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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(APPENDIX 5) (24 June 2002) URL: http://www.bailii.org/ew/other/EWLC/2002/165(APPENDIX_5).html Cite as: [2002] EWLC 165(APPENDIX 5) |
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appendix 5
the no-scheme rule - history
A.1 It is an established principle of compensation law that compensation “cannot include an increase in value which is entirely due to the scheme underlying the acquisition.” This rule, following the name of the case from which this formulation is taken, is often called the “Pointe Gourde rule”.[1] The rule requires the disregard of decreases in value caused by the scheme, as well as increases in value.[2] In other words, the value must be assessed in the “no scheme world”, that is “upon a consideration of the state of affairs which would have existed, if there had been no scheme of acquisition”.[3]
A.2 Although the rule was developed by the Courts, its effect has been reproduced, or reflected, in a number of provisions now contained in the Land Compensation Act 1961. They are section 5(3) (“special suitability”);[4] section 6 (disregard of changes in value arising from actual and prospective development);[5]section 9 (depreciation due to prospect of acquisition);[6] sections 14-16 (planning assumptions); section 17ff (certificates of appropriate alternative development).[7]
A.3 Strictly speaking the Pointe Gourde rule refers only to the judicial (or “common law”[8]) version of the rule, as opposed to the various statutory versions. Furthermore, as will be seen, there is room for debate whether the Pointe Gourde formulation is, or should be taken as, an accurate statement even of the judicial rule. Accordingly, we have preferred to use the term “no-scheme rule”, as a convenient shorthand for all the various manifestations of the rule, both statutory and non-statutory.
A.6 The 1845 Act provided limited guidance as to the basis on which compensation was to be assessed. Section 63 simply required “regard to be had… to the value of the land” (as well as loss to the owner due to severance or injurious affection). It was established in the early cases that this meant the value to the owner, not the value to the acquiring authority.[9] The cases up to 1919 were directed to working out this principle.
When Parliament gives compulsory powers, and provides that compensation shall be made to the person from whom the property is taken, it is intended that he shall be compensated to the extent of his loss; and that his loss shall be tested by what was the value of the thing to him, not by what will be its value to the persons acquiring it.[10]
A.8 Thus it was established that added value given by the existence of the undertaker’s statutory powers had to be left out of account. On the other hand, if the land had intrinsic advantages, which gave it special suitability of adaptability[11] for the proposed use, quite apart from the undertaker’s scheme, that could be taken into account in the valuation. Although the word “scheme” was sometimes used, it was interchangeable with words such as “purpose” or “undertaking”.
A.9 A number of the early cases on the rule concerned land acquired by water companies for reservoirs. Re Ossalinsky and Manchester Corporation (1883)[12] confirmed that the valuer should disregard any enhancement due to the use of statutory powers;[13] but this, it was held, did not mean that he should ignore the intrinsic suitability of the land for use as a reservoir:
You must not look at the particular purpose which the defendants in the case before the arbitrator are going to put land to when they take it under parliamentary powers or undertakings for any special purpose, but you may possibly use it as an illustration to anticipate or to answer an argument that the schemes thrown out by the plaintiff in this case are going to enhance the value of the land are not visionary (sic), but are schemes with certain probability in them. I do not see any objection to that being used as an argument.[14] (emphasis added)
A.10 This approach was followed in 1904 in another reservoir case.[15] If the site had “peculiar advantages for supplying water”[16] apart from any scheme “for appropriating the water to a particular water authority”, they could be taken into account:
It would be otherwise, no doubt, if there was no natural value in the place as a water site apart from the particular scheme or Act of Parliament, or, in other words, there is no value for which compensation ought to be given on this head if the value is created or enhanced simply by the Act or by the scheme of the promoters.[17]
A.11 Although not directly relevant to the no-scheme rule, it is useful to note another valuation principle, established by the Court of Appeal in 1914, which was part of the background to rule (3) in the 1919 Act.[18] The case concerned the valuation of a house for tax purposes.[19] As a house on its own it was worth £750, but to an adjoining nursing-home it had an added value of £250 for the purpose of extending the home. It was held that this “special purchaser” addition was not to be excluded. Furthermore, this did not mean that the valuer allowed simply “one extra bid”. As Swinfen Eady LJ said:
Such an assumption would ordinarily be quite erroneous. The knowledge of the special bid would affect market price, and others would join in competing for the property with a view to obtaining it at a price less than that at which the opinion would be formed that it would be worth the while of the special buyer to purchase.[20]
A.12 As will be seen, rule (3) in the 1919 Act required such special purchaser value to be excluded in assessing compensation for compulsory purchase, but this part of the rule was eventually repealed in 1991.[21]
A.14 In re Lucas and Chesterfield Gas and Water Board (1909)[22] is often taken as the leading authority for the rule. The case again concerned the acquisition of land for a reservoir, and the issue was whether the suitability of the claimant’s land for the purpose of constructing a reservoir could be taken into account. In a classic[23] statement of the rule, Fletcher Moulton LJ said:
The owner receives for the lands he gives up their equivalent, ie that which they were worth to him in money…But the equivalent is estimated to be the value to him, and not on the value to the purchaser, and hence it has from the first been recognised as an absolute rule that this value is to be estimated as it stood before the grant of the compulsory powers. The owner is only to receive compensation based upon the market value of his lands as they stood before the scheme was authorised by which they are put to public uses. Subject to that he is entitled to be paid the full price for his lands, and any and every element of value which they possess must be taken into consideration in so far as they increase the value to him.[24] (emphasis added)
This passage confirms the no-scheme rule as one aspect of the “value to the owner” principle. It also implies a relatively narrow approach, under which the scope of the “scheme” is limited to that whereby the subject land is “put to public uses”, and there is no looking back beyond the time of authorisation.[25]
A.15 The other significant feature of the case related to the precise limits of the “special adaptability” principle. On this aspect, there was a significant difference between the two leading judgments. Fletcher Moulton LJ considered that, where the land had special value only for the purpose of the acquiring authority, it must be disregarded. However, if that value also existed for other purchasers, it could be taken into account, even if those purchasers would themselves require statutory powers to realise that potential.[26] Thus, it was essential that there should be evidence of some market, apart from the interest of the acquiring undertaker,[27] even if that market might be limited to those having, or able to get, statutory powers.[28]
I agree… that the fact that no buyer for reservoir purposes can be found except a buyer who has obtained parliamentary powers does not prevent the special value being marketable… also on the ground that the fact that the board itself might become possible purchasers who would give a special price for the land ought to be considered.[29] (emphasis added)
However, the valuer had erred in treating the “probability and the realised probability as identical”. What had to be valued was, not the “realised” potential of the land for the acquiring authority’s purpose, following the actual grant of statutory powers, but simply “the possibility” of the site going into the market for that purpose.[30]
A.17 On this aspect, the third member of the Court, Buckley LJ appears to have agreed with the approach of Vaughan Williams LJ. He could see no reason why the answer should depend on the number of potential competitors.[31] However, since the result of the case was not affected by the difference on this point,[32] the existence of a majority for this view was not treated as conclusive in later cases.
A.18 In Sidney v N E Ry Co (1914),[33]the Divisional Court preferred the approach of Fletcher Moulton LJ. The facts were unusual. The railway company had taken over a stretch of line used as a private colliery railway and incorporated it into their main lines, overlooking the fact that their wayleave was limited in time. They subsequently obtained statutory powers to acquire the freehold. It was held that the valuer should take into account the possible market from adjoining colliery owners, but not the special need of the railway company itself:
… the umpire should have regard to the special adaptability of the land for railway purposes but not to the fact of the existence on it of an integral part of a public railway, or to the fact of such railway forming part of the main line.[34]
… the ingenuity of claimants has been largely exercised in discovering or attempting to discover special adaptability of some sort in any kind of land compulsorily taken. [35]
In his view “special adaptability was nothing more than an element in market value”.[36] Following the approach of Fletcher Moulton LJ in Lucas, he thought that the suitability for railway purposes could be taken into account, but not “the exigencies of the N E Railway Company”.[37]
A.20 Rowlatt J summarised the general principle as then understood:
It is well settled that the compensation must represent the value to the owner, not to the purchaser. But the value to the owner is not confined to the value of the land to the owner for his own purposes; it includes the value which the requirements of other persons for other purposes give it as a marketable commodity, provided that the existence of the scheme is not allowed to add to the value.[38]
A.21 Another useful summary of the perceived effect of the English cases, shortly before the intervention of the Scott Committee, was given in South East Rly Co v LCC.[39] This concerned a strip of land taken from the railway company for the widening of the Strand. The main issue was whether compensation for the land taken should be reduced to reflect the enhanced value of the adjoining land retained by the company. The answer was no (in the absence of statutory provision to that effect). Eve J set out six principles:
(1) The value to be ascertained is the value to the vendor, not its value to the purchaser, (2) In fixing the value to the vendor all restrictions imposed on the user and enjoyment of the land in his hands are to be taken into account, but the possibility of such restrictions being modified or removed for his benefit is not to be overlooked; (3) market price is not a conclusive test of real value; (4) increase in value consequent on the execution of the undertaking for or in connection with which the purchase is made must be disregarded; (5) the value to be ascertained is the price to be paid for the land with all its potentialities and with all the use made of it by the vendor; and (6) the true contractual position of the parties – that of purchaser and vendor – is not to be obscured by endeavouring to construe it as another contractual relation altogether – that of indemnifier and indemnified.[40] (emphasis added)
A.24 In Cedars Rapids Manufacturing and Power Co v Lacoste (1914),[41] two separate pieces of land (“the three subjects”) in the St Lawrence river were acquired in connection with a power generation scheme. The acquiring company had been granted powers under a Canadian statute to develop water powers on a stretch of the river, and had obtained a lease of the river bed and the right to abstract water.[42] The arbitrators’ award had been based on agricultural value; the Supreme Court of Canada had adopted a figure based on a proportion of the value to the undertakers.[43] The Privy Council rejected both approaches:
Where… the element of value over and above the bare value of the ground itself… consists in adaptability for a certain undertaking… the value is not a proportional part of the whole undertaking, but is merely the price, enhanced above the bare value of the ground which possible intended undertakers would give. That price must be tested by the imaginary market which would have ruled had the land been exposed for sale before any undertakers had secured the powers, or acquired the other subjects[44]which made the undertaking a realised possibility… [45]
For in that case there was only one subject. Here there are three subjects detached, and the value which all the witnesses attribute to them is only reached by joining them up, a process which depends on powers obtained not from the claimants, and for the enhanced value of which result the claimants have no right to be compensated. The real question to be investigated was, for what would these three subjects have been sold, had they been put up to auction without the appellant company being in existence with its acquired powers, but with the possibility of that or any other company coming into existence and obtaining powers…[46](emphasis added).
A.26 Thus, the valuer was required to ignore, not merely the compulsory powers granted for the acquisition of the three islands, but all the powers granted to the power company for its scheme. However, although the existence of the actual statutory powers was to be ignored, the possibility of such powers being granted in the future, to that or another company, was to be taken into account. This exercise in “possibilities” was similar to that envisaged by Vaughan Williams LJ,[47] but neither he nor the Privy Council gave any guidance as to how it was to be carried out in practice.[48]
A.27 In the other Canadian case, Fraser v City of Fraserville (1917),[49] river falls (“the Great Falls”) were expropriated by an electric light undertaking, which had previously expropriated lands higher up the river and was in the course of constructing a reservoir to increase the power of the falls.[50] The arbitrator had arrived at his award by taking a proportion of the capitalised profits to the undertakers, including, apparently, those due to the extra power, which would result from the reservoir.[51]
… the value to be ascertained is the value to the seller of the property in its actual condition at the time of expropriation with all its existing advantages and with all its possibilities, excluding any advantage due to the carrying out of the scheme for which the property is compulsorily acquired, the question of what is the scheme being a question of fact for the arbitrator in each case. (emphasis added)[52]
A.29 This passage is significant, in that its use of the word “scheme” was echoed in Pointe Gourde itself.[53] Also, it establishes that the identification of the scheme is a “question of fact” for the arbitrator, rather than one of law for the courts. This is stated as a simple proposition, without further reasoning or citation. Nor does the Privy Council give any specific guidance as to the scope of the “scheme” on the facts of the case, or whether it included the reservoir, which was under construction at the same time, but under a separate bye-law. However, it was the respondent’s submission that “the reservoir and the works upon the appellant’s land were all one scheme, and not two separate schemes”.[54] At the very least, the Privy Council did not reject this as a possible view of the facts.[55]
A.30 The establishment of the Scott Committee, at the end of the First World War, is described elsewhere in this Report.[56] One of the issues it sought to address was the problem of speculative values, arising from the need to take account of “special adaptability”, as highlighted in the Sidney case. Since the Committee’s reasoning provides the background to what became rule (3) in the 1919 Act, it deserves full citation:
The [Courts’] own decisions have quite logically said that all “potential” as well as actual value should be included under the head of “value to the owner.” But under the cloak of this criterion merely theoretical and often highly speculative elements of value which had no real existence have crept into awards as if they were actual; while elements of remote future value have all too often been discounted, and valued as if there were a readily available market.[57]
…the special adaptability of land for a particular purpose may be taken into account in assessing the price to be paid for land, even where that purpose is the very purpose for which the land is taken, and even although it is not used, or at the time intended to be used, and even although without getting neighbouring owners to agree upon a joint scheme of development it could not be used for that purpose, provided its adaptability is such that as to render it available for sale to other persons than the promoters. And it is not necessary for the owner to show that at any given moment there are actual competitors for the land, if by reason of the situation and character of the land there are what may be called natural customers for it.[58]
We do not think that the Tribunal is justified in having regard to the possibility that undertakers to whom the State has granted statutory powers may compete with each other for the same land. Such competition is only possible under an imperfect system for the granting of statutory powers. In our view, any competition between Public Authorities or any other statutory undertakers for the same land should be determined by the decision of the Sanctioning Authority… But, while we would exclude as a basis of market value any possible competition for the land between statutory undertakers, we would not exclude the competition of those who require the land for any purpose for which statutory powers are not required.
