The Supreme Court restored the Upper Tribunal’s award of £746,000 for grazing land compulsorily acquired for the Kingsway Business Park, holding that the tribunal had lawfully assessed its hope value for residential development in a world without that scheme. Underlying planning policies could properly be weighed when judging the prospects of permission apart from the scheme, and the statutory planning assumptions did not shut out that inquiry. The Court of Appeal was wrong to remit the assessment.
The dispute concerned compensation for two adjoining parcels of grazing land, totalling 26.85 acres, near Rochdale and close to Junction 21 of the M62. They formed part of a much larger area acquired under the North West Development Agency (Kingsway Business Park, Rochdale) Compulsory Purchase Order 2002 for the Kingsway Business Park. The land vested in the acquiring authority on 4 January 2006, the valuation date. Responsibility for compensation rested with the Homes and Communities Agency. The claimants, J S Bloor (Wilmslow) Ltd, sought £2,593,000 on the footing that the land had substantial hope value for residential development independently of the business-park scheme, with access from Buckley Hill Lane through an intervening plot known as the Nib, which they also owned but which was not included in the order. The authority said compensation should be confined to existing-use value of about £50,000.
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Planning background
The area’s development potential had been recognised since the 1960s. A 1999 master plan showed various forms of development, including some residential use, on the reference land within phase 5, and linked planning consents granted on 19 December 1999 had been commenced and remained extant at the valuation date. An earlier application for residential development on part of the reference land and the Nib was refused in January 2002 as piecemeal. The claimants bought the land and the Nib in May 2003 for £1.3 million. Their objection to the order was rejected principally because the land was needed for comprehensive development of the business park.
At the valuation date the statutory development plan included regional guidance identifying the business park as a strategic regional site, and the Rochdale Unitary Development Plan. Policy EC/6 allocated the site subject to criteria including access only from the A664 Kingsway and Junction 21, compatibility with a strategic business park, and limited residential development only as part of a comprehensive scheme for predominantly business uses. Similar policies appeared in the emerging replacement plan, which the parties agreed would be material to a hypothetical application. It was common ground that limited residential development with access from Buckley Hill Lane would not have been refused on highway grounds. A later application for a certificate of appropriate alternative development, including 74 dwellings, was withdrawn after officers recommended refusal for non-compliance with policy EC/6.
The statutory tests
Compensation is assessed under the Land Compensation Act 1961, as explained by the courts. Section 5 rule 2 takes the open-market value of the land. That principle is qualified by two groups of provisions. Section 6 and Schedule 1 require certain increases or diminutions in value attributable to development under the acquisition to be disregarded. The courts have treated those provisions as a statutory, but not exhaustive, embodiment of the Pointe Gourde, or no-scheme, rule: compensation must disregard any increase or decrease in value solely attributable to the underlying scheme. Although the Schedule refers in terms to development of land other than the land being valued, the rule has also been applied to the subject land itself.
Sections 14 to 16 separately require specified planning assumptions. Where, as here, land lies in an area allocated primarily for a range of two or more uses, section 16 requires an assumption that permission would be granted for development within that range which might reasonably have been expected if no part of the reference land were proposed for compulsory acquisition. That exercise uses a cancellation assumption confined to the reference land. Section 14(3) makes clear that these assumptions do not require it to be assumed that permission would necessarily be refused for other development. Section 17 provides a separate certification procedure; the application made here was withdrawn before determination.
The two groups of provisions do not operate on the same hypothetical world. The planning assumptions cancel the scheme only so far as it affects the reference land, as if those plots alone had been omitted from the order. Section 6, read with the no-scheme rule, requires the scheme to be disregarded in relation to the order land as a whole. The Upper Tribunal therefore spoke of a cancellation-assumption universe and a wider no-scheme, or no Kingsway Business Park, universe.
The Upper Tribunal
The tribunal, Judge Mole QC and Mr Francis FRICS, kept the two stages distinct. Under the cancellation assumption it imagined the business park under way in accordance with the master plan, with junction, spine road and parts of the loop roads built or under construction, and commitments too advanced for the developer to withdraw. It found a reasonable prospect of some residential development with access from a northern loop, but held that any resulting increase in value had to be disregarded because it was attributable to development of other order land and would not have been likely without the authority’s proposals.
