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URL: http://www.bailii.org/ew/cases/EWCA/Civ/2008/1230.html
Cite as: [2009] RVR 18, [2008] NPC 121, [2008] 46 EG 115, [2009] JPL 760, [2009] 1 P & CR 20, [2009] 1 EGLR 107, [2008] EWCA Civ 1230

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Neutral Citation Number: [2008] EWCA Civ 1230
Case No: C3/2008/0522

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
THE LANDS TRIBUNAL
ACQ/41/2005

Royal Courts of Justice
Strand, London, WC2A 2LL
13/11/2008

B e f o r e :

LORD JUSTICE CARNWATH
LORD JUSTICE THOMAS
and
LORD JUSTICE ETHERTON

____________________

Between:
TRANSPORT FOR LONDON
Appellant
- and -

SPIREROSE LIMITED (IN ADMINISTRATION)
Respondent

____________________

Michael Barnes QC & Eian Caws (instructed by Eversheds LLP) for the Appellant
Nicholas Nardecchia (instructed by Lodders LLP) for the Respondent
Hearing dates : Wednesday 29th & Thursday 30th October, 2008

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Carnwath LJ:

    This is the judgment of the court.

    Introduction

  1. 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.
  2. Public notice of the proposed Order had been given in autumn 1993 under the Transport and Works Act 1992. The 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.
  3. The issue

  4. 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).
  5. 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.
  6. 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:
  7. "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)
  8. 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.
  9. 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 -
  10. "…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)
  11. 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:
  12. "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…"
  13. 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:
  14. "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

  15. 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 flats above. TfL argued that no element of residential use would have been permitted.
  16. A curious feature of the case is that the claimants did indeed pursue a planning application for a scheme of that kind, but only after they had ceased to be owners of the site. They submitted an application to Hackney Borough Council on 24 November 2003, for what has been described as the "Calfordseaden scheme" (after the name of the responsible architects). The covering letter described it as an application for a "Certificate of Appropriate Alternative Development", but the application was in the form for planning permission. It was so treated by the council, which on the recommendation of the planning officer purported to grant planning permission. The permission was later quashed by consent in judicial review proceedings.
  17. As to what followed we quote the tribunal:
  18. "The council then proceeded to treat the planning application as an application for a section 17 certificate, although no notice of such application had been served on the acquiring authority. In his report to the planning committee the officer said that the application was a theoretical one for development that would not be built if the application were granted. He went on:
    "The proposal will therefore be assessed against the Unitary Development Plan Policies, the national polices, relevant PPG's and other material considerations at the time of December 2001 (the date that the CPO was made)."
    The officer was plainly in error in treating December 2001 as the relevant date for consideration under section 17 of the question whether planning permission would have been granted. The relevant date was the date in the autumn of 1993 when statutory notice was first published of the making of the (Order) under the Transport and Works Act 1992: see section 22(2)(a) of the 1961 Act and Fletcher Estates (Harlescott) Ltd v Secretary of State for the Environment [2000] 2 AC 307. After an evaluation of the proposal against the policies the officer recommended that a section 17 certificate for the development should be given. The council resolved to issue the certificate, but in the event no certificate was issued. The claimant did not appeal under section 18 nor did the acquiring authority itself at any time make application, as it could have done, for a section 17 certificate." (para 22-3)
  19. TfL had argued that under the relevant planning policies, including the 1995 statutory development plan ("UDP"), the site was reserved for employment uses, and that a scheme including residential development would not have been permitted. The tribunal agreed that this would have been the position in 1993, the relevant date for the purposes of a section 17 application. However, they accepted that by the valuation date the emphasis of the policies had changed. From about 1997 a sequence of national policy guidance notes had put a "fresh emphasis" on what was described as "mixed-use development". This new approach had been reflected in two recent planning appeal decisions in the area in 2001. Having discussed the evidence, the tribunal said:
  20. "Our conclusion is that the appeal decisions to which we have referred…, establish the correct approach for a planning authority to have taken in relation to the claimant's redevelopment proposals in the no-scheme world at the valuation date. In view of the location of the subject land and the nature of the existing building a mixed-use development would in our judgment have been permitted, provided that it was not incompatible, physically and in terms of use, with the adjacent buildings and uses." (para 85)

    They held that there was no such incompatibility and that the claimant's proposal would have been regarded as acceptable (para 86-7). We will return to the conclusions they drew from this for valuation purposes.