… the owner should not be entitled to any increased value for his land which can only arise, or could only have arisen by reason of the suitability of the land for a purpose to which it could only be applied under statutory powers.
This was the genesis of the main part of what became rule (3) in the 1919 Act: [59]
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[60]] the requirements of any Government Department or any local or public authority.[61]
A.35 A Harbour Authority had compulsorily acquired land from the claimant, containing fresh water springs, for the purpose of providing a water supply to the harbour (then under construction) and its hinterland. The harbour scheme had begun years before. The need for a fresh water supply arose from the discovery that existing supplies were affected by malaria. In practice the only possible purchaser of the land as a water supply was the Harbour Authority.[63] The Court of Appeal had held (following Fletcher Moulton LJ in Lucas) that, because the value of the Spring as a source of drinking water arose entirely from the scheme carried out by the Harbour Authority, the value for that purpose should be ignored.[64]
A.36 The Privy Council disagreed. Unlike the judges in Cedars Rapids and Fraser,[65] Lord Romer recognised the significant differences between the two main judgments in Lucas[66] (“diametrically opposed to one another”), and preferred that of Vaughan Williams LJ.[67] Even where the special value existed only for the acquiring authority, that should be taken into account in considering what a willing purchaser would pay:
… if the potentiality is of value to the vendor if there happen to be two or more possible purchasers of it, it is difficult to see why he should be willing to part with it for nothing merely because there is only one purchaser. To compel him to do so is to treat him as a vendor parting with his land under compulsion and not as a willing vendor. The fact is that the only possible purchaser of a potentiality is usually quite willing to pay for it…
… even where the only possible purchaser of the potentiality is the authority that has obtained the compulsory powers, the arbitrator in awarding compensation must ascertain to the best of his ability the price that would be paid by a willing purchaser to a willing vendor of the land with its potentiality in the same way that he would ascertain it in a case where there are several possible purchasers…[68]
The only difference that the scheme has made is that the acquiring authority, who before the scheme were possible purchasers only, have become purchasers who are under a pressing need to acquire the land; and that is a circumstance that is never allowed to enhance the value.
On the other hand, he expressly rejected an interpretation of the “scheme” which equated it with (and required disregard of) “the intention formed by the acquiring authority of exploiting the potentiality of the land”. Thus, it seems, their actual proposals for the land, as willing purchasers without compulsory powers, were to be taken into account in the valuation.[69]
A.38 The Indian case, therefore, apparently gave approval to a version of the no-scheme rule which was significantly narrower than that which had been adopted in the English cases before 1919, as summarised by Eve J in the S.E.Railway case.[70] This may not at the time[71] have been seen as particularly important in the English context, since by then those cases had apparently been overtaken by rule (3) of the 1919 Act.
A.39 It was not until 1947, in the Point Gourde case[72] itself, that the relationship between the no-scheme rule and the rule (3) was considered by the higher courts. Unfortunately, the reasoning given by the Privy Council, in relation either to the earlier cases or to the statute, was limited.
A.40 A quarry in Trinidad was acquired in connection with the establishment of a US naval base.[73] As the stated case showed, the land had “a special suitability or adaptability” for producing quarry products, and had a market value as quarry land before the acquisition. The quarry business of the owners was totally extinguished by the acquisition, and in assessing compensation the tribunal “was largely guided by the estimate it formed of the prospective profits”. Of the total award of $101,000, the sum of $86,000, which was not challenged, included the value of the quarry as a going concern, and made allowance for its “special suitability or adaptability” for that purpose. The issue concerned an additional sum of $15,000, explained in the case as follows:
The tribunal considered that the market value of the quarry land and business would be increased if the United States needs were supplied from this quarry land on a commercial basis as greater prospective profits might be expected.
As it was put in the “facts taken from the judgment of the Judicial Committee”, the sum of $15,000 was “evidently awarded as the measure of the loss of that element of prospective extra profit”.[74]
A.41 The sole issue[75] raised by the local court was whether this item was excluded by rule (3) (which was reproduced in the relevant statute[76]). It was held by the Privy Council that rule (3) had no application, because it was concerned with the use of the land itself, not of the products of the land. The use of the quarried stone in construction of the naval base, though of particular importance to the United States on account of their special needs, did not constitute a special adaptability of the land for any purpose.[77]
It is well settled that compensation for the compulsory acquisition of land cannot include an increase in value, which is entirely due to the scheme underlying the acquisition.[78]
He rejected an argument that the relevant scheme was the acquisition of the quarry land, not the construction of the naval base, because there was a specific finding in the case that the land acquired was “required by the United States for the establishment of a naval base in Trinidad.”[79]
A.44 The result itself is not unexpected, but the reasoning seems the wrong way round. The interpretation of rule (3) was curiously narrow. As we have seen, the reference to “special adaptability” in rule (3) was related to the use of that, and similar terms, in earlier cases. As Shearman J had said in Sidney, special adaptability was “nothing more than an element in market value”.[80] The Scott Committee might have been surprised to learn that the special locational suitability of a quarry to provide materials for construction of a naval dock was not within the rule.[81]
A.45 By contrast, the application of the judicial rule was unexpectedly wide. The Indian case, although the most recent consideration of the subject by the Privy Council,[82] was ignored in Lord MacDermott’s judgment. The word “scheme” was applied without any reference to Lord Romer’s discussion of its correct use, and misuse.[83] Instead, reliance was placed on a first instance summary (Eve J in S.E.Railway) of English authorities that had been expressly disapproved by the Privy Council. Under the Indian case, the only “scheme” to be disregarded would have been the fact of compulsory purchase. The special interest of the US Navy in the products of the quarry would not have been left out of account; compensation would have included the amount which the Navy would have been willing to pay, in friendly negotiations, for that extra value.[84]
A.46 Right or wrong, however, the Pointe Gourde case established the conventional form of the modern rule. Two particular features of the case were to become important in the subsequent development of the rule. First, Lord MacDermott’s formulation referred to the scheme underlying the acquisition, rather than (as in Fraser)[85] the scheme for which the acquisition was authorised. There is no suggestion that this was thought to be a significant difference. Indeed, the relevant finding as to the scheme (see above) used the word “for”, and was expressed in terms appropriate to the Fraser test. However, as will be seen, the change of terminology was to lead, in subsequent cases, to a wider interpretation of the scope of the “scheme”, both spatially and temporally.
A.47 Secondly, the no-scheme rule was used to exclude value attributable to use of land other than the subject of the valuation.[86] Previous cases had been concerned principally with the special suitability of the subject land for development on that land. As Denyer-Green notes, the proximity of the naval base would have given the quarry added value, even if it had not been compulsorily acquired. He comments:
… the latter value was betterment and for the first time it was excluded from the compensation. Hence the significance of the case to present day acquisitions where market value may well be enhanced by acquiring authority schemes. [87]
A.48 The Pointe-Gourde case (1947) was decided by the Privy Council at almost the same time as the planning system of this country was being radically altered by the Town and Country Planning Act 1947. The general features of the 1947 Act were outlined in Part II of this Report.[88] The most durable aspect was the imposition of universal planning control, under a system the main elements of which have survived until today. The other main element, which did not survive, was the expropriation by the state of all development value.
A.49 The assumption was that most development would be promoted by public authorities, using compulsory powers where necessary, on land designated for that purpose in a statutory plan. Where land was developed privately, a development charge was payable. Where land was compulsorily acquired, compensation was based on existing use value, which would normally exclude any potential value for other uses, including the authority’s own scheme. Thus the “no-scheme rule” had little relevance.[89] There was however a statutory rule to ensure that, in valuing land, any depreciation caused by its designation for compulsory purchase, was disregarded.[90]
A.50 In the following period, in so far as the no-scheme rule was mentioned, it was not by reference to the Pointe Gourde case.[91] That case was referred to in a number of Lands Tribunal decisions as authority on rule (3) of the 1919 rules.[92]
A.51 The only relevant higher authority, from the years before 1959, appears to be Lambe v Secretary of State for War in the Court of Appeal.[93] In that case, the Secretary of State had purchased the freehold of a territorial army headquarters building, over which the territorial army already had a lease. The Court of Appeal accepted that the special interest of the Secretary of State in marrying the two interests could be taken into account. It approved the Tribunal’s valuation described as being “assessed in conformity with the judgment in the Indian case…” In doing so, it adopted Lord Romer’s definition of the “scheme”, and rejected the argument of the acquiring authority that Pointe Gourde required the Tribunal to disregard the price which the authority would be prepared to pay in friendly negotiations. Parker LJ adopted Lord Romer’s words:
The wish of a particular purchaser, though not his compulsion, may always be taken into consideration for what it is worth.[94]
A.53 The 1959 Act was intended to restore the market value principle of compensation as it applied before the 1947 Act. Its main provisions were reproduced in the 1961 Act, in which it was consolidated with (inter alia) the extant provisions of the 1919 Act (including rule 3). In that form, with some later amendments, they remain part of the current law. In restoring market value, it was thought necessary to make specific provision to take account of the advent of universal planning control.[95] The solution of the 1959 Act was to make specific provision for the planning assumptions to be made in the valuation of the subject land (ss 2-8). These rules became sections 14ff of the 1961 Act.[96]
A.54 Separate provision (section 9) was made for the disregard of increases or decreases in value attributable to actual or prospective development of other land within the authority’s scheme. One significant innovation in section 9 was the attempt to prescribe, by way of a Table, the application of the principle to different categories of project, such as new towns, and areas of comprehensive development. This became section 6 of, and Schedule 1 to, the 1961 Act.[97] Section 9 also retained the 1947 rule, relating to disregard of depreciation due to designation for compulsory acquisition, but extended it to depreciation due to any “indication” (in the development plan or otherwise) of the likelihood of compulsory acquisition. This became section 9 of the 1961 Act.
A.55 The general purpose of the new rules was explained by the Lord Chancellor introducing the Bill:
The new basis of compensation under the Bill is founded on the principle that the owner of the land acquired should receive the value which he could expect to get for his land in a private sale in the open market if there were no proposal by any public authority to buy the land…
But nowadays… the value of land depends very much upon planning permissions. We need therefore to know the answer to the question: “With what planning permissions could the land be expected to be sold in the open market if it were not wanted by a public authority?” [Sections 2 to 8][98] seek to provide the answer to this question…
[Section 9] seeks to protect acquiring authorities from paying for value clearly created by the very scheme for which they are buying the land. It enunciates and extends the well-established principle in compensation that “value due to the scheme” must be ignored. The same clause protects owners whose land is being bought from depreciation caused by the threat of a public acquisition.[99] (emphasis added)
A.57 The 1961 Act was a consolidation, and was not intended to change the law. However, it had the effect of bringing together in one statute two sets of rules based on the no-scheme principle (section 5(3) from the 1919 Act; and sections 6ff from the 1959 Act), without any real attempt to co-ordinate them.[100]
A.58 As will be seen, section 6 (with the First Schedule)[101] has been subject to particular criticism: the convoluted wording was difficult to interpret;[102] the section applied to “other land”, but made no equivalent provision for the subject land;[103] and the statute failed to indicate whether or not the new rules were intended as a complete no-scheme code, or simply as a supplement to the judicial rule.[104]
A.59 However, if one ignores these problems, the general approach was reasonably clear. The legislature attempted to take account of the different circumstances in which compulsory purchase orders might be made, under the post-war planning regime. Some would be for single, self-contained projects; others would be related to much more extensive designations, such as comprehensive development areas or new towns. Thus, different rules were laid down for disregarding the value attributable to development on associated land, depending on whether the associated land was: within the same compulsory purchase order (case 1); within the same comprehensive development area (case 2); within an area designated under the New Towns Act (case 3); within a town development area (case 4); within an urban development area (case 4A); or within a housing action trust area (case 4B) (The last two were added in 1980 and 1988 respectively, by the Acts which introduced those designations[105]).
… [the development] would not have been likely to be carried out if…the acquiring authority had not acquired and did not propose to acquire any of the land.[106]
Thus, under this head only the value effects of the particular proposal to acquire were to be disregarded.
A.61 Where, however, the order was for land within one of the designations specified in the Schedule, there would be a two-stage application of the rule. Thus, for example, where the order was for land within an area designated for a new town (case 3), there were to be disregarded, not only changes of value attributable to development for the purposes of the particular proposal (as above); but also changes in value attributable to development “in the course of the development of the new town”, in so far as that development “would not have been likely to be carried … if the [new town] area… had not been [so] designated…”.[107] Thus, under this head both the value effects of the particular proposal, and also those of the original designation as a new town, were to be left out of account.[108]
A.62 This analysis shows why the new rules were rightly described to Parliament as “extending” the existing rule. The one-stage test for case 1, taken on its own, was a reasonably close representation of the rule as stated, for example, by Eve J.[109] It required one to look no further than the purpose or “undertaking” for which the particular compulsory purchase order was made. However, the two-stage test for the other cases went much further than any application of the rule in the previous authorities. It required the valuer to look back, beyond the inception of the particular acquisition, to the original designation, however far back in time and however more extensive in area than the immediate proposal.
With what planning permissions could the land be expected to be sold in the open market if it were not wanted by a public authority?