For the wider disregard, the tribunal accepted that planning policies would have continued to support a business park even if this scheme had failed, but regarded another scheme as a long shot that would add little if anything to existing-use value. The only development capable of producing an increase that need not be disregarded was one taking no part of the other order land, and therefore taking access from Buckley Hill Lane. In that no-scheme world both the benefits of the scheme’s infrastructure and disadvantages such as traffic objections based on the scheme had to be left out of account. Broader objections based on prejudice to a future business park would carry much less weight than objections tied to a specific scheme just starting. The tribunal therefore gave limited weight to the 2002 refusal and the fate of the section 17 application, both of which had relied on policy EC/6 and the need for a comprehensive scheme.
Looking at development already present off Buckley Hill Lane, the long identification of the land for substantial development, agreement that a substantial number of houses could take access from the lane, and the motorway junction as a fact on the ground outside the order, the tribunal concluded that a hypothetical purchaser would see some extra hope value. It put the chance of permission at no better than 50/50 and assessed deferral at five years. After considering the valuation evidence it awarded £746,000. There was no challenge to the valuation arithmetic.
The Court of Appeal
The authority’s principal argument was that once planning status had been fixed under sections 14 to 16, section 6 could not alter the assumed permissions or policies. Patten LJ rejected both that submission and the claimants’ defence of the tribunal. He held that planning status did have to be modified for the no-scheme valuation, but that the tribunal was wrong merely to downgrade policies EC/6 and EC/7 while leaving the allocation for development in place. It should have considered the land’s planning potential without regard to the scheme and its underlying policies, including by reference to wider policies such as PPG3, and struck a fair balance on that basis. The assessment was remitted. Sales LJ likewise rejected the argument that planning status was immutably fixed by section 14, but held that the tribunal had still wrongly given weight to historic, current and emerging policies promoting the business park and to what it had called extensive policy support for residential development on part of the reference land. Jackson LJ agreed with both judgments.
The Supreme Court
Lord Carnwath, with whom Lord Neuberger, Lord Clarke, Lord Sumption and Lord Hughes agreed, held that the Court of Appeal had adopted reasoning supported by neither party and had wrongly treated disregard of the scheme as extending to all past and present policies supporting development on the land. The tribunal was entitled to treat the underlying policies, including the development-plan allocation, as potentially relevant to the prospect of development apart from this scheme. How much weight they carried in the no-scheme world was pre-eminently for the specialist tribunal, which had also visited the area. Its conclusion that objections under PPG3 or policy EC/6 would not have been enough to rule out development in the absence of the scheme disclosed no error of law.
The authority’s stricter argument was also rejected. Nothing in the statute or the authorities makes planning status conclusively fixed by sections 14 to 16. Section 14(3) confirms that the statutory assumptions are not exclusive and do not imply a presumption against other development. They operate only in the claimant’s favour and do not remove the long-established right to argue for prospective value under other provisions or the general law. Since the restoration of market-value compensation, development value has been an important element of compensation because open-market value may depend on what permission exists or could be obtained. In Transport for London v Spirerose Ltd the issue was whether a prospective permission should be valued as a certainty or as a hope, not whether the prospect could be taken into account at all.
Application of the no-scheme rule may itself change the assumed planning status of the subject land. In Melwood Units Pty Ltd v Main Roads Commissioner compensation reflected the fact that, but for the expressway project, permission would have been obtained for a drive-in shopping centre. The two Jelson cases, concerning the same strip acquired for a road, showed that refusal of a section 17 certificate did not prevent the tribunal taking account of residential prospects under the no-scheme rule, because the statutory certificate looked at the position when development on either side had already made further development impossible, whereas the general rule permitted a broader view. A dictum distinguishing the effect of a scheme on value from the characterisation of the interest was concerned with the nature of the interest in land, not its planning status, and did not support the authority’s argument.
Lord Carnwath described the tribunal’s application of these difficult unamended provisions to complex facts as exemplary and found no error of law.
Verdict: The Court unanimously allowed the landowner’s appeal and restored the Upper Tribunal’s compensation award of £746,000. The tribunal was entitled to take account of the prospect of planning permission apart from the Kingsway Business Park scheme.
Source: Homes and Communities Agency v J S Bloor (Wilmslow) Ltd [2017] UKSC 12