    Statutory provisions

  21. We turn to the relevant provisions of the 1961 Act. The general rule is that compensation for land which is compulsorily acquired is assessed at a notional purchase price, that is, the amount which it might be expected to realise "if sold in the open market by a willing seller" (s 5(2)). This rule is subject to a number of qualifications and exceptions. Most relevant in this case is section 9, which has been treated as a statutory embodiment of one aspect of the no-scheme rule. It is headed "Disregard of depreciation due to prospect of acquisition by authority possessing compulsory purchase powers". It reads:
  22. "No account shall be taken of any depreciation of the value of the relevant interest which is attributable to the fact that (whether by way of . . . allocation or other particulars contained in the current development plan, or by any other means) an indication has been given that the relevant land is, or is likely, to be acquired by an authority possessing compulsory purchase powers."
  23. Section 14 is the first of a group of sections headed "Assumptions as to planning permission". It sets the context for the following provisions, which lay down (ss 15-16) certain specific assumptions as to planning permission that are to be made in assessing compensation under the Act, and (s 17ff) deal with certificates of appropriate alternative development.
  24. Before looking at these provisions in more detail, we observe an apparent lack of consistency in the various formulations of the statutory criterion at different times. The original Act spoke generally of permission which "might reasonably have been expected to be granted…" In 1980 these words were replaced in some (but not all) the provisions by the words "would have been granted" (Local Government, Planning and Land Act 1980, s 121, Sch 24; see also s 193, Sch 33). Amendments made in 1991 reverted to the language of "reasonable expectation" (see ss 14(3A), (7)(a) – discussed below). The legislative thinking behind these differences is not altogether clear. However, the 1991 amendments may be of some significance in the present case, as we shall explain.
  25. Section 14, so far as relevant, provides:
  26. "(1) For the purpose of assessing compensation in respect of any compulsory acquisition, such one or more of the assumptions mentioned in sections fifteen and sixteen of this Act as are applicable to the relevant land or any part thereof shall (subject to subsection (3A) of this section) be made in ascertaining the value of the relevant interest.
    (2) Any planning permission which is to be assumed in accordance with any of the provisions of those sections is in addition to any planning permission which may be in force at the date of service of the notice to treat.
    (3) Nothing in those provisions shall be construed as requiring it to be assumed that planning permission would necessarily be refused for any development which is not development for which, in accordance with those provisions, the granting of planning permission is to be assumed.
    (3A) In determining –
    (a) for the purpose referred to in subsection (1) of this section whether planning permission for any development could in any particular circumstances reasonably have been expected to be granted in respect of any land; or
    (b) whether any of the assumptions mentioned in section 16 of this Act (but not section 15) are applicable to the relevant land or any part thereof,
    regard shall be had to any contrary opinion expressed in relation to that land in any certificate issued under Part III of this Act."
  27. Section 14(3A) was inserted by amendment in 1991 (Planning and Compensation Act 1991 s 70, sched 15.). At the same time there were added subsections (5) to (8), which provide that in determining compensation, where land is acquired for construction of a highway, it is not to be assumed that any other highway would be constructed to meet the same need. This amendment was designed to reverse the effect of the House of Lords decision in Margate Corporation v Devotwill Investments Ltd [1970] 3 All ER 864, to which we shall refer in connection with Mr Barnes' arguments based on Porter v Secretary of State for Transport [1996] 3All ER 693.
  28. At this stage it is of interest to note the language used by the statute to indicate the determinations to which the prohibition applies:
  29. "(7) The determinations referred to in subsection (5) of this section are—"
    (a) a determination, for the purpose of assessing compensation in respect of any compulsory acquisition, whether planning permission might reasonably have been expected to be granted for any development if no part of the relevant land were proposed to be acquired by any authority possessing compulsory purchase powers, and
    (b) a determination under section 17 of this Act as to the development for which, in the opinion of the local planning authority, planning permission would or would not have been granted if no part of the relevant land were proposed to be acquired by any authority possessing compulsory purchase powers." (emphasis added)
  30. Here again one notes the discrepancy between the language of probability and that of reasonable expectation. Paragraph (b) relating to section 17 reflects the 1980 amendments. We take paragraph (a) as being intended to refer to any other versions of the no-scheme world, including section 9 and the judicial version of the rule, as well as section 16 (which was not affected by the 1980 amendments). The legislative intention seems to assimilate as far as possible the various versions of the rule. This will be of some significance when considering the policy issues raised by the case (see para 65 below).
  31. Section 14(3) is of direct relevance in the present case. It makes clear that the statutory code for determining planning status is not exhaustive. Whether or not the case can be brought within any of the specific provisions, it is open to a claimant to seek to persuade the tribunal that in the no-scheme world the value of the site would have been enhanced by a permission, or the prospect of a permission, for some valuable development.
  32. In that respect, the statute reflects the effect of cases such as Jelson Ltd v Blaby DC [1977] 1 WLR 1020 ("the second Jelson case"). That case was a striking example of the potential mismatch between the judicial and statutory versions of the principle. It concerned a strip of land originally reserved for a road, and subsequently sold to the council under a purchase notice. In the first Jelson case this court had held that under section 17 there was no right to a valuable certificate (Jelson v Minister of Housing and Local Government [1970] 1QB 243). In the second, by contrast it was held that under the judicial version of the rule permission could be assumed for residential development.
  33. The difference lay in the date from which the hypothetical no-scheme world was taken to have begun. Under section 17, the inquiry began at the date of the relevant notice under section 22, by which time the adjoining land had been developed in a way which precluded development of the strip. Under the judicial version (or section 9), it was possible to look further back in history, and ask how the land (including the acquired land) would have been developed if there had never been a road project. In Fletcher Estates Ltd v Secretary of State [2000] 2AC 307 the House of Lords confirmed the interpretation of section 17 in the first Jelson case, while leaving open the "wider issues" raised by the second Jelson case.
  34. We mention in passing Mr Barnes' argument before the tribunal (see para 61), not pressed in this court, that the no-scheme rule had nothing to do with planning assumptions, being "a principle of valuation and not planning status". This argument was based on some comments of Lord Denning MR in Myers v Milton Keynes Development Corpn [1974] 1 WLR 696, and of Carnwath LJ in Roberts v South Gloucestershire Council [2003] RVR 43. He was right in our view not to pursue the point. The observations in Roberts were certainly not intended to support such an argument. It is also inconsistent with the reasoning of Lord Denning himself in the second Jelson case, and with one of the leading cases in the Privy Council, Melwood Units Pty Ltd v Main Roads Commissioner [1979] AC 426 (assumed permission for a shopping centre).
  35. Section s 15 and 16 deal respectively with "assumptions not directly derived from development plans", and "special assumptions in respect of certain land comprised in development plans". It is sufficient to refer to section 15(5), which gives effect to a positive section 17 certificate:
  36. "Where a certificate is issued under the provisions of Part III of this Act, it shall be assumed that any planning permission which, according to the certificate, [would have been] granted in respect of the relevant land or part thereof, [if it were not proposed to be acquired by any authority possessing compulsory purchase powers] would be so granted…"

    The words in brackets reflect amendments made in 1980, to accord with amendments made to section 17 itself at the same time, replacing the "reasonable expectation" wording. (It is not clear why no corresponding amendment was made at that time to the similar wording of section 16.)

