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Transport for London (London Underground Ltd v Spirerose Ltd [2009] UKHL 44 (30 July 2009) - LawCareNigeria
Home » INTERNATIONAL » Transport for London (London Underground Ltd v Spirerose Ltd [2009] UKHL 44 (30 July 2009)
The Tribunal found in the present case that there was a probability that planning permission for a valuable re-development of the land in question would have been granted. But they awarded compensation on the basis of a valuation of the land not on the footing that the permission would probably have been granted but on the footing that it would have been granted. They attributed a value of £608,000 to the land on that latter footing but a value of only £400,000 on the footing that “permission is not as a matter of law to be assumed and only hope value is to be taken into account”. The Court of Appeal affirmed the Tribunal’s decision and the issue for your Lordships is whether the Tribunal was justified in law in treating a probability as a certainty.
It may be that part of the thinking was based on the jurisprudence relating to the burden of proof in civil cases. The party on whom lies the burden of proving a relevant fact can succeed in discharging that burden on the so-called “balance of probabilities”. If the existence of the fact is more probable than not, the burden of proof is satisfied. But this is to do with proof of historic fact. It has nothing to do with valuation. A search for the market value of land at a particular date must take account of the attributes of the land at that date. Absent statutory intervention there is no warrant for adding attributes that the land does not possess nor, for that matter, for subtracting attributes that the land does possess. The land in the present case had a promising potential for the grant of planning permission but it did not have the benefit of an actual grant of planning permission. To transform a probability of planning permission into a certainty of planning permission on the footing that the civil standard of proof, the balance of probabilities, has been satisfied misunderstands, in my respectful opinion, the nature of the valuation exercise that Rule (2) of section 5 requires.
Example 150.1 Such conventions have arisen in the compulsory purchase of land. One of these is known as the ‘no-scheme rule’ or ‘Pointe Gourde rule’. As stated by Lord MacDermott:
‘When Parliament gives compulsory powers, and provides that compensation shall be made to the person from whom property is taken, for the loss that he sustains, 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.’”
As it happens, the Privy Council’s advice to His Majesty in Pointe Gourde was given shortly before the passing of the Town and Country Planning Act 1947, which introduced unprecedented statutory control of the use and physical development of land in England and Wales. It was a very important milestone in the history of compensation for the compulsory purchase of land. Parliament was faced with a momentous choice, whether to compensate landowners for no more than the value of their land in its current use and state of physical development (as enhanced by any actual permission or general development rights under the 1947 Act) or to extend compensation to the “hope value” of obtaining permission for development in the future. Parliament took the former view, treating future development rights as public property. (That notion was not wholly novel in this country, as demonstrated by Lloyd George’s increment value duty introduced by the Finance (1909-10) Act 1910; the intricacies of that long-defunct tax explain why, surprisingly, it was the Revenue that was arguing – unsuccessfully – for a lower value in IRC v Clay [1914] 3 KB 466; Clay was not a compulsory purchase case at all but was cited by the respondent’s counsel in Pointe Gourde and described by him as having “disturbed the waters”.)
The scheme, in this case, is the extension of the London Underground from Dalston to Whitechapel. It is not suggested that the carrying out of that scheme increases or depresses the value of the respondent’s land in any particular way, except so far as it has taken away the respondent’s prospect of obtaining planning permission for mixed-use redevelopment, since no planning authority was going to authorise redevelopment on a site marked for compulsory purchase, as the respondent’s land has been since 1993. The respondent is therefore entitled to compensation for the loss of a chance, assessed as at the valuation date (3 December 2001), of obtaining planning permission in a “non-scheme world” sometime between 1993 and 2001. Unless it falls within one of the statutory assumptions in section 6 of and the First Schedule to the 1961 Act, that chance is to be assessed as “hope value”, a concept with which valuers, and the Lands Tribunal, are very familiar.
