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You are here: BAILII >> Databases >> England and Wales Lands Tribunal >> Spirerose Ltd v Transport for London [2007] EWLands ACQ_41_2005 (16 November 2007)
URL: http://www.bailii.org/ew/cases/EWLands/2007/ACQ_41_2005.html
Cite as: [2007] EWLands ACQ_41_2005, [2008] RVR 12, [2007] 49 EG 102

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ACQ/41/2005
LANDS TRIBUNAL ACT 1949
COMPENSATION – compulsory purchase – acquisition of former industrial premises –
claim for loss of development value – valuation – planning permission in no-scheme world –
whether planning permission that would have been granted in no-scheme world to be
assumed or whether claimant confined to hope value – method of valuation – residual basis
adopted in absence of adequate comparables – compensation determined at £608,000
IN THE MATTER of A NOTICE OF REFERENCE
BETWEEN
SPIREROSE LIMITED (in administration)
Claimant
and
TRANSPORT FOR LONDON
Respondent
Re: 64-70 Holywell Lane, London EC2
Before: The President and P R Francis FRICS
Sitting at: Procession House, 110 New Bridge Street, London EC4V 6JL
on
13 February and 2 – 5 July 2007
Nicholas Nardecchia instructed by Lodders, solicitors of Stratford-upon-Avon, for the claimant
Michael Barnes QC instructed by TfL Legal Services for the respondent
© CROWN COPYRIGHT 2007
1

The following cases are referred to in this decision:
Fletcher Estates (Harlescott) Ltd v Secretary of State for the Environment [2000] 2 AC 307
Melwood Unit Pty Ltd v Commissioner of Main Roads [1979] AC 426
Jelson Ltd v Blaby District Council [1977] 1 WLR 1020
Purfleet Farms Ltd v Secretary of State for Transport [2002] RVR 203
Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC
565
Waters v Welsh Development Authority [2004] 1 WLR 1304
Jelson Ltd v Minister of Housing and Local Government [1974] RVR 406; [1970] 1 QB 243
Williamson v Cambridgeshire County Council (1977) 34 P & CR 117
Pentrehobyn Trustees v National Assembly for Wales [2003] RVR 140
Stayley Developments Ltd v Secretary of State [2000] 1 EGLR 167
Horn v Sunderland Corporation [1941] 2 KB 26
Director of Public Buildings and Land v Shun Fung Ltd [1995] AC 111
Porter v Secretary of State for Transport [1996] 3 All ER 693
Margate Corpn v Devotwill Investments Ltd [1970] 3 All ER 864
Davies v Taylor [1974] AC 207
Myers v Milton Keynes Development Corpn [1974] 1 WLR 696
Roberts v South Gloucestershire District Council [2003] RVR 43
Thomas’s Executors v Merthyr Tydfil County Borough Council [2003] RVR 246
RMC (UK) Ltd v London Borough of Greenwich [2005] RVR 140
Essex County Showground Group Ltd v Essex County Council [2006] RVR 366
Snook v Somerset County Council [2004] RVR 254
The following further cases were referred to in argument:
Admiral Management Services Ltd v Para-Protect Europe Ltd [2002] 1 WLR 2722
Bwllfa and Merthyr Dare Steam Collieries (1891) v Pontypridd Waterworks Company [1903]
AC 426
Chaplin v Hicks [1911] 2 KB 786
Cheater v Cater [1918] 1 KB 247
Cornwall Coast Country Club v Cardgrange Ltd [1987] 1 EGLR 146
Co-operative Wholesale Society Ltd v National Westminster Bank plc [1995] 1 EGLR 97
Cuckmere Brick Company Limited v Mutual Finance Limited [1971] 1 Ch 949
Curry’s Group Plc v Martin [1999] 3 EGLR 165
Dawkins v Ash Brothers & Heaton Ltd [1969] 2 AC 366
Duvan Estates Ltd v Rossette Sunshine Savouries Ltd Estates Gazette 30 January 1982
Engell v Fitch (1869) LR 4 QB 659
Frankenberg v Famous Lasky Film Services Ltd [1931] 1 CA 428
Garton v Hunter (VO) [1969] 2 QB 37
Gaze v Holden (1983) 266 Estates Gazette 998
Great Eastern Railway company v Haughley (1866) LR 1 QB 666
Industrial Properties (Barton Hill) Ltd v Associated Electrical Industries Ltd (1976)
(unreported)
Jacobs v London County Council [1950] AC 361
Lee v Minister of Transport [1966] 1 QB 111
Leschke v Jeffs and Faulkner [1955] Queensland Law Notes 67
London County Council v Tobin [1959] 1 WLR 354
Lynall v Inland Revenue Commissioners [1972] AC 680
2

Re Nossen’s Letters Patent [1969] 1 WLR 638
Norwich Union Life Insurance Society v Preston [1957] 1 WLR 813
Pecheries Ostendaises v Merchant Marine Assurance Company [1928] 1 KB 750
Segama v Penny Le Roy Ltd Estates Gazette 28 January 1984
Singer and Friedlander Ltd v John D Wood & Co [1977] 2 EGLR 243
Tate & Lyle Food and Distribution Ltd v Greater London Council [1982] 1 WLR 149
Trocette Property Company Ltd v Greater London Council (1974) 28 P&CR 408
Tudor Properties Ltd v Bolton Metropolitan Borough Council [2000] RVR 94
Windward Properties Ltd v Government of St Vincent and the Grenadines [1996] 1 WLR 279
Yorkshire Bank Ltd v Hall [1999] 1 WLR 1713
Zubaida v Hargreaves [1995] 1 EGLR 127
Baker v The Queen [1975] AC 774
R v Warner (1662) 1 Keb 66
Camrose v Basingstoke Corpn [1966] 1 WLR 1100
Van Dyck v Secretary of State for the Environment [1993] JPL 565
CTSE Kwong Lam v Wong Chit Sen [1983] 1 WLR 1349
3

DECISION
Introduction
1.      The claimants in this case were the owners of industrial premises that were compulsorily
acquired by Transport for London under the London Underground (East London Line
Extension) Order 1997. The premises were located on the south side of Holywell Lane, close
to its junction with Shoreditch High Street, in the area known as South Shoreditch, a mixed-use
area on the northern fringe of the City of London. The claimant’s case was that at the valuation
date, 3 December 2001, planning permission could reasonably have been expected, and should
be assumed, for redevelopment of the land with a building consisting of basement, ground and
first floor offices and two floors of flats above, and that, on this basis, the value of the land was
£907,072. TfL said that it was wrong in law to assume the grant of planning permission in the
absence of an assumption that fell to be made under sections 14 to 17 of the Land
Compensation Act 1961 and, at the most, only hope value could be claimed. They said,
however, that under the planning policies that then applied the local planning authority would
not have permitted any element of residential in an application for development and that, even
if it had done so, the highest value in the land was its then current use value, assessed at
£227,500.
2.      We began hearing the reference on 13 February 2007, but we adjourned the hearing to
enable the claimant to prepare a disturbance claim. In the event, however, when the hearing
was resumed in July, the claimant abandoned any claim on this basis and pursued a case based
on development value. Following the hearing we received extensive closing submissions in
writing and we viewed the land and its surroundings and the sites of the comparables relied on
by the valuers on 9 August 2007. In addition, for the purpose of considering the residual
valuations adduced by the parties and carrying out our own, we were provided with the
computer program that each of the valuers had used.
The subject land and its surroundings
3.      A draft statement of facts and issues had been prepared by the claimant but was not
agreed, although the planning experts did produce a joint statement of the facts agreed, and
issues outstanding in planning terms. From these, the evidence given and our inspection we
find the following facts. The subject property formerly comprised single storey industrial
premises of brick construction under flat roofs with natural light provided by windows on the
front elevation and glazed skylights. Understood to have been built in the late 1940s with later
extensions, it contained ground floor and basement accommodation which was acquired by the
claimant in two parts – 64-67 Holywell Lane in April 1999 and 68-70 Holywell Lane in
December 1999. The whole had been occupied since 1994 by Die Formes (Cutter
Manufacturers) Ltd and had latterly been used as a printing works. The uses were agreed to
fall within B2 (industrial) and B8 (storage) in the Town and Country Planning Use Classes
Order 1987. There was a small yard and a loading area to one side, and a recessed section on
the front elevation allowed for the parking of one vehicle. The buildings were demolished
during 2002, after the valuation date, leaving a cleared site extending to between 3,122 and
3,354 sq ft (290 to 312 sq m).
4

4.      The premises were located on the south side of Holywell Lane, close to its junction with
Shoreditch High Street, in the area known as South Shoreditch. It was a mixed-use area on the
northern fringe of the City of London, and was well served by public transport with four
underground stations located nearby as well as a number of bus routes. The adjacent building
to the west, 59-63 Holywell Lane, was a 4-storey unit of similar age that had the benefit of a
1984 planning permission for industrial/warehouse use with ancillary office accommodation,
and the adjoining building to the east was 196 Shoreditch High Street. That was a Grade II
listed building that had restaurant use at ground floor and four flats on the upper floors. To the
north of the property, on the opposite side of Holywell Lane, between the rear of the shops
fronting Shoreditch High Street and the railway viaduct to the west, was an area of open land
used for car parking.
The compulsory acquisition
5.      In autumn 1993 the acquiring authority made, and gave public notice of, an application
for an order under the Transport and Works Act 1992 to authorise the construction of the East
London Line Extension, a new railway line between Dalston and Whitechapel. This order, the
London Underground (East London Line Extension) Order 1997, was confirmed by the
Secretary of State on 20 January 1997. The order authorised the compulsory acquisition of the
subject premises and other land. Notice to treat in respect of the subject land was served on the
claimant on 24 August 2001 and, following notice of entry, possession was taken on 3
December 2001, which is the valuation date for the purposes of this reference. The claimant
lodged notice of reference with the Tribunal on 6 April 2005.
Witnesses
6.      Issues relating to planning and valuation were the subject of evidence and submission
and we shall describe these in due course. Planning evidence was given for the claimant by
Nicholas Mark Fennell BSc MRICS, a partner in Dalton Warner Davis LLP, Chartered
Surveyors, Planning and Development Consultants, of London EC3 and for the acquiring
authority by Philip Rowell BA (Hons) Dip TP MRTPI, an Associate with Adams Hendry
Consulting Ltd, Chartered Town Planners and Environmental Consultants. The remaining
issues are matters of valuation, and evidence on them was given for the claimant by Andrew
John Hardy FRICS, Managing Director of Smith Melzack Pepper Angliss, Property
Consultants of London EC2, and for the acquiring authority by David Brown Todd BSc (Econ)
FRICS FCIArb a Divisional Partner and Head of the City Professional Department of Strutt
and Parker, Chartered Surveyors of London EC2.
Planning: the parties’ cases
7.      The claimant’s case was that, on the evidence of its planning expert Mr Fennell, a
reasonable planning authority would have granted permission at the valuation date for a mixed-
use development and in particular a scheme similar to one that had been the subject of an
application to the planning authority on 24 November 2003 would have received planning
permission. As a matter of law, Mr Nicholas Nardecchia submitted on behalf of the claimants,
it should be assumed for the purposes of valuation that such a permission was granted. The
5

acquiring authority’s case was that, on the basis of the evidence of their planning expert
Mr Rowell, there was little likelihood of permission for a mixed use development being
granted; and, as Mr Michael Barnes QC for the acquiring authority submitted, any prospect that
there might be of such a permission could only be reflected in hope value since as a matter of
law an actual permission could not be assumed.
Planning: the evidence
8.      Mr Fennell said that he had over 20 years experience in planning matters in city fringe
areas including South Shoreditch. He said that it was his professional opinion that a
hypothetical purchaser, at the valuation date, would have anticipated that planning permission
would be granted for a scheme similar to that proposed by the claimant in its application to
Hackney Borough Council of 24 November 2003. That scheme, referred to as the
“Calfordseaden scheme” after the architects who submitted the application on behalf of the
claimant was, as eventually modified, for “the erection of a four storey plus basement building
to provide 493 sq m of office floor space (Class B1) at basement, ground and first floors and
for five residential units totalling 336 sq m, consisting of 4 x 1 bedroom flats and 1x 3 bedroom
maisonette at second and third floor levels”. Mr Fennell said that he would also have
concluded that consent would be forthcoming for a scheme that proposed live/work
accommodation instead of B1 floor space at first floor.
9.      Under section 54A of the Town and Country Planning Act 1990, Mr Fennell said, any
planning application would have to be determined in accordance with the statutory
development plan unless material considerations indicated otherwise. The statutory
development plan was the London Borough of Hackney Unitary Development plan, adopted in
June 1995, and for the area in question it was evident that, at the time, there was a general
presumption in favour of the provision or retention of Class B2 (general industrial) (Policy
SSH2), together with a recognition that B1 might also be appropriate where it included an
appropriate B2 element (Policy SSH3). Mr Fennell acknowledged that employment policy E2
stated that residential development would not normally be permitted within Defined
Employment Areas, and Policy E5 required the retention of employment generating land uses,
and stated that the council would resist proposals that included a residential element where
there would be a loss of such employment space. It was to be borne in mind, however, that, in
the claimant’s proposed scheme, there would be no loss of employment space.
10.    Most importantly, Mr Fennell said, any prospective purchaser of the subject land would
consider the council’s thinking current at the valuation date (as evidenced by actual recent
planning decisions) and other material considerations including Government planning policy
guidance (particularly PPG 1 and PPG 3) and statutory instruments that post-dated the UDP,
together with supplementary policy guidance and proposed planning policy revisions. By the
valuation date there had been a clear indication that the council intended to revise its UDP
policies in response to changes in circumstances as, in 1998, LB Hackney recognised that
economic, social and cultural circumstances had changed, and it needed to take account of
Central Government initiatives. It produced Working Draft Policies for public consultation in
1999 and, importantly, it proposed a new Policy – E6 (D1), that would apply to facilitate
mixed-use development, so long as certain criteria were met, in the city fringe area south of
Old Street, including Holywell Lane. The review said that the concentration on manufacturing
6