  37. We have already referred to section 17. It provides a means whereby the claimant or the acquiring authority may obtain a determination, through the planning system, of the classes of development which –
  38. "would be appropriate for the land in question if it were not proposed to be acquired by any authority possessing compulsory purchase powers" (s 17(3)

    In response to such an application the authority is required to state one of the following:

    "(a) that planning permission would have been granted for development of one or more classes specified in the certificate (whether specified in the application or not) and for any development for which the land is to be acquired, but would not have been granted for any other development; or
    (b) that planning permission would have been granted for any development for which the land is to be acquired, but would not have been granted for any other development,…"

    (By the 1980 amendments, the words "would have been granted" replaced the words "might reasonably have been expected to be granted".)

  39. It is common ground that in deciding whether planning permission "would have" been granted, the local planning authority applies the civil standard of proof, that is on the balance of probabilities. If that test is satisfied, section 15(5) requires the tribunal to value on the basis that the permission "would be granted". In other words a finding the planning permission was more probable than not is converted into –
  40. "… the equivalent of a certainty that planning permission would be granted in relation to that land" (Porter v Secretary of State [1996] 3All ER 693, 704c per Stuart-Smith LJ). "
  41. The claimant in the present case was not able to take advantage of this useful regime, not because of any weakness in his planning evidence in the period immediately before the valuation date, but because of a statutory anomaly relating to the date of assessment. Section 22 (as interpreted by this court in the first Jelson case) fixes the time by which the section 17 criterion is to be applied. That bears no necessary relation to the planning position at the valuation date (that is, the date of entry). As has been seen, in this case, it had the surprising effect that the planning determination had to be made by reference to circumstances in autumn 1993, some eight years before the date of entry. That was of no conceivable assistance, given the changes in planning policy in the ensuing period.
  42. The tribunal's reasoning

  43. The tribunal summarised the respective contentions of the parties:
  44. "For the claimants, Mr Nardecchia submitted that, if the evidence showed that at the valuation date there was a reasonable prospect of planning permission being granted in the no-scheme world, such permission was to be assumed for the purpose of valuing the subject land. Mr Barnes, for the acquiring authority, said that, in the absence of an actual planning permission or a permission that was required to be assumed under Land Compensation Act 1961, the prospect at the valuation date of planning permission being granted could only be reflected in hope value."

    The tribunal expressed surprise that what they described as "this important issue in the law of compensation" did not appear to have arisen previously "in such starkly defined terms".

  45. At first sight this formulation understates the claimant's case. The proposition was that in the no-scheme world there would have been an actual permission for mixed development, not simply a "reasonable prospect" of permission. In this respect the ambivalence, which we have already noted in the statutory language, is reflected both in the arguments, and in some of the tribunal's reasoning.
  46. For example, at the end of the passage on the planning evidence which we have quoted above, the tribunal said:
  47. "88. 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…."(emphasis added)

    By contrast, at the end of the decision, when summarising their conclusions, they said:

    "We determine the compensation payable as follows:
    (a) On the basis that planning permission for a mixed use development would have been granted at the valuation date, which we find on the facts to be the case, and on the basis that such permission is to be assumed for the purposes of valuation, which we conclude to be the correct approach in law, £608,000." (para 135, emphasis added)
  48. This apparent inconsistency is resolved when these passages are read in the context of the decision as a whole. The tribunal considered that, at least on the present facts, if there were a reasonable prospect of a planning permission at the valuation date, then it was also probable, applying the civil standard of proof, that permission would have been granted. This was because in the no-scheme world, the owner would have been expected to do what was necessary to advance his own interests, by preparing and submitting a suitable planning application; and he would have been entitled to assume that the planning authority would decide it in accordance with the applicable planning policies.
  49. This approach is most explicit in a passage in which the tribunal rejected a possible argument that an allowance should be made for the time needed after the valuation date to process an application. They said:
  50. "… under rule (2) in section 5 the land is to be valued as though sold in the open market by a willing seller. If the conclusion is that in the no-scheme world on the balance of probabilities planning permission would have been granted or (which, as it seems to us, is effectively the same thing) there would have been a reasonable prospect of such planning permission being granted, it is, in our judgment, realistic to assume that the hypothetical seller would have taken steps to achieve that permission before putting the land on the market. On the assumed hypothesis, therefore, there would not at the date of valuation have been a mere prospect of planning permission. There would have been a determined planning application granting permission…" (para 66, emphasis added).

    This, as we read it, is not a legal conclusion, but simply a common sense judgment of fact, which the tribunal was clearly entitled to make. We do not understand Mr Barnes to suggest otherwise.

  51. The tribunal later explained how this approach differed from that of assessing hope value:
  52. "Whether planning permission would have been granted in the no-scheme world is to be determined by reference to the decision that a reasonable planning authority would have made. By contrast hope value is to be assessed by reference to the view that the market would have taken as to the prospects of achieving planning permission." (para 70(d))

    The tribunal accordingly valued the site on the basis of the full value of the assumed permission, which they assessed as £608,000. The alternative "hope value" assessment of £400,000 was made on the basis that there would have been no actual permission, but only a "very good prospect", subject to such uncertainties as would have been perceived by the market (para 134).

    The issue restated

  53. Assuming that we have correctly analysed the tribunal's factual conclusions, we would restate the issue of law as follows:
  54. Where the tribunal finds on the balance of probability that in the no-scheme world planning permission would have been in existence at the valuation date, should the tribunal –
    (i) treat that hypothetical permission as a certainty, to be assessed at its full value? or
    (ii) award only "hope value", that is, a percentage of the full value, reflecting the degree of the probability as perceived by the market?

    The authority on which Mr Barnes primarily relied in support of the hope value approach, before the tribunal as in this court, was Porter v Secretary of State, to which we now turn.

