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You are here: BAILII >> Databases >> The Law Commission >> TOWARDS A COMPULSORY PURCHASE CODE: (1) COMPENSATION (A Consultative Report) [2002] EWLC 165(3) (24 June 2002) URL: http://www.bailii.org/ew/other/EWLC/2002/165(3).html Cite as: [2002] EWLC 165(3) |
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Part
III
the compensation code- introduction
… the right [of the owner] to be put, so far as money can do it, in the same position as if his land had not been taken from him. In other words, he gains a money payment not less than the loss imposed on him in the public interest, but on the other hand no greater.[1]
More recent authorities put the emphasis on “fairness”:
… no allowance is to be made because the resumption or acquisition was compulsory; and land is to be valued at the price it might be expected to realise if sold by a willing seller, not an unwilling seller. But subject to these qualifications, a claimant is entitled to be compensated fairly and fully for his loss. Conversely, and built into the concept of fair compensation, is the corollary that a person is entitled to compensation for losses fairly attributable to the taking of his land, but not to any greater amount. It is ultimately by this touchstone, with its two facets, that all claims for compensation succeed or fail.[2] (emphasis added)
3.3 Compensation for the compulsory acquisition of land is traditionally assessed under four heads:
(1) Market value - of the land subject to acquisition (“the subject land”);[3]
(2) Disturbance - other loss not based on the value of land (typically removal expenses or temporary business losses);[4]
(3) Injury to retained land -
(a) Severance - loss of value caused by the severance of the subject land from other land forming part of the same holding;[5]
(b) Injurious affection - loss in value caused to retained land by the works or their use.[6]
… the sum to be ascertained is in essence one sum, namely, the proper price or compensation payable in all the circumstances of the case.[7]
3.5 An alternative basis of assessment - equivalent reinstatement - is permitted, where the subject land is used for a purpose for which there is no general market (for example a church).[8]
3.6 There are a number of other rules, derived from statute or case law:
(1) The date of assessment is normally the date of entry by the authority (or, if earlier, date of determination of compensation);[9]
(2) Under the no-scheme principle compensation is to be assessed disregarding the scheme of acquisition;[10]
(3) There are special rules for the planning assumptions to be made in valuing the land;[11]
(4) Increases in value due to unlawful uses must be disregarded;[12]
(5) Enhancements carried out with a view to increased compensation are disregarded;[13]
(6) Under the betterment rules, the compensation otherwise payable may be offset by an increase in value of adjoining land;[14]
(7) There are separate rules for compensation for injurious affection where no land is taken.[15]
(1) those from whom land is taken are restored, as far as possible, to the position they would have been in if there had been no compulsory purchase;
(2) in addition to the value of the land taken, all those affected should be entitled to compensation for any and all of the actual losses which they can show that they have sustained as a result of an acquiring authority’s actions;
(3) such an entitlement should apply irrespective of whether land is actually taken from the claimant for the scheme and even if the acquiring authority decides not to proceed after the compulsory purchase order has been confirmed; and
(4) it is not appropriate for there to be any differentiation in entitlement solely as a result of the powers under which a particular order has been made.[16]
3.8 An important innovation is the proposal that the date of the initial notice of the making of the compulsory purchase order (which we will refer to in this Report as “the first notice date”[17]) should provide the trigger for the right to claim losses, whether or not the compulsory purchase proceeds:
… the date on which the acquiring authority notify those directly affected of the making of the compulsory purchase order should be defined as the date from which appropriate losses can be reimbursed and as the date from which such claimants have a duty to mitigate their losses. This should apply in relation to any actual and justifiable loss or expense irrespective of whether the relevant compulsory purchase order is subsequently confirmed or implemented. However, the defined date should be regarded as a baseline and, as CPPRAG pointed out, any particular loss should only be reimbursable from the date, thereafter, on which it is first incurred.[18]
3.9 In effect, the Policy Statement treats compulsory acquisition as a process,[19] starting from the first notice of the making of the order (“the first notice date”) and ending with the date of entry (or earlier assessment of compensation) (“the valuation date”). Consistently with this approach, all losses resulting from the CPO process, starting from the first notice date, are in principle compensatable, whether or not the acquisition proceeds. The duty to mitigate also starts from that date.
3.10
The general intention is to achieveend
result will be new legislation:
… to provide a single statutory Compensation Code giving effect to the Law Commission’s recommendations for achieving the principle that, in all cases, a claimant should [be] properly compensated for all the losses incurred as a direct result of the compulsory purchase order, with no differentiation according to the powers under which any particular order may be made, whether or not it is implemented and whether or not land is actually taken from the claimant.[20]
3.11 In general, at least so far as relates to claimants from whom land is “actually taken,” this statement of principle represents no departure from the current law. The more detailed recommendations of the Policy Statement will be considered below as they arise. The issue of compensation for injurious affection, affecting those from whom no land is acquired, will be considered separately in Part IX. Our proposals for compensation where an order is not implemented (“abortive orders”) will form part of the next Consultative Report on “Implementation”.[21]
(1) The overall principle of “fair compensation”;
(2)
The traditional heads of compensation (market value,
disturbance, severance/injurious affection), and the alternative of equivalent
reinstatement. In accordance with the Policy Statement, compulsory
acquisition will be treated, in effect as a process.[22] The process will be treated as starting from
the first notice of the making of the order (“the first notice date”) and
ending with the date of entry (or earlier assessment of compensation) (“the
valuation date”). Consistently with this approach, all losses resulting from
the CPO process, starting from the first notice date, will in principle be
compensatable, whether or not the acquisition proceeds. The duty to mitigate
will also start from that date.
