Land – Compulsory purchase – Compensation – Appellant secretary of state appealing against certificate of appropriate alternative development – Preliminary issue arising whether certificates granted for adjoining sites acquired for same scheme, or applications for certificates for such sites, to be considered when determining prospect of planning permission on cancellation assumptions – Upper Tribunal determining preliminary issue in favour of respondent landowners – Appellant appealing – Whether tribunal erring in law – Appeal dismissed
The appellant secretary of state compulsorily acquired four contiguous sites for the construction of a new terminus in Birmingham for the HS2 high-speed railway. The sites were all cleared for development in anticipation of expansion of the city centre. Each site was a substantial potential development site in its own right and each respondent landowner was entitled to compensation.
Under the legislation governing compensation, a landowner was entitled to apply to the local planning authority for a certificate of appropriate alternative development (CAAD), to identify every development for which planning permission could reasonably have been expected to be granted if the land had not been acquired compulsorily. Where such a certificate was granted, it was to be assumed for the purposes of assessing compensation that planning permission for that development had been granted. Each of the respondents applied for a CAAD under section 17 of the Land Compensation Act 1961.
The Upper Tribunal determined as a preliminary issue that, in determining the development for which planning permission could reasonably have been expected to be granted for the purposes of section 14(4)(b) of the 1961 Act, the decision maker was not required to assume that CAAD applications or decisions arising from the compulsory acquisition of land for the same underlying scheme had never been made. The decision maker had to treat such applications and decisions as what they were, and not as notional applications for, or grants of, planning permission. They were not material planning considerations: [2020] UKUT 37 (LC); [2020] RVR 154. The appellant appealed.
Held: The appeal was dismissed.
(1) Where land was acquired compulsorily, compensation was assessed on the basis of a hypothetical sale in the open market. The legislation required that hypothetical sale to be assessed on the basis of certain counter-factual assumptions; in particular assumptions about planning permission. The underlying principle was that fair compensation should be given to the owner whose land had been compulsorily taken. The aim of compensation was to provide a fair financial equivalent for the land taken: Transport of London v Spirerose Ltd [2009] UKHL 44; [2009] 3 EGLR 103 applied.
(2) Things were to be taken as they were in reality on the valuation date, except to the extent that the instrument postulating the hypothetical transaction required a departure from reality. The hypothesis was only a mechanism for enabling one to arrive at a value of particular property for a particular purpose. The world of make-believe had to be kept as near as possible to reality which had to be adhered to so far as possible and departed from only when the hypothesis so required. Where the hypothesis inevitably entailed a particular consequence, the valuer had to take that consequence into account. But there was a clear distinction between hypotheses expressly directed to be made and assumptions allegedly consequential on the express hypotheses. Where the alleged consequence was not inevitable, but merely possible (or even probable), the consequence could not be assumed to have happened. Events which post-dated the valuation date could not generally be taken into account. But the purchaser would have regard to future possibilities, and it was his perception of the future possibilities that mattered. There was, in that respect, a clear difference between events before and after the valuation date. What had happened before the valuation date was either known (because it really happened) or was required by the hypothesis to be assumed to have happened. But the future was unknowable. Assumptions about the future should not be made. Nor could a tribunal make findings of fact about the future. All that a purchaser (and by extension a valuer) could do was assess the effect on current value of future possibilities: Harbinger Capital Partners v Caldwell [2013] EWCA Civ 492 followed.
(3) The starting point was the real world, modified either by an express statutory assumption, or by what was necessarily inherent in the concept of an open market valuation. If there was ambiguity in an assumption that the statute required to be made, then the principle of equivalence might assist in resolving the ambiguity, but it was not an overriding independent and free-standing principle. Appropriate alternative development was development for which, on certain assumptions, planning permission could reasonably have been expected to be granted on the valuation date. Those assumptions were that: the scheme of development underlying the acquisition had been cancelled on the launch date; no action had been taken by the acquiring authority for the purposes of the scheme; and there was no prospect of the same scheme, or any other project to meet the same or substantially the same need, being carried out in the exercise of a statutory function or by the exercise of compulsory purchase powers: section 14(5).
(4) It was not merely that the applications for CAADs would not have been made, but that they could not have been made. An essential precondition for the making of such an application (namely a proposal for compulsory acquisition) did not exist in the “no scheme world”. Therefore, it was the inevitable consequence of the cancellation assumption that no CAAD applications could have been made. In relation to many large-scale proposals for regeneration, the relevant authority might begin the process of site assembly long before any decision to resort to compulsory powers had been made, let alone before it had been made public; and hence long before the launch date. Merely to assume that the scheme had been cancelled on the launch date would not deal with such a case. The cancellation assumption required it to be assumed that no CAAD applications on other sites had been made. It followed that, in considering an application for a CAAD on one particular site, applications for CAADs (or the issue of CAADs) on different sites had to be disregarded.
Neil King QC and Guy Williams (instructed by DLA Piper UK LLP) appeared for the appellant; James Pereira QC and Caroline Daly (instructed by Town Legal LLP) appeared for the first respondent; David Elvin QC and Richard Moules (instructed by BCLP LLP) appeared for the second respondent; David Elvin QC and Richard Moules (instructed by Ashurst LLP) appeared for the third respondent; Richard Glover QC (instructed by Mills & Reeve LLP) appeared for the fourth respondent.
Eileen O’Grady, barrister
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