    Porter v Secretary of State

    The decision

  55. We gratefully adopt the tribunal's summary of the facts and the decisions of the tribunal and court (para 51):
  56. "In that case land had been acquired for a road, and there was a claim for compensation for the value of the land taken and for severance and/or injurious affection of other land retained by the claimant. The claimant was granted on appeal under section 18 of the 1961 Act a certificate of appropriate alternative development in respect of the land acquired. The basis of the decision of the Secretary of State was that, in the absence of the actual scheme, a road would have been built along a different alignment, and in these circumstances the land acquired would have been suitable for residential development…
    Before the Lands Tribunal the claimant sought compensation for severance and/or injurious affection on the same basis, ie that in the absence of the actual scheme a road would have been built along a different alignment and the retained land would in consequence have received planning permission for residential development. The Lands Tribunal (Judge Marder QC, President) held ((1995) 70 P & CR 82), acceding to the contention of the claimant, that the acquiring authority was estopped from advancing evidence to show that the conclusions of the Secretary of State on the section 18 appeal should not be followed.
    The Court of Appeal allowed the acquiring authority's appeal on the two grounds advanced on their behalf by Mr Barnes QC. The first (on which Peter Gibson LJ dissented) was that the planning judgment involved in the decision on the section 18 appeal was not of the character that could form the basis of an estoppel per rem judicatam. The second reason, the one that is material for present purposes, was that the issue determined by the Secretary of State was not the same as the issue that the Lands Tribunal had to determine." (para 51-2)
  57. In view of its importance to Mr Barnes' arguments, we should set out in full the relevant passage of Stuart-Smith LJ's judgment (agreed by the other members of the court):
  58. "I turn to consider the second question, namely whether the issue determined by the Secretary of State is the same as that which has to be determined by the Lands Tribunal. Mr Barnes submits that it is not. What the Lands Tribunal has to assess is the diminution in value, if any, to the land of the respondents retained by them. Consideration of the open market value of a piece of land will involve an assessment of the chances of planning permission being granted for it, together with such questions as the demand for such development. The assessment of the prospect of planning permission no doubt depends to a large extent on where an alternative bypass would have gone if it had not followed the yellow route. To this extent the questions before the Lands Tribunal and the Secretary of State are similar; but in my view they are not the same.
    The point can best be illustrated by taking an example where the facts may be somewhat different from those which in fact existed. Suppose there were two alternative routes to the route chosen, one to the east of it and one to the west. The two alternatives might be very evenly balanced. But the Secretary of State might decide that the scales just tipped in favour of the eastern route, with the result that he concludes that planning permission would have been granted up to that alternative route and this would include the claimants' land. Because of the assumptions required to be made in relation to the acquired land, this finding is the equivalent of a certainty that planning permission would be granted in relation to that land. Mr Barnes also submits that the finding as to the position of the alternative route must also be regarded as a certainty, because he says it is a finding of hypothetical fact. It is only necessary for the Secretary of State to find the position of the alternative on a balance of probability; but the Lands Tribunal have to assess the extent of the chance, which in the example given is only just better than even.
    Where a court or tribunal has to decide what would have happened in a hypothetical situation which does not exist, it usually has to approach the matter on the basis of assessing what were the chances or prospect of it happening. The chance may be almost a certainty at one end to a mere speculative hope at the other. The value will depend on how good this chance is. Where, however, the court or tribunal has to decide what in fact has happened as an historical fact, it does so on balance of probability; and once it decides that it is more probable than not, then the fact is found and is established as a certainty. This distinction is well illustrated by Davies v Taylor [1972] 3 All ER 836, [1974] AC 207 and Allied Maples Group Ltd v Simmons & Simmons (a firm) [1995] 4 All ER 907, [1995] 1 WLR 1602.
    It would be unnecessary for the Secretary of State to evaluate the chance of the eastern route being the preferred alternative route in the event that the actual route was not chosen, provided it was more than 50%; but the Lands Tribunal would be concerned in assessing value to evaluate the chances of this happening more precisely.
    It may well be that on the facts of this case the only viable alternative was the green route and other alternatives can be completely discounted. I do not know. But a question of principle cannot be determined on the basis of favourable facts of a particular case, and for this reason also I am of the opinion that the Secretary of State's decision did not create an issue estoppel." (pp 703-4)

    The tribunal's view

  59. The tribunal held that the case was distinguishable, on the grounds that it was concerned with a different form of compensation, under section 7 of the 1965 Act rather than section 5 of the 1961 Act.
  60. They noted Mr Barnes' argument, relying on that case and the authorities referred to, that the question of planning permission was "probabilistic, not deterministic". They continued:
  61. "54… It is, happily, however, unnecessary for us to explore the complex area of damages for loss of a chance… because it seems to us that the simple answer to Mr Barnes's contention is that the questions before a tribunal that has to determine compensation, like the questions before a court where damages are sought in tort or contract, are (to use his terms) deterministic where they relate to matters up to and including the time of injury and are probabilistic thereafter. The injury, in a claim for compensation, is the taking of the land, and compensation is assessed as at the date of entry. As to what had happened or what would have happened by that date if the land had not been taken the questions are deterministic. As to the prospects of things occurring after that date the question are probabilistic. Assumptions arising under the statute or Pointe Gourde are to be determined as facts. In applying… Pointe Gourde the tribunal determines what would have happened in the no-scheme world. It does not attribute a percentage chance to a particular potential event and seek somehow to apply this percentage to the value that the land would have had if the chance had been a certainty."

