Judgments - Transport for London (London Underground Limited) (Appellants) v Spirerose Limited (in administration) (Respondents)

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22.  Apart from some limited relaxation in 1954, the stern principle introduced by the 1947 Act held the field until the Town and Country Planning Act 1959. Until the coming into force of the 1959 Act the law was still (I venture to say) reasonably straightforward, at any rate by comparison with what was to come: the Pointe Gourde decision meant that the “value to owner” principle was to be found not only in the explicit provisions of rule 5 of section 2 of the 1919 Act but also in the less explicit provisions, as judicially expounded, of section 2(2); and the general “current use” rule in the 1947 Act, although stern, was at least simple. That simplicity was swept away by Part I of the 1959 Act. The stark simplicity of the 1845 Act and the relative simplicity of the 1919 Act were replaced by provisions displaying the least attractive features of statutory draftsmanship in the second half of the twentieth century. In Camrose v Basingstoke Corporation [1966] 1 WLR 1100, 1110 Russell LJ said of section 6 of the 1961 Act:

“The drafting of this section appears to me calculated to postpone as long as possible comprehension of its purport.”

Similarly in Davy v Leeds Corporation 1964 3 AER 390, 394 Harman LJ referred to these provisions as “a Slough of Despond.”

23.  The general shape of the changes made by Part I of the 1959 Act is however reasonably clear. Sections 2 to 4 contained a series of statutory assumptions as to the grant of planning permission in respect of land being compulsorily acquired, and (in section 5) provisions as to the issue by the local planning authority of a certificate of appropriate alternative development, the contents of which were material to some of the statutory assumptions. Section 9 of the 1959 Act provided for various planning matters (most relating to development of other land in the same scheme) to be disregarded. These provisions of the 1959 Act are now found, subject to some amendments, in the Land Compensation Act 1961 sections 14 to 16 (statutory assumptions), section 17 (certificate of appropriate alternative development) and section 6 and First Schedule (statutory disregards).

24.  The background set out above (which is more fully discussed in Waters, both in the speeches in the House already mentioned and in the admirable judgment of Carnwath LJ in the Court of Appeal, [2003] 4 All ER 384) explains the general nature of the problems of construction presented by the 1961 Act. It is a consolidating Act which, as it must, follows closely the wording of the enactments which it is consolidating. So it brings together into a single statute, which your Lordships have to construe as a whole, the simple, unvarnished language of the 1919 Act and the complexities of the 1959 Act which caused so much grief to Russell LJ in Camrose and Harman LJ in Davy. As the majority of this House decided in Waters, the Pointe Gourde principle has survived not only the 1919 Act but also the 1959 Act. But now that those statutes are consolidated in the 1961 Act (as from time to time amended, principally to reflect changes in planning law) it must be recognised, in my opinion, that the principle’s vigour is now channelled and restrained by a much more complex statutory scheme.

25.  There is to my mind a parallel with the travails with the interpretation of taxing statutes that courts endured during the years between Ramsay in 1981 and MacNiven in 2001. For a time the courts lost sight of the truth that the Ramsay principle is a principle of statutory construction, and that taxing statutes are not a different species of enactment subject to different rules of construction. The principal authorities, well known to tax practitioners, are WT Ramsay Ltd v IRC [1982] AC 300, Furniss v Dawson [1984] AC 474, IRC v McGuckian [1997] 1 WLR 991 (especially Lord Browne-Wilkinson at p 998, Lord Steyn at pp 999-1000 and Lord Cooke at p 1005) and MacNiven v Westmoreland Investments Ltd [2003] 1 AC 311 (especially Lord Nicholls at paras 1-8 and Lord Hoffmann at paras 28-32). To these I would add a short passage, less well known in this country, from the dissenting judgment of Kirby J in Commissioner of Taxation v Ryan (2000) 201 CLR 109, 146,

“It is hubris on the part of specialised lawyers to consider that ‘their Act’ is special and distinct from general movements in statutory construction which have been such a marked feature of our legal system in recent decades. The Act in question here is not different in this respect. It should be construed, like any other federal statute, to give effect to the ascertained purpose of the Parliament.”