employment in the South Shoreditch area was now out of date, and that the overall aim was to
emphasise the mixed-use nature “for now and the future”, as opposed to the historic emphasis
on industrial employment functions. It acknowledged that local policy context was changing,
demand for mixed land uses was not abating, and the status of the defined employment area
was increasingly coming into question. Mr Fennell acknowledged that as the UDP review was
abandoned in March 2000, so that it never got to the public consultation stage, the document
had limited formal weight. However, he said, it was nevertheless indicative of the council’s
recognition that its policies in the area of the subject property were, indeed, in need of
updating.
11.    The effect of these changes was to give the council a platform for determining
applications in South Shoreditch in a more flexible manner, and a degree of diligent research
would have revealed a number of approvals for the redevelopment of employment land and
buildings for mixed use purposes that included residential and live/work elements. Mr Fennell
produced a schedule of 14 approvals that, he said, clearly indicated that mixed-use
developments had become acceptable by December 2001. Furthermore, whilst he understood
that the question of the claimant’s application for a certificate of appropriate alternative
development under section 17 of the 1990 Act in 2004 was a matter of dispute between the
parties, it was an indisputable fact that the technical planning assessment clearly considered
that the principle of residential development would be supported on the site to contribute to the
regeneration of the area whilst at the same time preserving the pre-existing employment use.
Indeed, the recommendation in the officer’s report was that, were the land not earmarked for
compulsory acquisition, planning permission would have been granted for the claimant’s
proposed mixed-use scheme. Also, he said, there would be no requirement for a 12 month
marketing period under policy E5 or the proposed E6 (D1). No employment space would be
lost – indeed the proposal was for the employment floor space to be increased from 340 sq m to
493 sq m.
12.    Mr Fennell said that the proposals would not have been in conflict with any of the
adjoining or adjacent uses, introducing as they would a balance of 60% employment and 40%
residential or, if live/work were to be allowed on the first floor, a 50/50 employment/residential
split. A four-storey plus basement development would also not have been out of scale with the
surrounding properties, and would have been compatible with the overall street scene. The
core employment objective of the adopted UDP would not be compromised, especially as the
council recognised that the 1988 GPDO enabled change of use from Class B2 to Class B1
without the need for planning permission. To resist the proposal, which should be seen as a
qualitative gain, would be neither realistic in December 2001, nor consistent with new and
emerging Government policy. The subject property was run down and in dilapidated
condition, and did not constitute optimum use of the site. Thus, a prospective purchaser would
confidently have expected to be successful if a planning application for a scheme like that
proposed by the claimant were made.
13.    Mr Fennell said that two planning appeal decisions at Westland Place, Nile Street and 5
Garden Walk, in each of which permission had been granted for mixed use developments,
added weight to his views, especially as the claimant’s proposals were for a higher employment
content than previously existed. As to other comparables referred to by Mr Rowell, he thought
that none of them had any better chance of achieving planning consent. In cross-examination,
Mr Fennell said that, in accordance with his instructions, he had only considered the question
7

of the claimant’s proposed scheme but, in his view, other alternatives, including solely B1
commercial uses, would have had an equal chance of success. He placed no weight on the fact
that a retrospective planning application to regularise the residential use that was occurring at
the adjacent building, Wich House, 59-63 Holywell Lane, had been refused, since he took the
view it had been an ill-conceived application, submitted by one of the tenants, and was doomed
to failure from the start. He accepted that, whereas he was looking at an outline application,
the fact that the subject property adjoined a listed building (196 Shoreditch High Street), when
it came to detailed considerations of final design, some care would be needed, but in his view
that would not cause any particular constraints. Indeed, he said, a new 4-storey building would
be more compatible with the surrounding properties than the pre-existing single storey unit.
14.    Mr Rowell said that he had 10 years post-qualification experience in town and country
planning matters, specifically in respect of strategic transport planning, the application of
policy to development proposals, and development control issues. His firm, Adams Hendry
Consulting, had been advising TfL on environmental issues in relation to the East London Line
Extension since 1994. Mr Rowell produced a report, and three supplemental statements. He
set out the national and regional policies and guidance that he and Mr Fennell agreed would be
material considerations (under section 54A), including PPG 1 and PPG 3, and those policies
within the statutory development plan that would apply to the subject property. He said that
the introductory section of the UDP made clear that its policies were intended to be effective
for between 5 and 10 years, but it also acknowledged that:
“the Council recognises that circumstances change and there will be a need to review
the plan and keep it up to date. The Council will consider the need to make interim
changes or undertake a full review of the plan in the light of changing planning trends
and issues which affect the use and development of land.” [UDP Introduction para
24].
15.    However, Mr Rowell said, the review that was begun in 1999 was abandoned after a very
short time, before any public consultation had taken place. As para 48 of PPG 1 made clear,
the weight to be attached to emerging development plan policies depended on what stage had
been reached, increasing as the policy review progressed. In his view, whilst in principle the
proposals in that review could not be entirely dismissed as material considerations, in practice
no significant weight should be attached to it. The relevant policies and text of the extant UDP
would, therefore, have been of primary significance for development control purposes. He said
that his analysis of those general policies led him to conclude that given the property’s location
within the South Shoreditch Defined Emloyment Area (SSDEA), favourable consideration
would have been given to proposals for continued employment use and redevelopment.
However, the more specific policies relating to the South Shoreditch Inset Area (SSIA), and the
SSDEA sub-area, led him to believe that the failure in the claimant’s proposed scheme to retain
any element of B2 would have meant that it was contrary to adopted policy. The proposed
residential use also contravened a number of policies, to the extent that an application at the
valuation date would, in his view, undoubtedly have been refused.
16.    In respect of development control decisions that he considered relevant to the subject
property, he said that the refused application in 2000 for the change of use from general
industrial/warehouse use to live/work units and the construction of a roof terrace at the
adjoining Wich House, 59-63 Holywell Lane, was highly relevant. Although the exact extent
8

of the proposed live/work content was not clear, it appeared from the Delegated Decision
Report that it was only the 3rd floor for which the change of use was required. The reasons for
refusal were that it would have resulted in a reduction of employment generating space, and the
Decision Report had said that there was no justification for permitting residential development
in a DEA contrary to policy E2. The officer considered that the property, as existing, was an
appropriate size and in an appropriate location for B2 use, and there were no special
circumstances to warrant a departure from Policy SSH 3 (retention of existing B2 uses).
Live/work units, being synonymous with residential uses, were also not appropriate in close
proximity to B2 uses. Mr Rowell said that precisely the same circumstances applied at the
subject property, and residential use there would also have been inappropriate in this location.
He accepted in cross-examination, however, that, as Mr Fennell had shown in his schedule of
consents, permission had been obtained in 1997 for continued use as live/work units at 55
Holywell Lane, and that the first reason for refusal on Wich House – loss of employment space
– would not have applied to the subject property.
17.     Referring to 196 Shoreditch High Street, at which consent had been obtained in 1997 for
conversion of the upper floors to residential flats, Mr Rowell pointed out that an informative in
the decision notice made it clear that whilst residential use would not normally be permitted, an
exception had been made to enable a listed building to be restored.
18.     In his second supplementary report, Mr Rowell said that he had considered all of the
comparable properties upon which Mr Todd had relied for the purposes of valuation. All of
these had been sold without planning consent, and in every case, he said, whilst he had only
had time to form a general conclusion, he thought the properties would have had a better
chance of obtaining permission for a development that included a residential element than the
subject property would have done at the valuation date. He said that whilst, on the face of it,
the fact that the comparable properties did eventually obtain consents that incorporated
residential uses might appear to give an indication of a council’s general approach, each
application had to be considered on its own individual merits, and the background facts would
be the determining factor. This, he said, was precisely what happened in respect of the two
appeal decisions.
19.    In the Westland Place appeal the inspector considered that, as the UDP contained no
policies concerning mixed uses and the need to reduce reliance on the private car, it was out of
date and, having concluded that he could attach little weight to the emerging UDP draft
revisions, indicated he proposed to give more weight to advice in PPG 1, 3, 4 and 13.
However, Mr Rowell said that, whilst those guidance notes encouraged local authorities to
achieve or facilitate mixed-use developments, they clearly did not give blanket approval to all
potential mixed-use schemes that might override policy and other material considerations.
The inspector had referred to a number of other developments, permissions and appeal
decisions that were mentioned at the inquiry and had concluded that none of them were directly
relevant to the subject of the appeal he was hearing, saying that the most they did was to serve
as a general guide to how the council and others had approached mixed-use proposals, and that
the case before him had to be considered on its own merits. The circumstances in the 5 Garden
Walk appeal were also very different from those relating to the subject property, and
Mr Rowell said that, therefore, the appeal decisions were of little assistance.
9

20.    On the basis of all the evidence and his findings, Mr Rowell concluded that if he were
advising a potential purchaser of the claimant’s property he would have to say that, in
December 2001, there would have been little likelihood of achieving planning permission for
the mixed-use scheme as proposed. In cross-examination he accepted that there was some
likelihood that planning permission for pure commercial (B1) use might have been achieved,
but in his view the chances were no greater than 60–70%, as the local authority might have
been reluctant to lose the existing B2 use, even though no such use was occurring at the
relevant time. He acknowledged that the claimant’s scheme would not result in the loss of any
employment space, and in fact allowed for an increase in that element. He also agreed that
there was no evidence locally that proposals for redeveloping B2 uses with B1 were being
refused, and neither were applications for mixed-use schemes incorporating residential, other
than the one relating to Wich House, 59-63 Holywell Lane where, he accepted, the applicant
had not helped his own case.
Planning: the abortive section 17 certificate application
21.    On 24 November 2003 Calfordseaden made a planning application on behalf of
Spirerose. It sought outline permission for “Mixed development of basement and ground floor
B1 space with 3 floors of residential space above.” That a planning application should have
been made is obviously surprising since LUL had entered on the land under their statutory
powers some two years previously. Surprisingly also, the council’s planning officer
recommended the grant of permission, and the council granted planning permission. Their
obvious error in doing so was corrected when the permission was quashed by consent in
judicial review proceedings brought by LUL.
22.    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).”
23.     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 London Underground (East London Line Extension) 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.
10

The point of law: assumption of planning permission or hope value only
24.    The difference between the parties on the correct approach in law in relation to the
prospect of the grant of planning permission was fundamental, and we will deal with this
before setting out the conclusions that we have reached on the planning evidence. 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. Curiously this important issue in the law of compensation does not appear to have
arisen previously in such starkly defined terms.
25.    Mr Nardecchia’s contention was that the assumption of such planning permission as
might reasonably have been expected in the no-scheme world was properly to be made in
application of the Pointe Gourde principle; and that Melwood Unit Pty Ltd v Commissioner of
Main Roads
[1979] AC 426 and Jelson Ltd v Blaby District Council [1977] 1 WLR 1020
provided the authority for this. Alternatively, he said, basing himself on Jelson v Blaby, such
permission was to be assumed by virtue of section 9 of the 1961 Act.
26.    In his very extensive and helpful submissions, Mr Barnes advanced what he said were
eleven reasons why the contention of the claimant, that compensation was to be assessed on the
basis of such planning permission as could reasonably have been expected to be granted in the
no-scheme world, could not be correct. When examined these reasons are, we think in reality
three, or at any rate they fall into three categories: firstly that the contention runs counter to
established principles of valuation; secondly that it is inconsistent with the statute, which
makes exhaustive provision in relation to planning assumptions; and thirdly that it is contrary
to authority.
Planning assumption issue: statutory provisions
27.    The 1961 Act contains in sections 14 to 16 provisions that lay down specific assumptions
as to planning permission that are to be made in assessing compensation under the Act. These
are supplemented in Part III of the Act by provisions dealing with certificates of appropriate
alternative development. The fundamental question that arises is whether these statutory
provisions are to be treated as exhaustive in terms of the assumptions as to planning permission
that can be made, as Mr Barnes contended, or whether, and, if so, to what extent, assumptions
that are not derived from the provisions themselves can also be made.
28.    In section 14 the following provisions are particularly to be noted:
“(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
11

(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.”
29. Section 15 lays down assumptions of planning permission for the acquiring authority’s
own proposed development (subsection (1)) and for development falling within a class
specified in the Third Schedule to the Town and Country Planning Act 1990 (subsection (3)).
Subsection (5) provides as follows:
“(5) Where a certificate is issued under the provisions of Part III of the 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, but, where any conditions are, in accordance with those provisions, specified
in the certificate, only subject to those conditions and, if any future time is so
specified, only at that time.”
30. Section 16 specifies assumptions of planning permission that are to be made for
development that is in accordance with the provisions of the development plan (in language
that relates to the old-style development plans which were replaced under the Town and
Country Planning Act 1968). If the land is allocated for development or is within a
comprehensive development area, permission is to be assumed for development for an
allocated purpose provided that planning permission “might reasonably have been expected to
be granted” for that development “if no part of the relevant land were proposed to be acquired
by any authority possessing compulsory purchase powers” (see subsections (2), (3), (4) and
(7)). In the case of development for which the land is defined in the development plan for
development of a specified description permission for such development is to be assumed
without qualification (subsection (1)). The system of defining sites and allocating land, which
applied to development plans prepared in accordance with section 5(2) of the Town and
12

Country Planning Act 1947, was abolished by the 1968 Act, so that section 16 has for a long
time badly needed bringing into conformity with new-style development plans: see Purfleet
Farms Ltd v Secretary of State for the Environment, Transport and the Regions
[2002] RVR
203 at paras 37 and 38.
31.    Section 17 contains provisions relating to certificates of appropriate alternative
development. Where an interest in land is proposed to be acquired compulsorily both the
landowner and the acquiring authority are entitled to apply to the local planning authority for
such a certificate (subsection (1)), but, if reference to the Lands Tribunal has been made, the
consent of the other party or the leave of the Tribunal is required (subsection (2)). It is to be
noted that until the Planning and Compensation Act 1991 application for a section 17
certificate could only be made where the land was not shown for residential, industrial or
commercial development in the development plan. The 1991 Act amended section 17 so as to
remove this limitation, and subsection (3) of section 14 was amended and subsection (3A) was
inserted.
32.    An application under section 17 must “state whether there are, in the applicant’s opinion,
any classes of development which, either immediately or at a future time, would be appropriate
for the land in question if it were not proposed to be acquired by any authority possessing
compulsory purchase powers and, if so, shall specify the classes of development and the times
at which they would be so appropriate”: subsection (3)(a). The local planning authority must,
applying this hypothesis, issue a certificate stating either “(a) that planning permission for
development of one or more classes specified in the certificate (whether specified in the
application or not) would have been granted, 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”:
subsection (4). If permission in the authority’s opinion would only have been granted subject
to conditions or at a future time, the certificate under (a) must state this (subsection (5)).
Section 18 contains provision for appeal by either party to the Secretary of State against the
contents of a certificate or where the authority has failed to issue a certificate.
Planning assumption issue: the Pointe Gourde principle
33.    The Pointe Gourde principle (as established in Pointe Gourde Quarrying and Transport
Co Ltd v Sub-Intendent of Crown Lands
[1947] AC 565), on which Mr Nardecchia relies, is
that the compensation payable for the compulsory acquisition of land must exclude any
increase in the value of the land that is wholly due to the scheme underlying the acquisition;
and Melwood establishes that the principle also applies to any such decrease in value.
34.    Sections 14 to 16 appear in Part II of the 1961 Act, which is entitled “Provisions
determining amount of compensation”. Sections 5 to 9 contain the general provisions. On the
face of it this part of the Act was intended to provide a complete code for the assessment of
compensation for the land acquired. However,
“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
13

is so, but this is less repugnant as an interpretation of the Act than the alternative.”
(per Lord Nicholls of Birkenhead in Waters v Welsh Development Authority [2004] 1
WLR 1304 at para 54)
35. The decisions to which Lord Nicholls was referring were ones in which the relationship
between the principle and the provisions in section 6 of and Schedule 1 to the Act were under
consideration. That section and the schedule make provision for disregarding the value
attributable to development, or the prospect of development, of land other than the land
acquired in a range of specified circumstances. Pointe Gourde was applied by the courts so as
to make an equivalent assumption for the land itself in the no-scheme world. The co-existence
of the section 6 code and the Pointe Gourde principle gave rise to problems associated with
identifying the ambit of the scheme for the purpose of applying Pointe Gourde in a particular
case, and Waters is now the leading case on how the principle in Pointe Gourde should be
applied.
36. In the key part of his speech Lord Nicholls (with whom Lord Woolf CJ, Lord Steyn and
Lord Brown of Eaton-under-Heywood agreed), said this:
“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…
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…(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…”
37. Alone among the Law Lords Lord Scott of Foscote saw the Pointe Gourde rule, as Lord
Brown put it at para 131, “as no more than a misconceived accretion to the legislative scheme
which itself, therefore, ought to be disregarded.” For his part Lord Brown set out in a section
of his speech headed “Has the Pointe Gourde rule survived the 1961 Act?” his reasons for
concluding that the rule had become entrenched and that the case law on it should continue to
be applied.
38. It is clear, therefore, from Waters that the Pointe Gourde principle is properly to be
applied as an adjunct to the statutory code. This is clearly established in relation to the
provisions in section 6 and Schedule 1, but is it relevant to planning assumptions? and is it
properly to be used as an adjunct to the provisions of sections 14 to 16? The answer to both
these questions is, in our judgment, yes; and the authorities are, for the first, Melwood and, for
the second, Jelson v Blaby.
14

