Select Committee on the Crossrail Bill Minutes of Evidence

Examination of Witnesses (Questions 10940 - 10959)

  10940. You know that the sole remaining issue before you today is the special compensation regime which the Association seeks. I refer in paragraph 6 to the conclusions and recommendations of the Select Committee in the other place in relation to that, and you have the documents in front of you in the pack.

  10941. Paragraph 8 refers to the arrangements that we made, and the position is this: as a rule, where compensation is payable by a statutory undertaker to a neighbouring land owner in respect of the carrying out of public works, the amount recoverable is limited to the depreciation in value of that land owner's affected property. But in the case of the market tenants what we have done is to agree that they should be able to recover not only any reduction in value of their leasehold interest but, crucially, they should be able to recover a further amount which represents any consequential loss, particularly loss of trade or business, loss of profits, which resulted from that event —

  10942. CHAIRMAN: Just remind us again where we find undertaking No 234? It is in your bundle, I think.

  10943. MR MOULD: It is more legible if you turn to page 42.[24] The substance of it is set out at clause 13 in that draft of the deed: "In the assessment of compensation payable to the Trader as a result of an injurious affection claim", which is a claim under section 10, "the Undertaker will include an amount representing any consequential loss, whether or not reflected in the value of the land: (a) which was caused by the construction of the authorised works, and (b) for which the Undertaker would have been liable to pay damages if the authorised works were not authorised by the Act".

  10944. Just to explain that last part, as your Lordships will recall, if you bring a claim in nuisance in common law you recover not only a sum of money which reflects the degree to which your property has been devalued as a result of the nuisance but also any consequential losses such as loss of trade and business which you have suffered, for example, if you run a business on that land, as a result of the nuisance. So if somebody causes a nuisance which damages your goods on the land you can recover the cost of repairing those goods as well as the loss of value to your freehold or leasehold interest.

  10945. What we have done in the case of the Smithfield traders is to bring their rights under the Compensation Code into line with the common law position, and the significance of that is this: that ordinarily, of course, the right under section 10, that is the statutory compensation claim, which, as Mr Dingemans has explained, is the route whereby you get to a remedy for this kind of disruption where the work has been carried out by a statutory undertaker, is more limited than the position at common law because ordinarily, when one is pursuing a statutory compensation claim, you only get the money which represents the reduction in value of your land; you do not get any compensation for any loss of business or trade or profits that results from that. So this provision which we have undertaken to set in place in relation to this particular Petitioner is a significant extension of the ordinary rules which apply to other people along the route.

  10946. In order to try and get away from what I acknowledge are rather dry legal concepts and into an attempt to say how this would work in practice I have quoted from the explanatory letter we sent to the Association in the light of the House of Commons Committee's recommendation, and I will just read that out: "One of the points about which you expressed concern when addressing the Select Committee on the Crossrail Bill related to compensation for losses arising from the destruction of carcasses where those carcasses were condemned by environmental health officers in consequence of dust emanating from an adjacent Crossrail working site. We do not expect that to happen, but in the event that it did occur we can confirm that, since in these circumstances physical damage will have occurred to the carcass in question by the escape of dust, the Promoter agrees that it should be included in the matters ranking for compensation under the proposals described above."

  10947. So the effect of the extended law as to what you can claim for under a statutory compensation claim in those circumstances in practice does bring in the right for these particular Petitioners to recover for damaged stock, effectively, which is I think one of the principal concerns that they have put before your Lordships today. So they already have that in the bag, so to speak.

  10948. Then I go to another example, which is the second point which has been raised today, which is the concern that traders may suffer loss of trade or business as a result of roads around the market being obstructed because of the Crossrail works. Direct interference with members of the Association's ability to gain access to their premises would provide a proper basis for a claim for compensation, so insofar as traders do experience any significant loss of trade due to Crossrail road closures and obstructions around Smithfield which are shown directly to have interfered with their access to the market, they will in principle have a claim for compensation, and we have agreed they should have an extended right to recover trading and business losses in relation to that kind of that claim as well in response to the Select Committee's report.

  10949. Now, we do not expect that kind of objection to happen for the reasons I have given, but because your Lordships are concerned with the point that you can never say never, if unexpectedly that kind of problem did happen, well then there is already under our proposals a route to claim compensation in the proposals we have made in response to the Select Committee. So that is why we do say in paragraph 11 that we understand that we satisfied the Select Committee's requirement in the other place, and certainly it is fair to say that in its Special Report it did not indicate any dissatisfaction with the proposals that we have set out in that respect, and those are set out in the relevant register and so forth.

  10950. Then I come to the key point before you today, which is this: the alternative arrangements we have made do not extend the circumstances in which the market tenants will have the right to make a claim for compensation beyond those that are well-established under the general law, and for the circumstances in which such a claim may be made one needs just to look at the Law Commission's final report at page 15 in the bundle, and it is very clearly set out in paragraphs 11.4 and 11.6 of that document.[25]

  10951. The short point is that which is set out in paragraph 14 of my note. The effect of the current law is that market tenants will not have the right to claim for compensation of disturbance which is the inevitable consequence of the proper performance of the Crossrail works. In that respect, they will be in exactly the same position as any neighbouring land owner (whether commercial or residential) disturbed by the construction of the railway and in the same position as any such neighbouring land owner disturbed by the construction of public or private development schemes, large or small, throughout the country.