3.13 The “no-scheme rule” will be rationalised and limited in scope; in summary:
(1) The existing rules, statutory or judge-made, will be replaced by a new statutory statement of the rule;
(2) There will be a basic “disregard” rule, providing for the disregard of increases caused by the “project” for which the land is acquired;
(3)
There will be separate provision for disregard of decreases in value caused by the project
or related blightfor the same or an associated purpose.[23]
3.14
The rules relating to planning assumptions will be simplified,
along lines consistent with the new “disregard” rule, but applying the
“cancellation approach” (following the Fletcher
Estates case[24]),
so that the retrospective effect of the rule will be limited to events
subsequent to the first notice date. There will be a new certificate procedure
(replacing section 17 of the 1961 Act). We invite views on whether the appeal
against the local planning authority’s decision should be (as now) to the
Secretary of State, or to the Lands Tribunal.[25]
in advance of, or at the same time as other
valuation issues; and, in the former case, to be able to delegate to a planning
inspector.
(1) Compensation for interference with rights;
(2) Compensation for acquisition of rights;
(3) Advance payments;
(4) Lands Tribunal extended jurisdiction;
(5) Interest;
3.17 We explain our reasons for not including the following:
(1) Tax;
(2) Subsequent planning permissions;
(3) Additional loss payments;
(4) Disturbance payments;
(5) Compensation for minor tenancies.
:Compensation
for acquisition of rights;
(1)Advance payments;
(1)Lands Tribunal
jurisdiction
(1)Interest;
(1) Statement of right to compensation
(2) Preliminary issues
(3) Market value
(4) Disturbance
(5) Effects on retained land
(a) Severance and injurious affection
(b) Betterment
(6) Equivalent reinstatement
(7) Incidental rules
(a) Prospects of lease renewal, and effect of rehousing tenants
(b) Illegal uses
(c) Enhancements with a view to increased compensation
(d) Consistency and mitigation
(8) Date for assessment
(9)
The no-schemedisregard
rule
(10) Planning assumptions
(11) Related issues
(a) Compensation for interference with rights
(b) Compensation for acquisition of rights;
(c) Advance payments
(d) Lands Tribunal extended jurisdiction
(e) Interest
(f) Tax
(12) Matters not covered
(a) Subsequent planning permissions
(b) Additional loss payments
(c) Disturbance payments
(d) Compensation for minor tenancies
(13) Injurious affection where no land is taken
[1]Horn v Sunderland Corp [1941] 2 KB 26, 42, per Scott LJ. This is similar to the classic statement of the same principle as applied to common law damages: see Livingstone v Raywards Coal Co (1880) 5 App Cas 25, per Lord Blackburn.
[2]Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111, 125, per Lord Nicholls.
[3]1961 Act, s 5(2). See Part IV, para 4.15 below.
[4]1961 Act , s 5(6), preserving case law rules. See Part IV, para 4.20 below.
[5]1965 Act, s 7. See Part V below.
[6]Ibid. Section 7 of the 1965 Act applies only where land has been acquired from the claimant. Section 10 provides separate rules for injurious affection where no land is taken (see Part V and Part IX below).
[7]Horn v Sunderland Corp [1941] 2 KB 26, 34, CA, approved in Hughes v Doncaster Council [1991] 1 AC 382, 392, HL. There are special rules for tax purposes: see e.g. Taxation of Chargeable Gains Act 1992, s 245, which provides for apportionment between amounts of a capital and income nature (see Part VIII, para 8.51-52).
[8]1961 Act, s 5(5). See Part V, para 5.36 below.
[9]See Part V, para 5.71 below. In the case of a vesting declaration, it is the date of vesting: see Part V, para 5.72.
[10]The statutory and case law history of the rule are examined in Appendix 5.
[11]1961 Act, s 14ff. See Part VII, paras 7.31-32.
[12]1961 Act, s 5(4). See Part V, para 5.59.
[13]Acquisition of Land Act 1981, s 4. See Part V, para 5.64.
[14]1961 Act, s 7. See Part V, para 5.30.
[15]1965 Act, s 10; Land Compensation Act 1973, Part I; see Part V and Part IX below.
[16]Policy Statement, para 4.2.
[17]See Part II, para 2.30 above.
[18]Policy Statement, App, para 3.8.
[19]See Prasad v Wolverhampton BC [1983] Ch 333, 334; Sheffield DC v Glossop Sectional Buildings Ltd [1994] 2 EGLR 29, 31K-L Cf the discussion in Shun Fung [1995] AC 111, 136-139, per Lord Hope.
[20]Policy Statement, para 4.2.
[21]See Part I, para 1.23 above.
[22]Cf the discussion in Shun Fung [1995] AC 111, 136-139, per Lord Hope.
[23]In line with CPPRAG’s recommendation to retain an extended version of 1961 Act, s 9: see Part VII below.
[24][2000] 2 AC 307: see App 5, para A.104.
[25]See Part VII, para 7.40 below.