Planning assumption issue: Melwood and Jelson v Blaby
39. In Melwood a developer had acquired 37 acres of land, a strip of which was subject to an
expressway proposal that would have the effect of severing the land, leaving 25 acres to the
north and smaller area to the south. He sought planning permission for development of the 37
acres as a drive-in shopping centre, but was granted permission on the 25 acres only. The land
for the expressway was compulsorily acquired, and compensation was awarded on the basis
that the land acquired and the land to the south never had any potential as part of a shopping
centre. The Judicial Committee of the Privy Council held that this was wrong. It accepted that
“but for the expressway project and its impact on the 37 acres an application to develop the
whole area for a drive-in shopping centre with ancillary car parking would have been granted
by the registration board, including the resumed land and the south land” ([1979] AC 426 at
433F). Giving the judgment of the Board, Lord Russell of Killowen said (at 434 C-E):
“Under the principle in Pointe Gourde Quarrying and Transport Co Ltd v Sub-
Intendent of Crown Lands
[1949] A.C. 656 the landowner cannot claim compensation
to the extent to which the value of his land is enhanced by the very scheme of which
the resumption forms an integral part: that principle in their Lordships’ opinion
operates also in reverse. A resuming authority cannot by its project of resumption
destroy the potential of the whole 37 acres for development as a drive-in shopping
centre, and then resume and sever on the basis that that destroyed potential had never
existed. Moreover, in their Lordships’ opinion the principle remains applicable in a
case such as the present, notwithstanding that planning permission had not been given
for the whole 37 acres and would not have been given, when the lack of such
permission was manifestly due to the expressway project, and it is established that,
without the expressway project, such planning permission would have been given for
the whole 37 acres. To hold otherwise in this case would enable the acquiring
authority to inflict by its project the same injustice at one remove.”
40. Melwood thus establishes that Pointe Gourde is relevant to planning assumptions.
Indeed it is clear, in our view, that the principle underlies the provisions relating to planning
assumptions in the 1961 Act. The Law Commission noted this in paras D.63-D.65 on pages
191-2 of their report “Towards a Compulsory Purchase Code: (1) Compensation” Law Com No
286, December 2003. But Melwood, a case from Queensland, was not concerned with the use
of Pointe Gourde as an adjunct to the provisions of sections 14 to 16 of the 1961 Act. The case
that provides authority on that matter is Jelson v Blaby.
41. Jelson v Blaby was an appeal to the Court of Appeal from the Lands Tribunal on a claim
for compensation for the deemed compulsory purchase of land following a purchase notice.
The subject land had some years before been shown as part of a proposed ring road in the
development plan. The land on either side of it was shown for residential development, and
this residential development was in due course carried out. The road proposal was eventually
abandoned and the council was forced to acquire the strip of land that had been reserved for it
pursuant to a purchase notice. The claimant sought a section 17 certificate for residential
development. On appeal the Minister issued a nil certificate. He did so on the basis that the
correct time at which to consider whether planning permission might reasonably have been
expected to be granted was the date of the deemed notice to treat and at that time, after the land
on either side had been developed, the land was incapable of development. The Minister’s
15

decision was challenged, but his approach was held to be correct by the Court of Appeal in
Jelson Ltd v Minister of Housing and Local Government [1970] 1 QB 243. There was
agreement between the parties on the amount of compensation that would be payable on the
assumption that the road scheme underlying the acquisition must be ignored and that, if there
had never been the proposal for the road, the land would have been developed as part of the
neighbouring estate. The dispute was as to whether such assumption was required. The
claimant founded its case on Pointe Gourde and on section 9 of the 1961 Act. In the Lands
Tribunal ([1974] RVR 406) the Member (V G Wellings QC) said (at 423):
“It appears to me that if the Pointe Gourde principle does not require a diminution in
value entirely due to the scheme underlying the acquisition to be left out of account,
section 9 of the Act of 1961 provides the analogous principle … in rather wider terms
than the Pointe Gourde principle is usually expressed.”
He found in favour of the claimant. He concluded that the scheme underlying the acquisition
was the road proposal, notwithstanding that it had been abandoned before the deemed
compulsory acquisition, and he accepted the valuation that was based on the assumption that
the land would have been developed as part of the adjoining estate. He did not think it
necessary to base his decision on Pointe Gourde.
42.    In the Court of Appeal Lord Denning MR, with whom Stephenson and Waller LJJ
agreed, noted that the claimant relied both on Pointe Gourde and on section 9, and he said at
1027F:
“The position is, to my mind, that there is depreciation here which is covered both by
the Pointe Gourde principle and by section 9 of the Land Compensation Act 1961.”
43.    Since none of the statutory assumptions as to planning permission could have applied on
the facts of the case so as to give rise to an assumption of permission for residential
development, it is necessarily implicit in this conclusion that, applying Pointe Gourde, it was
appropriate to assume the grant of such planning permission. It seems to us that this authority
provides the conclusive answer to Mr Barnes’s contention that only a planning permission
which was in force at the valuation date or is to be assumed under the statutory provisions in
sections 14 to 16 can be taken into account.
Planning assumption issue: section 14(3)
44.    Mr Barnes’s contention on section 14(3) was that the assumption of planning permission
under Pointe Gourde was either inconsistent with the provision or sat very uneasily with it. He
relied on a dictum in Williamson v Cambridgeshire County Council (1977) 34 P & CR 117, a
decision of this Tribunal (Sir Douglas Frank QC, President). At 122 the President said:
“It seems to me that where a claimant comes before this Tribunal saying, as is said
here, that permission could reasonably have been expected to have been granted, on
the date of notice of entry for a development, then the appropriate course is to apply
for a [section 17] certificate…Section 14(3) is not intended to require the Lands
Tribunal to undertake the sort of exercise which has been imposed on me in this case.
On the contrary it is directed to the hope of getting a planning permission sometime in
the future and not the realisation of that hope by the date of the notice of entry.”
16

45.    It does not appear that Jelson v Blaby was cited in that case, and it is at least doubtful
whether the President would have expressed himself in this way if it had been. Subsection
14(3) provides that nothing in the sections 15 and 16 is to be construed as requiring it to be
assumed that planning permission would necessarily be refused for any development for which,
in accordance with those provisions, planning permission is to be assumed. For our part, we
see no conflict or tension between this provision and the Pointe Gourde planning permission
assumption. If it is appropriate to assume the grant of planning permission under Pointe
Gourde
, section 14(3) in our judgment allows this to be done.
46.    Mr Barnes said that this provision was the reiteration of the aspect of the principle of
equivalence under which the value of the hope of obtaining planning permission must be taken
into account since it is inherent in the open market value of the land. He said that, clearly, the
expectation of obtaining a planning permission is to be judged in the no-scheme world.
Expressed in this way, it is evident that a claimant’s entitlement to rely on hope value as part of
the open market value of the land is derived from the Pointe Gourde principle: if the scheme
has deprived him of the expectation that he would have had in the no-scheme world of the hope
of obtaining planning permission, any resulting diminution in value of the land is to be left out
of account. That is essentially how Mr Barnes puts it. We agree that it is correct to deal with
hope value on this basis. What we do not understand is why the effect of the principle should
be treated as being confined to hope value. Indeed, if in the no-scheme world planning
permission would have been granted on or before the valuation date, to assume that permission
had not been so granted and that the claimant only had a hope that it might be granted would, it
seems to us, clearly conflict with the principle of equivalence.
47.    In our judgment, section 14(3) and the other statutory provisions do not carry the
implication that the claimant may not seek compensation on the basis of such planning
permission as would have been granted in the no-scheme world other than as expressly
provided for in sections 15 to 16. In addition we think that the first part of section 14(3A) -
“In determining ... for the purpose referred to in subsection (1) of this section whether planning
permission could in any particular circumstances reasonably have been expected to be granted
in respect of any land ...” - is consistent with compensation being assessed on this basis in the
absence of any statutory planning assumption, and we note what was said about this in
Pentrehobyn Trustees v National Assembly for Wales [2003] RVR 140 at paras 77 to 79.
48.    In practical terms it is also to be borne in mind that a claimant who wishes to rely on
hope value, and an acquiring authority that wishes to oppose such reliance, will in all
probability seek to call the same planning evidence before the Tribunal as would be required if
the matter to be determined was whether planning permission would have been granted for the
development in question. One difference, however, is that, in determining hope value, the
Tribunal does not simply have to evaluate such evidence but it has to determine also what the
market would have made of it at the valuation date: see Stayley Developments Ltd v Secretary
of State
[2000] 1 EGLR 167. In that sense, the hope value inquiry, with this added dimension,
could be an even wider one. As far as valuation is concerned, the Tribunal may be invited by
the parties to determine the value of the land with planning permission and then to make some
deduction from this to reflect the fact that there was no planning permission but only the hope
of one – an essentially speculative exercise; or, as it was asked to do in this case by the
acquiring authority on the basis of Mr Todd’s evidence, to evaluate a number of comparables
in which the price appeared to include an element of hope value and reach a conclusion in the
17

light of this on the value of the subject land. This latter approach – seeking to identify the
amount of hope value in comparable transactions – is difficult and speculative. On either basis
the task of the Tribunal when evaluating hope value in such a case as this is unlikely to be
easier, and may well be more difficult, than the exercise from which Sir Douglas Frank QC
recoiled in Williamson.
Planning assumption issue: basic valuation principles
49.    The two principles of valuation on which Mr Barnes relied were the presumption of
reality and the principle of equivalence. We do not think that either of these provides any
assistance in resolving the issue between the parties when regard is had to the Pointe Gourde
principle. As to the presumption of reality, Mr Barnes said that nearly all valuation of land
required a hypothesis that the land was being sold or let on some specific date; and the
presumption of reality, he said, demanded that, unless expressly or impliedly required by the
prescribed terms of the hypothesis, there should be no departure from reality. There is no
dispute about the existence of the principle. However, if the matter is addressed in Mr
Barnes’s terms, the crucial question is whether the proviso “unless expressly or impliedly
required by the prescribed terms of the hypothesis” applies. The circumstance in which the
land falls to be valued is its compulsory acquisition. Its market value in the real world may not
have been the same as it would have been if there had been no proposal to acquire it
compulsorily or if the project underlying its acquisition had never existed or had been
cancelled. It is clear that reality, as represented by the actual state of affairs at the valuation
date, may well need to be departed from in valuing the land if the claimant is to receive fair
compensation. This is what is achieved by applying the Pointe Gourde principle.
50.     Under the second principle relied on by Mr Barnes, the principle of equivalence, a
claimant is entitled to fair compensation but not to a greater amount than his loss (see Horn v
Sunderland Corporation
[1941] 2 KB 26 per Scott LJ at 49; Director of Public Buildings and
Land v Shun Fung Ltd
[1995] AC 111, per Lord Nicholls of Birkenhead at 125). It is in order
to deal with the fact that compensation assessed on the basis of the real world value of the land
at the date of acquisition would not represent fair compensation but might be more or less than
the claimant’s loss that the statutory rules and assumptions were enacted. And the courts have
recognised that the principle in Pointe Gourde is properly to be applied so as to supplement the
statutory rules and assumptions in order to achieve this objective: see, eg, Waters, per Lord
Nicholls at para 63. Mr Barnes’s contention that it would offend the principle of equivalence if
compensation were to be based on the assumption of the grant of planning permission rather
than the hope of it is, we think, fallacious. As we have said, if the conclusion of the Tribunal
were that in the no-scheme world permission for development would have been granted at the
valuation date, it would, or could, offend the principle of equivalence if compensation were not
to take account of that conclusion.
Planning assumption issue: cases relied on
51.    The third principal contention advanced by Mr Barnes – that the assumption of planning
permission under Pointe Gourde was contrary to authority – was based primarily on the Court
of Appeal decision in Porter v Secretary of State for Transport [1996] 3 All ER 693. In that
18

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. (It is to be noted that the land fell to be valued at a time
before the 1991 Act, following the decision in Margate Corpn v Devotwill Investments Ltd
[1970] 3 All ER 864, added subsections (5) to (7) of section 14 so as to exclude a claim on this
basis by imposing the assumption that no road would be built to meet the same need as the
scheme road.) 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.
52. 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. Stuart-Smith LJ,
who gave the leading judgment, said this ([1996] 3 All ER 693 at 703j – 704f).
“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.
19