A.64 This was achieved by specifying the assumptions to be made, broadly in three categories:
(1) Permission was to be assumed for development of the subject land in accordance with the acquiring authority’s own proposals (s 15);[110]
(2) If the subject land was allocated in the development plan for some form of valuable development (e.g. residential or commercial), permission was to be assumed for such development in accordance with the allocation as would have been given in the absence of the compulsory purchase proposal (s 16);
(3) If it was not so allocated,[111] a certificate could be obtained as to the permission which would have been granted in the absence of the compulsory purchase proposal (s 17).
These were to be in addition to any actual permissions in force at the date of notice to treat.[112]
… regarding the planning permission that might reasonably have been expected to be granted in respect of the land in question, if it were not proposed to be acquired[113] by any authority possessing compulsory purchase powers.[114]
Permission in accordance with the certificate was to be assumed for valuation purposes.[115] On the other hand, lack of such a certificate, or even a negative certificate, was not to lead to the assumption that permission would necessarily be refused for any development;[116] but was a matter to be taken into account:
… in determining whether planning permission for any development could in any particular circumstances reasonably have been expected to be granted in respect of any land, regard shall be had to any contrary opinion expressed in relation to that land in [the certificate][117]
A.66 In the early cases under the new statutes, the Courts readily assumed that the new statutory rules were intended to reflect the judicial rule.In the first case to reach the higher courts, Davy v Leeds Corporation (1964), Lord Dilhorne referred to the Pointe Gourde case, and observed that section 9(2) of the 1959 Act (section 6 of the 1961 Act) had “given statutory expression to the principle which Lord MacDermott stated was well settled”.[118] None of the earlier cases on the no-scheme rule were cited.[119] It seems to have been from this time that the rule first became commonly referred to by reference to the Pointe Gourde case.[120] The Indian case, and its approval by the Court of Appeal in Lambe, seem to have been largely forgotten.[121]
(1) Assimilation of the judicial and statutory versions
(2) Judicial evolution
(3) The no-scheme world
(4) Decreases in value due to the scheme
(5) A valuation tool only
(6) The Indian case
A.68 Although the new statutory rules were seen as giving effect to the Pointe-Gourde principle, it was not clear whether they were intended to be a self-contained code, or merely to supplement the existing judicial version of the rule. Further, the convoluted wording of the section,[122] made it very difficult to interpret or apply. The solution eventually adopted by the Courts was to treat section 6 and the judicial rule as existing side-by-side as part of a single legal principle, so that in practice little distinction was made between the two, and literal interpretation of the statute was largely abandoned.
A.69 This process of assimilation began in Camrose v Basingstoke Corporation.[123]In Camrose, the Corporation made an order under the Town Development Act to expand Basingstoke and receive an influx of population from London. A large proportion of the land required was owned by the appellant, who agreed to sell it for its compulsory purchase value. In valuing the subject land, the Tribunal distinguished between parts of the subject land close to the town, which it valued at full residential value, and more remote parts, which it valued (ignoring the town development scheme) at “hope value” only. The problem was that section 6 applied a statutory version of the no-scheme rule to surrounding land, within defined categories (“the other land”), but it said nothing about the application of the rule to the subject land itself.
The explanation of section 6(1) is, I think, this: The legislature was aware of the general principle that, in assessing compensation for compulsory acquisition of a defined parcel of land, you do not take into account an increase in value of that parcel of land if the increase is entirely due to the scheme involving (sic) the acquisition. That was settled by Pointe Gourde Quarrying and Transport Co v Sub-Intendent of Crown Lands ... It is left untouched by section 6(1). But there might be some doubt as to its scope. So the legislature passed section 6(1) and the First Schedule in order to make it clear that you were not to take into account any increase due to the development of the other land, namely, land other than the claimed parcel. I think that the decision in the Pointe Gourde case covers one aspect: and section 6(1) covers the other ...[124]
… the history of compulsory acquisition, in which it has long been judicially established that the prospect of the direct impact of the relevant scheme on the land to be acquired is to be ignored. It is not possible against that background to construe the section as tacitly or by implication altering the law. Rather is the exclusion of the relevant land a recognition of a well-known situation for which legislation was not necessary.[125]
A.72 By 1970, therefore, it was clear that the Pointe Gourde rule survived alongside the provisions of the 1961 rule.[126] As the Tribunal said in a case in 1970:
The existing state of the law is certainly that the Pointe Gourde principle will operate to achieve results which would previously have been achieved at common law, unless those results were already achieved by the statute.[127]
Indeed, the Tribunal’s view was that, where appropriate, both had to be applied independently.[128] However, it became difficult to see why the statute was needed at all, since, as the Tribunal itself observed, all the cases in Schedule 1 seemed “to fall fairly and squarely within the common law principle as stated by Lord MacDermott”.[129]
A.73 This important case can be treated as settling the modern form of the common law rule, at least in the Court of Appeal.[131] From 1960, the Corporation had been seeking to assemble an area of 391 acres for housing development. 305 acres were acquired by private agreement. Planning permission for the whole area was granted by the Minister in late 1963. In early 1964, a compulsory purchase order was made for the remainder. The claim related to 74 acres belonging to one owner. By the time of the acquisition of the 74 acres, comparable adjoining land of the claimants was being sold to a private developer at a price (£6,700 per acre), on the basis that, having regard to the Corporation’s plans, it was “dead ripe” for development, and could take advantage of the infrastructure and other improvements under the Corporation’s plans. The Tribunal treated the development of the whole 391 acres as the “scheme” to be disregarded under the rule, on the basis that, in the no-scheme world, the development would have been deferred for two years, and there would have been additional infrastructure costs. The Tribunal reduced the value to £5,350 per acre.[132]
A.74 The owners argued that this reduction was not justified, either by section 6, because the area for application of the rule was limited to the “area authorised to be acquired” under the compulsory purchase order;[133] or under the judicial rule, because the plans for the 391 acres were not sufficiently “precise and definite” to constitute a “scheme”. The Court of Appeal rejected these arguments and upheld the Tribunal’s approach.
A.75 The judgments in effect ignored the limitations on section 6, proceeding on the basis that, in the light of Camrose,[134] it was sufficient to apply the judicial rule.[135] As to that, they rejected the argument that the Pointe Gourde principle only applies “when the scheme is precise and definite; and is made known to all the world”. Lord Denning (in a much quoted passage) said:
A scheme is a progressive thing. It starts vague and known to few. It becomes more precise and better known as time goes on. Eventually it becomes precise and definite, and known to all. Correspondingly, its impact has a progressive effect on values. At first it has little effect because it is so vague and uncertain. As it becomes more precise and better known, so its impact increases until it has an important effect. It is this increase, whether big or small, which is to be disregarded at the time when the value is to be assessed.[136]
… the purpose of the so called Pointe Gourde rule is to prevent the acquisition of the land being at a price which is inflated by the very project or scheme which gives rise to the acquisition. The extent of the scheme is a matter of fact in every case ... It is for the tribunal of fact to consider just what activities - past, present or future - are properly to be regarded as the scheme within the meaning of this proposition.[137]
A.77 Wilson was (perhaps unconsciously) innovatory in four ways:
(1) It confirmed that the judicial rule survived, not merely for the purpose of remedying apparent anomalies in the statutory version. In Camrose, the Court of Appeal had been faced with the apparent absurdity that the rule should apply to “other land” but not to the subject land. In Wilson, there was no such absurdity. It would have been perfectly possible to have limited it to the land subject to the actual order. The result was that the tightly drafted limits[138] of section 6 became irrelevant thereafter.
(2) Lord Denning’s statement that the scheme needed to be traced back to the time when the scheme was “vague and known to few” was a substantial extension of the retrospective scope of the rule, and apparently unsupported by previous authority.[139] For example, Fletcher Moulton LJ in Lucas required the valuer to look back to the position “as it stood before the grant of compulsory powers” or “before the scheme was authorised.”[140] It went further even than section 9 (in relation to decreases in value), which at least required some “indication” (in a development plan or otherwise) of the prospect of compulsory purchase.[141] Widgery LJ did not apparently go so far.[142]
(3) The rule lost any necessary link with the scope of the special powers granted to the authority. As has been seen, the original justification of the rule was directly linked to the special advantages only available to a body having statutory or similar powers for a particular project.[143] In all the subsequent cases, the definition of the scheme was related in some way to the extent of those powers. The 1961 Act preserved that link in Schedule 1, under which all the cases are defined by reference to specific statutory regimes. In Wilson, however, that link is lost. No reference is made to any particular statutory basis for the development of the remainder of the 391 acres.[144] The Corporation appears simply to have acquired the land, and sought planning permission,[145] in the same way as a private developer.
(4) It followed that there was no necessary limit to the spatial extent of the scheme.[146] This increased the potential for unfairness between those whose land was taken, and those able to retain it and take advantage of the wider scheme. As Keith Davies observes (in relation to the Wilson case):
Why should one owner get less per acre than his neighbour for comparable land, merely because he sold under compulsion and his neighbour did not?[147]
A.78 The width of the rule as so established meant that valuers were required to conduct an elaborate game of imagination, inventing the “no-scheme world” to be assumed for the purpose of valuation. In theory, this involved going back to the very inception of the scheme (possibly even before approval, when it was “vague and known to few”) and rewriting history thereafter. This process of looking back beyond the particular order had been sanctioned by the 1961 Act, in the case of the specific designations (as set out in cases 2 to 4B).[148] However, under the extended version of the judicial rule, it was not confined to those categories.[149]
A.79 The exercise was graphically explained by Lord Denning:
The valuer must cast aside his knowledge of what has in fact happened in the past eight years due to the scheme. He must ignore the developments which will in all probability take place in the future ten years owing to the scheme. Instead, he must let his imagination take flight to the clouds. He must conjure up a land of make-believe, where there has not been, nor will be, a brave new town, but where there is to be supposed the old order of things continuing…[150]
A.80 It is not, however, to be assumed that under “the old order” things would have remained static in the area. The valuer is required to consider whether there might have been other changes in the area, which would have affected the value of the subject land. In Margate Corp v Devotwill,[151] land allocated for residential development was required for a by-pass scheme. The question arose what assumption the Tribunal should make about the possibility of an alternative road scheme in the no-scheme world, which would have facilitated development of the subject site. The Tribunal had taken the view that, if the actual bypass on the subject land were to be disregarded, the inevitable corollary would be the construction of an alternative by-pass on other land, to meet the urgent traffic need. This approach was held, in the House of Lords, to be too simplistic:
If there was to be a bypass on the respondent’s land it by no means followed that there would inevitably be a bypass somewhere else. There might be or there might not be. It might have been possible to have another route for the bypass; it might have been quite impossible… There would have to be a new examination of the problem. Were there then some other ways? If so what were they – and how effective would they be? Would it have been practicable to effect some road-widening? Could some traffic regulatory adjustments have been made?…[152] (the judgment enumerates a series of similar questions which the unfortunate Tribunal would have to consider on the renewed hearing)
A.81 The impracticality of this solution was recognised by the legislature in 1991, by providing that where land is taken for a highway, it is to be assumed (for the purposes of the planning assumptions under the 1961 Act) that “no highway would be constructed to meet the same or substantially the same need...” [153] But no change was made in relation to the similar questions which arise under the common law rule, or in relation to acquisitions for purposes other than highways.
A.82 As developed in the cases up to Pointe Gourde, the no-scheme rule was concerned with disregard of increases in value caused by the scheme. Recognition of the need for a rule to protect the dispossessed owner against the blighting effect of designation for acquisition seems to date back to section 51(3) of the 1947 Act,[154] which was expanded in section 9 of the 1961 Act:
9. No account shall be taken of any depreciation of the value of the relevant interest which is attributable to the fact that (whether by way of …allocation or other particulars contained in the current development plan, or by any other means)[155] an indication had been given that the relevant land is, or is likely, to be acquired by an authority possessing compulsory purchase powers.
This was not originally seen as related to the Pointe Gourde rule.[156] It seems that it was not until the second Jelson case[157] that section 9 was directly linked with the Pointe Gourde rule.[158]
A.83 In the Melwood Units case, in 1979, the Privy Council confirmed that the judicial rule applied to decreases in value, as well as increases, quite apart from any statutory provision to that effect.[159] In that case, the claimant’s site of 37 acres was severed by an expressway, with the result that only 25 acres north of the road could be developed as a shopping centre, and the actual permission was confined to that area. Compensation was assessed (under the no scheme rule) on the basis that but for the road-scheme, planning permission would have been granted for the whole 37 acres.
A.84 In the Rugby Water Board case,[160] the House of Lords held that the no-scheme rule applied to valuation only, and not to the ascertainment of the interests to be valued. The case concerned the compulsory acquisition of two farms held under agricultural tenancies. Under the Agricultural Holdings Act[161] and the relevant leases, the landlords could serve a notice to quit where land was required for another use for which permission had been granted. The issue was whether, following compulsory purchase for a permitted reservoir, the respective interests of landlord and tenant should be valued as though such a notice could be served; or whether that possibility should be disregarded as entirely due to the authority’s scheme.
A.85 The House, by a majority, held that the interests had to be assessed as they stood in the real world at the date of notice to treat, and that the no scheme rule had no application.[162] As already noted, the speeches contain extensive references to the earlier authorities. However, although it represents probably the leading modern authority on the rule in the House of Lords, the limited issue raised by the appeal did not require any detailed analysis of the underlying principles, or the conflicting formulations.
