Hughes v Doncaster Metropolitan Borough Council
| Jurisdiction | England & Wales |
| Judge | Lord Bridge of Harwich,Lord Templeman,Lord Griffiths,Lord Ackner,Lord Lowry |
| Judgment Date | 13 December 1990 |
| Judgment citation (vLex) | [1990] UKHL J1213-2 |
| Date | 13 December 1990 |
| Court | House of Lords |
[1990] UKHL J1213-2
Lord Bridge of Harwich
Lord Templeman
Lord Griffiths
Lord Ackner
Lord Lowry
House of Lords
My Lords,
This appeal raises two questions of law in respect of the compensation payable pursuant to section 5 of the Land Compensation Act 1961 for land acquired by compulsory acquisition. The land in question was acquired by the Doncaster Metropolitan Borough Council ("the acquiring authority") from Mr. and Mrs. Hughes ("the claimants") pursuant to a compulsory purchase order made in 1973. Notice to treat was served in January 1976 and the acquiring authority took possession on 1 November 1981. The total area of the site acquired was 3.872 acres. The whole site was used by the claimants until the date of acquisition for the purpose of their business as merchants dealing in scrap metal and rags. Part of the site ("the blue land") had been used for the same purpose since 1959. The claimants purchased the blue land in 1969 together with the goodwill of the scrap metal and rag merchant's business carried on there by their predecessors in title. The claimants purchased the remainder of the site ("the green land") in 1972 and the use of the green land for the purpose of the business began then. No permission had ever been granted under the Town and Country Planning Acts for the development involved in the material change of use of the blue land and the green land when they were first used for the purpose of the scrap metal and rag merchant's business in 1959 and 1972 respectively. Thus, when the site was acquired the position under the Town and Country Planning Act 1971 was that the use of the blue land, being a use begun before the end of 1963, was an "established use" as defined by section 94 and was immune from enforcement proceedings under Part V, but the use of the green land remained liable to enforcement proceedings requiring its discontinuance.
The two questions of law raised by the appeal depend upon the true construction of the rules for the assessment of compensation in respect of any compulsory acquisition originally enacted by section 2 of the Acquisition of Land (Assessment of Compensation) Act 1919 and now re-enacted, with no material amendment, by section 5 of the consolidating Act of 1961. They provide as follows:
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"(1) No allowance shall be made on account of the acquisition being compulsory:
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(2) The value of land shall, subject as hereinafter provided, be taken to be the amount which the land if sold in the open market by a willing seller might be expected to realise:
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(3) The special suitability or adaptabllity 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 the requirements of any authority possessing compulsory purchase powers:
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(4) Where the value of the land is increased by reason of the use thereof or of any premises thereon in a manner which could be restrained by any court, or is contrary to law, or is detrimental to the health of the occupants of the premises or to the public health, the amount of that increase shall not be taken into account:
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(5) Where the land is, and but for the compulsory acquisition would continue to be, devoted to a purpose of such a nature that there is no general demand or market for land for that purpose, the compensation may, if the Lands Tribunal is satisfied that reinstatement in some other place is bona fide intended, be assessed on the basis of the reasonable cost of equivalent reinstatement:
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(6) The provisions of rule (2) shall not affect the assessment of compensation for disturbance or any other matter not directly based on the value of land.
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..:"
The first question is whether rule 4 applies, as the acquiring authority contend, to the assessment of compensation generally, including any element referable to disturbance, or whether, as the claimants contend, it applies only to the assessment of the market value of the land acquired and not to the assessment of compensation for disturbance.
The second question is whether a use of land begun between 1 July 1948 and 31 December 1963 without the grant of planning permission under the Town and Country Planning Acts is, as the acquiring authority contend but the claimants dispute, a use which is "contrary to law" within the meaning of rule 4 notwithstanding that it is an established use which is immune from enforcement proceedings.