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.”
53. At 706 d-e, Peter Gibson LJ said that on the second question (“in the issue of whether
there would have been an alternative bypass on the line of the preferred route the same as that
to be determined by the Lands Tribunal?”) he agreed with Stuart-Smith LJ for the reasons that
he had given. Thorpe LJ at 706b said that he accepted Mr Barnes’s submissions on both issues.
54. Mr Barnes relied on Porter for his submission that the question of planning permission,
as he put it in the language of theoretical physicists, is probabilistic, not deterministic. Thus a
widow, separated from her husband at the date of his death in a road accident and suing under
the Fatal Accidents Acts 1846-1959, would be entitled to damages that reflected the chance (in
percentage terms) that a reconciliation would have been effected if her husband had not died
(Davies v Taylor [1974] AC 207). And a claimant who had lost his chance to sue to recover
£1m because his solicitors had negligently allowed the limitation to expire without issuing
proceedings would recover in damages not £1m, but an amount that reflected the chance of
recovering this amount. It is, happily, however, unnecessary for us to explore the complex area
of damages for loss of a chance (and we are aware that there is substantial further authority
since Davies v Taylor) 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 section 6 and Schedule 1 or
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.
55. It is to be noted that neither Jelson v Blaby nor Melwood was cited in Porter, and on one
view it could be said to be inconsistent with those decisions. Porter was, however, concerned
20

with a claim under section 7 of the Compulsory Purchase Act 1965 for severance and/or
injurious affection of the retained land. The statutory assumptions under section 6 or sections
14 to 16 of the 1961 Act do not apply to the assessment of compensation on such a claim, and
the role of Pointe Gourde may accordingly be different. The conclusion we have reached is
that, until the Court of Appeal has resolved any conflict that there may be between Jelson v
Blaby
and Melwood on the one hand and Porter on the other, Porter should be regarded as
confined to considerations that arise on claims under section 7 and as having no application to
the question of planning assumptions in relation to the land acquired.
56.    Mr Barnes also relied on a passage in the speech of Lord Hope of Craighead in Fletcher
Estates
. The issue in that case was whether, for the purposes of determining an application for
a certificate of appropriate alternative development under section 17, the relevant policies and
facts should be viewed on the basis that the scheme had never been conceived at all or on the
basis that it had been cancelled on the relevant date (the time of the notice to acquire the land).
The House of Lords held that the cancellation assumption was the right one. The passage on
which Mr Barnes relies is at [2000] 2 AC 307, 325A-D, where Lord Hope (with whose speech
the other Law Lords agreed) said:
“I can find nothing in the overall scheme of the Act which requires the question
whether planning permission would have been granted for any classes of alternative
development to be determined by reference to events which may or may not have
happened in the past if the proposal had not come into existence.”
57.    The observation in this passage is one that is clearly important in the context of the issue
that we are now addressing, particularly since we note that counsel for the appellant (Mr Robin
Purchas QC) is reported (at 310C) as having submitted as follows:
“The purpose of section 17 of the Act of 1961 (as originally enacted) was, in
conjunction with the obligation to include development value in the assessment of
compensation, to provide a procedure for the determination by the planning authority
(as opposed to, for example, the Lands Tribunal) consistently with the Pointe Gourde
principle of the question what planning permission would have been granted in the
non-acquisition world.”
Moreover in summarising the statutory framework Lord Hope, having quoted section 9 of the
1961 Act (which provides that no account is to be taken of any depreciation which is
attributable to an indication of a proposal to acquire), said this (at 315E-G):
“Applying the Pointe Gourde principle…the reverse situation is regulated by common
law. The compensation cannot include an increase in value which is due to the
scheme underlying the acquisition. So the whole question must be approached upon a
consideration of the state of affairs which would have existed if there had been no
scheme.
But the value of land cannot be determined under these rules without making any
assumptions about the planning permission, if any, which would have been granted for
the development of the land if it were not proposed to be acquired…”
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and Lord Hope went on to refer to the statutory planning assumptions. He did not refer to any
assumption of planning permission to be determined by the Lands Tribunal pursuant to Pointe
Gourde
of the sort suggested by Mr Purchas.
58.    Having, at the end of his speech, made the observation on which Mr Barnes relies, Lord
Hope went on:
“It may be, as Mr. Ouseley suggested, that these wider issues can be raised under
section 9 of the Act when the amount of the compensation which is to be paid for land
which is to be taken compulsorily is being assessed by the Lands Tribunal: see Jelson
Ltd. v. Blaby District Council
[1977] 1 W.L.R. 1020, in which Jelsons were held to be
entitled to the full economic value of the land which had been taken from them
disregarding the effects of the scheme under section 9. But that is not a matter which
your Lordships need to resolve in this case.”
59.    We can see an argument that Lord Hope in these passages must be taken to have rejected
any assumption of planning permission being made under Pointe Gourde independently of the
statutory provisions in sections 14 to 16 and, possibly, section 9. However, in the absence of
express disapproval of Jelson v Blaby, that decision is binding on us; and we would for our part
consider that an assumption of planning permission under Pointe Gourde, where that is
necessary to provide fair compensation, is a proper application of the Pointe Gourde principle.
We return to section 9 below.
Planning assumption issue: further contentions
60.    Two further contentions advanced by Mr Barnes need to be addressed. The first is that, if
planning permission is to be assumed under Pointe Gourde, the hypothetical purchaser would
be able to acquire the land with the benefit of planning permission but without the costs
associated with obtaining planning permission, for instance large contributions under section
106 agreements. We do not think that this is the case. If a large contribution under a section
106 agreement would fall to be made in order to obtain the planning permission to be assumed,
we see no reason why this should not be brought into account in assessing compensation. This
is what the Tribunal did in Purfleet Farms (see [2002] RVR 203 at paragraph 97), and we think
that a correct application of Pointe Gourde would require it.
61.    The other contention is that Pointe Gourde is a principle of valuation and not planning
status, and in support of it Mr Barnes relied on Myers v Milton Keynes Development Corpn
[1974] 1 WLR 696 and Roberts v South Gloucestershire District Council [2003] RVR 43. The
answer to this contention is that, as the Law Commission in its report “Towards a Compulsory
Purchase Code: (1) Compensation” Law Com No.286 (December 2003) p 205 n 192 points
out, despite what was said by Lord Denning MR in Myers, in both Jelson v Blaby and Melwood
“assumed permissions were treated as valuation issues under the judicial version of the no
scheme rule”. We do not read the judgment of Carnwath LJ in Roberts as expressing a
contrary view.
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Planning assumption issue: application of Pointe Gourde
62.    In Pentrehobyn the Tribunal, after a detailed examination of the statutory provisions and
relevant authorities, concluded that it was open to a claimant to rely on any planning
permission that would have been granted in the no-scheme world. At [2003] RVR 140 para 79
it said that section 14(3A) must be taken to be an implied statutory acceptance of the decision
in Jelson v Blaby, by virtue of which a claimant could rely on such planning permission as
would have been granted in the no-scheme world. At para 80 it said that there was authority,
which had been relied on for many years and was by implication accepted in the 1991
amendments to the 1961 Act, that a claimant could rely on any planning permission that would
have been granted if the scheme had not been conceived. In spite of the fact that there was a
section 17 certificate, therefore, the Tribunal went on to make a determination on what
planning permission would have been granted in the no-scheme world. Similarly in Thomas’s
Executors v Merthyr Tydfil County Borough Council
[2003] RVR 246, it made such a
determination even though a section 17 certificate had been granted.
63.    It certainly appears to have become the practice of valuers, no doubt reinforced from time
to time with advice given to them on the law, to value land that has been compulsorily acquired
on the assumption that such planning permission as might reasonably have been expected to be
granted for its development in the no-scheme world would have been granted at the valuation
date. (The practice is not, however, by any means universal, and it is to be noted that in the
present case not only did the acquiring authority’s valuer approach the matter on the basis of
hope value rather than an assumed planning permission but the claimant’s original valuer did
so too.) This was the case in Pentrehobyn, where the acquiring authority’s planning expert, on
whose evidence their valuer based himself, sought to establish whether the subject land would
have received planning permission by the valuation date (see paragraph 25 of that decision).
Two other recent cases illustrate the practice. In RMC (UK) Ltd v London Borough of
Greenwich
[2005] RVR 140 there was agreement between the parties that, in addition to any
actual planning permission or one to be assumed under section 16, any planning permission
that would have been granted prior to the valuation date in the no-scheme world was to be
assumed (see paragraph 37 of that decision). In Essex County Showground Group Ltd v Essex
County Council
[2006] RVR 366 there was agreement between the parties that the correct
approach in valuing the land was to ask what planning permission could reasonably have been
expected to be granted at the valuation date (see paragraph 24 of that decision). In each of
those cases the Tribunal adopted the approach of the parties in this respect.
64.    Pentrehobyn was decided before the decision of Waters in the House of Lords. Waters
has made clear that the function of Pointe Gourde is to supplement the statutory procedures
where this is necessary to ensure that the claimant receives fair compensation; and it
emphasises that it should be applied only for this purpose and should not be extended beyond
it. At para 55 Lord Nicholls said:
“…Undoubtedly the present state of the law gives rise to serious valuation difficulties.
It is unreal to require land to be valued on the basis of what would have been the
position if a major development which took place years ago had not been carried
out…In a recent case in the Lands Tribunal the President had to rewrite the history of
Mold in North Wales over 17 years. He described this as a ‘virtually impossible task’:
see Pentrehobyn…”
23

It is, we think, appropriate in the light of Waters to consider whether, to apply Pointe Gourde
so as to permit a claimant to rely, without any limitation, on any planning permission that
would have been granted in the no-scheme world, is not pressing the principle too far. Jelson v
Blaby
could be said to be authority for no more than that Pointe Gourde can be used to
supplement the statutory provisions where those provisions, and in particular the assumption
derived from a section 17 certificate, would give a level of compensation far removed from
what would be fair. Under the statutory provisions the claimant in that case was only able to
achieve a nil certificate under section 17 and on that basis the land was virtually valueless.
That was because, at the material date for the determination of the application, the land on
either side of the subject land had been developed in such a way that the land itself was
rendered incapable of development. But, in the absence of the scheme underlying the
acquisition, the road proposal, the land would have received planning permission for
development as part of the adjacent residential development. It was obviously fair that
compensation should be assessed on that basis; and it was appropriate, therefore, to make the
assumption by applying Pointe Gourde. It is certainly arguable in the light of Waters that the
correct approach to planning assumptions in any particular case is to apply the statutory
provisions and only to proceed to introduce an assumption derived from Pointe Gourde if the
statutory provisions would give compensation that is far removed from what would be fair.
65.     Our view is that to seek to restrict the application of Pointe Gourde in this way is not
correct. If it is accepted, as the acquiring authority accept (indeed, as they assert), that under
(or, perhaps more accurately, as recognised by) section 14(3) hope value, and thus the prospect
of planning permission, is properly to be determined as in the no-scheme world, we cannot see
why it should be considered inappropriate to apply Pointe Gourde to enable compensation to
be assessed on the assumption of such planning permission as would have been granted in the
no-scheme world. Indeed, as we have said, to restrict compensation to a value based on hope
value alone where the evidence shows that permission would have been granted would not be
fair compensation.
66.    One particular matter that requires consideration is whether, if planning permission is to
be assumed under Pointe Gourde, allowance should be made in the valuation for the time
required after the valuation date for obtaining permission. This was a matter of dispute
between the parties. Clearly no such allowance would be required if the Tribunal’s conclusion
was that at the valuation date permission would have been granted. But a conclusion on the
facts that planning permission would have been granted at the valuation date would necessarily
require an assumption that a planning application had been made. It may be that in some
circumstances it would not be right to assume that a planning application would have been
made in time for it to have been determined by the valuation date. But 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. If there were not a
reasonable prospect of permission being granted, on the other hand, the realistic assumption
would be that the hypothetical seller would not have courted a refusal by making an
application, so that there could at the valuation date have been some hope value. Unless there
24

is evidence to displace it, therefore, we think that, if at the valuation date on the balance of
probabilities planning permission would have been granted for a particular development, such
permission should be assumed for the purposes of valuation. In the present case, although we
were referred in support of Mr Todd’s hope value assessment to transactions in which land had
been sold without planning permission but had later received it, we do not think that the
evidence shows that a willing seller of the subject land would not have taken steps to ensure
that the land had planning permission at the date of the assumed sale.
67.    We note that the Law Commission’s recommended Rule 14(2) covering planning
permission for appropriate alternative development (see p 107 of the report) would make the
general provision that in valuing the subject land, “Account shall…be taken of value
attributable to…development [of the land] for which planning permission could reasonably
have been expected to be granted” in circumstances specified in sub-rule (2)(b). Except that
those circumstances include the assumption that the scheme was cancelled on the valuation
date rather than that it had never existed (an assumption that applies for the purposes of
sections 16 and 17 but not in relation to any permission assumption under Pointe Gourde: see
Pentrehobyn at paras 65-80), this suggested provision reflects, we believe, the practical effect
of the law as we find it to be at present.
Planning assumption issue: section 9
68.    The decision of the Court of Appeal in Jelson v Blaby was based, as we have noted, both
on Pointe Gourde and on section 9 of the 1961 Act, each of which was held sufficient to entitle
the claimant to compensation on the basis of the value that the land would have had if
developed as part of the adjoining residential estate. Mr Nardecchia’s submission, which we
have accepted, that if the evidence shows that at the valuation date there was a reasonable
prospect of planning permission being granted in the no-scheme world, such permission is to
be assumed for the purpose of valuing the subject land, was founded on Pointe Gourde, and we
have considered it on this basis. In the alternative he also sought to base his contention on
section 9, although he stressed that his preferred basis was Pointe Gourde. The section
provides:
“9. No account shall be taken of any depreciation in 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.”
69.    In Fletcher Estates, in a passage we have noted above, Lord Hope appeared to leave open
for future consideration whether Jelson v Blaby was correctly decided in relation to section 9.
Mr Barnes pointed out that in Pentrehobyn the Tribunal (in paras 92-95) had considered the
history and function of section 9 and had concluded that it was improbable that it was intended
to enable a claimant to assert that in the no-scheme world planning permission would have
been granted for a particular development and to found his valuation upon this. However,
Jelson v Blaby is authority that it does do so, and we are bound by that decision (as indeed the
Tribunal in Pentrehobyn at para 92 said that it was). It is also the case that, if the section
applies so as enable reliance to be placed on such planning permission as would have been
25

granted in the no-scheme world, it necessarily applies as a rule and not, as Pointe Gourde could
be said to apply, as a matter of discretion.
Planning assumption issue: conclusions
70. We can summarise our conclusions on the planning assumption issue as follows:
(a)  On the basis of the Pointe Gourde rule compensation may be awarded on the
assumption that planning permission for development would have been granted
in the no-scheme world even though no such assumption may fall to be made
under the provisions of sections 15 and 16.
(b) If the conclusion of the Tribunal is that planning permission would have been
granted at the valuation date, it is to be assumed, in the absence of evidence to
the contrary, that the hypothetical willing seller would have applied for such
permission in time for it to be granted by that date.
(c)  The assumption of such planning permission under Pointe Gourde is
discretionary, and the purpose is to ensure that the claimant receives fair
compensation; but there is no requirement that it may only be made where the
compensation on the statutory assumptions would be far removed from what
would be fair.
(d) 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.
(e)  Jelson v Blaby is authority that section 9 enables a claimant to rely on such
planning permission as would have been granted in the no-scheme world.
Planning: conclusions
71. At the valuation date the statutory development plan was the London Borough of
Hackney Unitary Development Plan, adopted in June 1995. The UDP proposals map showed
the site as in part within a Defined Employment Area and in part within the line of the
proposed railway. It is agreed that in the absence of the scheme the whole of the site would
have been shown within the DEA. Holywell Lane was also shown as lying within the South
Shoreditch Inset Area (SSIA), and specifically within the South Shoreditch Defined
Employment Area (SSDEA).
72. Strategic Policy ST25 stated that the council would especially resist the loss of
employment land and premises through changes of use and redevelopment. Policy E2 said that
the council would give favourable consideration to employment generating development within
DEAs, provided it did not conflict with policies for the SSIA, but that residential development
would not normally be permitted within DEAs. Policy E5 said that any proposals resulting in a
26