26.  Lord Nicholls’ review in Waters of the history makes only a passing reference (in paras 47 and 48) to the 1947 Act and the 1959 Act. He refers to them in the context, highly relevant in Waters, of the increasingly complex and far-reaching schemes of development brought in by the 1947 Act, the New Towns Act 1946 and later statutes concerned with comprehensive urban regeneration. In paras 49-54 he summarises section 6 of and the First Schedule to, the 1961 Act, but only for the purpose of deciding whether there are gaps (he referred to a “gaping lacuna”) in the statutory code requiring to be filled by Pointe Gourde. Although entitled to the greatest possible respect, this part of his opinion cannot, I think, be regarded as essential to the House’s decision in Waters.

The issue and the facts

27.  The issue in this appeal can be stated quite shortly: it being common ground that the land acquired would (but for the proposed scheme) have had a reasonable prospect of obtaining planning permission for commercial and residential redevelopment, should that prospect be treated as a certainty (though not falling within any of the statutory assumptions) or should it be reflected merely in hope value? (The issues as stated in the bound volume are more discursive, and are not agreed, but my version gives the gist of the issue.)

28.  The essential facts can also be stated quite shortly. The detailed findings of the Lands Tribunal are carefully set out in paras 3 to 23 of its written decision, but the essentials are that the respondent owned a single storey printing works (with basement) in Holywell Lane, South Shoreditch. The site was required for the extension of the London Underground between Dalston and Whitechapel. Notice under the Transport and Works Act 1992 was given in 1993. The London Underground (East London Line Extension) Order was confirmed in 1997. Notice to treat was given to the respondent on 24 August 2001 and possession was taken on 3 December 2001, which is the statutory valuation date.

29.  The Tribunal’s findings as to the prospect of permission for redevelopment (and also its conclusion as to the law, the central point in this appeal) are set out in paras 88 and 89 of the decision:

“Our conclusion, therefore, is that at the valuation date there was a reasonable prospect of planning permission being obtained for the development (the Calfordseaden scheme) and that, in accordance with our views on the issue of law, planning permission should be assumed for the purposes of valuation. We would add that, at the relevant date for a section 17 certificate, the autumn of 1993, there is no evidence to suggest any likelihood of planning permission for mixed-use development and it can reasonably be inferred that a certificate for such a use would not have been given.

We need also to consider the prospects of obtaining planning permission for the purposes of valuation based on hope value. Our own assessment is that the prospects of obtaining planning permission at the valuation date would have been good. In order to assess hope value, however, what is relevant is not our view of the prospects but the view that prospective purchasers of the site would have taken as to the prospects. In the event we find nothing in the evidence before us to suggest that the view of the market at the valuation date would have been different from the conclusion that we have reached in this respect.”

The reference to the Calfordseaden scheme is to a four-storey (with basement) mixed-use building designed by architects of that name. The reference to a section 17 certificate is to a certificate of appropriate alternative development. The respondent made an abortive attempt to obtain such a certificate, but it would have been of no practical utility since it would have related to a date over eight years before the valuation date. In terms of figures, the difference between the two approaches is between £608,000 and £400,000 (para 135 (a) and (c) of the Lands Tribunal’s decision).

Are there gaps for Pointe Gourde to fill in this case?

30.  In para 50 of his opinion in Waters Lord Nicholls drew attention to Part III of the First Schedule to the 1961 Act, added by amendment in 1980. He drew attention to para 11, which provides,

“Paragraph 10 of this Schedule shall have effect in relation to any increase or diminution in value to be left out of account by virtue of any rule of law relating to the assessment of compensation in respect of compulsory acquisition as it has effect in relation to any increase or diminution in value to be left out of account by virtue of section 6 of this Act.”

I agree that this can only be explained as a reference to the Pointe Gourde principle in some shape or form. It does not necessarily mean that what is to be read into the statutory code under that principle has not been attenuated as that code has become more complex.