    The historical context

  62. As the tribunal observed, the hypothetical inquiry assumed to be required in that case would no longer arise in the modern law. The background was the House of Lords decision in Margate Corporation v Devotwill [1970] 3 All ER 864, in which it was held that, faced with the need to disregard a proposed road scheme, the valuer could not restrict the inquiry. He had to conduct "a new examination of the problem" to decide what would have happened in the no-scheme world: whether there would have been a new road at all, and if so where; or whether some other solution altogether might have been found, such as widening existing roads. The House gave little help as to how this complex exercise was to be conducted in an entirely hypothetical world.
  63. Judged retrospectively by the guidance in Waters, that process might have been categorised as an approach which was to be rejected as "unreal or virtually impossible". It is not surprising that the legislature intervened by providing that in such a case no alternative road is to be assumed in the no-scheme world (ss 14(5)-(8), noted above). The acquisition in Porter preceded the commencement of the amended statute.
  64. We would add that, even viewed against the law as it was before the 1991 changes, the premise of the arguments in Porter seems questionable. It seems to have been assumed without argument that the no-scheme rule applied to the assessment of injurious affection of retained land, in the same way as it did to the assessment of the value of the land acquired. Although we have not needed to examine that proposition, it seems far from settled law. The Law Commission report (LC 286 pp 85-6) refers to one Lands Tribunal case in which the no-scheme rule was held to apply under section 7 (Clark v Wareham RDC (1972) 25 P&CR 423). Furthermore in Melwood the rule was treated as applying in the same way to the acquired land and the severed land. By contrast, in English Property Corp v Kingston LBC (1999) 77 P&CR 1, this court declined to apply the rule to the assessment of compensation for injury to the retained land, because there was no "scheme for the acquisition" of that land (pp 10-11, per Morritt LJ; see also Guy Roots QC and others: Law of Compulsory Purchase (2008) p 437 n4).
  65. There certainly appears to have been no previous case in which the highly artificial inquiry required by the House of Lords in Devotwill has been held to apply under section 7. It is one thing to compensate the owner of retained land for loss of actual planning potential caused by the road. It is quite another to compensate him for the loss of planning potential, which he would only have enjoyed if the road had followed a hypothetical alternative route. That seems to stretch the principle of equivalence beyond any natural limits.
  66. The reasoning of the court in Porter

  67. In any event, Mr Barnes, as we understand him, does not argue that Porter is binding on us in the present context. He submits rather that it provides a persuasive analogy, and that it would be undesirable for the court to adopt a different approach to a similar issue in the same general statutory context.
  68. Turning to the reasoning of the court, we observe without disrespect that on this issue it was relatively short. This may have been because the main arguments were directed to the question of issue estoppel, on which the conclusion of the majority was sufficient to decide the case against the appellant. Mr Nardecchia, who was a junior in the case, told us that the second point was raised by the respondents for the first time in the Court of Appeal, and that the court itself had introduced the possible parallel with cases such as Allied Maples (in which Stuart-Smith LJ had himself given the leading judgment the previous year).
  69. Mr Nardecchia also points to the fact that neither Jelson nor Melwood was cited to the court. As he says, they would have shown that at least in some circumstances application of the Pointe Gourde principle may produce an assumed certainty of planning permission for valuation purposes. It might indeed be thought that the contrast between the two Jelson cases (see above) could have provided a more direct route for holding that, even in respect of the same land, the questions under section 17 and the Pointe Gourde were not identical.
  70. In any event, we have no difficulty with the actual decision in Porter that the relevant questions (that is, under 1961 Act s 17 and 1965 Act s 7, respectively) were not the same. They related to different pieces of land, and different statutory causes of action. The first concerned the land which had been actually acquired, for which a purchase price had to be fixed under section 5 of the 1961 Act. The second concerned the retained land, in respect of which the claim was, not for the purchase price, but for diminution in value caused by the road project (under section 7). The test under that section is the extent of -
  71. "the damage… sustained by the owner of the land by reason of the severing of the land purchased from the other land of the owner, or otherwise injuriously affecting that other land by the exercise of the powers conferred by this or the other special Act."

    This wording is a restatement in a consolidation Act of the original 1845 wording (Land Clauses Consolidation Act 1845 s 63). On its face, it is notably different from that of section 17.

  72. When these various factors are taken into account, the argument of the claimants in Porter that the issues were not merely related, but identical, seems in retrospect to have been somewhat ambitious.
  73. Common law parallels

  74. We should add that, assuming that the question of an alternative route for the road did properly arise under section 7, we can understand the view that compensation was more appropriately assessed on the basis of loss of a chance, given the highly speculative nature of the inquiry.
  75. The issue under section 7 is conceptually similar to that in an action for injury to land, for example for nuisance. In such a case the claimant might assert that the nuisance (perhaps, an escape of polluting material) not only caused physical damage to his land, but also blighted its potential for improved use or development. During the hearing we expressed surprise that this issue had not arisen in a common law context on facts closer to the present than Davies v Taylor or Allied Maples. Since then we have been reminded of Blue Circle Industries plc v Ministry of Defence [1999] Ch 289; [1998] EWCA Civ 945, which seems to provide a more useful analogy.
  76. In that case an escape of water from the Atomic Weapons Establishment at Aldermaston caused contamination to Blue Circle's adjoining estate. One alleged consequence was the loss of the prospect of a sale to a buyer who was in active negotiations at the time. The trial judge (Carnwath J) held that there was "a strong probability" that the sale would have been concluded at a price of close to £10.5m. He assessed damages on the basis of 75% of the loss. The award was upheld by this court, applying the Allied Maples approach. Aldous LJ commented on the contrary argument:
  77. "The MoD… submitted that the judge's assessment based upon a loss of the sale to Sun was wrong. They submitted that the measure of loss was the diminution in value assessed as at the date of the damage. They accepted that loss of a sale could provide evidence of diminution in value, but the measure of damages was the diminution, not the loss of the bargain. In the present case damages assessed upon the basis of a loss of a sale were inappropriate because they reflected the sensitivity of a particular purchaser, not the position of the market.
    It is correct that the judge's assessment of the plaintiffs' loss depended upon the hypothetical action of a third party, but it is permissible to assess the damages upon that basis provided that causation is established…
    [He referred to the judgment of Stuart-Smith LJ in Allied Maples and continued]
    The judge found causation established and therefore had every reason to conclude that compensation by an award of damages which would place BCL in a position in which it would have been, if the contamination had not occurred, was best assessed upon the basis of that loss of a chance." (pp 303-4)
  78. There is some similarity between the assessment of loss in such a case and the assessment of compensation for injurious affection under section 7. There may therefore be a reasonable argument for applying the loss of chance approach, at least where, as in Porter, the assessment was said to depend on "the hypothetical action of a third party" (that is, the highway authority). However, we would not see that as providing any precedent for the assessment of the purchase price under section 5.
  79. The correct analysis