reduction of site area or floor space used for employment-generating land uses would be
resisted.
73.    Strategic Policy ST27, which applied to the SSIA, stated that the council would seek to
protect and enhance the mixed employment and special land-use character of the area. The text
made clear that it was the council’s policy to restrict residential development in the area
because of the inappropriate environment and the desire not to restrict unduly the operations of
local businesses. Within the SSDEA there was to be a presumption in favour of schemes that
either provided or retained a proportion of Class B2 (General Industrial) floor space (policy
SSH2).
74.     Housing policy HO3 stated that, outside sites specifically identified for housing on the
proposal map, housing would normally be permitted provided that it did not conflict with the
retention of land and floor space for employment uses and that the environment of the site was
acceptable. Listed building policies (of potential relevance because the subject lands adjoins
the listed 196 Shoreditch High Street) stated that the council would preserve and enhance listed
buildings (Policy ST8) and would not normally permit any development that adversely affected
the setting of a listed buildings (Policy EQ18).
75.    As is often the case with policies that are expressed in qualified terms, arguments could
no doubt have been advanced in favour of the proposed development of the subject land, but
the conclusion we have formed is that the effect of policies favouring B2 uses in the SSDEA
and the potential incompatibility of such uses with residential development would have meant
that the proposal would not have been in accordance with the employment and housing polices
of the plan. However, the essence of Mr Fennell’s evidence, which in this respect we accept, is
that the policies of the 1995 UDP were no longer being strictly applied in South Shoreditch at
the valuation date because they had been superseded by a new approach based on changes in
the area and in national and local policy guidance which had occurred between 1997 and 2001.
The policies of the UDP which were no longer being strictly applied included those which
sought to favour Class B2 development and exclude residential uses from the area in order to
preserve its historic character. They were no longer being strictly applied because the council
recognised that the industrial character of the area had changed to a mixed-use character and it
was neither realistic nor consistent with new government policy to seek to resist such change.
76.    In February 1997 the replacement PPG1: General Policy and Principles was issued. It
contained, as it put it, “a fresh emphasis on mixed use development.” Paragraph 8 is
particularly to be noted:
“Within town centres but also elsewhere, mixed use development can help create
vitality and diversity and reduce the need to travel. It can be more sustainable than
development consisting of a single use. Local planning authorities should include
policies in their development plans to promote and retain mixed uses, particularly in
town centres, in other areas highly accessible by means of transport other than the
private car and in areas of major new development. What will be appropriate on a
particular site will be determined by the characteristics of the area - schemes will
need to fit in with and be complementary to their surroundings - and the likely impact
27

on sustainability, overall travel patterns and car use. The character of existing
residential areas should not be undermined by inappropriate new uses.”
77.    There is no dispute that the subject land was an area that was highly accessible by means
of transport other than the private car, and in which policies promoting and retaining mixed
uses should be included under the terms of this guidance. Similarly PPG3 paras 49-51 urged
authorities to promote developments containing a mix of uses, including housing.
78.    In June 1996 the council published planning guidance on live/work development, and it
updated this in July 1999. The guidance stated the benefits of such development but said that it
would only be allowed in DEAs if certain criteria were met. In 1998 the council embarked on
a review of it UDP, but it abandoned this in March 2000. As a policy document it would
therefore have carried no weight at the valuation date. It is sufficient to note that it contained a
policy, E6 (D1), which applied to the city fringe area including Holywell Lane, that set out
criteria for permitting mixed-use development. These included requirements that there should
be no lack of operational business floor space and that the uses within the development should
be compatible. We accept that this policy arose out of guidance in the PPGs and was
consistent with them.
79.    The claimant placed reliance on a number of planning permissions for mixed-use
development in the area that the council had granted in the period 1995-2001. Mr Rowell said
that they were clearly indicative that mixed employment and residential or live/work
development was acceptable in December 2001. Reliance was also placed on two appeal
decisions.
80.    The appeal decision on Westland Place, Nile Street, Britannia Walk, London N1
concerned the council’s failure to determine applications for, in one case, an 8 and 9 storey
building and, in the other, a 6 and 7 storey building, in each case with a basement. The uses
were said to comprise B1 business use, live/work units and flats. The decision is dated 3 July
2001. The site was included within a DEA in the SS1A, and was thus subject to policies E1,
E5 and ST25, which aimed to safeguard and resist the loss of employment generating uses and
site area. The site was identified in the UDP as being in an area which would be safeguard for
B1 and B2 development. The inspector identified three main issues that arose in the appeals.
The second issue was whether the proposals would result in the loss of potential employment
generating development or floor space, contrary to relevant local and national policies.
81.    The inspector noted that PPG1 encouraged mixed-use developments and said that they
could help create vitality and diversity and reduce the need to travel. PPG3 and PPG4 also
promoted mixed-use development, and PPG13 aimed to reduce the need for car journeys. He
went on:
“The UDP does not contain any policies concerning mixed uses. No policies
concerning the need to reduce reliance on the private car were drawn to my attention
in the UDP. I therefore consider that the UDP is out of date as it has been superseded
by more recent planning policy guidance issued by the Government on these matters
(see paragraph 54 of PPG1). I have previously concluded that I can give little weight
28

to the Draft UDP. Consequently, I intend to give more weight to Government advice
in PPG1, PPG3, PPG4 and PPG13 on these matters than the UDP or the Draft UDP.”
82. Addressing specifically the second issue the inspector said:
“Despite the Council’s concerns about loss of employment development, it has
granted permission for a mixed-use development on the site. I believe this to be a
realistic action given the Government’s encouragement for mixed-use development
that I have mentioned, the lack of reference to such proposals in the UDP, and the
Councils SPG on live/work development. The Council recognised at the Inquiry (and
also in its Draft UDP) that policies and attitudes to mixed-use development have
changed. Moreover, the character of the area is one of mixed-use development
containing a large number of live/work units, and this as acknowledged in the
Conservation Area report (Document 4) and by the recent permissions granted by the
council in the surrounding area. Given this, I again consider that the permission
granted for the Appeal B proposal forms a benchmark against which the Appeal A
proposal should be assessed.”
83. The inspector noted that the council desired to see 50% or more of the net floor space in a
development in a DEA used for commercial purposes. He said in relation to this:
“The Council’s figure of 50% plus of pure commercial floor space in a development
is not contained in any UDP policy or SPG - it is a ‘rule of thumb’ which had been
applied to other similar proposals, such as the housing association development
opposite. That being so, the weight that I can give it is slight. Until the floor space
proportion is finalised in policy terms, I consider that each case must be decided on its
own merits, bearing in mind factors such as the type/mix of development proposed,
the location of the site, the site’s allocation in the UDP, employment levels, and
commercial floor space availability. In this case, my judgment is that the proportion
of commercial floor space should be around and close to 50% due to the site’s
allocation and employment protected status in the UDP.”
84. The second appeal decision, given on 24 July 2001, concerned a site at 5 Garden Walk,
London EC2, within the South Shoreditch Defined Employment Area and the South Shoreditch
Conservation Area. The site contained a 2-storey industrial building used for the manufacture
of furniture with adjacent servicing and car parking spaces. The appellants sought
conservation area consent for the demolition of the building and planning permission for an 8-
storey building for mixed commercial use and live/work units. The council had failed to
determine either application. The inspector granted both the consent and the permission. He
concluded that the concept of live/work units as a component of urban regeneration in the inner
city was ideally suited to implementation on the site in conjunction with commercial uses on
the lower floors.
85. We accept that these two decisions are good evidence for the purpose of determining
what decision a reasonable planning authority would have made on an application for
development of the subject land. It appears to us also that the planning permissions for mixed-
use development that had been granted by the council prior to the valuation date were generally
29

consistent with the approach of the inspectors in these two appeals. It is clear that at the
valuation date the policies in the UDP were substantially out of date to the extent that they
failed to make provision for mixed-use development as required by PPG1. The council itself
had recognised this and had sought to address it in the UDP review, which it abandoned in
March 2000 (and to which, as we have said, no weight is to be attached). It had also granted
the planning permissions relied on by the claimant. Our conclusion is that the appeal decisions
to which we have referred, and particularly that on Westland Place, 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.
86.    We accept that the subject land was suitable for mixed-use development. There was no
Class B2 use close to the land. The properties to the east were those fronting Shoreditch High
Street, with a mix of retail, service B1 and residential uses. To the west, Wich House, 59-63
Holywell Lane contained a storage use on the ground floor and residential uses or the upper
floors. Although permission had been refused in July 2000 for a live/work use on the third
floor, we accept that this was a reflection of the inadequacy of the application rather than a
rejection of mixed-use development as such.
87.    As for the particular proposal to which the valuers’ evidence was directed we conclude
that it would have been regarded as acceptable. The replacement of 340 sq m of B2 floor space
by 493 sq m of B1 floor space would not have been considered objectionable, nor would the
residential element. There is no reason to suppose that the relationship of the proposed
building to the listed building at 196 Shoreditch High Street would have led to its rejection.
The proposed building would have been regarded as a potential improvement to the setting of
the listed building, and detailed consideration would have been given to its design.
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. 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.
89.    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.
30

Valuation: introduction
90.    Mr Hardy, for the claimant, produced what he described as an addendum to an earlier
expert witness report that had been prepared by John Cousins BSc MRICS, the former head of
Smith Melzack Pepper Angliss’s valuation department who, with effect from 1 May 2007, had
left the firm, and was unavailable to attend the hearing. He confirmed that in the absence of
Mr Cousins, the original report was to be adopted as if it were his, together with the
amendments and additions he had provided. He said that whilst his firm had been instructed in
the matter in December 2005, he personally had no previous experience in compensation
matters, and only became involved on a formal basis shortly before Mr Cousins left.
However, he said he did have previous knowledge of the subject property, prior to his joining
his current firm, having given informal advice and valuations to the claimant in respect of the
prospective development potential of the site since about 1999.
91.    In his view, in the light of the poor state of the then existing buildings, and the
redevelopment potential of the site, a prospective purchaser would undoubtedly be a developer,
and he would need to undertake a residual calculation to assess what he could afford to pay for
the site. This was the only approach that Mr Cousins had used, and Mr Hardy emphasised that
it was also his opinion that this was the correct methodology to use in this case. During the
course of the hearing, a number of inconsistencies were found in his residual valuation, and
with some further agreement between the experts in respect of areas, he provided a final
version on the last day, this being attached at Appendix 1. The expressed value for the subject
property of £907,072 was based upon the assumption that planning permission existed at the
valuation date for the claimant’s proposed mixed-use scheme, and that vacant possession was
immediately available. Those assumptions, he said in cross-examination, had been made at the
request of his instructing solicitors.
92.    In the light of the methodology used by Mr Todd, and the fact that he assumed that the
Tribunal would require an alternative, Mr Hardy also produced a valuation on the comparables
basis in the additions he provided to Mr Cousins’ original report. His own analysis of six of
the comparables that had been considered by Mr Todd produced a value of £718,000. Finally,
in the event that the Tribunal found that existing use value was the appropriate figure to adopt,
Mr Hardy said it would be £653,310.
93.    Mr Todd, for the acquiring authority, used three approaches. He said that the existing use
value of the property, assessed purely on an investment basis, was £227,500. However,
recognising that a prospective purchaser would anticipate being able to obtain planning
approval for redevelopment of the site, he researched a number of sales of comparable
properties in the vicinity, adjusting the results to reflect various factors including the likelihood
or otherwise of being able to gain the required planning consents. That analysis produced a
value for the subject property of £281,000, but it was submitted that some £50,000 then needed
to be deducted to reflect the alleged need to remove the legal encumbrance of the tenancy to
Die Formes, and the cost of removing printing equipment. Mr Todd’s residual valuation
(Appendix 2), on the basis of the claimant’s proposed mixed use scheme and assuming
planning permission existed, came to £274,489 (which included an allowance for obtaining
possession), but he said that, in reality, a very substantial discount would have to be made to
31

reflect the risks that permission might not be obtained, and thus concluded that the existing use
value was the correct figure to apply.
94.    This Tribunal has said on many occasions that a valuation by reference to comparable
transactions will usually provide the best evidence of open market value and is to be preferred
to a residual valuation (see for instance Snook v Somerset County Council [2004] RVR 254 at
paragraph 30). In the present case, as we shall say, the evidence of comparables that was
adduced is inadequate in our view to enable us to base a valuation upon it, and we are therefore
thrown back on a residual valuation. We deal first with the evidence and our conclusions on
the residual valuations, including our own valuation. We then consider the evidence on the
comparative basis valuations. We then deal with existing use value and, finally hope value. A
hope value valuation is required to give an alternative value if we are wrong on the point of
law. Existing use value needs to be determined both because it could affect a hope value
valuation and because it would become relevant if it produced a value that was higher than the
residual valuation or the hope value valuation.
Residual valuation
95.    In preparing their residual valuations, the experts used an industry standard computer
program from Circle Software Ltd, commonly referred to as “Circle Developer”, and at the
request of the Tribunal, a copy was made available to us. Whilst the valuers were understood
to have agreed all the underlying assumptions to be inputted into the residual model, we have
noted some differences that make a marginal difference to the final result. These are set out in
table form below:
HARDY
TODD
Disposal:
Purchaser’s costs based on gross
capitalisation
Purchaser’s costs based upon net
capitalisation
Purchaser’s costs added to cost
(not deducted from sale)
Purchaser’s costs deducted from sale
(not added to cost)
Interest:
Interest not calculated on items in
final DCF period
Interest calculated on items in final
DCF period
Interest not included in IRR
calculations
Interest included in IRR calculations
Cashflow:
Initial IRR guess rate 8%
Initial IRR guess rate 10%
We adopt Mr Hardy’s inputs for the above in our residual valuation that appears at Appendix 3.
96. Mr Hardy said that, based upon his instructions that it was to be assumed that the subject
property had the benefit of planning consent for the claimant’s proposed scheme and that work
could effectively commence immediately after the valuation date, the property would
undoubtedly be acquired by a developer. That developer would wish to undertake a residual
valuation to calculate the amount he could afford to pay, and, therefore, that was the most
appropriate method in this case. He (and Mr Cousins before him) had been able to agree many
of the component parts (other than the underlying assumptions referred to above) with
Mr Todd, but there remained differences in a number of key areas. Both valuers made a
32

number of amendments to their figures during the course of the hearing. Mr Hardy’s final
version at £907,072 is at Appendix 1, and Mr Todd’s at £274,489 is at Appendix 2. For the
sake of brevity, we consider the evidence of both valuers together on those areas upon which
they failed to agree and provide our conclusions as to the appropriate inputs under each
disputed head.
97.    On the projected revenue side, Mr Hardy adopted Mr Cousins’ assessment that
achievable office rents would be £22.50 psf for the ground and first floors and £15 psf for the
basement area, based upon details of comparable local lettings from September 2001 where
basements were included, and others. Mr Todd agreed £22.50 for the first floor, but suggested
£20.00 for the majority of the ground floor as it would have less natural light especially at the
rear, and would be inconveniently divided by the staircase leading to the upper levels, and £10
psf for the reception area. However, in cross-examination, he accepted that his concerns about
natural lighting on the ground floor were unfounded. £10 psf was, he said, the appropriate
figure for the basement, and here lighting was definitely a problem. He noted that Mr
Cousins’s comparables had comfort cooling and he adjusted accordingly. As to the lower rate
for the reception area, he argued that that was standard valuation practice. Mr Hardy said, in
cross-examination, that he was of the view that the layout of the scheme, which he thought
nowhere near perfect or the best use of the site, would evolve as it progressed, and his rental
values reflected that. It was evident to us that he based his projections upon an assumption that
the Calfordseaden plans could be improved but, as far as this exercise is concerned, the
calculations must be based upon the scheme as proposed. Indeed, the floor areas agreed
between the valuers are as shown on the scheme plans.
98.    It was submitted by Mr Nardecchia that Mr Todd had discounted the achieved rents on
the basement at Luke Street (£18 psf), which was also described as dark, by too much to allow
for the lack of comfort cooling in the proposed scheme and the fact that, as Mr Todd had
admitted, rents had increased by some 5% between September and December 2001. Mr Barnes
submitted, in connection with this item and all the others upon which the valuers had failed to
agree, that Mr Hardy had, when initially adopting Mr Cousins’ residual valuation, failed to
consider the matter in sufficient detail, as evidenced by the innumerable changes that he had
had to make to his valuation during the hearing.
99.    We agree with Mr Barnes, and are satisfied that Mr Todd has, in general terms,
demonstrated a rather more careful and considered approach although, as will be seen below,
there are some aspects of his valuation with which we do not agree. We note his acceptance
that he was wrong regarding the ground floor lighting, and are of the view that if, as we deem
correct, the reception area is to be taken at a lower rate, the rate should be the same as at the
first floor – £22.50 psf. We also think he may have been, on the basis of the comparable
evidence, somewhat harsh on the basement. In our residual valuation therefore (which is at
Appendix 3) we adopt the agreed £22.50 psf for the ground and first floor offices, £11.25 psf
(50% of the office rate) for the reception areas, and conclude that £12.50 psf is appropriate for
the basement.
100.   As to the residential element, both Mr Cousins and Mr Todd had used, as their main
comparables, the prices achieved for new flats and refurbishments in Hoxton Square, along
with others in the vicinity. On the basis of this evidence, Mr Cousins had said £425 per sq ft
33