31.  Lord Nicholls then stated in para 51:

“The first and most obvious oddity of this enactment is that it makes no provision regarding value attributable to the prospect of development of the subject land itself. It is frankly impossible to believe that Parliament intended that enhancement of value attributable to the prospect of development of associated land should be disregarded but not enhancement in value attributable to the prospect of development of the subject land itself. The statutory assumptions regarding planning permissions in respect of the subject land, set out in sections 14 to 16, do not provide an adequate explanation for this difference in treatment. Planning permission is one thing, the prospect of development is another.”

He went on to refer to Camrose.

32.  This closely-reasoned passage calls for careful study. Plainly Lord Nicholls had not overlooked that section 15(1) provides for it to be assumed that the land taken has planning permission for the proposed development (where such permission is not actually in existence at the valuation date). The last two sentences of the paragraph show that. But if planning permission is to be assumed (say, for residential development of 70-plus acres of agricultural land on the edge of a conurbation, as in Wilson v Liverpool Corporation [1971] 1 WLR 302) why should it be incredible that Parliament did not intend the compensation to reflect the increase in value due to that assumed planning permission? If that was not its intention Parliament would be snatching back with one hand what it had just given with the other. The assumption of planning permission for residential development may not enable a landowner to obtain the full development value eventually realised, both because of delay and because a developer would expect to make a good profit for itself. That is the difference between what Vaughan Williams LJ called “the probability” and “the realised probability” in Lucas at p28. But to have to accept some discount on the full development value is very different from a total disregard under section 6 and the First Schedule.

33.   Lord Nicholls’ reference to Camrose may provide the explanation. If (to take an extreme and indeed absurd example) planning permission for residential development were assumed for 1,000 acres of high-altitude moorland in Cumbria, the open-market value of the land could be expected to reflect the market’s scepticism as to whether the development would ever be carried out and prove profitable. That is the point, in much less extreme circumstances, of the Camrose case. Disregarding (under section 6 and the First Schedule, case 4) what Lord Denning MR called the “artificial inflation” of Basingstoke under the Town Development Act 1952, and the extra infrastructure needed for that expansion, the 233 outlying acres (part of the total 550 acres acquired from the Berry family trustees) were unlikely to be developed for many years. Therefore, although there was an assumed planning permission, it was in the circumstances discounted to no more than “hope value”—hope not of planning permission (which was assumed), but of the permission being acted on (see [1966] 1 WLR 1100, 1106).

34.  In Camrose Lord Denning MR also stated that Pointe Gourde had been approved by this House in Davy v Leeds Corporation [1965] 1 WLR 445. That seems debatable. Only Viscount Dilhorne (with whom Lord Cohen agreed) referred to Pointe Gourde, and what Viscount Dilhorne said was that it had been given statutory expression by section 9(2) of the 1959 Act (now section 6 of, and the First Schedule to, the 1961 Act, which was not in force at the time of the relevant events in Davy). No member of the Appellate Committee in Davy said that Pointe Gourde operated otherwise than through its statutory expression. Russell LJ (in Camrose) described Davy as an application of the Pointe Gourde principle. I would prefer to describe it as a correct application of the statutory code embodying that principle.

35.  In his opinion in Waters (para 53) Lord Nicholls also found a “gaping lacuna” in the statutory code illustrated by Wilson v Liverpool Corporation. The Corporation wished to acquire and develop 391 acres as a housing estate. It managed to acquire 305 acres by agreement. The prospect of development of the 305 acres was disregarded, and the relevant 74 acres which were compulsorily acquired were valued at a discount on the price fetched by a “dead-ripe” comparable (£6,700 per acre discounted to about £4,700 per acre). This result was arrived at by treating the Pointe Gourde principle as still informing the assumption to be made in an unusual situation. The situation was unusual since of the seven different cases found in the First Schedule to the 1961 Act as from time to time amended, only the first is expressed in terms of authority for compulsory acquisition; the other six all refer to types of planning designation for large-scale development. I would regard Wilson v Liverpool Corporation as a marginal case which Parliament may not have foreseen (rather than as a gaping lacuna). It is of no direct relevance to the facts of this appeal, which are much simpler than either Wilson or Waters.

