Gas, electricity and other services are essential to our daily lives. However, the infrastructure needed to supply them can sometimes impede development. Arnold White Estates Ltd v National Grid Electricity Transmission Ltd [2014] EWCA Civ 216; [2014] PLSCS 70 concerned land that was ripe for residential development, but for fact that it lay underneath an overhead electricity line.
The landowner contracted to sell the land to a developer, conditionally upon the removal of the line, and gave the requisite notice to terminate the electricity wayleave agreement. However, NGET sought and secured a statutory wayleave to retain the line for a further 15 years. The landowner claimed compensation under the Electricity Act 1989 for the loss caused by the grant of the statutory wayleave. It argued that the compensation should be assessed by reference to the price payable under the conditional contract. NGET objected to paying compensation based on a figure fixed by a contract to which it was not a party, especially as property prices had fallen since the contract was made.
The parties agreed that the open market development value of the land, without the power line and ignoring the conditional contract, was £3,195,000. However, the price that would have been payable under the contract, had the power line been removed, had risen due to indexation to £5,829,477.
The Upper Tribunal upheld the landowner’s claim and fixed the compensation for the grant of the statutory wayleave by reference to the price payable under the contract (after deducting £1 to cover the value of the pylon land subject to the wayleave). NGET pressed its point in the Court of Appeal. It accepted that the destruction of the development value of the land was a legitimate head of compensation, but claimed that the tribunal’s decision to award the landowner a sum that was, in effect, the full contract price involved a radical departure from settled principles that apply to compulsory acquisition, with major implications for the electricity supply industry.
The Court of Appeal noted that there are very few authorities dealing with compensation for the grant of a wayleave – and none that deal directly with this particular point. It understood why NGET had drawn on the principles that apply to compulsory purchase. However, compensation payable for the grant of a wayleave is quite different because no land is taken, or retained, on the grant of a wayleave, which is why the Electricity Act makes special provision for compensation in such cases.
The right to compensation under the legislation is expressed in the most general terms. The only limitation imposed by the statute is that the loss for which compensation is claimed must be loss suffered by the claimant in his capacity as the owner or occupier of the land. Consequently, the Court of Appeal agreed with the tribunal that compensation should be assessed on the basis of the full contract price, as opposed to being based on the objective market value of the land. This would ensure that the landowner received no more, and no less, than its loss, regardless of whether the development value of the pylon land had risen or fallen on the date on which the statutory wayleave was granted.
Allyson Colby is a property law consultant