Transport for London v Spirerose Ltd ((in Administration))
| Jurisdiction | England & Wales |
| Judgment Date | 13 November 2008 |
| Neutral Citation | [2008] EWCA Civ 1230 |
| Docket Number | Case No: C3/2008/0522 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 November 2008 |
[2008] EWCA Civ 1230
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
THE LANDS TRIBUNAL
ACQ/41/2005
Lord Justice Carnwath
Lord Justice Thomas and
Lord Justice Etherton
Case No: C3/2008/0522
Michael Barnes QC & Eian Caws (instructed by Eversheds LLP) for the Appellant
Nicholas Nardecchia (instructed by Lodders LLP) for the Respondent
Hearing dates: Wednesday 29 th & Thursday 30 th October, 2008
Carnwath LJ:
This is the judgment of the court.
Introduction
The claimants were the owners of industrial premises (“the site”) on the south side of Holywell Lane, in the area known as South Shoreditch, a mixed-use area on the northern fringe of the City of London. The site was compulsorily acquired by Transport for London (“TfL”) under the London Underground (East London Line Extension) Order 1997 (“the Order”), as part of the project for the construction of the East London Line Extension, a new railway line between Dalston and Whitechapel.
Public notice of the proposed Order had been given in autumn 1993 under the Transport and Works Act 199The Order was confirmed by the Secretary of State on 20 January 1997. Notice to treat was served on the claimant on 24 August 2001. Possession was taken on 3 December 2001, which was therefore the valuation date for the purposes of compensation.
The issue
The principal issue is whether the site should be valued on the basis (a) (as the tribunal held) of its full value with planning permission for a mixed use development; or (b) as TfL argued, a percentage only of that value (“hope value”) reflecting the probability of the permission being granted, as perceived by the market in the no-scheme world. The alternative valuations (in accordance with the findings of the tribunal, which are not now in dispute) are £608,000 on basis (a): £400,000 on basis (b).
The resolution of this issue depends on the correct application of the so-called Pointe-Gourde, or “no-scheme” rule. In simple terms the rule is that compensation for the compulsory acquisition of land must be assessed in a “no-scheme world”, that is, excluding any increase or decrease in the value of the land that is wholly due to the scheme underlying the acquisition.
The rule is long-established, and has attracted more than a century of judicial learning, not all easy to reconcile. In Waters v Welsh Development Authority [2003] 4 All ER 384 [2002] EWCA Civ 924), the Court of Appeal, commented on the colourful history of the rule:
“The case-law (takes) one on an engrossing historical tour of the jurisdiction of the Judicial Committee of the Privy Council from its heyday at the beginning of the last century: railway-building in the jungles of Zanzibar ( Secretary of State for Foreign Affairs v Charlesworth [1901] AC 373); hydro-electric works in Canada ( Cedar Rapids Co v Lacoste [1914] AC 569;Fraser v Fraserville City [1917] AC 187); anti-malarial works related to harbour development in India (the “Indian case”: Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer, Vizagapatam [1939] AC 302); a quarry needed to build a US naval base in Trinidad (the Pointe Gourde case itself); a shopping centre in Queensland ( Melwood Units Ltd v Main Roads Commissioner [1979] AC 426); and, most recently, displacement of a steel-works to make way for a new town in Hong Kong ( Director of Buildings and Land –v—Shun Fung Ironworks Ltd. [1995] 2 AC 111).