  80. We therefore agree with the tribunal that Porter was plainly distinguishable. It remains to consider whether there is some other basis on which Mr Barnes' argument can be supported.
  81. We start from the observation that this was an expert tribunal, with unrivalled experience of the practical application of this esoteric branch of the law. The court should hesitate to interfere with its interpretation of the law unless satisfied that it is wrong (see per Lady Hale, AH(Sudan) v Secretary of State [2007] UKHL 49 para [30]).
  82. Its correctness can be tested in three ways: by reference, first to the "further authority" following Allied Maples, to which the tribunal referred; secondly to the cases in which the higher courts have upheld compensation awards based on assumed permissions; and thirdly to policy considerations.
  83. Gregg v Scott [2005] 2AC 176 contains the most recent guidance from the House of Lords on this issue, albeit in the very different context of damages in negligence for personal injury. Lord Nicholls dealt with the issue most fully. The fact that he was in the minority in the result does not, we think, affect the authority of his speech on this aspect. In a passage headed "Past facts and future prospects", he said:
  84. "… It is trite law that in the ordinary way a claimant must prove the facts giving rise to a cause of action against the defendant. Where the claim is based on negligence the facts to be proved include those constituting actionable damage as well as those giving rise to the existence of a duty of care and its breach.
    In the normal way proof of the facts constituting actionable damage calls for proof of the claimant's present position and proof of what would have been the claimant's position in the absence of the defendant's wrongful act or omission. As to what constitutes proof, traditionally the common law has drawn a distinction between proof of past facts and proof of future prospects. A happening in the past either occurred or it did not. Whether an event happened in the past is a matter to be established in civil cases on the balance of probability. If an event probably happened no discount is made for the possibility it did not. Proof of future possibilities is approached differently. Whether an event will happen in the future calls for an assessment of the likelihood of that event happening, because no one knows for certain what will happen in the future.
    This distinction between past and future is applied also when deciding what would have happened in the past or future but for a past happening such as the defendant's negligent act. What would have happened in the past but for something which happened in the past is, at least generally, a question decided by the courts on the all-or-nothing basis of the balance of probability. On this the authorities are not altogether consistent, but this seems to be the generally accepted practice. In contrast, what would have happened in the future but for something which happened in the past calls for an assessment of likelihood.
    Thus the question whether a claimant's hand was damaged in an accident at work is a matter to be decided on the balance of probability. So also is the hypothetical question whether, if the employer had duly provided the necessary protective equipment, the claimant would have worn it: see, for instance, McWilliams v Sir William Arrol & Co Ltd [1962] 1 WLR 295, 306-307, 309, Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602, 1610G, per Stuart-Smith LJ, and Barnett v Chelsea and Kensington Hospital Management Committee [1969] 1 QB 428, 439. By way of contrast, whether the claimant's damaged hand will develop osteoarthritis in later life calls for an estimate of the chances of that happening. Whether, hypothetically, his hand would have been likely to develop osteoarthritis in the future even without the accident also calls for such an estimate.
    This distinction was summarised in the well known words of Lord Diplock in Mallett v McMonagle [1970] AC 166, 176:
    'The role of the court in making an assessment of damages which depends upon its view as to what will be and what would have been is to be contrasted with its ordinary function in civil actions of determining what was. In determining what did happen in the past a court decides on the balance of probabilities. Anything that is more probable than not it treats as certain. But in assessing damages which depend upon its view as to what will happen in the future or would have happened in the future if something had not happened in the past, the court must make an estimate as to what are the chances that a particular thing will or would have happened and reflect those chances, whether they are more or less than even, in the amount of damages it awards.'
    Lord Reid made similar observations in Davies v Taylor [1974] AC 207, 212-213.
    This sharp distinction between past events and future possibilities is open to criticism. Whether an event occurred in the past can be every bit as uncertain as whether an event is likely to occur in the future. But by and large this established distinction works well enough. It has a comfortable simplicity which accords with everyday experience of the difference between knowing what happened in the past and forecasting what may happen in the future.
    In practice the distinction is least satisfactory when applied to hypothetical events (what would have happened had the wrong not been committed). The theory underpinning the all-or-nothing approach to proof of past facts appears to be that a past fact either happened or it did not and the law should proceed on the same footing. But the underlying certainty, that a past fact happened or it did not, is absent from hypothetical facts. By definition hypothetical events did not happen in the past, nor will they happen in the future. They are based on false assumptions. The defendant's wrong precluded them from ever materialising." (para 8-14)
  85. Lord Hoffmann said (para 82):
  86. "One striking exception to the assumption that everything is determined by impersonal laws of causality is the actions of human beings. The law treats human beings as having free will and the ability to choose between different courses of action, however strong may be the reasons for them to choose one course rather than another. This may provide part of the explanation for why in some cases damages are awarded for the loss of a chance of gaining an advantage or avoiding a disadvantage which depends upon the independent action of another person: see (Allied Maples) and the cases there cited.
    But the true basis of these cases is a good deal more complex. The fact that one cannot prove as a matter of necessary causation that someone would have done something is no reason why one should not prove that he was more likely than not to have done it. So, for example, the law distinguishes between cases in which the outcome depends upon what the claimant himself (McWilliams v Sir William Arrol & Co [1962] 1 WLR 295) or someone for whom the defendant is responsible (Bolitho v City and Hackney Health Authority [1998] AC 232) would have done, and cases in which it depends upon what some third party would have done. In the first class of cases the claimant must prove on a balance of probability that he or the defendant would have acted so as to produce a favourable outcome. In the latter class, he may recover for loss of the chance that the third party would have so acted. This apparently arbitrary distinction obviously rests on grounds of policy. In addition, most of the cases in which there has been recovery for loss of a chance have involved financial loss, where the chance can itself plausibly be characterised as an item of property, like a lottery ticket. It is however unnecessary to discuss these decisions because they obviously do not cover the present case." (paras 82-3, emphasis added in both extracts)
  87. 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.
  88. In Lord Nicholls' analysis, the approach applied to past fact is extended in practice to cases where the question is "what would have happened in the past but for something which happened in the past". That is illustrated by McWilliams, in which the question was whether, in a hypothetical world in which the employer provided the equipment, the employee would have worn it and so avoided the event which caused the loss. The division between past and future for these purposes is the date of the cause of action. It could be said, by way of analogy, that in the present context, the relevant cause of action is the date of entry, and the question is whether, before that time, a valuable permission would have been granted and that hypothetical fact should, therefore, be established on a balance of probability. On the other hand, it might be said that Lord Nicholls was merely stating the well established principle that causation in tort cases is established on a balance of probability, and that there is no analogy with compulsory purchase, where the compulsory acquisition itself gives rise to the liability of the acquiring authority to pay compensation.
  89. Lord Hoffmann gives a different explanation of McWilliams, treating it as turning on the identity of the hypothetical actor, the claimant rather than a third party. On that footing, there is no obvious analogy with the present case as there are two parties, the claimant and the local planning authority. On the other hand, the authority is not an ordinary third party, but one constrained by its duty to act rationally and in accordance with the applicable planning policies. As the tribunal's reasoning shows, the room for hypothesis in such a case may be relatively narrow. It was able to decide, as a matter of real-world fact, the applicable planning policies for a mixed-use development of the kind proposed. The only remaining unknowns in the no-scheme world were how the owner would have acted and how the planning authority would have responded. All that was needed to fill the gap was the reasonable assumption that the owner would have acted in accordance with his own interests, and the authority in accordance with its duty as planning authority.
  90. Turning to authorities on the no-scheme rule, the tribunal's approach draws some support from the only three cases cited to us in which awards based on hypothetical permissions have been upheld in the higher courts. In each it appears to have been the common assumption, accepted by the court, that compensation would reflect the full value of the permission. In Jelson there was an agreed valuation on that basis. In Melwood the Privy Council remitted the case for reconsideration on the basis that planning permission "would or would probably" have been granted, which formulation they treated as equivalent to a holding that "planning permission would have been obtainable" (p 438 G-H). There is no suggestion that they expected this to result in anything less than full development value. In English Property the experienced tribunal (HH Judge Rich QC and Michael Hopper FRICS) asked themselves whether permission "was likely to have been granted" and treated the affirmative answer as leading to an assessment based on development value ([1997] RVR 99, 112), an approach which was not questioned in this court. Notwithstanding that common assumption by tribunals, courts, practitioners and valuers, there is no reasoned judgment on this issue which is binding on this Court either way. It is important, therefore, to look at the matter from the perspective of policy and principle.
  91. Mr. Barnes relies on the principle of "equivalence" which he rightly says is at the heart of compensation policy. It would not, he submits, be in accordance with that principle for the claimant to be compensated for a probability as though it were a certainty. In simple terms, his argument is that to promote a probability into a certainty will result in overcompensation.
  92. It might also be said that it would be anomalous for a probability of planning permission to be translated into a certainty, whereas, as is clear and common ground between counsel, a possibility of planning permission, which is less than a probability, does not always result in a nil value in assessment of compensation. It may properly be reflected in hope value.
  93. Finally, the translation of a probability of planning permission into a certainty, for the purpose of assessing compensation under section 5 of the 1961 Act, would be a different approach to that favoured by the Court of Appeal in Porter for cases under section 7 of the 1965 Act.
  94. In our view, these points are clearly outweighed by other considerations. First and foremost, the 1961 Act is intended to provide a statutory code, in which as we have earlier noted (in discussing s. 14: para. 20 above) there is apparent a legislative intention to assimilate the various versions of the rule. It is accepted that, where the statutory assumptions apply, probability of a permission is converted into full value for valuation purposes. 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 would 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.
  95. The statutory policy reflects the common assumption and practice of tribunals, courts, practitioners and valuers. That policy and practice has obvious merit in simplifying the task of valuation for the purpose of assessing compensation. In doing so, it reduces the likelihood of disputes and litigation, it promotes compromise, and will save costs both in and out of court.
  96. In our view there is no anomaly in giving a hope value in cases where there would have been a possibility, but less than a probability, of planning permission. It is one thing, in the interests of consistency and simplicity, to assume the grant of planning permission when it would probably have been granted. It is quite a different thing to deprive the land owner of any hope value when such value would have been reflected in the market even though planning permission was improbable. To exclude such value would be contrary to the fundamental principles of assessment of compensation under the 1961 Act.
  97. In our view, the policy considerations in favour of the tribunal's conclusion are powerful. For the reasons we have given, there is no authority or other good reason for not giving effect to them. Accordingly, we dismiss the appeal.
  98. Postscript on the Government's Response to the Law Commission report