It has always been common ground that the compensation in this case is to be assessed by reference to the amount which the land to be compulsorily acquired “if sold in the open market … might be expected to realise” as at the date on which possession of the land was taken (or, if earlier, the date of assessment) – see rule (2) of section 5, and subsection (3) of section 5A, of the Land Compensation Act 1961. It has also always been common ground that, while there are certain statutorily required counter-factual adjustments which may have to be made in particular cases to the open market valuation of land which is being compulsorily acquired, in sections 14 to 22 of the 1961 Act, none of them apply here.
The Lands Tribunal in this case concluded that, as at the relevant valuation date, although planning permission for development of the land for mixed use had not been applied for or granted, it would have been regarded in the market as likely, but by no means certain, to be granted. In these circumstances, it would seem to follow that the valuation should have been carried out on a “hope value” basis – i.e. by assessing the price which would be obtained for the land bearing in mind (a) its value in the market in the light of its current state of physical development and its currently permitted use, and (b) any added value which would be attributed in the market to the prospect of obtaining planning permission for any physical redevelopment and/or change of use – in this case mixed development.
Secondly, the assumption made in the present case appears to bypass, indeed to render redundant, many of the specific assumptions as to assumed planning permission contained in sections 16 and 17 of the 1961 Act. Thus, in summary terms, subsections (2) and (3) of section 16 state that it should be assumed that land has planning permission for a particular use if two conditions are satisfied, namely (a) that it is allocated for that use in a development plan, and (b) that the use is one “for which permission might reasonably have been expected to be granted”. If the decision under appeal is correct, then that is a pointless, indeed almost absurd, provision: whenever permission for a change of use “might reasonably have been expected to be granted”, one must, if the courts below are correct, apparently assume that it has been granted.
Thirdly, the decision appears to “transgress”, as Scott LJ put it in Horn v Sunderland Corporation [1942] 2 KB 26, 49, “the principle of equivalence which is at the root of statutory compensation, the principle that the owner shall be paid neither less nor more than his loss”, save, I should add, where the legislation otherwise provides. (In my view, another principle relied on by the appellant acquiring authority, the presumption of reality as described by Megaw LJ in Trocette Property Co Ltd v Greater London Council (1974) 28 P & CR 408, amounts to much the same thing as the principle of equivalence.)
The only way the Pointe Gourde principle could be relied on, as a matter of logic, appears to me to be on the basis that, if the scheme in question had not been in existence, then at some time before the valuation date, the respondent land owner would have applied for, and, on the balance of probabilities, obtained permission for mixed development. I do not consider that that would be a legitimate invocation of the Pointe Gourde principle, which is concerned with the effect of the scheme on the value of the owner’s interest, not with the characterisation of that interest – see the remarks of Lord Cross of Chelsea in Rugby Joint Water Board v Shaw-Fox [1973] AC 202, 253, approving a dictum of Russell LJ in Minister of Transport v Pettitt (1968) 67 LGR 449, 462. It may amount to the same point put another way, but, when assessing compensation, it is, at least generally, inappropriate to invoke the principle for the purpose of speculating what might have happened – see per Lord Brown of Eaton-under-Heywood in Waters v Welsh Development Authority [2004] 1 WLR 1304, para 148, disapproving what was said by Lord Denning MR in Myers v Milton Keynes Development Corporation [1974] 1 WLR 696, 704.
Quite apart from this, I do not consider that it is right to invoke the Pointe Gourde principle, or any other principle developed by the courts, for the purpose of adding a wholly new assumption to the statutory assumptions which have been laid down by the legislature – see per Lord Pearson in Shaw-Fox [1973] AC 202, 214-5. All the more so if that assumption is effectively inconsistent with one or more of the express statutory assumptions. I do not thereby intend to suggest the Pointe Gourde principle has no part to play in this field, but its role is relatively limited. I agree with Lord Collins, when he says in para 127 that it is “a principle of statutory interpretation, mainly designed and used to explain and amplify the expression ‘value'”. As Lord Walker implies in para 36, the principle is a factor to be borne in mind when construing the compensation legislation with a view to achieving, so far as possible, a result consistent with its aim of fair compensation. That seems to me consistent with principle and with most of the authorities, including all the decisions of this House and of the Privy Council, to which your Lordships were taken.
