose’. The word
‘land’ in that phrase (the second place where it occurs in rule (5)) means land
in general and not the subject land. Accordingly, this condition of rule (5) is
not satisfied merely because there is a demand for the subject land. Third, the
word ‘general’ qualifies only ‘demand’. It does not qualify ‘market’. The
underlying concept is that there cannot be a market unless both supply and
demand exist, but there may be a general demand although there is no supply. In
that case the demand will be unsatisfied. With regard to the second and third
of these comments, I respectfully agree with, and adopt, what was said by
Waller LJ in Wilkinson v Middlesbrough Borough Council (1981) 45
P&CR 142, 148:
[Rule (5)]
provides, however, that there must be no general demand or market for land
for that purpose. This indicates to me that it is not sufficient that there
should be a demand for the land in question but that there must be a general
demand, ie a demand not [only] for that land but for other land elsewhere for
the same purpose. Furthermore, the use of the word ‘market’ connotes, in my
opinion, something more than the fact that there are potential users of the
land for the named purpose; it connotes that there is a buying and selling for
that purpose.
The only
qualification I would make to that statement is that I would have preferred to
omit the word ‘only’ where I have put it in square brackets and to substitute
the word ‘necessarily’. The quotation is from an opinion in which Waller LJ was
dissenting from the opinion of the majority (Templeman LJ and Sir David Cairns)
with whose decision I see no reason to disagree, but that does not affect the
soundness of the passage I have quoted.
The fourth,
and crucially important, comment on rule (5) is that the relevant question is
whether there ‘is’ a general demand or market, not whether there might be or
would be such demand or market in some possible future event. The word ‘is’ in
the present indicative refers to demand in conditions as they exist at present,
that is to say at the time when compensation falls to be assessed, and not to
demand in other conditions that might or would exist in the future.
There is no
dispute about the facts that the land at Botchergate would have continued to be
devoted to the purpose of a livestock mart but for the compulsory acquisition
and that reinstatement in some other place — Borderway — was bona fide
intended. Those two conditions for the applicability of rule (5) are clearly
satisfied. The dispute is as to whether there is a general demand or market for
livestock auction marts in England and Wales, or at least in parts of England
and Wales comparable to Carlisle and the surrounding country which provides the
catchment area for the Carlisle mart. At the preliminary hearing the member had
before him an agreed statement of facts. Oral evidence was also called by both
parties. The primary facts were largely agreed and may be summarised as
follows. Until 1974 the owners carried on the business of livestock auctioneers
at the Botchergate mart, as they and their predecessors had done for many
years. The mart was equipped with sale rings, offices and other buildings
appropriate to the business. In 1974, in consequence of a road construction
scheme which was then proposed by the county council’s predecessors, the owners
ceased to trade at the Botchergate mart. There were no alternative premises
available in Carlisle and they therefore built the Borderway mart on virgin
land which they obtained on the outskirts of Carlisle near the M6 on a 99-year
lease from Carlisle City Council. In August 1974 they began trading at the new
mart at Borderway. There have in recent years been very few transactions for
the sale of livestock marts in the United Kingdom. An agreed list of the few
transactions which were known to have occurred in England and Wales since 1957
forms appendix 1 to the member’s interim decision. It discloses only 18
transactions relating to 16 marts, and the member’s finding on that matter was
in the following terms:
Of course I
accept that the few transactions in livestock markets which are known to have
occurred and are described in appendix 1 are not sufficient in themselves to
prove that a general demand or market exists.
If that had
been the end of the finding it would have gone a considerable distance towards
showing that rule (5) applied. But it was not the end. It was immediately
followed by this passage in the member’s decision:
It is right
nevertheless to infer that there is a latent demand for land for the purpose of
a livestock market. That latent demand does not become apparent unless and
until the opportunity presents itself to make a bid, that is to say when land
devoted or intended to be devoted to the purpose of a livestock market is
offered for sale. That event rarely occurs and one reason why it may be so rare
is that, although livestock markets tend to diminish in number, those that
survive, if one is to judge by the circumstances of the Botchergate market,
tend to be profitable. I agree with the district valuer that if a livestock
market becomes available and is capable of producing a profit it will sell. I
agree with him also that the demand would come from auctioneers or other
persons engaged in or connected with agriculture in Cumbria or the northwest of
England.
It is clear
that there is no market in land which is devoted, or is to be devoted, to the
purpose of a livestock market. That is the inevitable inference from the very
small number of transactions in land devoted to that purpose. The issue is
whether there is a ‘general demand’ for land devoted or to be devoted to that
purpose, and especially whether a latent demand constitutes a general demand.
I have reached
the opinion that a latent demand, in the sense in which that expression is used
by the member in his interim decision, is not a general demand in the sense of
rule (5). In the first place such a latent demand is a demand which does not
presently exist; it is one which, in the words of the interim decision, ‘does
not become apparent unless and until . . . land devoted or intended to be
devoted to the purpose of a livestock market is offered for sale’. That is to
say that it only manifests itself in the event which rarely occurs of such land
being offered for sale. The evidence gives no basis for a conclusion (which
might have been possible if the evidence had been different) that there exists
an ever-present unsatisfied demand for
case, I would have expected to find evidence from estate agents that they were
frequently asked for land for that purpose and that they were unable to satisfy
it. Such a position might exist in an expanding industry. But the evidence of
the district valuer on behalf of the county council (which was apparently
accepted by the member) was that the supply of marts in the north of England
meets the needs of the agricultural community and that ‘a kind of equilibrium
has been reached’. He knew of no sale of virgin land for a new mart which was
not a replacement of an existing mart. One test was suggested during the
argument by my noble and learned friend, Lord Diplock, who asked why, if there
was a general demand for land for livestock marts, the land now used for the
Borderway mart had not been purchased long ago for that purpose, for which it
is evidently suitable. Counsel for the county council was not able to give a
reply which I found satisfactory. The only proper inference from these facts
is, in my view, that there is no general demand for land devoted, or to be
directed, to the purpose of livestock marts, but only a special demand which
will arise in particular circumstances.
The main
reason why the demand only emerges when an existing mart is offered for sale is
that, as the member found in his interim decision, very few towns in England
and Wales have more than one livestock mart. It appears that where one mart is
well established in a town no competitor is likely to set up business there.
The consequence is that the demand for marts, or for virgin land to be used for
marts, is intermittent and rarely emerges. Such a demand does not, in my view,
constitute a general demand.
For these
reasons I am of opinion that the member and the Court of Appeal erred in
holding that rule (5) was not applicable. In my view, compensation may be
assessed under rule (5) if the Lands Tribunal, in their discretion, think fit.
I would allow
the appeal, and remit the matter to the Lands Tribunal to determine the amount
of compensation due.
LORDS DIPLOCK,
ROSKILL, BRANDON OF OAKBROOK and TEMPLEMAN agreed that the appeal should be
allowed for the reasons given in the speech of Lord Fraser, and did not add any
observations of their own.
The appeal
was allowed and the case remitted to the Lands Tribunal to determine compensation.