The question of the amount of compensation to which the claimants were entitled was referred to the Lands Tribunal pursuant to the Act of 1961 and determined by Mr. Victor Wellings Q.C. He answered both questions of law in the claimants' favour. Holding that rule 4 did not apply to compensation for disturbance, he included in his assessment a sum of £300,000 as compensation for loss of the goodwill of the scrap metal and rag merchant's business as carried on over the whole site. Holding that the business use of the blue land was not contrary to law, he valued the uncovered part of the blue land, one acre in extent, at £17,500 as reflecting the business use. It was, however, common ground that the business use of the green land, being liable to enforcement proceedings, fell within rule 4. Mr. Wellings accordingly disregarded the enhancement in value which the business use attracted to the uncovered part of the green land. On this basis he valued the green land at £10,000 per acre. The total compensation, including the value of buildings and certain other items not relevant to the appeal, he determined in the sum of £551,160.
The acquiring authority appealed to the Court of Appeal by the case stated. The majority of the court (Staughton and Mann L.JJ.) [1990] 1 W.L.R. 845 affirmed Mr. Wellings' answer to the first question of law in favour of the claimants and accordingly dismissed the appeal in relation to the award of compensation for disturbance, but answered the second question of law in favour of the acquiring authority and accordingly allowed the appeal to the extent of reducing the valuation of the blue land from £17,500 to £10,000 to exclude the enhancement attributable to the business use, which they held to be contrary to law. Dillon L.J. dissented on both points. He answered the first question of law in favour of the acquiring authority and the second in favour of the claimants. By leave of the Court of Appeal the acquiring authority now appeal and the claimants cross-appeal to your Lordships' House.
It is well settled law that whatever compensation is payable to an owner on compulsory acquisition of his land in respect of disturbance is an element in assessing the value of the land to him, not a distinct and independent head of compensation. This is because, under section 63 of the Lands Clauses Consolidation Act 1845 (8 Vict. c. 18), the substance of which is now re-enacted by section 7 of the consolidating Compulsory Purchase Act 1965, "the value of the land to be purchased by the acquiring authority" is the only head of compensation under which compensation for disturbance is capable of being accommodated. The other heads of compensation for which the section provides, severance and injurious affection, relate only to the depreciatory effect of the acquisition on other land retained by the owner. Judicial interpretation of the Act of 1845 held that the value of the land meant its value to the owner, not its value to the acquiring authority: Stebbing v. Metropolitan Board of Works [1870] L.R. 6 Q.B. 37. This value was to be assessed as including all the loss which the owner suffered in consequence of being dispossessed: Rickets v. Metropolitan Railway Co. (1865) 34 L.J.Q.B. 257.
In Commissioners of Inland Revenue v. Glasgow and Southwestern Railway Co. (1887) 12 App. Cas. 315 a jury had assessed compensation payable to a land owner under the parallel provisions of the Lands Clauses Consolidation (Scotland) Act 1845 in separate sums representing the value of the land and buildings on the one hand and compensation for loss of business on the other. The conveyance on sale attracted ad valorem stamp duty under the Stamp Act 1870 and it was held that the sum allowed as compensation for loss of business was part of the consideration for the sale liable to the duty. Lord Halsbury L. C. said, at pp. 320-321:
"The two things, and the only two things, which are within the ambit and contemplation of the statute, are the value of the lands and such damages as may arise to other lands held therewith by reason of the particular land which is taken being taken from them.
… That was alone what the jury in this case had power to assess, because it is admitted that no question arises here upon the other part of the section — no question arises here about any damage from severance. It is admitted, therefore, impliedly, that the only thing which the jury had here to assess was the value of the land. … In treating of that value, the value under the circumstances to the person who is compelled to sell (because the statute compels him to do so) may be naturally and properly and justly taken into account; and when such phrases as 'damages for loss of business' -or 'compensation for the goodwill' taken from the person are used in a loose and general sense, they are not inaccurate for the purpose of giving verbal expression to what everybody understands as a matter of business; but in strictness the thing which is to be ascertained is the price to be paid for the land — that land with all the potentialities of it, with all the actual use of it by the person who holds it, is to be considered by those...
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