In any event, even if it was legitimate to invoke the Pointe Gourde principle in this connection, it seems to me that the result arrived at by the Lands Tribunal and the Court of Appeal would be contrary to the fundamental purpose of the principle. Assuming the scheme would have prevented the land owner obtaining planning permission for mixed use, then what the land owner was deprived of by the existence of the scheme was, according to the Lands Tribunal, not the certainty of getting such permission, but a good prospect of getting it. By awarding compensation on the basis that such permission would be certain to be, or had been, obtained, the courts below were therefore enabling the land owner to be better off than he would have been in the “no scheme world”. That appears to me to be contrary to, rather than consistent with, the principle.
While not eschewing the basic reasoning of the Lands Tribunal, the Court of Appeal relied on three further grounds for concluding that planning permission for residential development should be assumed to have been granted. “First and foremost”, the unfairness of the land owner in this case being unable to take advantage of a certificate under section 17(4)(b) of the 1961 Act – [2008] EWCA Civ 1230, para 65. Such a certificate would, if granted in respect of residential development of the land, have enabled the respondent to compensation on the basis that planning permission for such development had been granted, and therefore on the basis fixed by the Lands Tribunal. For my part, I would prefer to treat as an open question the issue whether it is right that such a certificate should be based on the situation as at the date of the notice to treat (whether deemed or actual). That was the effect of the decision in Jelson v Minister of Housing and Local Government [1970] 1 QB 243, but it may be appropriate for your Lordships to reconsider the issue one day (not least because of the subsequent decision of this House in Birmingham Corporation v West Midland Baptist (Trust) Association Inc [1970] AC 874). The issue has not been considered in this House, as it was conceded in Fletcher Estates Ltd v Secretary of State [2000] 2 AC 307 that Jelson [1970] 1 QB 243 was rightly decided.
The second point made by the Court of Appeal was that it would render the valuation exercise simpler and less controversial, if one assumed that planning permission had been actually granted, as opposed to embarking on a “hope value” exercise – [2008] EWCA Civ 1230, para 66. First, that is scarcely a principled reason for the Court’s conclusion, let alone a good enough reason for effectively adding a further assumption to the statutory assumptions. Secondly, it is not a persuasive reason: “hope value” valuations, i.e. valuations based on the assessment the market would make of the prospect of an event occurring, and the quantification which it would accord to that prospect, especially the grant of planning permission, are very familiar to any experienced surveyor or property lawyer. Thirdly, it is an unconvincing reason, because a “hope value” valuation would, even on the Court of Appeal’s reasoning, be required where the prospect of obtaining planning permission was less than 50%.
Thirdly, the Court of Appeal suggested that its approach “reflects the common assumption and practice of tribunals, courts, practitioners and valuers” – [2008] EWCA Civ 1230, para 66. I am far from convinced that this is correct; and, even if it is, it cannot justify an erroneous interpretation of the 1961 Act. The Court of Appeal’s observation lies a little unhappily with the observation of the Lands Tribunal in para 24 of its decision in this case, where it said that “this important issue in the law of compensation does not appear to have arisen previously in such starkly defined terms”. Your Lordships were also taken to an earlier decision of the Lands Tribunal, Pentrehobyn Trustees v National Assembly for Wales [2003] RVR 140, where, at para 95, the President, Mr George Bartlett QC (who also sat on this case) seems to have reached the opposite conclusion, albeit in somewhat different circumstances.
The land required by London Underground Ltd (“LUL”, to which TfL is the statutory successor) for construction of the East London Line Extension included land in the London Borough of Hackney belonging to Spirerose. The land comprised a small building used as a printing works. In 1993 notice of LUL’s application for the making of an Order for the purpose of carrying out the scheme was published, and in 1997 the Secretary of State for Transport made the London Underground (East London Line Extension) Order 1997.