  99. In Waters (para 3) Lord Nicholls adopted the following comment of the Court of Appeal:
  100. "The right to compensation for compulsory acquisition is a basic property right. It is unfortunate that ascertaining the rules upon which compensation is to be assessed can involve such a tortuous journey, through obscure statutes and apparently conflicting case law, as has been necessary in this case."
  101. The present case has highlighted serious defects in another part of the 1961 code, relating to assumed planning permissions. It is the second case in this court in a few months to do so. In Greenweb v Wandsworth LBC [2008] EWCA Civ 910 this court was constrained to uphold a decision of the tribunal which required the authority to pay £1.6m for a site with a modern market value of only £15,000. Buxton LJ criticised the failure of the legislature to respond to calls for reform from the Law Commission and the courts:
  102. "The Law Commission was not faced with, and did not set out, the possibly dire consequences of this legislation, which are demonstrated in practice in this case. That may be why the recommendation has not been acted on. But another very weighty authority has also urged the review of these provisions. In Colley v Canterbury City Council (No 2) [1993] AC 401, where the provisions as to rebuilding did have practical effect, albeit in a different sense from that of the present case, Lord Oliver, speaking at p 409C for a unanimous House of Lords, described the provisions as an anachronistic relic, and urged their reconsideration. That was fifteen years ago. Lord Oliver's call has not been heeded. This case shows that it must be heeded now. If the government is not prepared to act of its own motion, local authorities, who are faced with the unmeritorious deprivation of very scarce funds that occurred in this case, must exert political pressure to achieve the correction of the anomaly." (para 40)
  103. The present case has turned on another anomaly, relating to the time at which section 17 operates. The consequences of the anomaly have been less dramatic. However, this mismatch between the judicial and statutory versions of the principle has been a basic weakness of the code, evident at least since the Jelson cases in the 1970s.
  104. The present court comprises the Chairman of the Law Commission (Etherton LJ), a former Chairman who led the compulsory purchase project (Carnwath LJ), and a member of the court in Greenweb (Thomas LJ). It therefore seems appropriate for us to add some comment on the background of the Law Commission work, and the Government's Response to the final report, and to suggest a possible way forward.
  105. The background is explained in the Law Commission final report on compensation (LC 286 paras 1.1-17). The reference in 2001 had required it to review the law on compulsory purchase and compensation and to make proposals for "simplifying, consolidating and codifying the law". The Commission was asked to give priority to reviewing the rules relating to disregard of the scheme.
  106. The reference had followed a report by "CPPRAG" (an advisory group established by the then DETR), published in July 2000. That report concluded that the law had become "an unwieldy and lumbering creature", and called for a new statutory Compensation Code. The Government's intention in due course to promote "a single statutory Compensation Code" was confirmed in a DETR Policy Statement in 2001. Accordingly, the recommendations in the Commission's Final Report on Compensation (published in December 2003) were not merely directed to correcting perceived anomalies, but were cast in the form of "a Framework for a Code", containing detailed proposals as a basis for the new legislation. The report formed part of the background to the discussion in the House of Lords in Waters (decided in April 2004). The House endorsed the call for legislative reform following "the Law Commission's exemplary report" (per Lord Brown at para 164).
  107. The Government's response was published in December 2005. This signalled a change of policy. In substance the Response rejected the proposal for a new code as too ambitious, and requiring too much further work. The Government, it was said –
  108. "…would find it difficult to commit resources for the foreseeable future having regard to their numerous other legislative priorities" (para 8).