  10952. Under the current state of the law, such persons are not entitled to be indemnified for losses they may sustain by reason only of disturbance which inevitably results from the proper performance of building and construction works on neighbouring land.

  10953. Now, in its report the Commission carefully considered whether to recommend at least in the case of major public projects such as Crossrail that the rules should be changed so as to extend the right to claim compensation to embrace the kind of claim which the SMTA now proposes in its Petition, paragraph 28. The Commission considered that point in response to criticism of the perceived unfairness of the law of compensation as it presently applies to such projects, and it is right to note that that criticism as recorded by the Law Commission was voiced in essentially the same terms as had been put to your Lordships by Mr Dingemans on behalf of the Smithfield traders, and you can see that in paragraph 11.7 on page 16 of the bundle, where the Commission said this: that the complaint was that in relation to major public works the restriction of compensation for nuisance during the construction period does not fairly reflect the loss which may be caused by major public projects, and what the Review Group said was that: "The rule may cause particular injustice where the construction of public works (such as a highway) on neighbouring land extends over a prolonged period, causing a landowner to suffer damage or loss from noise, dust and vibration. Such damage may also be significant, particularly if the landowner's use of his land is for a trade or business which is affected by such disturbance."[26]

  10954. So precisely the sort of situation that the Smithfield traders say they face in the present case and, as you see, the main thrust was on fair balance, which is the same argument put by Mr Dingemans today.

  10955. Now, the position is that the Law Commission declined to recommend that the rules be changed in the way that was suggested by consultees then and is argued for by the Tenants' Association now, and they explained why they made no such recommendation in paragraphs 11.18 and 11.20 and 11.21 of the report.[27]

  10956. What they said was this in paragraph 11.18: "There was a similarly divided response to the question whether compensation for the effect of the construction of the works should continue to be restricted to circumstances for which a claim would have arisen at common law. Those who opposed the restriction emphasised the fact that many public works constructions were on a large scale and could last for several years, and, therefore, were different in nature from private projects for which the common law had been designed. Those who supported it were concerned at the difficulty of setting clear limits to the right, and the additional costs which would be caused."

  10957. In conclusion at paragraph 11.20 they say: "Our recommendation is designed to preserve the balancing of the existing law"—that is the key point—"which does not give rise to obvious anomaly or unfairness. We are sympathetic to the views expressed by CPPRAG, that the scale of many public works makes it inappropriate to apply to them the same criteria as to private operations. However, if that criterion is removed, the nature of the right changes. It is no longer simply compensation for loss of an existing right, given by the common law, but the creation of a new more extensive right, applicable only to injury caused by public works. That indeed is the effect of the Land Compensation Act 1973 in relation to the use of public works. However, the detailed rules have been designed [in that case] to produce a workable scheme with defined limits."

  10958. So that answers my learned friend's point, yes, of course, the `73 Act as regards the operation of a public works scheme does embrace a more extensive claim, but it has been precisely drawn by Parliament through that, and all the policy issues arising have been dealt with. But the Commission went on to say: "The decision whether to make a similar extension [of that kind] to the rights of those affected by the construction period must be one of policy, taking account of the additional costs which it would entail for public authorities. In order to restrict the multiplicity of claims, it might be appropriate to consider practical limitations (for example, by setting a threshold related to the amount of the claim; or limits by reference to the timescale of the works, or the distance of the claimant's property from the site of the works). It will also be necessary to establish detailed rules for the assessment of the claim. Detailed work of this kind must await a policy decision on the issues of principle".

  10959. And if you turn two pages on the recommendation at 11.23, Rule 22(2)(b), "Compensation shall be payable for any depreciation in the market value of the qualifying interest, and any consequential loss ... (i) which was caused by the construction of the works under statutory authority; and (ii) for which the statutory authority would have been liable to pay damages if the construction had not been authorised by statute", so as regards the liability the recommendation retained the structure of the existing law under the Compulsory Purchase Act.[28]

24   Committee Ref: P73, Draft Deed between the Nominated Undertaker and individual Smithfield Market Traders-Compensation (LONDLB-23-04-042) Back

25   The Law Commission (LAW COM No 286) Towards a Compulsory Purchase Code: (1) Compensation Final Report, Section 10 of the 1965 Act: injurious affection due to the construction of public works, Paras 11.4 and 11.6 (LONDLB-23-04-0156) Back

26   The Law Commission (LAW COM No 286) Towards a Compulsory Purchase Code: (1) Compensation Final Report, Section 10 of the 1965 Act: injurious affection due to the construction of public works, Para 11.7 (LONDLB-23-04-016 to -017) Back

27   The Law Commission (LAW COM No 286) Towards a Compulsory Purchase Code: (1) Compensation Final Report, Conclusion, Paras 11.18 and 11.20 (LONDLB-23-04-021) Back

28   The Law Commission (LAW COM No 286) Towards a Compulsory Purchase Code: (1) Compensation Final Report, Recommendations, Para 11.23 (LONDLB-23-04-023) Back

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