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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