    The views of the House of Lords in Waters were acknowledged, including Lord Nicholls' comments on the complexity and obscurity of the law, particularly of the no-scheme rule. However, it was thought that the obscurities were "largely derived from case law…, evolved to be fair to all parties in a wide range of circumstances" and that the rule had provided a "degree of flexibility" (para 15). As to the Commission's proposals to recast the planning assumption provisions in line with the "cancellation" assumption (as approved by the House of Lords in Fletcher Estates), it was thought that this might -

    "… militate against ensuring that the owner received a fair financial equivalent for the land taken in cases where his land had been sterilised from other development over a number of years while the statutory project was being worked up." (para 19)

    The proposal to repeal "third Schedule rights" (which would have solved the problem in Greenweb) was one of a series of recommendations which were not discussed in detail, because "they would not make any significant changes to established policy" (para 10).

  109. It is not of course for us to comment on the relative weight to be given to the case for a new compensation code, as compared to the Government's other legislative priorities. However, it seems that the form of the recommendations may have resulted in a failure to see the wood for the trees. Even if codification is not to be pursued, it does not remove the need to deal with the specific anomalies identified by the Commission. In the context of the planning assumptions that should not be a substantial or complex task.
  110. In general, it may be said, the law has become clearer though judicial activity both before and since the inception of the project. Recent decisions of the courts have brought greater clarity and coherence to some of the more intractable parts of compensation law. Particularly important has been a trilogy of cases at the highest level: Shun Fung Ironworks (above); Wildtree Hotels Ltd v Harrow LBC [2001] AC 1; and, most importantly, Waters. Section 6 and its associated schedule, which were the subject of Waters, were not only one of the most impenetrable parts of the statute; but also perhaps one of the more politically sensitive parts, because they deal with the balance between public and private interests in relation to major publicly promoted developments, such as the Cardiff Bay scheme. There remains a powerful case for statutory reform, but in the meantime the House of Lords has pointed a possible route through the statutory minefield.
  111. However, other anomalies cannot be remedied without legislative change. Repeal of third schedule rights is an obvious example, and would be a simple first step. The mismatch between section 17 and the judicial version of the no-scheme rule was left unresolved by the House of Lords in Fletcher. As the response points out it involves a choice between two approaches, one potentially more favourable to claimants than the other. However, that is not a reason for preserving the mismatch. Deciding between the two approaches is a policy matter for Minsters and Parliament. It is not a complex issue. It simply involves a policy choice, which should be capable of resolution without great difficulty or commitment of resources. Once the choice has been made, it would not be difficult, as a matter of drafting, to adapt the statute to give it consistent legal effect
  112. Those are just two examples. What seems to be lacking in the Response, having rejected the case for a comprehensive code on resource grounds, is any systematic appraisal of the costs and benefits of the specific recommendations viewed as candidates for piecemeal reform. Greenweb is a stark warning that saving on law reform can be a very false economy. The present case, in which the parties spent several days before the tribunal and two days before us, with all the attendant costs in and out of court, is another demonstration of the human and financial cost of obscurity in the law.
  113. Conclusion

  114. Returning to the present case, for the reasons set out above, we uphold the determination of the Lands Tribunal, and dismiss the appeal.


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