Not surprisingly, given the extraordinary variety of subject matter and location, the statements made in these cases are not always easily reconcilable with each other, nor readily transferable to the conditions of post-war Great Britain. Such statements must always be read in the factual context in which they occur. But the very diversity of the contexts encourages the hope that underlying it all is a principle of some robustness and universality.” (paras 37–8 per Carnwath LJ)
The history has been exhaustively discussed in a Law Commission Report ( Towards a Compulsory Purchase Code: (1) Compensation, LC 286, see especially Appendix D), and in the speeches in the House of Lords in Waters v Welsh Development Authority [2004] 1 WLR 1304. For present purposes, it is enough to note that in 1959, following the restoration of the principle of market value compensation, an attempt was made by statute to provide for the application of the no-scheme rule for use in the modern planning system. Those provisions with some amendments are now found in the Land Compensation Act 1961 Parts II and III. Most relevant for present purposes is section 17, which allows the claimant to apply to the local planning authority for a “certificate of appropriate alternative development”, with (under s 18) a right to appeal to the Secretary of State against an adverse decision. We shall need to return to the detail of those provisions, which though not directly applicable are relied on by way either of contrast (Mr Barnes for TfL) or of analogy (Mr Nardecchia for the claimants). The 1959 Act code created as many problems as it solved. The Law Commission recommended the replacement of the common law and statutory versions of the no-scheme rule in a comprehensive statutory code. That plea has so far gone unheeded by the legislature.
The report was however taken into account by the House of Lords in Waters, which can be seen as signalling a new, more flexible approach to the rule. Indeed Lord Woolf expressed the hope that -
“…that tribunals and practitioners in future will not find it necessary to refer to any other authority apart from this on the matters covered by their speeches. The process of valuation should be a matter of experienced evaluation of the facts of a particular transaction or transactions within broad general parameters laid down by the law. So far as possible valuation should eschew technical distinctions.” (para 71)
A majority of the House confirmed that the judicial version of the rule was not to be treated as displaced by the relevant provisions of the Land Compensation Act 1961. As Lord Nicholls explained:
“The courts…found themselves driven to conclude that the statutory code is not exhaustive and that the Pointe Gourde principle still applies. This conclusion is open to the criticism that in many instances this makes the statutory provisions otiose. This is so, but this is less repugnant as an interpretation of the Act than the alternative.”(para 54)
He provided some general guidance on the purpose of the principle and its practical application. Although the case was concerned principally with the definition of the scope of the “scheme”, which is not at issue in this case, much of the guidance is of general relevance. He said:
“61… What, then, is the purpose of this principle? Its purpose, in separating 'value to the owner' from 'value to the purchaser', is to forward Parliament's objective of providing dispossessed owners with a fair financial equivalent for their land. They are to receive fair compensation but not more than fair compensation. This is the overriding guiding principle when deciding the extent of a scheme.
62. This statement of general principle does no more than articulate the approach already adopted intuitively by tribunals when faced with making a choice between competing views of the extent of a scheme in a particular case. It is to be hoped that bringing this principle into the open will assist decision-making in difficult cases.
63 In applying this general principle there is of course no magical detailed formula which will provide a ready answer in every case. That is in the nature of things, circumstances varying so widely. But some pointers may be useful. (1) The Pointe Gourde principle should not be pressed too far. The principle is soundly based but it should be applied in a manner that achieves a fair and reasonable result. Otherwise the principle would thwart rather than advance the intention of Parliament. (2) A result is not fair and reasonable where it requires a valuation exercise which is unreal or virtually impossible. (3) A valuation result should be viewed with caution when it would lead to a gross disparity between the amount of compensation payable and the market values of comparable adjoining properties which are not being acquired. (4) When applied as a supplement to the s 6 code, which will usually be the position, the Pointe Gourde principle should be applied by analogy with the provisions of the statutory code…”
The last point was directed specifically to section 6 and Schedule 1, parts of which are notoriously obscure (once described by Harman LJ as a “monstrous legislative morass” or “Slough of Despond”: Davy v Leeds Corporation [1964] 3 AllER 390, 394). However, use of the statute by way of analogy can be a useful tool on other points of difficulty. A similar point had been made in the Court of Appeal in Waters:
“Even if the judicial rule is needed to fill the gaps, and mitigate the anomalies, in a flawed statutory regime, it may still be appropriate to look to the statute for guidance as to the underlying policy.” ([2003] 4 AllER at para 79, per Carnwath LJ)
Planning evidence and conclusions
Before considering the legal contentions, it is useful to summarise the respective cases as to the planning potential of the site, and the tribunal's conclusions on this issue. The claimant argued that planning permission should be assumed for a mixed-use development consisting of offices on the lower floors and two floors of...
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