was appropriate for the new residential units at Holywell Lane, and Mr Todd took £400 psf.
Mr Hardy said that he was of the view that the figure should be £450 psf, based upon a 10%
discount from “established levels” of £500 psf in Hoxton Square for flats with comparable,
relatively small floor areas. Whilst it was agreed that Hoxton Square was a better location than
the subject property, Mr Todd said that he did not agree Mr Hardy’s assessment of the average
prices achieved there, so his £400 psf was not a 20% discount from Hoxton Square values.
Although he admitted he had not carried out his own investigations, Mr Todd said his
conclusion was based upon all of the transactions that had been included in the schedule
originally produced by Mr Cousins, and also used by Mr Hardy.
101.  That schedule of transactions readily demonstrates to us that, with there being only one
mentioned in Hoxton Square at or above £500 psf, that figure could not be taken as an average,
and it seems to us £450 psf is somewhat nearer the mark. Following our site visit, and having
considered the levels achieved on all the flats referred to in the schedule (other than live/work
units) we are satisfied that Mr Todd’s figure of £400 psf fairly represents what would have
been achieved on the prospective new residential units at Holywell Street during the projected
marketing period.
102.  Turning to costs, the valuers were not far apart on construction, having used the
RICS/BCIS Building Cost Review as their source. Mr Hardy adopted Mr Cousins’ £100 psf,
and Mr Todd used £110. It was accepted that interpretation of the figures, and application to a
specific project, are somewhat subjective, but both valuers explained in detail how they
reached their conclusions. It seems to us that either of the figures could be equally applicable,
and so we simply split the difference at £105 psf – which is what Mr Todd said the valuers
would probably have done if they had been negotiating. Mr Todd allowed £10,000 for costs
associated with archaeological investigations, and Messrs Cousins/Hardy did not, although in
re-examination Mr Hardy agreed that if they were applicable, that was a reasonable estimate.
We accept that that cost should be applied.
103.  Mr Todd allowed £50,000 as a “vacant possession premium” whereas Mr Hardy included
nothing, assuming vacant possession to be available at the valuation date, and that the vendor
would have removed the former printing equipment. Whether or not an allowance should be
made was a matter of legal submission. Mr Barnes suggested that there was a possibility that
the lease formerly subsisting on 64-67 Holywell Lane may have passed to the Crown (under
the provisions of section 654 of the Companies Act 1985) when the company known as Die
Formes was dissolved and had not been disclaimed by the Treasury Solicitor under section 656
at the valuation date. If that was the case, and the property was, as the claimant contended, ripe
for redevelopment, then the Treasury Solicitor would have had a duty to seek a sum of money
for regularising the tenancy. A prudent purchaser would have built £20,000 into his residual
valuation to allow for this contingency together with a “spot figure”, as Mr Todd described it,
of £30,000 for clearing the premises.
104.  Mr Nardecchia pointed out that a document had been produced to show that the lease on
64-67 Holywell Lane terminated on 28 February 1994, that there was no evidence of the grant
of any subsequent lease or tenancy, and that no rents or other monies had since been received.
The premises were occupied by Mr Radford, his wife, and Mr Roscoe from February 1994 and
from whom the business of Die Formes was acquired by Spirerose in December 1999,
34

following the purchase of the freehold interests. The legal documentation relating to the
purchase of the buildings and the business clearly showed, Mr Nardecchia said, that there were
no subsisting tenancies, and vacant possession would have been available at the valuation date.
Notwithstanding this, even if the Treasury Solicitor had been involved, there was no evidence
that he would have sought any premium, and given the state and condition of the building he
would probably have been only too pleased to disclaim the lease at nil consideration to avoid
future liabilities. As to the cost of removal of equipment, there was no basis for the inclusion
of such a figure in the calculation. A vendor, whether a receiver or an individual or company,
would normally make arrangements for the removal of fixtures fittings and equipment and
would either re-use them elsewhere, or obtain monetary value on their disposal. We accept
Mr Nardecchia’s submissions on this point, and can see no justification for including any
allowance within the residual calculation. We accept the claimant’s evidence and consider it
fair to conclude that vacant possession would have been available on a sale at the valuation
date in the no-scheme world, and the 2 months allowed for obtaining vacant possession should
not be included. This factor, of course, affects project length.
105.  The valuers were significantly apart on the question of marketing costs for the
development. Mr Hardy, who allowed £5,000, said that at the relevant time, there was an
exceptionally strong market; the flats would have sold off-plan, thus negating the need for a
show flat or extensive advertising, and the offices would also have let easily. Mr Todd allowed
£40,000 as he was of the view, expressed in cross-examination rather than specifically in his
reports, that the market had become uncertain, particularly following the events of 11
September 2001, by the valuation date. However, as Mr Nardecchia pointed out in
submissions, that view contradicted what he had said in his written evidence, and the rental
evidence that had been produced showing a 5% increase between September and December
2001. We accept the claimant’s evidence in this regard, being satisfied that both the residential
and office markets were still buoyant at the valuation date, and in our judgment there was
nothing that would lead a developer to have doubts about the continuing strength of the market.
However, we are concerned that for a mixed development of this nature, the sum of £5,000
would not go very far at all in marketing terms and therefore consider that the sum of £20,000
would be more realistic for this item.
106.  The valuers were 0.01% apart in their assessment of the costs to be allowed for the
institution purchasing the investment. We take the industry standard of 5.76% as adopted by
Mr Todd. We note that both valuers allowed 5.5% for the acquisition costs, the difference of
0.26% from the sum normally included in such calculations relating to VAT on the 1.0%
agents fees and 0.5% legal fees and legal fees. However, as this element is agreed, we do not
disturb it.
107.  This leaves the question of project length – that being the total length of time elapsing
between the assumed acquisition of the subject property on the valuation date, and the final
disposal of the fully sold and let freehold as an investment. The sum allowed for costs of
finance is dependent upon this. Mr Hardy, based upon his assumptions of an existing planning
permission, vacant possession, and the site being “ready to go”, took an overall term of 12
months which, at the agreed cost of borrowing of 6.25%, resulted in an allowance of £81,715.
In his initial residual valuation, Mr Cousins had taken 28 months at 6%. Mr Todd projected a
period of 40 months which produced finance costs of £233,828.
35

108. Mr Hardy said that a period of 12 months was sufficient to allow for demolition and
construction and, bearing in mind the buoyant market, it was reasonable to anticipate that the
flats would all be sold, and the offices let, during that period. It was agreed that, whether or not
the offices were occupied immediately upon completion, a rent-free period of 6 months should
be allowed, and this was built into the calculation. Mr Todd’s residual valuation did not, of
course, assume planning permission to be in place at the valuation date, and it also assumed
that an initial 2 months would be required to obtain vacant possession. The period was made
up, sequentially, thus:
To obtain vacant possession and clear premises                               2 months
Marketing (existing premises)                                                        12 months
To obtain planning consent                                                            8 months
Demolition/construction                                                                12 months
Letting void (offices)                                                                     6 months
Total                                                                                            40 months
109. We have already dealt with the initial 2 month period. However, in our view, it is
unrealistic to suggest that no time at all would elapse between completion of the acquisition,
and starting work on site. Time would be needed to co-ordinate contractors and professional
advisers, start dates and the like, and we consider, therefore, that a 3 month period should be
allowed as “pre-construction” for this purpose. As to marketing of the existing premises, it was
submitted that if the acquiring authority’s planning arguments are accepted, a period of 12
months active marketing of the premises as available for sale or to let for their existing
industrial use, would have had to have been completed before an application would have been
entertained by L B Hackney. This point, Mr Barnes said, had indeed been acknowledged in
Mr Fennell’s planning evidence for the claimant. However, Mr Nardecchia pointed out that
Mr Fennell had in fact concluded (in para 6.5 of his report) that the authority would probably
not require this to be undertaken. Mr Fennell had also stated in his oral evidence that, as the
land was located within the City Fringe DEA proposed in the working draft of the UDP
Review, it was policy E6 rather than E5 that applied, and E6 had no such marketing
requirement. As will be seen from our conclusions on the planning issues we accept that there
would, in reality have been no such requirement and therefore, in our judgment, the whole of
that 12 month period can be deleted from the total.
110. Next, according to Mr Todd, at least 8 months should be allowed (knowing that Hackney
planners were notoriously slow in determining applications) to obtain the requisite permission.
Mr Fennell had suggested 6 months. Whilst we have determined above that it is to be assumed
that planning permission was in existence at the valuation date, we are of the view that in the
alternative, hope value, scenario that we have to consider, a period of 8 months is the minimum
that a prospective developer would have allowed if the whole planning exercise had to be
commenced upon completion of the purchase at the valuation date.
111. The time to be allowed for demolition and construction was not in dispute, but whilst
Mr Hardy thought that the offices would be let and would be occupied as soon as the
development was completed, Mr Todd allowed a further 6 months void for the commercial
element. He acknowledged that the flats would have been sold off-plan but said that what were
36

proposed to be very basic offices without comfort cooling or suspended ceilings were not pre-
let material and could not effectively be marketed until they were complete. We accept
Mr Todd’s views on this and add 6 months void for the offices (and allow for 6 months rent
free) in our calculation which becomes:
Period
PP exists at Valuation date
PP to be sought
To obtain vacant possession
0 months
0 months
To obtain planning consent
0 months
8 months
Pre-construction
3 months
3 months
Demolition/construction
12 months
12 months
Letting void (offices)
6 months
6 months
Total
21 months
29 months
112.  Our valuation is at Appendix 3. Adopting the agreed inputs and applying our own
conclusions on those that were not agreed, it produces a residual of £608,030 – say £608,000.
The valuation assumes, in accordance with our earlier conclusion, that planning permission is
to be assumed to have existed at the valuation date. If, however, planning permission is not to
be assumed at that date but is to be assumed at such time thereafter as it could have been
expected to be granted, so that an allowance should be made for the time needed to obtain it,
our valuation is that in Appendix 4, where the residual is £583,395 – say £583,000.
Comparative basis valuations - evidence
113.  Mr Todd considered an analysis of the sale of comparable properties in the area to be the
most appropriate route to establishing whether or not there was any additional value
attributable to the prospects of gaining planning permission. He initially considered eleven
transactions within a mile or so of the subject property, of which ten were open market sales,
and one, 197-198 Shoreditch High Street, was a negotiated settlement under the scheme. All of
the transactions took place within a time scale of 9 months either side of the valuation date. He
then dismissed three of these transactions. He rejected 55-57 Rivington Street and a site at the
corner of Wheler Street and Quaker Street because each of them had been sold with the benefit
of planning permission, and the prices achieved reflected that fact (£278.78 psf and £229.55 psf
respectively). Mr Todd also rejected 10a Great Eastern Street because, although it was very
close to the subject property, he thought that it might have had a significant element of ransom
value in connection with access to the adjacent property. Although he was unable to adduce
evidence to that effect, Mr Todd said he thought 10a had been purchased by the owner of the
adjoining property and, at £276.21 psf, was clearly out of line with the comparables upon
which he had relied.
37

114.  In making adjustments for the prospects of obtaining planning permission to the
comparables that he did use, so as to relate them to the different prospects on the subject
property, Mr Todd said he had relied to a large extent upon the views of Mr Rowell. He said
that a prospective purchaser would anticipate that there was some long-term hope of obtaining
permission for a development that included live/work or residential use on the upper floors, but
he was of the view that that hope would be less than it was with any of his comparables, other
than 97-101 Hackney Road, where he said the chances were the same. He also adjusted for
location, market growth, economies of scale (larger sites having a proportionately lower build
cost than smaller ones) and prominence. He produced a table analysing the sale of eight
properties, which, once adjustments to compare the sale site with the subject property had been
made, indicated an average value of £93.51 psf based on overall site area. All the properties
were in a Defined Employment Area, and six of them were in the South Shoreditch Inset Area.
The first property considered, 23-25 Waterson Street E2, was a 4,326 sq ft site where the
buildings had already been demolished and it was being used as a temporary car park. It was in
a quiet side street somewhat further away from the City but still within the South Shoreditch
Inset Area as depicted on the UDP plan. The site sold in May 2001 without planning consent
for a price equivalent to £116.61 per sq ft, but was subsequently developed following a
planning approval gained in 2004 for mixed B1 offices and residential use. Mr Todd deducted
£10,000 from the sale price for the fact that there would be no demolition costs, giving £114.21
psf, then added 5% for location and 10% for capital growth between May and December 2001,
but then deducted 20% for the fact that, in his view, there was a better chance of achieving
planning consent at Waterson Street than at the subject property. These adjustments resulted in
an overall 5% deduction from the achieved sale price to give an equivalent value of £108.50
psf.
115.  97-101 Hackney Road was a site of 6,547 sq ft that sold prior to auction 3 months after
the valuation date, without planning permission, for £91.64 psf. Slightly further from the City,
being just north of Waterson Street, it had a main road frontage but had yet to be developed.
Mr Todd considered that there was an equal chance of planning consent being obtained on this
site, but after adjustments for location, prominence and the capital growth that would have
occurred over the 3 month period, he felt there should be an overall reduction of 2.5% to give
an equivalent value of £89.35 psf. 9-11 Garden Walk was a cleared site of 6,534 sq ft, which
also sold prior to auction without planning permission for £153.05 psf in December 2001 and
did not therefore need any adjustment for growth. It was close to the subject property but in a
more attractive, quieter area that had a higher proportion of residential units. Planning
permission was granted in May 2003 for ground and first floor offices, with 5 floors of flats
above. The largest adjustment that had to be made, Mr Todd said, was a reduction of 35% to
reflect considerably higher hope value for achievement of the required planning consent that
existed at Garden Walk. After making further adjustments to allow for demolition costs and
economies of scale the overall reduction should be 40% giving an equivalent value of £90.90
psf.
116.   86-90 Curtain Road EC2 was a very large site of some 33,000 sq ft occupied by virtually
derelict buildings, sold without planning consent in September 2001 at £110.61 psf. It has
subsequently achieved planning consent and has been converted to part commercial and part
residential accommodation. Mr Todd said there was a 20% better chance of that permission
being achieved than on the subject property, and after the other adjustments he made for area,
economies of scale, prominence and growth, the overall reduction became 25% and the
equivalent value was thus £82.96 psf. 92-96 Curtain Road EC2, being immediately adjacent
38