A.86 The effect of this decision, in the context of agricultural holdings, was reversed by statute.[163] Otherwise, it remains good law, [164] although, as far as one can judge from reported cases, it does not appear to have caused serious problems in other contexts.[165]
A.87 The new, wider version of the no-scheme rule was difficult to reconcile with Lord Romer’s interpretation of the rule in the Indian case. As we have noted, the Indian case had been followed by the Court of Appeal in Lambe v Secretary of State for War (1955).[166] The same approach was adopted by the Tribunal in a 1970 case concerning the acquisition of land for Kent University.[167] The Tribunal, following Lord Romer said:
… even if the existing university is regarded as the only possible purchaser, that does not mean that the value of the land for university purposes is to be ignored, or that we should say there was no demand for the land because the only person who wanted it was the existing university.[168]
A.88 Neither the Indian case itself, nor Lambe, has ever been over-ruled, or even doubted, in the higher courts. The Indian case has been followed in other jurisdictions, and in English cases in other statutory contexts, in which market value was relevant to compensation.[169]
A.89 However, in a recent case,[170] the Tribunal declined to follow it. The case concerned the acquisition of land required to provide a wetland nature reserve to replace mudflats and other land taken for the Cardiff Bay Barrage development scheme. One question was whether the valuation should take any account of the potential value of the land as part of the overall development scheme, or whether that should be excluded under the no-scheme rule.
A.90 The President accepted the approach of the Indian case has “some attractions”:
… particularly where the acquiring authority is a commercial utility rather than an arm of central or local government acquiring the land for social needs. It does, however, give rise to problems in distinguishing between the authority’s pressure to buy, which is to be disregarded, and its motivation which is not; and difficulties of valuation are also likely to arise.
A.91 However, he concluded that the Indian case was “unquestionably at odds” with the rule as it has been applied in cases in the Court of Appeal and House of Lords, [171] and that the decision in Lambe could no longer be regarded as good law.[172] He summarised the effect of the no-scheme rule, in its judicial version, as follows:
Compulsory powers of acquisition are only conferred in the public interest. A compulsory purchase order is only made and confirmed for a public purpose which the making authority and the confirming authority judge to be sufficiently important to warrant compulsion. The principle is that any effect on the value of the land acquired arising from the public purpose or public purposes prompting their acquisition, whether from their adoption by the authority or from their implementation, is to be disregarded. A scheme or proposal is the embodiment of the public purpose or public purposes concerned.[173]
Applying this test, he decided that, even if the “scheme” was taken as simply the nature reserve proposal, the “public purpose” for that proposal was to compensate for the loss of the mudflats under the Barrage development scheme. Accordingly, any effect on value of this purpose had to be left out of account.[174]
(1) Limits of rule (3)
(2) Planning assumptions
(3) Ransom strips
(4) Disturbance
(5) Purchase notices
A.93 We have already referred to the narrow interpretation of rule (3),[175] adopted in Pointe Gourde, as the same time as the judicial rule was expanded to fill its place.[176] Subsequent cases have followed that lead, and the rule has been further cut down by statute. The legislature has also intervened to cut down the scope of the rule.[177]
(1) That the “adaptability” must be a quality of the subject land itself, not a quality of its products (Pointe Gourde), or of the nature of the interest (Lambe)[178];
(2) That “special” implies something “exceptional in character, quality or degree”, rather than qualities shared with other possible sites (Batchelor);[179]
(3) That the purpose requiring use of statutory powers must relate to the subject land, not to other land (Ozanne);[180]
(4) That the need for general forms of consent, such as planning permission or stopping-up orders, is not sufficient to bring the rule into play;[181]
(5) That the “market” may include a mere speculator, with no direct interest in the use of the land (Blandrent).[182]
A.95 A rare reported example of the rule having some practical effect is Livesey v CEGB.[183] In that case agricultural land was acquired for the erection of a power station at Ferrybridge. The Tribunal accepted, without any detailed discussion, that rule (3) applied, so as to exclude the value for use as a power station. However, the judicial version of the no-scheme rule seems to have been treated as having the same result.
A.96 Had it not been so restricted by judicial interpretation, the rule might have had unexpected effects. A significant but unremarked change was made by the 1961 Act, in which a reference to an authority “possessing compulsory purchase powers” replaced the words of the 1919 Act “any Government Department or any local or public authority.”[184] As already noted, “public authority” was defined by the 1919 Act so as to exclude bodies “trading for profit”.[185] The 1961 replacement has no such limitation. “Authority possessing compulsory purchase powers” means:
…in relation to any transaction,… any body of persons who could be or have been [authorised to acquire an interest in land compulsorily] for the purposes for which the transaction is or was effected…[186]
A.97 Thus, no distinction is made between privatised utilities operating for profit, and public authorities.[187] For example, if the decision in the Livesey case is correct, it would also apparently exclude any value attributable to the possibility of competition from a privatised power-generator.[188] Further, there is no need for the body to be in any sense public, or operating under statute. All that is needed is that it should have obtained, or have been able to obtain, compulsory powers.[189]
A.99 Section 14(2) allows account to be taken of any permission relating to the subject land, whether or not it includes other adjoining land (s 14(4)(b)). This applies whether or not the permission would have been granted in the no-scheme world. However, a permission on adjoining land, not including the subject land, will apparently have to satisfy the no-scheme rule. Stayley Developments Ltd v Secretary of State[190]illustrates the inconsistencies which may result:
The subject land had been acquired for the M66 motorway. By the time of the notice to treat, the motorway scheme had led to permission being granted on the surrounding land (but not the subject land) for industrial and related development; and a section 17 certificate was also given for industrial development of the subject land. The Act required the hypothetical permission for the subject land (under section 17) to be taken into account.[191] However, the actual permission for the surrounding land was ignored, because it would not have been granted in the no-scheme world.[192]
A.100 Section 15(1), inconsistently with the judicial rule,requires permission to be assumed for development of the subject land in accordance with the proposals of the planning authority, whether or not it would have been granted in the absence of the underlying scheme.[193] However, the same assumption does not apply to any surrounding land proposed to be developed by the authority. Unless it is covered by an existing permission which also applies to the subject land (see above), permission can only be assumed if it would have been granted in the no-scheme world. The result can be highly artificial, as illustrated by Myers v Milton Keynes DC:[194]
The Development Corporation acquired the claimant’s Estate, for the purpose of developing the new town of Milton Keynes. The Court accepted that the subject land itself was to be valued with planning permission for residential development, even though such a permission could not have been expected in the absence of the new town proposal. However, the existence of the new town proposal on the surrounding land had to be ignored.
A.101 Section 16 was apparently intended to have the effect that, where land was either “defined” or “allocated” by the development plan for valuable development, permission for it would be assumed. For example, in an area allocated in the plan for industry, an industrial permission would be assumed.[195] It has failed for two reasons:
(1) The section has not caught up with the modern system of local plans, which do not “define” development;[196]
(2) In relation to “allocated” land, its purpose was in effect nullified by the Court of Appeal holding that permission would only be assumed if it would have been granted in the no-scheme world (an assumption which could have been made without the assistance of statute).[197]
A.102 Section 17 has been more successful.[198] The certificate procedure was intended to provide a means by which, in cases where land was not allocated for any valuable use, the planning authority could “certify” the planning permission which would have been granted in the no-scheme world. As interpreted by the Courts, however, it has lost touch with the basis of the common law rule. Under the common law rule, apparently, the no-scheme world has to be recreated looking back to the inception of the scheme. Under section 17 there is no looking back; the position is considered on the basis that the scheme is cancelled immediately before the notice to treat or other “proposal to acquire”.
A.103 This can produce very different results, as illustrated by two cases, relating to the valuation of the same strip of land acquired from Jelson Estates Ltd in Blaby District. The subject land was a strip excluded from the development of surrounding land, to form part of a ring road. The ring road proposal was abandoned. The strip could not be developed on its own for housing purposes, and the council accepted a purchase notice:[199]
(1) The first Jelson case[200] was concerned with a decision by the Secretary of State, refusing a section 17 certificate for residential development. For this purpose the prospect of alternative development had to be considered at the date of the deemed notice to treat,[201] by which time the housing estates had been built on both sides of the strip of land, and separate development was impossible. A “nil” certificate was therefore correct.
(2) The second Jelson case[202] related to the subsequent decision of the Lands Tribunal, assessing compensation for the same strip of land. For that purpose, the Tribunal was not restricted by the negative certificate.[203] Applying the no-scheme rule, it was possible to look further back in time, and to assume the abandonment of the road-scheme from its inception, before the houses had been built; on that assumption, the strip would have been developed along with the other residential land.[204] Accordingly, the compensation for the land was assessed at residential values.[205]
A.104 The interpretation (in the first case) of section 17 was confirmed recently by the House of Lords in Fletcher Estates v Secretary of State.[206] The position had to be considered as at the date of the proposal to acquire, as defined,[207] on the basis that:
… the scheme for which the land is proposed to be acquired together with the underlying proposal which may appear in any of the planning documents, must be assumed on that date to have been cancelled. No assumption has to be made as to [what] may or may not have happened in the past.[208] (emphasis added)
The emphasised words provide an interesting contrast with Lord Romer’s statement (in the Indian case) that the “scheme” was limited to the obtaining of compulsory powers, and was not to be taken as including “the intention formed by the authority of exploiting the potentiality of the land.”[209]
A.105 Lord Hope emphasised the difficulty of:
…try[ing] to reconstruct the planning history of the area on the assumption that the proposal had never come into existence at all…. The further back in time one goes, the more likely it is that one assumption as to what would have happened must follow on another and the more difficult it is likely to be to reach a conclusion in which anybody can have confidence.[210]
This might have been equally valid as a comment on the application of the no-scheme rule in the second Jelson case; however, the House did not find it necessary to comment on the correctness of that decision.[211]
A.106 Particular problems, and protracted litigation, have resulted from cases applying the no-scheme rule to “ransom strips”. Typically, a builder may own a substantial area of potential development land, but need a small strip of land to secure the necessary access to the public highway. The owner of the strip will expect a substantial premium (or “ransom value”) above its existing use value, to unlock the potential of the development area. The Lands Tribunal decision in Stokes v Cambridge Corporation[212] has given its name to the valuation practice of treating the premium as equivalent to a proportion (typically one third to one half) of the increased development value so released.
A.107 There were questions about the relationship of this rule to the no-scheme principle. Authorities, acquiring access land to facilitate development on adjoining land, argued that the development value should be disregarded under the no-scheme rule, and the land valued at existing use value, without any ransom element.[213] In Ozanne v Herts CC, such arguments (encompassing the common law rule and rule (3)) led to hearings extending over six years (including three visits to the Court of Appeal and one to the House of Lords), before the case was sent back for complete rehearing by the Lands Tribunal.[214]
A.108 The present law appears now to be settled, following Batchelor v Kent County Council (1989),[215] where Mann LJ made it clear that the “ransom” element of value was not to be excluded under the no-scheme rule, unless it was solely attributable to the authority’s own proposals for development:
If a premium value is ‘entirely due to the scheme underlying the acquisition’ then it must be disregarded. If it was pre-existent to the acquisition it must in my judgment be regarded. To ignore the pre-existent value would be to expropriate without compensation and would contravene the fundamental principle of equivalence.”[216]
Thus, for example, where land is allocated in the local plan for private residential or commercial development, dependent upon access across the ransom strip, the negotiating position of the owner of the strip is not “entirely due” to the authority’s scheme, but derives from the planning allocation.
A.109 Although the law is apparently settled, its application in practice can cause difficulties, and the figures arrived at can seem somewhat arbitrary. The choice of the appropriate access for a major development will usually be based on both physical and planning factors, and may be the subject of special financing agreements between the developer and the relevant authorities, including provision for compulsory purchase of the necessary land. It may be impossible for the parties to judge in advance the likely cost of the access arrangements.[217]
A.110 In Director of Buildings and Land v Shun Fung Ironworks,[218]it was held that the disturbance claim could include losses incurred from the time of the announcement of the proposed acquisition (of the site of a steelworks), even though preceding the formal statutory process of resumption. The Privy Council upheld the Tribunal’s award for loss of profits from that date, assessed by comparing the profits (or losses) in the real world with those in the no-scheme world. The “scheme” in that cases was held to be confined to the threat of resumption of the steel works itself, rather than any wider proposal.
A.111 The application of the principle may pose more difficulties where the inception of the scheme is less clear-cut, and where its effects are less specific. For example, the declining profits of a corner shop in an area blighted by redevelopment proposals may be attributable to the “scheme”, but not necessarily to the acquisition, or threat of acquisition, of the shop itself. [219]
A.112 The Town and Country Planning Acts allow service of a purchase notice where land is shown to be “incapable of reasonable beneficial use” following the refusal of a planning permission. Where the notice is accepted, the effect is that the authority is “deemed” to have served a notice to treat, and compensation is assessed as though pursuant to a compulsory purchase order.[220] The application of the no-scheme rule in such cases poses a conceptual difficulty, since the rule assumes a scheme or project by the authority to acquire the land, rather than a sale which is forced upon it. The results have not been consistent:
(1) In Birmingham DC v Morris & Jacombs[221]the lack of beneficial use was due to the land being reserved by a planning condition as part of the access road. Its value as an access road was found to be £4,000, while its value for residential development would have been £15,000. The Court of Appeal held that there was no scheme of acquisition, the acquisition having been forced on the Council, and that the land should be valued at the lower figure.
