Welford v EDF Energy Network (LPN) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Thomas,Lord Justice Chadwick,Lord Justice Scott Baker |
| Judgment Date | 03 April 2007 |
| Neutral Citation | [2007] EWCA Civ 293 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: C3/2006/0903 & 0903(Z) |
| Date | 03 April 2007 |
[2007] EWCA Civ 293
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LANDS TRIBUNAL
LCA/30/2004
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Chadwick
Lord Justice Scott Baker and
Lord Justice Thomas
Case No: C3/2006/0903 & 0903(Z)
Guy Roots QC and Guy Williams (instructed by Lewis Silkin) for the Appellants
Romie Tager QC and Philip Kremen (instructed by Hughmans) for the Respondents
Hearing date: 15 February 2007
This is an appeal from the Lands Tribunal (The President and Mr NJ Rose) on a short point of law as to whether a claim for loss of profits was too remote in law to form part of a compensation claim under the Electricity Act 1989 for the grant of wayleave for underground cables. Although the point arose under the specific legislative provisions applicable under that Act, the principles applicable were those generally applicable to claims for compensation for the compulsory acquisition of land.
The facts
The facts out of which the appeal arises were found by the Tribunal as follows:
i) The first claimant, the first respondent to the appeal, began a waste separation and transfer business in the 1980s in the East End of London; he sold that business and ceased to be engaged in the waste transfer business (the sorting and reclamation of waste and its ultimate sale or disposal). He subsequently developed with the second claimant, the second respondent to the appeal, a skip hire business which was later based at Millwall Wharf in the East End; this business comprised the hire of skips and the disposal of the waste deposited in the skips by the hirers to others who operated a waste transfer business; they did not conduct a waste transfer business. As Millwall Wharf was to be redeveloped, these two claimants looked for alternative premises in the East End of London from which they could operate a waste transfer business together with the skip hire business as the operation of a waste transfer business would maximise their profits.
ii) 0n 21 June 1994 the first and second claimants purchased at auction land (site A) at Canning Town London for £51,000, thereafter negotiating the price down to £41,000. There was a large electricity pylon on the site; its development potential was therefore limited. The sale was completed on 30 April 1995. The intention of the first and second claimants was to transfer their skip hire business to site A and to improve the profitability of their business by undertaking waste transfer themselves by building a waste transfer station on the site. The first and second claimants incorporated the third claimant, the third respondent to the appeal, on 1 December 1994 and transferred all the assets of the business (including a licence to use site A) to the third claimant company, which commenced trading on 1 May 1995; the first and second claimants retained the freehold of site A.
iii) Since 1949 underground electricity cables had run east to west across the middle of site A. This had originally been permitted under a licence granted by the then owner of the site; after the expiry of that licence the presence of the cables was continued by virtue of various statutory provisions. The first and second claimants were unaware of the cables when they purchased the site.
iv) After the purchase of site A, the third claimant spent £10,000 clearing it of fly tipping and £20,000 in improvements to the site, principally by covering it with concrete.
v) On 23 June 1995, the claimants applied for planning permission to build the waste transfer station – essentially a large shed in which the waste would be sorted and reclaimed prior to sale or disposal; permission was granted on 7 September 1995, subject to certain conditions.
vi) In July 1995, the claimants became aware of the presence of the cables. On 12 September 1995 they gave notice to London Electricity plc, the predecessors of the appellants (EDF), to remove them. The presence of the cables made it impossible to build a waste transfer station on Site A. The Tribunal made a finding which is central to this appeal:
“the first and second claimants had done more than simply purchase the land with the intention of using it as a waste transfer station. They had also devoted substantial time and money in clearing the site and laying concrete in order to fit it for use for this purpose. They had had plans drawn up and had applied for (and had received) planning permission for this use. They were using the land for skip storage, which was a component part of the proposed waste transfer use (albeit it could, and did at the time, constitute a use in itself). Even though the use of the site as a waste transfer station had not begun, the business was clearly in existence.”
vii) Upon receipt of the notice, London Electricity became entitled to apply for a statutory wayleave for the underground cables under paragraph 6 of Schedule 4 to the Electricity Act 1989. Statutory wayleaves were granted on 17 August 1998 for a term of 15 years.
viii) On 15 October 1997, the claimants purchased an adjoining site (site B) and used this in conjunction with site A for lorry and skip storage; they obtained planning permission, after an initial refusal, in February 1999 and then developed it into a waste transfer station.
As a result of the statutory wayleaves the claimants became entitled to compensation under paragraph 7 of Schedule 4 to the Electricity Act:
“(1) Where a wayleave is granted to a licence holder under paragraph 6 above –
(a) the occupier of the land; and
(b) where the occupier is not also the owner of the land, the owner
may recover from the licence holder compensation in respect of the grant.
(2) Where in the exercise of any right conferred by such a wayleave any damage is caused to land or to moveables, any person interested in the land or moveables may recover from the licence holder compensation in respect of that damage; and where in consequence of the exercise of such a right a person is disturbed in his enjoyment of any land or moveables he may recover from the licence holder compensation in respect of that disturbance. ”
The statutory provisions only provided for compensation as at the date the wayleave was granted – 17 August 1998. The claimants considered that they had suffered loss during the period between 12 September 1995 and the grant of the wayleave on 17 August 1998. They commenced proceedings in the High Court but these were compromised by an arbitration agreement referring the dispute to the Lands Tribunal which under paragraph 7 of Schedule 4 had the jurisdiction to determine the compensation for the statutory wayleave. The agreement provided for the compensation to be determined on the same principles as compensation for the statutory wayleaves. It is not necessary for the purposes of this judgment to deal separately with the position in respect of the statutory claim and the claim referred from the High Court as the applicable principles are the same and as there was no change in the underlying land values between 1995 and 1998.
The claims made by the claimants were for:
i) Injurious affection—diminution in the value of the land in consequence of the grant of the wayleave.
ii) A disturbance claim for loss of profits of over £2m on the basis that they would, but for the presence of the cables, have been able to start their waste disposal business in January 1996. They had been unable to start that business until January 2000.
The dispute under the Act and the dispute referred under the arbitration agreement were heard together in October and November 2005.
EDF accepted that compensation was due for the injurious affection claim but contended that no compensation was payable for disturbance, because the profits alleged to have been lost related to a use of the land which had not commenced on 12 September 1995 and did not flow from disturbance in the use being made of the land at that date.
It was agreed that the Tribunal should determine four principal issues; two, issues (a) and (c), are relevant to this appeal.
“(a)Whether in the light of the evidence the claim for loss of profits properly falls within and is in accordance with the Electricity Act 1989 Schedule 4 paragraph 7
“(c)In relation to that part of the claim relating to the value of the land:
(i) whether this should be assessed … in relation to both site A and site B or to site A alone;
(ii) whether the land should be valued on the profits basis, as contended by the claimants, and what is the diminution in the value of the land pursuant to the Electricity Act 1989 and the arbitration agreement.”
The determination by the Tribunal
The Tribunal decided that the injurious affection claim occasioned by the grant of the wayleave should be determined on the basis of the diminution of the value of the freehold interest of the claimants occasioned by the presence of the cables on the site and the right of EDF to maintain the cables on the site from 12 September 1995 until the grant of the wayleave and thereafter for the period of the wayleave. The Tribunal rejected the evidence of the claimants' expert who had put forward a valuation on a profits basis; they found the figures did not reflect the market and that the claim was unsupported by evidence. The Tribunal essentially accepted the valuation approach of EDF's expert which was based on general industrial land values, with various adjustments. There is no appeal from that part of the...
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