warranted similar adjustments, in this case a 27.5% reduction (20% of which related to the
better planning prospects) from the sale price of £135.71 psf to £98.39 psf. 2-10 Hertford Road
N1
and an adjacent site were sold in March and July 2002 at £93.91 psf and £128.11 psf
respectively. These were adjusted in the same manner to produce equivalent values of £78.88
and £108.99. In both cases, the chances of achieving planning consent for
commercial/live/work/residential use were considered to be 10% better than at the subject
property. 197-198 Shoreditch High Street, acquired by agreement in connection with the
scheme, warranted a deduction of 35% from the compensation paid of £138.80 psf to allow for
that property’s infinitely greater prospects of obtaining planning consent.
117.  Mr Todd also analysed the acquisition of the subject property in two parts by the
claimant in April and December 1999, although he accepted that the purchase of the second,
smaller area as part of the acquisition of a business was not particularly useful. The major area,
of about 2,614 sq ft, was bought from the receiver for a price which equated to £43.99 psf.
That figure, he said, needed to be adjusted upwards by 100% to £87.98 psf to reflect market
growth in the 20 months to the valuation date. Having established a range of values of between
£87.98 psf and £93.51 psf, Mr Todd said that allowing for the fact that the four comparables
that needed the least adjustment came out to an average of £90.40 psf, he was of the view that
the appropriate value for the subject property, allowing for its limited prospects of obtaining
permission for a scheme that included residential elements, was £90 psf. This he applied to a
site area of 3,122 sq ft (being the area calculated by the architects Calfordseaden and advised
by them to the council in August 2004) to give £280,980, say £281,000. He then deducted
£20,000 to cover costs and delays in dealing with the Treasury Solicitor for obtaining vacant
possession, and £30,000 for the cost of removing the remaining printing machinery and
equipment, to leave a net £231,000.
118.  In cross-examination, Mr Todd acknowledged that he had used a number of comparables
that were somewhat further away from the City, and that if he had relied solely upon those that
were really close-by, the average adjusted values might have been higher. He said that he used
the purchase of the larger portion of the site by the claimant in 1999 as a starting point for his
valuation, but he accepted that by then the CPO was confirmed and the price, which was also
negotiated in September 1998, could not, therefore, be considered untainted by it. However,
he said that it could be expected that market value would have been paid, as the receiver would
be bound to achieve the best price possible. As to 197-198 Shoreditch High Street, Mr Todd
said that whilst it was a negotiated settlement, it was relevant as the compensation paid had to
be based upon open market evidence. However, he accepted that in reality the price actually
paid had been considered marginally below open market value and LUL had therefore been
keen to complete the deal. He accepted that the percentage adjustments he had made to the
properties and sites sold without planning permission had been subjective, and to a large extent
were based upon his knowledge of the area, and, as to the adjustments for the chance of
obtaining planning consent, had been influenced by Mr Rowell’s report. Mr Todd agreed with
the suggestion that, if the Tribunal found that planning permission would have been
forthcoming, the two comparables he had dismissed would become relevant, and, with the re-
adjustments that would have to be made to the comparables that did not have planning consent,
the rate for the subject property would need to be much higher. However, he stressed that
adjustments would still need to be made. For instance, Rivington Street was a much better
location, although being for office use only it did not have the more valuable residential
element. Wheler Street/Quaker Street on the other hand had a much higher residential content
than was provided for in the claimant’s scheme, together with valuable A3 use at ground floor.
39

119.  It was contended on behalf of the claimant that the majority of the comparables upon
which Mr Todd relied were in less attractive areas, further away from the City fringe, and
therefore less valuable. Mr Nardecchia submitted that a number of adjustments made by
Mr Todd did not fairly reflect the differences, and in any event, if the claimant’s planning
arguments were accepted, he should not have made any further adjustments for the likelihood
or otherwise of obtaining planning permission. The Rivington Street and Wheler Street/Quaker
Street comparables were, it was submitted, highly relevant and allowing for an accepted
adjustment to the former to reflect growth in the market, the average of the two was about £240
psf.
120.  The comparables method was not Mr Hardy’s preferred methodology, as it was his view
that, with the subject property presenting a specific redevelopment opportunity (the claimant’s
proposed scheme), a residual calculation was preferable, and would provide a more accurate
figure. However, he did analyse six of the comparables that had been considered by Mr Todd
(three of which had been rejected by him) to give an alternative to his principal valuation
method, and he also commented on some of the others. In his analyses, he made no distinction
between those sites that had planning permission and those which did not, choosing instead to
take an overall average per sq ft of the prices achieved, adjusted as necessary, and then applied
that to the subject property. The properties he chose to analyse were those, which, he said,
were closest to the subject property, and his valuation on this basis (amended at the
commencement of his evidence to reflect his late withdrawal of another comparable at 196
Shoreditch High Street) was £718,000.
121.  Referring firstly to 10a Great Eastern Street, Mr Hardy reduced the achieved price by
10% to reflect its smaller size to give an equivalent value of £248.14 psf. He said that 92-96
Curtain Road had a frontage to an extremely busy and noisy main road, the buildings were in
exceptionally poor condition and would be difficult and costly to convert, and the site area was
twice that of the subject property. He therefore adjusted the purchase price of £135.71 to
£192.57 to reflect the differences. 86-90 Curtain Road was 10 times the size of the subject
property, and in Mr Hardy’s view an even larger adjustment was needed. He applied 45% to
the £110.61 sale price to give £167.24 psf. He accepted in evidence that he had not made any
further adjustment for the fact that it had transpired that the property had suffered severe
structural problems, and needed £4.5 million to stabilise it. If he had done so, he said the
averaging exercise would have produced a higher figure. On 9-11 Garden Walk, Mr Hardy
added 10% to the sale price of £153.05 for its quieter location and larger size to give £168.35.
Of the two properties that had been sold with planning permission, Mr Hardy made no
adjustment to Rivington Street (£278.78 psf). On Wheler Street/Quaker Street, which he
considered to be eminently comparable, Mr Hardy said initially that, because it had full
planning permission, and the assumption that the subject property only had outline consent
presented “a small element of risk”, he was proposing to adjust that price of £229.55 psf by
averaging it with the preceding 5. However, having realised that meant it would be given a
weighted average 5 times that of the other comparables, he finally settled upon an unweighted
average of all 6 comparables to give £214.10 psf. He applied this to a site area for the subject
property of 3,354 sq ft, which, he said, was derived from calculations undertaken by the
acquiring authority in December 2005, by digitally overlaying the title plans onto the Ordnance
Survey sheet.
40

122.  Mr Hardy rejected 197-198 Shoreditch High Street as it was a CPO related settlement,
and there were questions over whether the agreed price actually represented the open market
value in the no-scheme world. He also dismissed 97-101 Hackney Road, the site and building
in Hertford Road and 23-25 Waterson Street, as these were considered to be too far away to
provide a meaningful comparison. Finally, he did not consider the previous transactions
relating to the subject property. He accepted in cross-examination that he had assumed in
carrying out his analyses that planning permission did exist for the claimant’s scheme at the
valuation date and that, if permission were not to be assumed, the exercise would need to be
done again.
123.  In submissions, Mr Nardecchia said that the averaging exercise could be open to criticism
as it was too general in nature, and the difference between the £718,000 arrived at by this
method and the one arrived at on the residual basis could be due to the deficiencies of the
comparables and the averaging process based upon them. However he said that whilst it was
the claimant’s case that no adjustments should be made for differential hope value of obtaining
planning permission, it was possible to derive separate averages for those sites that did have
permission (about £240 psf) and those that did not (£195 psf), both of these figures being
substantially higher than the £90 psf propounded by Mr Todd. Mr Barnes pointed out that, as
had been mentioned in a rebuttal report from Mr Todd, it appeared that Mr Hardy had made his
adjustments for the size of the comparable properties and sites in the wrong direction.
Comparative basis valuations - conclusions
124.  Mr Todd produced his comparables for the purpose of valuing the subject land on the
assumption that there was no planning permission for its development but that there was a hope
that planning permission might be granted. He therefore based himself on the comparables that
related to sites that did not have planning permission at the time of the transaction and he
rejected as of no assistance for his purposes the two transactions where there was planning
permission. We have concluded that the subject land is to be valued on the assumption that it
had planning permission on the valuation date, and we cannot derive a value on this basis from
transactions relating to sites without planning permission. We also consider that a valuation
based on hope value cannot satisfactorily be made, as Mr Todd sought to do, on the basis of
these transactions. The making of adjustments to reflect the comparative chances of obtaining
planning consent for redevelopment in those cases where properties were sold without the
benefit of it is inescapably speculative, and Mr Todd acknowledged in cross-examination the
subjective nature of the exercise. A purchaser would not have known whether planning
permission would be granted or when it might be obtained, the amount of floorspace that
would be permitted or the mix of uses. He might have anticipated achieving a less valuable
consent than was eventually achieved and the price paid might, therefore, have been less than
that which would have been appropriate if the exact planning prospects had been known. Or he
might have expected a more valuable consent. There could have been a range of possible types
of development, with different prospects relating to each. If a property had significant existing
use value that could well affect the purchase price since that could well reduce the downside
risk in a speculative purchase. With insufficient knowledge of the circumstances surrounding
each of the comparable transactions, we are thus forced to the conclusion that it would be
unsafe to seek to base a valuation on those transactions where planning permission did not
exist.
41

125.  One aspect of the unreliability of the hope value transactions can be seen in graphic form
by reference to the residual valuations in the present case. It is clear from these that the value
of a development site in this location was substantially dependent on the proportionate mix of
residential and business uses. Mr Hardy took a rate of £450 psf for the residential element of
the proposed development and a rate for the ground and first floor business uses that capitalises
at £270 psf. Mr Todd took £400 psf for the residential floors and capitalised rates of £225 and
£270 psf respectively for the ground and first floors. We have taken that £400 and £270. Since
the costs attributable to each of the uses in the residual valuations are not significantly
different, it follows that if, for instance, the first floor were to be residential rather than
business or if the second floor were to be business rather than residential the difference in gross
development value would be in excess of £200,000. Expressed in terms of £ psf for a site area
of 3,122 sqft (Mr Todd’s figure, which we accept), this difference would be £64 psf. The
difference would clearly be very significant indeed whether related to Mr Hardy’s residual
valuation (£907,072), which gave £290 psf, Mr Hardy’s £274,489 and £88 psf or our own
£608,000 and £195 psf. On any of the hope value comparables lack of knowledge of the mix
of uses that might be permitted would be a significant factor.
126.  Two of the transactions related to sites with planning permission. Wheler Street/ Quaker
Street, where the price devalues to £229 psf, had planning permission for ground floor retail
and residential on four floors above, and 55-57 Rivington Street, which devalues to £278 psf,
had permission for a three-story office building. Rivington Street was in a better location and it
appears there may well have been a hope of achieving planning permission for at least some
residential floorspace, but even allowing for these factors, given the different uses permitted at
the two sites, it is very difficult to reconcile these two prices. Our conclusion is that these two
transactions are too narrow and unsatisfactory a base to enable a comparative basis valuation of
the subject land to be made. The general observation may, however, be made that these two
sites with planning permission fetched substantially more (£229-278 psf) than the sites without
planning permission (£44-153 psf), and this is what we would expect. (We omit from the latter
category 10a Great Eastern Street, where it seems clear that special considerations applied.)
Existing use value – evidence
127.  The valuers agreed that, to assess the existing use value of the subject property, the
investment method was appropriate, although there were virtually no comparables available of
either sales of like units, or rental evidence. They were unable to agree the areas of the ground
floor and basement as they existed at the valuation date. Mr Hardy acknowledged that an
existing use valuation had not been produced in the original report but in carrying out this
exercise himself, adopted the stated internal floor area of 3,660 sq ft overall from Mr Cousins’
description of the property. He said that from information provided by his City of London
office, he was of the view that an appropriate rental value for a City fringe light industrial
workshop would be about £12.50 per sq ft (psf) overall but he made no distinction between
ground floor and basement. In cross-examination he said he thought £15 psf on the ground
floor and £10 psf for the basement were appropriate, and thus his figure was an average.
However, as Mr Barnes pointed out in his submissions, the ground floor area was in fact almost
three times the size of the basement. Mr Hardy said that in arriving at his figure, he had also
considered the schedule of office rents that Mr Cousins had produced and had made an
appropriate discount. He did not agree with Mr Todd’s reliance upon the valuation officer’s
42

assessment for rating purposes, but in any event, he said, the existing use value was not
relevant, as no account was taken of the development potential.
128.  To the resulting rental value of £45,750pa Mr Hardy then applied a yield of 7%, which
was 1% less than that which Mr Cousins and Mr Todd had believed would be appropriate for
capitalising the prospective new offices in their residual valuations. This figure, he said,
reflected the considerable redevelopment potential that existed (which in cross-examination he
stated to be the opportunity to increase the income by renovation or conversion to offices), but
he accepted that he had not allowed anything for the cost of the works that would be required
to facilitate the expected growth in income. Mr Nardecchia acknowledged in closing that
Mr Hardy’s yield admitted an element of redevelopment value and was not therefore, strictly
speaking, an existing use valuation. Using the 7% multiplier of 14.28 gave a capital value of
£653,310.
129.  In his original report of 12 May 2006, Mr Todd assessed the existing use value of the
subject property at £250,000 but did not explain how that figure was reached. He had at that
time been of the view that the value of the property, assessed by reference to comparables and
reflecting its under-developed nature and thus an element of hope value, was £281,000 and it
had not been necessary, therefore, to provide justification for the EUV. However, in his
second supplemental report of January 2007 he said that he had not previously been aware of
Die Formes tenancy, and by the time an allowance was made for obtaining vacant possession,
the existing use value became the highest valuation, and thus the compensation to be awarded.
In January 2007 he produced a third supplementary report that, following his discussions with
Mr Hardy on the issue of floor areas, and noting an earlier arithmetical error, re-examined his
estimate of the existing use value.
130.  Mr Todd said that he adopted the gross internal areas from the plans that were attached to
the schedule of condition prepared by Watts & Partners and which gave 2,298 sq ft on the
ground floor, and 891 sq ft in the basement, totalling 3,189 sq ft. Those areas, he said, were
broadly supported by those in the summary valuation prepared by the Valuation Office Agency
for the 2005 rating list which were, in fact, slightly less. As there was no contemporaneous
evidence of rental values for similar premises in the area at or around the valuation date,
Mr Todd adopted the figures used by the VO, as these would have been derived from rental
return forms received from general industrial users in the immediate vicinity. These were
£6.19 psf for the ground floor, and £3.10 psf for the basement, to which he added £400 for each
of the three car parking spaces, giving an annual rental value of £18,187. Whilst he accepted
that the antecedent valuation date was 1 April 2003, some 16 months after the valuation date,
he was of the view that there was likely to have been little difference in values between the two
dates. Although demand had been strong until the latter part of 2002, it had tailed off, and it
also had to be borne in mind that the subject premises were in poor condition and that would be
reflected in the rental value. He also accepted that the valuations for rating assessments were
on the statutory hypothesis that required the assumption of a tenancy from year to year, but
pointed out that in practical terms there should be little difference as the figures in the rental
returns would most likely relate to traditional periodic tenancies. Nevertheless he did
acknowledge in cross-examination that a valuation based purely on rating returns would be less
reliable than reference to comparables. Applying a multiplier of 12.5 to the rental value to
reflect a YP of 8%, produced £227,338, say £227,500.
43