(2) In Jelson v Blaby DC,[222] the purchase notice related to a strip of land which had been excluded from an earlier development, because of its reservation for a road scheme (later abandoned), and was incapable of development on its own. Although the acquisition was, as in the previous case, forced on the authority, the Court of Appeal accepted that the effects of the road scheme were to be disregarded (under the common law rule and section 9), and upheld the award based on the higher residential value.[223]
A.113 The no-scheme rule appears to feature in some form in all other Commonwealth systems derived from the 1845 Act.[224]
A.114 Most of the Australian statutes include some reference to it, but it is also treated as part of the common law.[225] It is a question of statutory construction whether the particular provision is to be treated as expressing, modifying, or supplanting the common law.[226] Typical is LAA 1989 (Cth), which restates the no-scheme rule in two paragraphs:
In assessing compensation, there shall be disregarded:
(a) any special suitability or adaptability of the relevant land for a purpose for which it could only be used pursuant to a power conferred by or under law, or for which it could only be used by a government, public or local authority…
(c) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the purpose for which the interest was acquired;[227]
A.115 (a) is similar to rule (3) as it appeared in the English 1919 Act.[228] The ALRC thought such a provision was necessary to counter cases[229] where compensation had reflected potential for public use by including a figure “unsupported by mathematical calculation and lacking intellectual persuasion”. They said:
It is desirable to have a rule, excluding any potentiality realisable only by a statutory authority. In cases where the statutory authority is only one of the potential purchasers, the usual rules should apply. The landowner should not suffer because one bidder uses its statutory powers to pre-empt competition.[230]
It gave no evidence that the rule had been successful in achieving that purpose. In Canada, the rule has been dispensed with in most jurisdictions. [231]
A.116 (c) is designed to give effect to the no-scheme rule. [232] The previous Act was in similar terms but referred only to disregard of increases in value.[233] The ALRC recognised it as a statutory expression of the Pointe Gourde principle, but regarded the existing statute as deficient in merely referring to increases.[234] There is no suggestion in the ALRC report that the application of the rule in this formulation had caused significant problems.
A.117 The reference to the “purpose” for which the interest is acquired may be read against the background of the procedure for compulsory purchase under the same Act. This starts with a “pre-acquisition declaration” by the Minister that he is considering acquisition for “a public purpose”; the “public purpose” must be identified in the declaration.[235] The implication may be that it is this purpose which will be disregarded in assessing compensation. [236]
A.118 A similar mixture of statutory and judicial versions of the rule is to be found in Canada.[237] A typical example of a statutory rule is Canada Act 1985, section 26(11)(c) which requires disregard of increases or decreases due to:
the anticipation of expropriation by the Crown or from any knowledge or expectation, prior to the expropriation, of the public work or other public purpose for which the interest was expropriated.
A.119 The leading Supreme Court case of Fraser v R[238] shows a narrow approach to the judicial rule. The case concerned the acquisition by the Crown of land required to build a causeway; the issue was whether the valuation should take account of the use of 9 million tons of rock, on the subject property, to build the causeway. [239] Ritchie J referred to Pointe Gourde and other cases, which he regarded as establishing that:
… the amount fixed by way of compensation must not reflect in any way the value which the property will have to the acquiring authority after expropriation and as an integral part of the scheme devised by that authority.[240]
However, distinguishing Pointe Gourde,[241] and following the Indian case,[242] he held that this did not require the special adaptability of the land for use for the Crown’s purpose to be disregarded.[243]
A.120 The South African Expropriation Act 1975, section 12(5) provides a series of rules to be applied in determining compensation, of which the following are relevant in the present context:[244]
(b) the special suitability or usefulness of the property in question for the purpose for which it is required by the State, shall not be taken into account if it is unlikely that the property would have been purchased for that purpose on the open market or that the right to use the property for that purpose would have been so purchased;
(f) any enhancement of depreciation, before or after the date of the notice, in the value of the property in question, which may be due to the purpose for which or in connection with which the property is being expropriated or is to be used, or which is a consequence of any work or act which the State may carry out or perform or already has carried out or performed or intends to carry out or perform in connection with such purpose, shall not be taken into account.[245]
A.122 The American courts have developed an equivalent principle of “project enhancement”, but narrowly confined to the enhancement due to the prospect of compulsory acquisition of the subject land. The case-law was reviewed by the Californian Supreme Court in Merced Irrigation Dist. v Woolstenhulme.[246] The Court referred to the general principle, as established by the US Supreme Court, that “project enhanced” value is a proper element of compensation, unless the property itself was “probably within the scope of the project from the time the Government was committed to it.”[247] A distinction was drawn between enhancement in the value of land likely to be taken as part of the proposed improvement; and enhancement in the value of land expected to be outside the improvement, whose value may rise because of the benefits of proximity to the project. In determining just compensation, the former, but not the latter, had to be excluded.[248]
A.123 In the particular case, the land was in the area of a regional water project. It was originally excluded from the project, but was subsequently included. It was held that it was wrong to eliminate the appreciation in market value which the project gave it before it was “designated for condemnation”, since that would in effect deny the owner “the market value of his property prior to the time when it was pinpointed for taking”.[249]
A.124 The same principle was applied in another California case, on facts not dissimilar to Pointe Gourde. In People v Andresen,[250] the state sought to condemn property for use as a rock quarry for repairing dams in the area, following a major rock slide. Compensation was assessed taking account of the enhanced value due to the Government’s indications (in the months prior to condemnation) that the rock would be used for this purpose. Indications of prospective use did not necessarily imply condemnation, and therefore were properly taken into account in fixing the market value.
A.125 There is nowspecific provision in the Californian Code:[251]
The fair market value of the property shall not include any
increase or decrease in value of the property that is attributable to any of
the following:
(a)The project for which the property is
taken….
A.126 A similar concept is found in the French Expropriation Code.[252] Values are based on the “effective use” (“l’usage effectif”) of the land one year before the date of the opening of the statutory inquiry into the project; no account is to be taken of changes in value after this date due to the “announcement of the works” (l’annonce des travaux), or to public works carried out three years before that date in the built-up area (l’agglomération) in which the land is situated.
A.128 It is a curious fact that the no-scheme rule, in its judicial and statutory versions, has not been subject to full review by the House of Lords in the 40 years since the restoration of the market value basis of compensation in 1959.[253] The present law rests on Court of Appeal authority, which itself, as we have seen, was based on limited analysis of either the statute or the earlier authorities. Those earlier authorities include two conflicting Court of Appeal judgments (in Lucas), and two conflicting decisions of the Privy Council (the Indian case and Pointe Gourde).
A.129 It is, therefore, still open to the House of Lords to reconsider the position, and it is far from clear how the various conflicts would be resolved. The recent decision in Fletcher, though limited to section 17, suggests that the House might be sympathetic to an argument which sought to restrict the more speculative features of the rule.[254]
A.130 The clearest, and most authoritative, statement of the rule, which the Privy Council apparently intended to adopt in Pointe Gourde, is probably that of Lord Buckmaster in Fraser v City of Fraserville (1917).[255] What is to be excluded is “any advantage due to the carrying out of the scheme for which the property is compulsorily acquired”. That was said in the context of projects, whose extent was identified by the statute or statutory instrument by which they were authorised, the only factual issue being whether or not they were to be treated as a single “scheme” for the purposes of the rule. The ambit of the rule has been extended and obscured by its rewording by the Privy Council in Pointe Gourde, referring to “the scheme underlying the acquisition”, and by its interpretation in later cases, which have treated the issue as one of pure fact.
A.131 As for the statutory versions, rule (3) of the 1919 Act has been interpreted so narrowly as to have little practical effect. In any event, it was directed to the perceived problems of the time, as identified by the Scott Committee.[256] It sought to exclude speculative values dependent upon the exercise of statutory powers, whether by the acquiring authority itself, or by competing authorities. The problem of competing authorities was attributed to the “imperfect system” of granting statutory powers; it is not an issue which has featured in any of the post-war cases, no doubt due to the more centralised and regulated systems of control now in place. As to exercise of powers by the acquiring authority itself, this seems in practice to be covered by the judicial version of the rule.[257] Accordingly, rule (3) seems to have become effectively redundant.
A.132 Turning to the more modern versions, section 9 of the 1961 Act, originally derived from the 1947 Act, requires disregard of decreases in value attributable to an “indication” of the prospect of compulsory purchase. It provides protection against blight caused by the prospect of compulsory acquisition. It was not originally related to the no-scheme rule, but can be seen as a reasonable extension of it. It is less easy to support its use, as in the second Jelson case,[258] as a foundation for additional planning assumptions not supported by the provisions of the 1961 Act dealing specifically with that issue.[259]
A.134 A more faithful interpretation might have modelled the future development of the no-scheme rule on the statutory version, rather than the other way round. In relation to self-contained orders, application of case 1 (directly or by analogy) would have led to the rule being confined to the area of the particular compulsory purchase order. In relation to the other cases, the need to “rewrite history” would have remained, although it would have been within defined statutory bounds. Furthermore, the comparison of the wording of section 6 with that of section 17 might have encouraged the court to bring the two into line as far as possible.[260]
[1]Pointe Gourde Quarrying and Transport Co v Sub-Intendent of Crown Lands [1947] AC 565, PC, at p 572, per Lord MacDermott.
[2]Melwood Units Pty Ltd v Commissioner of Main Roads [1979] AC 426.
[3]Fletcher Estates v Secretary of State [2000] 2 AC 307, 315 per Lord Hope. This hypothetical state of affairs is usually referred to as “the no-scheme world”.
[4]This is derived from the 1991 Act, giving effect to recommendations of the Scott Committee: see para A.30 below.
[5]This is one of a complex group of provisions (ss 6-8) dealing with the disregard of different categories of development on adjoining land. Sections 7-8 deal with increases in value of adjacent land. The background and general effect of section 6 (formerly, s 9(2) of the 1959 Act) is described in Part II and Part VI.
[6]This also comes from the 1959 Act, although based on a provision in the 1947 Act: see Part II and Part VI.
[7]These provisions, in their current form, are set out in Appendix 3.
[8]The term “common law rule” is sometimes used to describe the principle developed in the cases. However, since compensation is an entirely statutory creation, it is perhaps more accurate to treat the rule as one of interpretation of the word “value” in the relevant statutes: see Rugby Water Board v Shaw-Fox [1973] AC 202, 214, per Lord Pearson. To maintain the distinction, therefore, we shall refer to the “judicial” and “statutory” versions of the rule.
[9]See e.g. Penny v Penny (1868) LR 5 EQ 277.
[10]Stebbing v Metropolitan Board of Works (1870) LR 6 QB 37, 42 per Cockburn CJ.
[11]Although different expressions are used in the earlier cases, the term “special adaptability” seems to have become the most popular in the period leading up to the 1919 Act (see para A.19 below, referring to the comments of Shearman J in 1914), and it was used by the Scott Committee (paras A.30-33 below). The 1919 Act itself (in rule (3)) refers to “special suitability or adaptability”: see para A.32 below. But, as it appears from the cases referred to below, other terms are also used (e.g. “peculiar advantages”, “natural value”, “special value”).
[12]Reported in Browne and Allan’s Law of Compensation (2nd ed 1903) p 659, and cited (as the earliest reported example of the principle) by Lord Hodson in Rugby Joint Water Board v Foottit [1973] AC 202, 219.
[13]“When a railway company, or any other person who takes land under compulsory power, is to pay for that land, you are not to make them, as it were, buy it from themselves; you are not to take the value which, in their hands, it would acquire, and make them pay for it as if they had no compulsory power…” (ibid, per Stephen J).
[14]Per Grove J; quoted by Buckley LJ in In re Lucas and Chesterfield Gas and Water Board [1909] 1 KB 16, 36. (The words after “special purpose” were omitted from Lord Hodson’s quotation from the same passage in the Rugby Water Board case).
[15]In re Gough and Apatria, Silloth and District Joint Water Board [1904] 1 KB 417. This seems to be the first use of the word “scheme” in this context.
[16]“If there is a site which has peculiar advantages for the supply of water to a particular valley or a particular area of any other kind, or to all valleys or areas within a certain distance, if those valleys are what might be called natural customers for water by reason of their populousness and of their situation - if the site has peculiar advantages for supplying in that sense”: ibid, per Lord Alverstone CJ, at 422.
[17]Ibid.
[18]IRC v Clay & Buchanan [1914] 3 KB 466 The case was cited with approval by the Privy Council in the Indian case (see para A.34 below).
[19]The question was the amount which it would realise “if sold… in the open market by a willing seller…”: Finance Act 1910, s 25(1).
[20][1914] 3 KB 466, 476. For a modern application of this approach, see Mercury Communications Ltd v London & India Dock Investments Ltd (1993) 69 P&CR 135, 158 (Judge Hague QC). He criticised the decision in BP Petroleum v Ryder [1987] RVR 211 (Peter Gibson J) for having “resurrected the ‘one more bid’ argument”.
[21]See para A.93 below.
[22][1909] 1 KB 16. The powers were conferred under a local Act (Chesterfield Gas and Water Board Act 1904): pp 18-19.
[23] It was relied on by both majority and minority in the leading modern House of Lords authority, Rugby Water Board v Shaw-Fox [1973] AC 202, at p 214 (Lord Pearson), p 243 (Lord Simon)See also (in Australia) Crompton v Commissioner of Highways (1973) 5 SASR 301, per Wells J: “[f]undamentally, the law is founded on the classic formulation by Fletcher-Moulton LJ In re Lucas and Chesterfield Gas and Water Board [1909] 1 KB 16, at 29-30.”
[24]Ibid,p 29.
[25]Vaughan Williams LJ also thought that the matter should be looked at “as it existed before the promoters had obtained their powers”: p 28.
[26]Ibid, p 31. The arbitrator had found that the site had “particular natural advantages” for a reservoir”: p 19.
[27]He had in mind that “in a densely populated country like England” a particular tract suitable for a reservoir might be “useful in this way to more than one locality, and may thus be the subject of competition between them”: ibid.