36.  There is a lacuna in this case only if your Lordships conclude that the underlying aim of fair compensation—compensation neither obviously in excess, nor obviously falling short, of what the respondent would have received in a no-scheme world—is not met by applying the terms of the 1961 Act, as amended, in their natural meaning. If your Lordships conclude that the natural meaning would produce an unfair result, some other construction may be called for. But that would be a matter of applying recognised, purposive principles of statutory construction, not invoking some judge-made rule which operates outside recognised principles of statutory construction.

37.  The scheme, in this case, is the extension of the London Underground from Dalston to Whitechapel. It is not suggested that the carrying out of that scheme increases or depresses the value of the respondent’s land in any particular way, except so far as it has taken away the respondent’s prospect of obtaining planning permission for mixed-use redevelopment, since no planning authority was going to authorise redevelopment on a site marked for compulsory purchase, as the respondent’s land has been since 1993. The respondent is therefore entitled to compensation for the loss of a chance, assessed as at the valuation date (3 December 2001), of obtaining planning permission in a “non-scheme world” sometime between 1993 and 2001. Unless it falls within one of the statutory assumptions in section 6 of and the First Schedule to the 1961 Act, that chance is to be assessed as “hope value", a concept with which valuers, and the Lands Tribunal, are very familiar.

38.  It is common ground that the case does not fall within any of the statutory assumptions. Yet the Lands Tribunal and the Court of Appeal, with vast experience of this field of the law, came to the conclusion that planning permission should be assumed, even though none of the statutory assumptions applied. The effect of their reasoning (taken to extremes) is that if there is at the valuation date a 51% chance of planning permission being granted, that should be treated as a 100% certainty. It on the other hand there is a 49% chance, it is either to be treated as no chance at all, or (as the Court of Appeal seemed to favour) left as it is, as a 49% chance. Neither solution seems satisfactory.

39.  In reaching this conclusion the Lands Tribunal relied mainly on the decision of the Privy Council in Melwood Units Pty Ltd v Commissioner of Main Roads [1979] AC 426 and Jelson Ltd v Blaby District Council [1977] 1 WLR 1020. But it seems reasonably clear that each of those cases started from a finding by the fact-finding tribunal that in the absence of the proposed scheme involving compulsory purchase, planning permission would have been granted (not might have been, or would have been expected on the balance of probability to be, granted). They do not therefore assist in the process of elevating a good chance into an assumed certainty.

40.  In the judgment of the Court of Appeal delivered by Carnwath LJ, the Court (para 61) was rightly less impressed by the significance of Melwood and Jelson. Instead it saw itself as having to cope with an anomaly (para 65):

“As has been seen, the claimant was unable to take advantage of the statutory assumptions because of an anomaly in the provisions fixing the date of consideration. As far as possible, we should interpret the no-scheme rule so as to remedy the anomaly rather than extend it. Further, reflecting the same point, it is plainly desirable that there should be consistency in the assessment of compensation for compulsory acquisition of land in materially similar cases, whether or not the statutory assumptions apply.”

41.  I sympathise with the Court of Appeal’s aim but I respectfully think that it went too far. It assumed that a case in which the owner was unable to take advantage of any statutory assumption (whether under section 16 of the 1961 Act, or under a certificate of appropriate alternative development issued under section 17) was an anomaly to be remedied in the interests of fairness. But Parliament has enacted a statutory code of some complexity demonstrating that it does not regard all these cases as “materially similar.” For the Court to try to correct the code in accordance with its perception of what is fair would amount to judicial legislation. It would upset the balance of the code which Parliament must be supposed to have considered carefully. It would (for instance) render much of section 16 redundant.

42.  The Court of Appeal quoted at length from the decision of this House in Gregg v Scott [2005] 2 AC 176. In that case the House was asked, in effect, to extend the ambit of “loss of a chance” in tort cases from the issue of quantification of damage to the issue of liability (and in particular, causation of damage, which is an essential of liability in tort). The House was divided on that controversial issue. I am doubtful whether the law of compensation for compulsory acquisition of land will be greatly enriched by reference to the jurisprudence on “loss of a chance” in tort. “Hope value” is, as I have observed, a well-understood concept which has served for generations. The introduction of the tort cases may have been influenced by the fact that Stuart-Smith LJ, who presided and gave the leading judgment in Porter v Secretary of State for Transport [1996] 3 AER 693, had also presided and given the leading judgment in Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602. I have no doubt, however, that Porter was rightly decided.