“Nothing in those provisions shall be construed as requiring it to be assumed that planning permission would necessarily be refused for any development which is not development for which, in accordance with those provisions, the granting of planning permission is to be assumed …”
Because so much of the argument before the Tribunal, the Court of Appeal, and this House, turned on the application of what is known as the Pointe Gourde principle, to which I shall have to revert, it would be convenient if I were at this point to quote its classic formulation: “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”: Pointe Gourde Quarrying and Transport Co, Ltd v Sub-Intendent of Crown Lands [1947] AC 656, 572, per Lord MacDermott (PC). There is a valuable survey of the principle, its antecedents and its subsequent use in Law Commission, Towards a Compulsory Purchase Code: (I) Compensation, Cm 6071 (2003), App D, [2002] EWLC 165, prepared when Carnwath J was Chairman of the Law Commission.
I emphasise that the reference is to “possibilities of the land and not its realized possibilities”, and that a deduction would have to be made to take account of the fact that the land might not be required for building or might not be required for a considerable time. This is a powerful confirmation of a principled approach to valuation. There is no reason why the same principles should not apply when the modern law of town planning is factored in. It is elementary that the price which the land in question might reasonably be expected to fetch on the open market at the valuation date would be expected to reflect whatever development potential the land has: Mon Tresor & Mon Desert Ltd v Ministry of Housing and Lands [2008] UKPC 31, [2008] 3 EGLR 13, at [27], per Lord Brown of Eaton-under-Heywood.
Jelson Ltd v Blaby District Council [1977] 1 WLR 1020 was an appeal from the Tribunal on the claim for compensation for the deemed compulsory purchase of land following the purchase notice. There were three agreed alternative valuations between the parties on the amount of compensation. The first was on the assumption that any decrease in value due to the effect of the road scheme was to be ignored and consequently that the land would have been developed as part of the neighbouring estate, which gave a figure of £60,000. The second was on the assumption that planning permission could reasonably have been expected to be granted for a 31 unit residential development, which gave a loss of £26,350. The third was an assumption that at the date of valuation there was no prospect of planning permission being granted for residential development but that there was some “hope value”, which gave a figure of £6,700. The second basis was rejected by the Tribunal, on the ground that planning permission for that layout could not have been reasonably expected, or indeed expected at all: (1974) 28 P & CR 450, at 459. The Tribunal found for the first method because the valuation exercise was to be approached on the basis that there had been no road scheme and said (quoted at [1977] 1 WLR 1025 at 1025): “… if the Pointe Gourde principle does not require a diminution in value entirely due to the scheme underlying the acquisition to be left out of account, section 9 of the Act of 1961 provides the analogous principle … in rather wider terms than the Pointe Gourde principle is usually expressed.”
In my opinion it is a principle of statutory interpretation, mainly designed and used to explain and amplify the expression “value.” It is in this sense that it has sometimes been referred to as a common law principle: see e.g. Fletcher Estates (Harlescott) Ltd v Secretary of State for the Environment [2000] 2 AC 307, 315, per Lord Hope of Craighead; Waters v Welsh Development Agency at [142] per Lord Brown of Eaton-under-Heywood. In Rugby Joint Water Board v Shaw-Fox [1973] AC 202 at 213 to 215 Lord Pearson reviewed the authorities and concluded that although the Pointe Gourde principle had been described as a “common law principle”, it could not be such a principle “because compulsory acquisition and compensation for it are entirely creations of statute” (at 214). He went on: “The Pointe Gourde principle in my opinion involves an interpretation of the word ‘value’ in those statutory provisions which require the compensation for compulsory acquisition to include the value of the lands taken” (at 214-215). I am satisfied that this the right approach and that there is nothing in Lord Nicholls’ speech in Waters which is inconsistent with this view.
Rahman & Ors, R v [2008] UKHL 45 (2 July 2008)
Murray and Another v. Foyle Meats Ltd (Northern Ireland) [1999] UKHL 30 (08 July 1999)