[28]Ibid,p 31-2: “In the case of waterworks for public supply promoters must always arm themselves with parliamentary powers, since distribution would otherwise be impracticable. But if by its prudence and foresight a public authority had by private negotiation secured a desirable site for a reservoir for the water supply of its own district, it would not be in accordance with the practice of Parliament to refuse to it the powers necessary to its effective use for that purpose.”
[29]Ibid, p 25.
[30]Ibid, p 28.
[31]Ibid,pp 35-6: “The appellants admit… that, if there be three persons whose combined properties offer special adaptability for some person, each is in compensation under the Act entitled to receive the fair value of his land having regard to its special adaptability…But if one of the three is desirous of buying out the other two, then, if their argument is right, the element of special adaptability is removed, because he as one of the three can prevent the user for the special purpose… This appears to me to be a suicidal argument.”
[32]On the facts of the case, the difference between Vaughan Williams LJ and Fletcher Moulton LJ was not material to the decision, because the arbitrator was held to have erred in law on either view (see p 32).
[34]Ibid, p 635, per Avory J. The owners were claiming “… an enhanced value… on the sole ground that the railway company are placed in great difficulty from the fact that if the wayleave expired they would be left, not with a main line on the premises, but with a bit of the mainline ending at one place and another bit beginning at another place…” (p 639, per Shearman J).
[35]Ibid, p 640.
[36]Ibid, p 640. He gave as an example the “adaptability” of land bordering a river for the purposes of potential purchasers wanting to establish a wharf.
[37]Ibid, p 640.
[38]Ibid, p 636. Rowlatt J’s judgment on the facts seems to be affected by the “one extra bid” argument, which was rejected by the Court of Appeal in the Clay case, decided a few weeks later (see para A.11 above).
[39][1915] 2 Ch 252.
[40][1915] 2 Ch 252, 259.
[41][1914] AC 569. “The law… has been explained in numerous cases, nowhere with greater precision than in the case of In re Lucas and Chesterfield Gas and Water Board, where Vaughan Williams and Fletcher Moulton LJJ deal with the whole subject exhaustively and accurately.” (p 576, per Lord Dunedin).
[42]“The scheme” was to construct a dyke in the river bed between the three pieces of land, which would impound all the waters in the river north of the dyke: ibid,p 575.
[43]Ibid, p 578: “All the witnesses persist in looking at the three subjects as forming parts of a completed whole and they estimate their value as proportional parts of that whole whose value they calculate by what it will bring in by way of profit to the undertakers.”
[44]As far as one can see from the report, the reference to “the other subjects” (in the words emphasised) was intended to include such things as the lease of the river-bed, and the water-abstraction rights: ibid,p 575.
[45]Ibid, p 576.
[46]Ibid, p 579.
[47]See para A.16 above.
[48]As the ALRC commented (op cit, para 234): “The Privy Council gave no guidance as to how the Canadian court was to assess this possibility and ascribe a value nor did it explain why it was right in principle to allow the owner to take some part of the value to the hypothetical statutory authority but no part of the value to the actual statutory authority.”
[50]The falls had been used for electricity generation for some years before the lease and business were sold (voluntarily) to the municipality in 1905; in 1907, the municipality adopted a bye-law authorising the construction of a reservoir higher up the river, with powers of expropriation; the bye-law authorising acquisition of the Great Falls was passed in 1909: ibid, pp 189-90.
[51]This seems to be the effect of the judgment below (cited in French by the Privy Council): “Ils ont, comme dans la cause citée plus haute, commis l’erreur de faire participer l’expropriée aux bénéfices de la plus-value, donnée à la propriété, par la réalisation de l’objet pour lequel acquistion en était faite. Ils font payer à la ville, non pas la valeur d’un pouvoir d’eau pouvant développer 300 h.p., qui est ce que les propriétaires vendent, mais moitié de la valeur d’un pouvoir additionnel de 1200 h.p., qui est ce que la ville doit réaliser par l’exécution des travaux qu’elle a en vue ou en voie d’exécution.”: ibid,p 193.
[52]Ibid, p 194.
[53]See para A.42 below; but the words “for which” (rather than “underlying”) more clearly direct attention to the future, rather than the past.
[54]Ibid, p 188.
[55]In Sprinz v Kingston upon Hull City Council [1975] RVR 178, 183 (n 128 below), Fraser was cited by counsel for the authority without dissent from the claimant, for the proposition that: “the fact that the proposals involved separate acquisitions, by instruments or time, does not prevent the joint proposals constituting one scheme”.
[56]Part II, para 2.5.
[57]The Scott Report,para 8.
[58]Ibid,para. 10. Similar observations had been made in the Sidney case itself (see para A.18 above).
[59]The Acquisition of Land Act 1919, s 2(3), replaced (with amendments) by the Land Compensation Act 1961, s 5 (3).
[60]These words, which followed a separate recommendation of the Scott Committee, designed to counter the effect of the decision in IRC v Clay [1914] 3 KB 346 (see para A.11 above), are not relevant to the discussion of the no-scheme rule; they were repealed by the Planning and Compensation Act 1991.
[61]The Act applied initially to compulsory acquisition by “any Government Department or any local or public authority” (s 1(1)); “public authority” was defined as “any body of persons, not trading for profit, authorised by or under any Act to carry on a railway, canal, dock or other public undertaking”. It was subsequently extended to cover most bodies exercising compulsory purchase powers. See para A.96 below.
[62] Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer, Vizagapatam [1939] AC 302 (“the Indian case” is a convenient, and frequently used, shorthand).
[63]Ibid, p 327.
[64]Ibid,pp 326-7. Before the Privy Council, the authority maintained the position that the “purpose of the acquisition (here the harbour or malarial schemes) must be excluded”; the claimant argued that since the land was “left out in the original scheme”, the value resulting from it should be taken into account: pp 306-7.
[65]Lord Romer referred to Lord Buckmaster’s formulation of the rule in Fraser, but observed that it “makes no reference whatever to the present question”: ibid,p 321.Lord Romer does, however, appear to go further than the Canadian cases, in apparently requiring the authority’s actual proposals for the site to be taken into account, rather than merely the possibility of such proposals: see para A.37 below, and cf paras A.16 and A.25 above.
[66]See paras A.15-16 above.
[67][1939] AC 301, 320-1. He criticised the decision in Sidney v NE Ry Co (see above) for similar reasons: pp 321-3.
[68]Ibid, pp 316-7, 322.
[69]Ibid,pp 319-20.
[70]See para A.21 above. Eve J’s formulation of the rule was not apparently cited, in argument or in the judgments, in the Indian case.
[71]In any event, at the time of this case (1939), the precise scope of the no-scheme rule was probably not seen as a very live issue.
[72]Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565.
[73]The UK Government had agreed with the US Government in March 1941 to lease land required for naval bases. Certain land belonging to the claimant, at Pointe Gourde in Trinidad, was required for the establishment of one such base. It was acquired compulsorily in April 1941, under powers conferred by the Land Acquisition Ordinance 1941: ibid, p 566.
[74]Ibid,pp 566-8.
[75]See ibid, p 568. Although this was stated as the issue for determination, the judgment of the Full Court, as Lord MacDermott observed, appeared to be based on the no-scheme principle: ibid,pp 572-3.
[76]Section 11(2) of the Land Acquisition Ordinance, No 14 of 1941.
[77][1947] AC at p 572.
[78]Ibid, at p 572. He cited with approval Eve J’s formulation of the rule in SE Railway v LCC (see above). The only other case cited in the judgment was Fraser v Fraserville (see above). It is to be noted that Eve J did not use the term “scheme”, but referred to an increase in value “consequent upon the execution of the undertaking for or in connection with which the purchase is made…” (see above).
[79]Ibid, p 573.
[80]See para A.19 above.
[81]On this interpretation, even if rule (3) had been applicable in the Indian case, it would have had no effect; again, it was the special suitability of a product of the land (the water from the springs), rather than of the land itself, which gave the added value. However, it is difficult to see that as a significant distinction from, e.g., the reservoir cases (see paras A.14-29 above), where the special suitability lay in the topography of the land, allowing it to be used for a reservoir, rather than in the existence of a water-supply on site.
[82]It was cited in argument: ibid, at p 569.
[83]See para A.37 above. In Waters v Welsh Development Agency (June 2002), the Court of Appeal suggested that the difference between the two cases turned on their particular facts: in the Indian case the acquisition of the water supply arose from a separate decision, some years after the start of the harbour project; in the Pointe Gourde case, the quarrying and the land for the naval base was acquired as part of the same order.
[84]It is to be noted that the stated case did not in terms raise the Indian case issue. The extra sum was expressed in the stated case as the additional profitability of the quarry business arising from the navy project, not (as under the Indian case) an additional sum which the navy would have paid for the land in friendly negotiations. Cf Keith Davies in Law of Compulsory Purchase and Compensation (5th ed 1994), at pp 130-2; he suggests that the tribunal’s real error was in awarding the value of the products in addition to the value of the land: “(it)… is rather like saying that the market price of a farm as a going concern includes not only the land, the goodwill and the equipment, but also the retail value of all the produce into the bargain.” However, this interpretation seems doubtful; as far as one can judge from the report, the $15,000 was the increase in the going concern value of the quarry undertaking, not the value of the products as such.
[85]See para A.28 above.
[86]Although the quarry seems to have been included in the same compulsory acquisition as the land needed for the actual naval base ([1947] AC at p 566, referred to at n 72 above), it appears to have been treated it as a separate item for valuation purposes (ibid p 567).
[87]Denyer-Green, op cit,p 217-8. Fraser (para A.27 above) might be an earlier example.
[88]See Part II, para 2.8.
[89]See the discussion in Kaye v Basingstoke Corp (1969) 20 P& CR 417, 453.
[90]Town and Country Planning Act 1947, s 51(3). An expanded version of this became section 9 of the 1961 Act (see below).
[91]It is of interest that, even in 1962, in the last edition of the then standard work on compensation (Cripps, Compulsory Acquisition of Land (11th ed)), the Pointe Gourde case is referred to (para 4-114) as an authority on rule (3), rather than for the judicial rule which later took its name. That rule is explained by reference to Lucas, Fraser, and the Indian case: Cripps, paras 4-014, 015,111.
[92]Lester v Secretary of State for War (1951) 2 P &CR 74; London Investment and Mortgage Co Ltd v Middlesex County Council (1952) 2 P & CR 331; Glover v Edmonton Corpn (1953) 3 P & CR 451; Lambe v Secretary of State for War (1954) 4 P & CR 230. In one Lands Tribunal case, it was cited as affirming the “well-settled principle” stated by Eve J in the S E Rly case: Cooper v Smallburgh RDC (1958) 9 P & CR 396.
[93][1955] 2 QB 612. The case is discussed further below at paras A.87-91.
[94]Ibid, at 622.
[95]The background was explained by Lord Denning in Myers v Milton Keynes Development Corpn [1974] 1 WLR 696, 702. It is doubtful whether such elaborate provision was in fact needed; in jurisdictions unaffected by the 1961 Act, the no-scheme rule has been able to take account of any appropriate planning assumptions, without statutory assistance: see e.g. Melwood Units v Commissioner of Main Roads [1979]AC 426 PC (Queensland) (Compensation, following severance of a development site by a new road, was assessed on the basis that, but for the road scheme, planning permission would have been granted for the whole site).
[96]See paras A.63-65 below.
[97]See para A.58 below.
[98]These are the section numbers as they became in the 1959 Act. In the 1961 Act, ss 2-8 became ss 14-18; s 9 became ss 6-9.
[99]Hansard (HL) 14th April 1959, col 578.
[100]We have referred elsewhere to the uncertainty about which rules apply only to the subject (or “relevant”) land: Part V, para 5.14 above. There was also a confusing change of the order of the provisions. In the 1959 Act, the provisions for planning assumptions on the subject land, were followed logically by the provisions relating to disregard of development on other land within the same CPO or designation. In the 1961 Act, the order was reversed. Sections 9(2) to (5) of the 1959 (dealing with “other land”), became ss 6 to 8 of the 1961 Act, in a group headed “General Provisions” (immediately following the 1919 rules, reproduced in s 5). The rules for planning assumptions on the subject land are in ss 14 ff, under a separate heading - “Assumptions as to planning permission”.
[101]The full text is set out in App 3.
[102]See para A.68 below.
[103]See para A.69 below.
[104]See para A.68 below.
[105]Local Government, Planning and Land Act 1980, s 134; Housing Act 1988, Part III.
[106]1961 Act, s 6(1)(a), Sched 1, case 1.
[107]Ibid s 6(1)(b), Sched 1, case 3.
[108]In relation to an Urban Development Area (case 4A), there is a further qualification: it is specifically provided that development is not excluded from being left out of account, if it is (a) development carried out before designation of the UDA, (b) development outside the UDA, or (c) development by an authority other than the acquiring authority. This refinement was added by 1980 Act, s 145(2).
[109]“(4) increase in value consequent on the execution of the undertaking for or in connection with which the purchase is made must be disregarded”: S E Railway v LCC [1915] 2 Ch 252, 259 (para A.21 above).
[110]As an apparent exception to the no-scheme rule, this applied whether or not the permission would have been granted in the absence of the authority’s proposal: see para A.100 below.
[111]In 1991 the restriction to land not allocated for valuable development was removed, so that the section 17 certificate procedure was extended to any land subject to compulsory acquisition: 1991 Act, s 65(1) .
[112]1961 Act, s 14(2). The reference to the date of “notice to treat” may reflect the fact that, before the West Midland case in 1968 (see Part V, paras 5.71-74 above) this was thought to be the valuation date.
[113]Land was “proposed to be acquired…” in the circumstances defined by 1961 Act, s 22(2): that is, in the case of an ordinary compulsory purchase order, the date of the statutory notice of the making of the order. (The section is set out in App 3).