43.  The conclusion which Carnwath LJ drew from Gregg v Scott was (para 58):

“These passages are helpful in making clear that the law offers neither a single solution nor total logical coherence as to the standard of proof for establishing hypothetical events, and that policy considerations are an important factor.”

This paragraph refers to a sentence in the opinion of Lord Hoffmann (para 83) emphasised by Carnwath LJ,

“This apparently arbitrary distinction obviously rests on grounds of policy.”

44.  I respectfully question whether the distinction is arbitrary. Decisions taken by the free choice of the claimant (as in McWilliams v Sir William Arrol & Co. [1962] 1 WLR 295) or by the defendant (as personified by the responsible doctor, as in Bolitho v City and Hackney Health Authority [1998] AC 232) go to liability and are therefore (even though hypothetical) decided on the balance of probability. As Baroness Hale said in Gregg v Scott (para 194, quoting Tony Weir, Tort Law (2002) p75):

“The idea that recovery should be proportional to the cogency of the proof of causation is utterly unacceptable.”

Questions of quantification of damage, on the other hand, may involve quantifying chances, either future or hypothetical, especially when the outcome would depend (or would have depended) on action taken by a third party either as a matter of free choice (as in Allied Maples) or in the exercise of a responsible judgment (as in Kitchen v Royal Air Force Association [1958] 1 WLR 563). The decision of a local planning authority is comparable to that of a judge trying an action for damages; the decision is not arbitrary, but neither is it predictable with certainty.

45.  For these reasons (which are, I believe, consonant with those of Lord Collins) I would allow the appeal and award compensation of £400,000.

LORD MANCE

46.  I have had the benefit of reading in draft the speech of my noble and learned friend Lord Collins of Mapesbury. I agree with his reasoning and conclusions and with the further illumination of the area in the speech of my noble and learned friend, Lord Walker of Gestingthorpe, which I have also seen in draft. I therefore agree that the appeal should be allowed.

LORD NEUBERGER OF ABBOTSBURY

My Lords,

47.  I have had the benefit of reading in draft the admirable opinions of my noble and learned friends, Lord Walker of Gestingthorpe and Lord Collins of Mapesbury, and I agree with them that this appeal must be allowed.

48.  It has always been common ground that the compensation in this case is to be assessed by reference to the amount which the land to be compulsorily acquired “if sold in the open market … might be expected to realise” as at the date on which possession of the land was taken (or, if earlier, the date of assessment) - see rule (2) of section 5, and subsection (3) of section 5A, of the Land Compensation Act 1961. It has also always been common ground that, while there are certain statutorily required counter-factual adjustments which may have to be made in particular cases to the open market valuation of land which is being compulsorily acquired, in sections 14 to 22 of the 1961 Act, none of them apply here.

49.  The Lands Tribunal in this case concluded that, as at the relevant valuation date, although planning permission for development of the land for mixed use had not been applied for or granted, it would have been regarded in the market as likely, but by no means certain, to be granted. In these circumstances, it would seem to follow that the valuation should have been carried out on a “hope value” basis - i.e. by assessing the price which would be obtained for the land bearing in mind (a) its value in the market in the light of its current state of physical development and its currently permitted use, and (b) any added value which would be attributed in the market to the prospect of obtaining planning permission for any physical redevelopment and/or change of use - in this case mixed development.

50.  Both the Lands Tribunal and the Court of Appeal nonetheless held that the land should be valued on the basis that it actually had planning permission for residential development. This is a very surprising result, at least on the face of it, for three reasons. First, if a statute directs that property is to be valued on an open market basis as at a certain date, one would not expect any counter-factual assumptions to be made other than those which are inherent in the valuation exercise (such as the assumption that the property has been on the market and is the subject of a sale agreement on the valuation date) or those which are directed by the statute. To put the point another way, the courts below appear to have inserted a judge-made assumption into a statutory formula, which seems to be complete and self-contained.

 
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