[114]1961 Act, s 17(4), This was amended by the 1991 Act, s 65 to refer to permission which “would have been granted” rather than “might reasonably have been expected to be granted”. The change was presumably intended to reduce the scope for speculation. It is not clear, however, why the same change was not made to s 14, as part of the amendments made by the same Act (see n 192 below).
[115]1961 Act, s 15(3).
[116]Ibid, s 14(3).
[117]Ibid, s 14(3) (s 14(3A), following the 1991 amendments: 1991 Act Sched 15 para 15(2)).
[118]Davy v Leeds Corpn [1965] 1 WLR 445, 453 The case concerned some houses owned by the claimants, within one of 13 slum clearance areas. A compulsory purchase order was made, covering the 13 slum clearance areas and other adjoining land required to form a suitable re-development area. The owners argued that their houses should be valued as though the whole CPO area were cleared and ripe for development. This was rejected (applying section 6, case 1) because the clearance would not have taken place in the absence of the proposal for compulsory purchase. (Before the Tribunal it had been argued erroneously that section 6 did not apply, because clearance was not “development”; it was not until the CA that it was noticed that this point was expressly covered by the section: see [1964] 3 All ER 390, 392).
[119]Since there was a single CPO covering the whole of the area planned for redevelopment, there was no need for any discussion of the possible differences between s 6 and the judicial no-scheme rule.
[120]Cf n 91 above, referring to the 1962 edition of Cripps.
[121] In Davy, the Pointe Gourde case was the only authority cited on this point. The Indian case does not appear to have been cited in any of the leading modern cases (see below, e.g. Camrose, Wilson, Myers, Devotwill), until the Rugby Water Board case in 1973 (see paras A.87-91 below). Even then, the differences between various versions were not discussed. The most illuminating discussion in the earlier period, including reference to the Indian case, is to be found in the decision of the Lands Tribunal (Sir Michael Rowe QC) in Kaye v Basingstoke Corp (1969) 20 P& CR 417. However, his view that the judicial rule only survived for the purpose of “plugging gaps” in section 6 was not followed in later cases, because it was inconsistent with Camrose: see n 128 below (Sprinz).
[122]In Davy in the Court of Appeal, Harman LJ, in a memorable passage, described the language of the section as “a monstrous legislative morass” or “Slough of Despond”: [1964] 3 All ER 390, 394. To Diplock LJ, preferring “a Minoan to a peregrine metaphor”, it was a “labyrinth” (p 396). Even Lord Denning MR said that he had “rarely come across such a mass of obscurity, even in a statute.”(p 392). (It was no mean achievement to have so baffled three of the leading minds of the then Court of Appeal; and this, in spite of the assistance, as counsel, of the future Lord Bridge and Sir Frank Layfield QC).
[123][1966] 1 WLR 1100. The only cases referred to in argument, or in the judgment, were Pointe Gourde and Davy.
[124]Ibid, p 1107. The explanation, while producing a sensible result in the case, was not supported by anything in the history of the Act, or in the Parliamentary debates.
[125]Ibid, pp 1110-1. He commented: “The drafting of this section appears to me calculated to postpone as long as possible comprehension of its purport”.
[126]The view that section 6 of the 1961 Act was an exhaustive code seems to have had its last gasp in Devotwill v Margate Corp [1969] 2 All ER 97, 106, per Winn LJ (he referred, however, to “the gallantry with which counsel for the acquiring authority sought to interpret the lamentable language of the section before finally abandoning any reliance.”).
[127]St John the Baptist Hospital v Canterbury City Council [1970] RVR 608, 630.
[128]“… it is our opinion that, as a matter of strict law both [section 6] and the [Pointe Gourde] principle must be applied, where on the facts they are capable of applying, independently of each other.”: Sprinz v Kingston upon Hull City Council [1975] RVR 178, 173 LT (D Frank QC, President and V Wellings QC). The Tribunal rejected the view (expressed in Kaye – see n 89 above) that the judicial rule survived only for the purpose of plugging the gaps in section 6: p 183. The main issue in Sprinz was whether the Council’s plans for development, in the Bransholme South and North areas of the city, were to be treated as one scheme or two. The Tribunal took the latter view, largely because the development areas were separately defined and there was an 8 year gap between the development of Bransholme South and North respectively: p 184. The test applied was “to find out on what date there was a scheme and then to ascertain whether it included Bransholme North”: p 183.
[129]Wilson v Liverpool City Council [1969] RVR 741 LT (J S Daniel QC and J R Laird). It is to be noted, however, that the legislature persisted in treating the Schedule as a separate and detailed Code, by adding yet further refinements, in relation to new towns (1973 Act, s 50), and urban development areas (Sched 1, Part III, added in 1980).
[130][1971] 1 WLR 302, CA.
[131] See e.g. Bolton MBC v Tudor Properties [2000] RVR 292, where Mummery LJ gives a summary of the principles as established by that and later cases. The facts of Bolton are noted in Part VI, para 6.23.
[132]It made a further deduction, under 1961 Act s 7, to represent the enhancement, due to the scheme, in the value of the adjoining land which had been sold privately. The full facts of the cases appear in the Lands Tribunal decision at [1969] RVR 741. They are summarised in App 6.
[133]See 1961 Act, Sched 1, case 1, and s 6(3)(a).
[134]The claimants accepted in argument that the continued existence of the judicial rule was settled by Camrose, but reserved the point for argument in the House of Lords: [1971] 1 WLR 302, 310.
[135]The only cases referred to (without any detailed analysis) were Pointe Gourde and Fraser.
[136][1971] 1 WLR 302, 310. It is not clear why Lord Denning needed to go so far. The only issue was whether the “scheme” was made sufficiently clear by the Minister’s grant of outline permission in 1963, or whether it needed to await “final clearance” of detailed plans in 1968 (see [1969] RVR at 748).
[137]Ibid, p 310.
[138]An illustration of the precision of the drafting can be seen in 1961 Act, s 6(3)(b) which, in relation to acquisitions for defence purposes, extends the scope of Case 1 to include adjacent land comprised in a notice to treat under like powers, served one month before or after the notice to treat for the subject land. Under the Wilson interpretation, this provision would have been unnecessary, since orders, so closely connected in time and space, would have been treated as part of a single scheme.
[139]Of the two cases referred to in the judgment, in Pointe Gourde the history of the “scheme” seems to have started with the UK/US agreement in March 1941, followed almost immediately by the acquisition: para A.40. n 73 above. In Fraser the retrospective scope of the scheme was not determined by the Privy Council: see para A.29 above.
[140]See para A.14 above.
[141]The text of s 9 is in App 3. Cf the second Jelson case (paras A.82 and A.103-105 below), where Lord Denning equated s 9 with the Pointe Gourde rule.
[142]He said that the scheme must exist “in some shape or form at the confirmation of the compulsory purchase order itself”, and “then… it may develop almost from day to day…”: p 310 (emphasis added). The other judge (Megaw LJ) made no comment on this point but simply “agreed”.
[143]See paras A.6-12 above.
[144]Other than its general powers to acquire land for housing purposes.
[145]Cf Ozanne v Herts CC [1991] 1 WLR 105 (see para A.107 below), where it was confirmed that the reference to “statutory powers” in rule (3) meant something more specific than the mere need to obtain planning permission.
[146]An extreme illustration is Bird & Bird v Wakefield MDC [1978] 2 EGLR 16 CA, where a CPO for some 30 acres, promoted by a District Council for industrial development, was held to be part of a County Council “scheme” for an area of some 770 acres, even though the County Council had made no proposals for compulsory purchase.
[147]K Davies, op cit, para. 7.9.
[148]An example is Bromley LBC v LDDC [1997] RVR 173, 176, 186ff (rewriting history after 9 years of “scheme” development in the London Docklands Development Area).
[149]See e.g. Cronin v Swansea CC [1972] RVR 428 (the scheme was traced back 25 years to a declaratory order made in 1947 in connection with war damage). The Tribunal held that the rule did not require it to assume that “the whole of the town centre of Swansea should remain fossilised in the state in which it was to be found at the end of the last war”. All that was to be left out of account, under Pointe Gourde, was any increase in value which was “entirely due” to the scheme. It was proper therefore to take account of any enhancement by virtue of the development “by agencies other than that of the council acting in the exercise of their statutory powers”: p 431 (Emlyn Jones, FRICS).
[150]Myers v Milton Keynes DC [1974] 1 WLR 696, 704. The exercise was further complicated in that case by the fact that, under the statutory rules, planning permission was to be assumed in 10 years time. The valuer’s imagination, therefore, had to be sufficiently fertile, to rewrite history 8 years back to the beginning of the new town scheme, and carry it forward for 10 years in the future.
[151][1970] 3 All ER 864.
[152]Ibid, 869-870.
[153]Planning and Compensation Act 1991, s 70 (inserting new subsections (5)-(8), into section 14 of the 1961 Act).
[154]See paras A.48-49 above.
[155]The reference to “allocation… in the current development plan” can be traced back to s 50(3) of the 1947 Act. Under, ibid, s 5(2), one of the principal functions of the development plan was to designate land for compulsory purchase. That is no longer the case.
[156]See e.g Cripps,para 4-111; section 9 is dealt with separately (para 4-121a).
[157]Jelson Ltd v Blaby District Council [1977] 1 WLR 1020 CA; see para A.103-105 below .
[158]It was treated as part of the same principle in Fletcher Estates v Secretary of State [2000] 2 AC 307, 315, per Lord Hope. See also the critical discussion of the Pointe Gourde rule in K Davies, op cit,para 7.4ff.
[159]Melwood Units v Commissioner of Main Roads [1979] AC 426 PC. Pointe Gourde was referred to and it was simply asserted, without discussion, that the same principle applied “in reverse”: p 434, per Lord Russell. The particular statute referred only to “increases” in value; but “the absence of the reverse of the medal” in the statute did not change the position: ibid, p 435E.
[160]Rugby Water Board v Shaw-Fox [1973] AC 202.
[161]Agricultural Holdings Act 1948, ss 23, 24(2)(b).
[162]In his dissenting speech, Lord Simon convincingly attacked the majority’s reasoning as “artificial, legalistic and destructive of the fundamental principles on which compensation is assessed…” (p 241H).
[163]Land Compensation Act 1973, s 48.
[164]The decision was followed reluctantly in Australia: Road Construction Authority v Tiligadis [1988] ACLD 203 (Gobbo J).
[165]The results can seem artificial. For example, in Abbey Homesteads Ltd v Northants CC (1992) 32 RVR 110 CA, land was acquired for a school and was subject to a prior restrictive covenant reserving it for that purpose. It was held that (in accordance with Rugby Water Board) the interest to be valued was the land subject to the covenant; but that, in valuing it, it could be assumed that in the no-scheme world there was an 85% chance of the covenant being discharged by the Lands Tribunal (under s 84 of the Law of Property Act 1925).
[166][1955] 2 QB 612. See paras A.51 and A.66 above.
[167] St John the Baptist Hospital v Canterbury City Council [1970] RVR 608.
[168][1970] RVR at p 631 (J S Daniel QC). The Tribunal held on the facts that there were other potential buyers.
[169] The Indian case has been followed in the Supreme Court of Canada in Fraser v R [1963] SCR 455 (see para A.119 below)and in later cases - see Todd, op cit, p146ff. It has also been followed in English cases, not covered by the Land Compensation Act 1961: see BP Petroleum v Ryder [1987] EGLR 233, 248 (Peter Gibson J); Mercury Communications Ltd v London and India Dock Investments (1995) 69 P & CR 135 (Judge Nigel Hague QC). The latter case is discussed in App 7. See also R Evans (Leeds) Ltd v English Electric (1978) 36 P&CR 185 (Donaldson J).
[170] Waters v Welsh Development Agency [2001] RVR 93 (George Bartlett QC, President) at first instance.
[171]Ibid,para 52 (He refers to Davy, Wilson, Myers, and Rugby Joint Water Board – see above).
[172]Ibid, para 53.
[173]Waters
v Welsh Development Agency [2001] RVR 93 (
George Bartlett QC, President)Ibid, para
54.
[174]Ibid paras 55-7. He also held that, if it were necessary to identify “the scheme underlying the acquisition”, it should be taken as the Cardiff Bay barrage, not simply the nature reserve: para 65. This aspect of the decision, but not the “public purpose” test, was upheld by the Court of Appeal. The Court of Appeal also declined to accept that the Indian case was no longer good law; see para A.45 above.
[175]See para A.32 above for the original wording of the rule in the 1919 Act. The current version (1961 Act, s 5(3)) is in App 3.
[176]See para A.45 above.
[177]The “special purchaser” part of the rule (not directly relevant to the present discussion) was repealed by Planning and Compensation Act 1991, Scheds 15, 19.
[178]Lambe v Secretary of State for War [1955] 2 QB 612.
[179]Per Mann LJ in Batchelor v Kent CC [1989] 59 P&CR 357, 362.
[180]Ozanne v Herts CC [1991] 1 WLR 105,111 per Lord Mackay LC. In that case it was argued that the rule required to be left out the possibility of the use of adjoining land for access, since that could only be achieved by use of the council’s powers to stop up an existing road. See below (“ransom strips”).
[181]Ibid, at p 112. Lord McKay cited, as illustration of the powers to which rule (3) might apply, the Parliamentary powers granted for water-power development in the Cedar Rapids case (para A.24 above); he contrasted those powers, with the consents required in the same case for erecting works in the river-bed and for water-abstraction, which were not within rule (3). A wider construction would mean that the rule would exclude any use to which the land could be put “only after obtaining some particular statutory consent such as planning permission, consent under the Building Acts, or the like”: p 112C-E.
[182]Blandrent Investment Developments Ltd v British Gas Corporation [1979] 2 EGLR 18, 22, per Lord Scarman.
[183][1965] EGD 605, LT.
[184]1919 Act, s 2(3). See para A.32 above.
[185]1919 Act, s 12. See n 61 above. The 1947 Act, s 57(1) extended the 1919 Act so that references to “public authorities” included the Central Land Board (established under that Act), and statutory undertakers (as defined by s 119(1)), whether or not trading for profit. The 1959 Act, s 1(2) applied the 1919 rules to all compulsory acquisitions.
[186]1961 Act, s 39(1). This amendment seems to have been made in the 1961 Act as a consequential amendment, as appropriate to a consolidation Act, following the extension of the Act (by s 1 of the 1959 Act) to cover all compulsory acquisitions (cf 1919 Act, s 1, which applied only to acquisitions by Government Departments, or local or public authorities, as there defined). There is no indication in Hansard that the implications for rule (3) were separately considered.
[187]A recent review for the Scottish Executive has recommended consideration of the “need for privatised utilities to be required to obtain a ‘public interest certificate’ if they wish to continue to benefit from the application of rule 3” (Review of Compulsory Purchase and Land Compensation: Scottish Executive Central Research Unit 2001).
[188]See Electricity Act 1989, Sched 3, under which the Secretary of State may authorise compulsory acquisition by privatised licence-holders.
[189]Compulsory powers do not necessarily depend on a public or statutory function. For example, a private manufacturing company might obtain compulsory powers under the Transport and Works Act 1992 for a railway link to its factory; if so, the value attributable to that use would apparently be excluded under the rule, even though the purpose is essentially commercial.
[190]LT December 2000 (ACQ/144/1998).
[191]1961 Act, s 15(5).
[192]If, however, the actual permission on the surrounding land had included any part of the subject land, it would have been taken into account: 1961 Act, s 14(2),(4)(b), whereby any permission in force at the date of notice to treat is taken into account, if it is a permission for the subject land, or for any area including that land.
[193]Although not directly relevant to the no-scheme rule, we should also note section 15(3), which preserves, subject to restrictions, the right to take account of certain categories of so-called “Third Schedule” development: see Town and Country Planning Act 1990, Scheds 3, 10. These complex provisions defined certain categories of minor development which were excluded from the definition of “new development” under the 1947 Act, for the purpose of determining the scope of the existing use under that Act. They have limited purpose today and there seems little justification for including them.
[194][1974] 1 WLR 696, CA. We have already quoted Lord Denning’s description of the “land of make-believe” required by the rule. It was apparently agreed in that case that the assumed permission under s 15 was a matter affecting the nature of the “interest”, and therefore (under the Rugby Water Board case – see para A.84 above) not affected by the no-scheme rule: p 702. However, this approach is unsupported by any other authority; it conflicts with Melwood Units v Commissioner of Roads (see n 95 above and para A.83 above), and with Lord Denning’s own application of the rule in e.g. the second Jelson case (see para A.103 below) (in both of which cases assumed permissions were treated as valuation issues, within the judicial version of the no-scheme rule).
[195] “…it is to be assumed that there is permission for the use for which the land is defined or allocated in the development plan” Hansard (HC) 13th November 1958, cols 588-9 ( J R Bevins MP, Parliamentary Secretary, Ministry of Housing and Local Government).
[196] Purfleet Farms v Secretary of State (LT, January 2001, ACQ/108/2000): “It is an element of the compensation legislation that…cries out for revision.” (George Bartlett QC President).
[197]Provincial Properties v Caterham UDC [1972] 1 QB 453 CA.
[198]See para A.65 above.
[199]Under Town and Country Planning Act 1990, s 137 (land incapable of reasonably beneficial use).
[200]Jelson Ltd v Minister of Housing and Local Government [1970] 1QB 243, CA.
[201]The “proposal date” as defined by 1961 Act, s 22(2)(b).
[202]Jelson Ltd v Blaby District Council [1977] 1 WLR 1020, CA.
[203]1961 Act, s 14(3): see para A.65 above.
[204]The same result was arrived at under 1961 Act, s 9 (see para A.77 above), by treating the original road scheme as an “indication” that the land was to be compulsorily acquired. Cf the narrower view of causation taken by the Court of Appeal (also under Lord Denning) in Hoveringham Gravels Ltd v Secretary of State for the Environment [1975] QB 764 (compensation not allowed under the Ancient Monuments Act, when designation had been followed by refusal of planning permission for development).
[205]In Fletcher Estates, the House of Lords did not find it necessary to examine the correctness of the second Jelson case (see Fletcher at p 325C).
[206][2000] 2 AC 307, HL. The case concerned land acquired in 1990 by the Department of Transport for a bypass, on a line which had been defined since 1970. It was held that the s17 issue should be judged by reference to the time of the proposal to acquire (1986).
[207]That is, depending on the procedure, the date of the original notice of the order, the deemed notice to treat, or an offer in writing by the authority: 1961 Act, s 22(2).
[208] Fletcher,at p 322H, per Lord Hope.
[209]See para A.37 above.
[210]Ibid,p 323D. He quoted (p 324A) Phillimore LJ (in the first Jelson case, para A.103 above, at p 255) where he said that to look back further “would open up a considerable field for guesswork which would often make it impossible to give firm advice to any member of the public as to his rights.”
[211]Ibid, p 325C.
[212](1961) 13 P&CR 77. The particular case concerned the valuation of land compulsorily acquired for industrial development, where the authority owned the land needed for access; the issue was the amount of the deduction to represent that interest.
[213]In JA Pye (Oxford) Limited v Kingswood BC [1998] 2 EGLR 159, the authority and the developer had entered an agreement for the authority to acquire the access land, on the assumption (mistaken as it proved) that existing use value would be paid.
[214][1988] RVR 133 (First Lands Tribunal decision); [1989] RVR 179 (Court of Appeal); [1991] 1 WLR 105 (House of Lords); [1991] RVR 229, [1992] 38 EG 158 (Second Lands Tribunal decision); [1995] RVR 40 (Second Court of Appeal decision). There were two separate hearings before differently constituted Courts of Appeal (3rd May 1994 and 10th October 1994). On the last occasion the case was remitted to the Lands Tribunal for a complete rehearing. The parties then settled.
[215](1989) 59 P&CR 357.
[216]Ibid, p 361. In a later case it was suggested that the words in italics should have read “pre-existent to the scheme”: Wards Construction v Barclay Bank (1994) 64 P&CR 391, 396 per Nource LJ.
[217]See, e.g., the Batchelor case itself (ibid). Planning permission had been granted for a substantial residential development, subject to a condition preventing occupation of houses in phase 2, until off-site road works (including a new roundabout) were completed. The County Council, under an agreement with the developer, made a compulsory purchase order for the necessary land (0.86 acres). The value for its existing agricultural use was £3,000. The first tribunal valued it at £500,000; following a successful appeal (on the grounds that the basis of the award had not been explained) a second Tribunal valued it at £2.15m. An appeal against this award was rejected: Wards Construction Ltd v Barclays Bank (1994) 68 P&CR 391. Nourse LJ expressed some “mystification” at the range of the figures, but concluded that there was no error of law (p 394). See also JA Pye (Oxford) Limited v Kingswood BC [1998] 2 EGLR 159.
[218][1995] 2 AC 111, PC. The case is discussed in more detail in Part IV.
[219]See Emslie v Aberdeen DC [1994] 1 EGLR 33, 38, per Lord President Hope.
[220]Town and Country Planning Act 1990, ss 137 and 143.
[221][1977] RVR 15.
[222]See para A.103 above.
[223]Although the case was heard some six months after Morris & Jacombs, the latter does not appear to have been cited in argument.
[224]See e.g. Jacobs, The Law of Resumption and Compensation in Australia (1st ed 1998) chapter 27; Todd, The Law of Expropriation and Compensation in Canada (1st ed 1992) chapter 6.
[225]See e.g. the Melwood Units case (n 95 and para A.83 above).
[226]Road Construction Authority v Tiligardis [1988] ACLD 203; and see D Brown, op cit, para 3.22.
[227]LAA (Cth) 1989, section 60(a) and (c).
[228]See para A.32 above.
[229]Notably Cedars Rapids Manufacturing and Power Co v Lacoste [1914] AC 569, where three islands in the St Lawrence river were acquired for a power generation scheme; the Supreme Court of Canada awarded compensation on the basis of their value for the scheme. The Privy Council rejected this approach, because the actual scheme of the acquiring company could not be taken into account; it held, however, that the valuation had to have regard to “the possibility of that or any other company coming into existence and obtaining powers”: ibid, p 579. Rule (3) of the 1919 rules seems to have been designed to exclude that possibility.
[230]ALRC, op cit, paras 234, 250. It recommended retention of the rule to deal with problems of speculative values (citing cases such as Cedar Rapids, see para A.24 above).
[231]See Todd, op cit, pp 152-4. The Report of the Royal Commission on Expropriation, 1961-63 (“The Clyne Report”) had considered the matter and concluded that the possibility of increased compensation resulting from competition among statutory takers was so remote that it was not necessary to exclude it (ibid).
[232]The use of “purpose” rather than “scheme” is echoed in some of the English cases: see e.g. Waters v Welsh Development Agency [2001] RVR 93 (LT), 102, para 54: “…any effect on the value of the land acquired arising from the public purpose or public purposes prompting the acquisition, whether from their adoption by the authority or from their implementation, is to be disregarded.”
[233]Land Acquisition Act 1955, s 23(2).
[234]ALRC, op cit, para 247.
[235]LAA 1989 (Cth), s 22(1)(2).
[236]Although this implication does not appear to have been drawn expressly in any of the relevant authorities, it may help to explain the relative lack of litigation on the scope of the “purpose” to be disregarded under the rule.
[237]See Todd, op cit, pp 160-165.
[238](1963) 40 DLR (2d) 707.
[239]The facts of the cases were unusual, in that, due to “bureaucratic bungling” the expropriation order had to be reissued, by which time the Crown had entered an agreement with a contractor which contemplated use of this rock for the project; “the potential market for this commodity had thus become a reality” (see the analysis at Todd, op cit,p 148).
[240]Ibid, p 722.
[241]Ritchie J distinguished Pointe Gourde on the basis that there: “the special suitability… could not arise until after the acquisition by the British Crown and after the lands had been leased to the United States for the purpose of building the base and that it only came into being because of the special needs of the United States.” (p 723). It is not easy to see, however, why these were seen as distinguishing factors, since in both cases it was the needs of the public project which created the special demand. Cartwright J reached the same result on the basis that “the reality of the situation” was that what the Crown was acquiring “was intended to be used not as land but as a source of building material for which there was an ascertainable market price”. (pp 709-710).
[242]See para A.88 above.
[243]See also the Californian case, People v Andresen (1987) 193 CA3d 1144, where a quarry was expropriated for repairs to a dam; the enhanced value off the quarry for this purpose was allowed because the expectation that the state would use rock from this quarry was “not tantamount” to an expectation that it would take the quarry itself. See below.
[244]The 1975 Act (Act 63 of 1975) was a consolidation of South Africa’s principal expropriation legislation. Its main compensation provisions were expressed in a single section: section 12 (as amended by the Expropriation Act Amendment of 1992). The State is entitled to expropriate property for public necessity or public utility. Compensation generally is based on the amount that would have been realised by the property “if sold…in the open market by a willing seller to a willing buyer”, subject to a number of detailed rules. These provisions have to be read now subject to the 1996 Constitution, section 25(3), which contains a number of overlapping provisions relevant to compensation, which have no parallel in the UK.
[245]Expropriation Act 1975 (Act 63 of 1975), s 12(5)(f).
[246](1971) 4 Cal.3d 478, Tobriner J. The California Constitution (S 14, Art 1) provides that private property shall not be taken without “just compensation”.
[247]United States v Miller (1943) 317 US 369, 377.
[248](1971) 4 Cal.3d 478, 490-92. The Court declined the invitation to hold in the abstract that identical principles applied to project depreciation or “blight”, since it might encourage authorities to announce a project at an early stage in order to drive down values: p 483, n 1.
[249]Ibid,p 484.
[250](1987) 193 CA3d 1144.
[251]Californian expropriation law is codified principally in the California Code of Civil Procedure (“CCP”), sections 1230.010-1273.050. Compensation is specifically addressed in sections 1263.010-1263.620. Further provisions, on relocation, are found in the California Government Code, sections 7260-7277 (“Relocation assistance”). See also the California Evidence Code, sections 810-824 (“Evidence of Market Value of Property”).
[252]See Code de l’expropriation pour cause d’utilite publique , Art L 13-15.
[253]In Davy and Rugby Water Board the issues were relatively narrow. Even in the Ozanne saga (see para A.107 above), the House of Lords’ consideration (unlike that of the Court of Appeal) was limited, by the grounds of appeal, to rule (3).
[254]See paras A.104-105 above.
[255][1917] AC 187. See para A.27 above.
[256]See paras A.30-33 above.
[257]As shown by Pointe Gourde itself, where rule (3) was held not to apply: see paras A.39-47 above.
[258]See para A.103 above.
[259]Although s 14 accepts the possibility of assumed permissions other than those derived from any certificate under section 17, it seems to contemplate that the test for determining those assumed permissions will be exactly the same as under section 17: see para A.65 above.
[260]The “cancellation approach”, eventually approved for section 17 in Fletcher, could have been seen as equally appropriate for section 6. Thus, under case 1, it would not have been necessary to look back beyond the particular proposal to acquire. The precise definition of “proposal to acquire” would have required to be considered, since s 22(3) does not apply directly to s 6.