Existing use value – conclusions
131.  It was clear that neither Mr Cousins, nor Mr Todd set much store by the existing use
value when their initial reports were prepared. Mr Cousins made no mention of it, and
Mr Todd settled upon a figure of £250,000 that was not supported by any calculations or
methodology. All the valuers who have been involved concluded that the property contained
development potential, to varying degrees, and it is quite understandable that little thought
appeared to have been given to a basis that should exclude any hope value for future
development. Indeed, it was only when potential costs associated with removing a tenant came
into play that it became apparent, in the acquiring authority’s view, that existing use value
might exceed that which might obtain if development potential were taken into account. At
that stage, Mr Todd sought to reconsider the matter and as a result reduced his initial figure by
£22,500. In closing Mr Nardecchia criticised the use by Mr Todd of the VO’s valuation on a
number of grounds including the fact that the rating valuation was carried out in the real world
on the statutory basis, rather than, as was required here, the open market value in the no-
scheme world on the basis of section 5, rule (2) of the Act. There was also a disparity in dates
and it was submitted therefore that no weight should be given to that evidence. Whilst we
agree that, as Mr Todd admitted, that evidence was not ideal, we are satisfied that it is
considerably more persuasive than that of Mr Hardy, who produced no rental evidence
whatsoever for an appropriate type of user and relied principally upon a conversation he had
had with one of his colleagues, who gave an opinion on rental values for light industrial units
on the City fringe. We were not told whether they were 2007 values, or those considered to be
applicable at the valuation date. He did say that he had also considered Mr Cousins’s schedule
of comparable lettings and had made a significant discount from that. However, that schedule
was for B1 offices, and in our view rental values for such a use would bear no relation to the
type of premises that are the subject of this reference. Mr Hardy also made no distinction
between ground floor and basement in his overall assessment of £12.50 psf, and when
challenged referred to it being an average between ground and basement rates. As was pointed
out, with there being so much difference in areas, that could not have been so. We attach no
weight to his expressed opinions in this element of the valuation.
132.  In the absence of any other evidence we are bound to attach weight to Mr Todd’s analysis
as he did, as Mr Barnes said, at least attempt to adduce comparable evidence and explained
how he went about it. We therefore adopt his rental values. As to areas, we are satisfied that
Mr Todd’s approach was entirely reasonable, and again he explained where his figures came
from. Mr Cousins did not disclose in his original report the provenance of his estimate of
3,660 sq ft which did not, in any event, distinguish between floors. Mr Hardy simply adopted
that figure and, as we have said, he did not seem to have considered the question of different
floors until he was cross-examined on the point. We therefore accept Mr Todd’s areas.
Finally, turning to the question of yield, it was accepted by the claimant that Mr Hardy’s use of
7%, reflecting as it did development potential, did not produce a true or untainted existing use
value. As Mr Todd and Mr Cousins had agreed 8% between them, we adopt that figure. The
valuation is therefore:
Ground floor 2,298 sq ft @ £6.19 psf                                   £ 14,224
Basement 891 sq ft @ £3.10 psf                                          £ 2,762
3 parking spaces @ £400 each                                             £ 1,200
44

£ 18,186
YP in perpetuity at                                             12.5
£227,325
Say £227,500
Hope value
133.  Based upon our conclusion that if we are wrong in our view that planning consent is to be
assumed at the valuation date, there was a strong likelihood that the claimant’s scheme as
proposed would have gained consent if an application had been made at the valuation date, it is
necessary, to arrive at our valuation in the alternative, to consider the size of the reduction that
a prospective purchaser would make from the full development value to reflect the risk.
Allowing only for an extension to the development cycle to allow for the time taken to achieve
planning consent would make only a marginal difference to the residual land value if that
method were used. However, a residual valuation can be of no assistance in these
circumstances, as it does not, and cannot, include any allowance for the risk that the required
permission might not be forthcoming. Moreover, as we have said, we do not find Mr Todd’s
hope value comparables of assistance in deriving a value for the subject land because of the
great range of unknowns and uncertainties relating to them.
134.  To reach our assessment of the value of the site on the basis that there was no more than
a hope of planning permission, we start by noting our conclusion on existing use value
(£227,500) and the value that we find that the site would have had with the benefit of planning
permission (£608,000). Its value if there was only a hope of planning permission would be
somewhere between these two figures. Our conclusion is that there would have been a very
good prospect indeed of getting planning permission for some form of redevelopment, a good
chance of getting permission for the scheme that has been the subject of the residual valuation
and little chance of achieving a planning permission for a scheme with a greater element of
residential floorspace. We see no reason for thinking that a purchaser would not form a similar
assessment both of the existing use and development values and the prospects of achieving
planning permission. He would, however, be very conscious of the uncertainties – of not
achieving planning permission for a valuable development, of the amount of floorspace and the
mix and the potential for delay in achieving permission. Our conclusion is that a purchaser in
these circumstances would have been prepared to pay substantially more than existing use
value but much less than full development value, say £400,000.
Conclusion
135.  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.
45

(b)    Alternatively, if such a permission is to be assumed, but only at such time after
the valuation date as it could have been expected to be granted, our valuation is
£583,000.
(c)     Alternatively, if such permission is not as a matter of law to be assumed and
only hope value is to be taken into account, £400,000.
We would add that if a restricted approach to the application of Pointe Gourde were correct
(see paragraph 64 above), so that planning permission should only be assumed pursuant to
Pointe Gourde if the statutory provisions would give compensation that is far removed from
what would be fair, our conclusion is that this restricted test would be satisfied. The reason for
this is that none of the statutory provisions would give a value that is in excess of existing use
value. If a section 17 certificate had been issued, the relevant date would have been autumn
1993, and at that time planning permission for a mixed-use scheme would not have been
forthcoming. The difference between each of the values that we have determined above and
existing use value is very great.
136. This decision determines the substantive issues in this reference and will become final
when the question of costs is decided. The accompanying letter sets out the procedure for
making submissions on costs.
Dated 16 November 2007
George Bartlett QC, President
Paul R Francis FRICS
46

CLAIMANT’S VALUATION
ANDREW JOHN HARDY FRICS
ACQ/41/2005
APPENDIX 1
rd
Valuation as at 3rd December 2001
Appraisal Summary for Part 1
REVENUE
Sales Valuation
ft2
Rate ft2
Grs. Value
3rd Floor
1,638
£450.00
737,100
2nd Floor
1,638
£450.00
737,100
3,276
1,474,200
Rental Area Summary
ft2
Rate ft2
Grs. Rent pa
Lower Grd Floor
1,736
£15.00
26,040
Ground Floor
1,953
£22.50
43,943
1st Floor
1,638
£22.50
36,855
5,327
106,838
Investment Valuation
Yield
Lower Grd Floor
Valuation Rent
26,040
YP @
8.0000%
(6mths Rent Free)
PV 6m @
8.0000%
Ground Floor
Valuation Rent
43,943
YP @
8.0000%
(6mths Rent Free)
PV 6m @
8.0000%
1st Floor
Valuation Rent
36,855
YP @
8.0000%
(6mths Rent Free)
PV 6m @
8.0000%
Factor
Cap. Rent
12.5000
0.9623
313,213
12.5000
0.9623
528,546
12.5000
0.9623
443,297
1,285,055
2,759,255
2,759,255
GROSS DEVELOPMENT VALUE
NET REALISATION
OUTLAY
ACQUISITION COSTS
Acquisition Price
907,072
Stamp Duty
4.00%
36,283
Acquisition Agent Fees
1.00%
9,071
Acquisition Legal Fees
0.50%
4,535
956,961
CONSTRUCTION COSTS
Summary
ft2
Rate ft2
Costs
Lower Grd Floor
2,105
£100.00
210,500
Ground Floor
2,560
£100.00
256,000
1st Floor
1,965
£100.00
196,500
3rd Floor
1,965
£100.00
196,500
2nd Floor
1,965
10,560
£100.00
196,500
1,056,000
Contingency
5.00%
52,800
52,800
PROFESSIONAL FEES
Architect
5.00%
52,800
Quantity Surveyor
1.00%
10,560
47

Structural Engineer
1.00%
10,560
Mech./Elec. Engineer
1.00%
10,560
Project Manager
1.00%
10,560
Constr. Des. Management
1.00%
10,560
Post construction Costs
5,000
MARKETING
Marketing
5,000
Letting Agent Fees
15.00%
16,026
Letting Legal Fees
5,342
DISPOSAL FEES
Purchaser’s Costs
5.75%
73,891
Sales Agent Fees
27,593
Sales Legal Fees
0.50%
13,427
FINANCE
Debit Rate 6.250% Credit Rate 0.000% (effective)
Land
54,480
Building
27,234
Total Finance Cost
110,600
26,368
114,911
81,715
TOTAL COSTS
2,399,354
359,902
PROFIT
Performance Measures
Profit on Costs
15.00%
Profit on GDV%
13.04%
Profit on NDV%
13.40%
Development Yield
4.45%
Equivalent Yield (Normal)
7.71%
Equivalent Yield (True)
8.08%
IRR%
30.50%
Rent Cover
3 yrs 4 mths
Profit Erosion (finance rate 6.250%)
2 yrs 3 mths
48

ACQUIRING AUTHORITY’S VALUATION
DAVID BROWN TODD BSc (ECON) FRICS FCIArb
64-67 Holywell Lane, London EC2
Redevelopment
ACQ/41/2005
APPENDIX 2
Appraisal Summary for Linked Parts 1 2
REVENUE
Sales Valuation
ft2
Rate ft2
Grs. Value
Second
1,638
£400.00
655,200
Third
1,638
£400.00
655,200
3,276
1,310,400
Rental Area Summary
ft2
Rate ft2
Grs. Value pa
Lower Grd
1,736
£10.00
17,360
Grd
1,703
£20.00
34,060
Grd Recep
250
£10.00
2,500
First
1,638
£22.50
36,855
5,327
90,775
Investment Valuation
Valuation Rent
Yield
Lower Grd
17,360
YP @
8.00%
6 mths rent free
PV (6 mths) @
8.00%
Grd
34,060
YP @
8.00%
6 mths rent free
PV (6 mths) @
8.00%
Grd Recep
2,500
YP @
8.00%
6 mths rent free
PV (6 mths) @
8.00%
First
36,855
YP @
8.00%
6 mths rent free
PV (6mths) @
8.00%
Factor
Cap. Rent
12.5000
0.9623
208,808
12.5000
0.9623
409,678
12.5000
0.9623
30,070
12.5000
0.9623
443,297
1,091,854
GROSS DEVELOPMENT VALUE
Purchaser’s Costs
NET DEVELOPMENT VALUE
NET REALISATION
5.76%
-59,466
2,402,254
2,342,788
2,342,788
OUTLAY
ACQUISITION COSTS
Acquisition Price
Stamp Duty
Acquisition Agent Fees
Acquisition Legal Fees
CONSTRUCTION COSTS
Summary                            ft2
Lower Grd                    6,630
Second                          3,930
10,560
Contingency
PROFESSIONAL FEES
Professional Fees
274,489
4.00%
10,980
1.00%
2,745
0.50%
1,372
289,586
Rate ft2
Costs
£110.00
729,300
£110.00
432,300
1,161,600
5.00%
58,080
58,080
10.00%
116,160
49

MARKETING
Marketing
Letting Agent Fees
Letting Legal Fees
DISPOSAL FEES
Sales Agent Fee
Sales Legal Fees
ADDITIONAL COSTS
Post Construction Costs
VP Premium
Archaeological Costs
40,000
15.00%
13,616
5.00%
4,539
43,084
0.50%
11,714
5,000
50,000
10,000
58,155
54,798
65,000
FINANCE
Debit Rate 6.250% Credit Rate 0.000% (Effective)
Total Finance Cost
TOTAL COSTS
PROFIT
Performance Measures
233,829
2,037,207
305,581
Profit on Costs%
15.00%
Profit on GDV%
12.72%
Profit on NDV%
13.04%
Development Yield
4.46%
Equivalent Yield (Normal)
8.00%
Equivalent Yield (True)
8.42%
IRR%
13.52%
Rent Cover
3 yrs 4 mths
Profit Erosion (finance rate 6.250%)
2 yrs 3 mths
50

ACQ/41/2005
APPENDIX 3
LANDS TRIBUNAL VALUATION
64-67 HOLYWELL LANE, LONDON EC2
Appraisal Summary for Part 1
REVENUE
Sales Valuation
ft2
Rate ft2
Grs. Value
Second floor
1,638
£400.00
655,200
Third floor
1,638
£400.00
655,200
Totals
3,276
1,310,400
Rental Area Summary
ft2
Rate ft2
Gross MRV
Lower ground
1,736
£12.50
21,700
Ground
1,703
£22.50
38,318
First
1,638
£22.50
36,855
Reception
250
£11.25
2,813
Totals
5,327
99,685
Investment Valuation
Lower ground
Market Rent
21,700
YP @
8.0000%
12.5000
(6 mths rent free)
PV (6 mths) @
8.0000%
0.9623
261,010
Ground
Market Rent
38,318
YP @
8.0000%
12.5000
(6 mths rent free)
PV (6 mths) @
8.0000%
0.9623
460,888
First
Market Rent
36,855
YP @
8.0000%
12.5000
(6 mths rent free)
PV (6mths) @
8.0000%
0.9623
443,297
Reception
Market Rent
2,813
YP @
8.0000%
12.5000
(6 mths rent free)
PV (6 mths) @
8.0000%
0.9623
33,829
1,199,024
GROSS DEVELOPMENT VALUE
2,509,424
NET REALISATION
OUTLAY
ACQUISITION COSTS
Residualised Price
608,030
Stamp Duty
4.00%
24,321
Agent Fees
1.00%
6,080
Legal Fees
0.50%
3,040
641,472
CONSTRUCTION COSTS
Construction
ft2
Rate ft2
Costs
Lower ground
2,105
£105.00
221,025
Ground
2,560
£105.00
268,800
First
1,965
£105.00
206,325
Second floor
1,965
£105.00
206,325
Third floor
1,965
£105.00
206,325
Totals
10,560
1,108,800
1,108,800
51

Contingency
PROFESSIONAL FEES
Architect
Quantity Surveyor
Structural Engineer
Mech./Elec.Engineer
Project Manager
C.D. Manager
MARKETING & LETTING
Marketing
Letting Agent Fee
Letting Legal Fee
5.00%
55,440
55,440
5.00%
1.00%
1.00%
1.00%
1.00%
1.00%
55,440
11,088
11,088
11.088
11.088
11.088
110,880
20,000
14,953
4,984
39,937
69,064
24,404
12,202
105,669
10,000
5,000
15,000
47,031
35,214
22,665
104,910
2,182,108
327,316
15.00%
5.00%
DISPOSAL FEES
Purchaser’s Costs                                             5.76%
Sales Agent Fee                                               1.00%
Sales Legal Fee                                               0.50%
Additional Costs
Archaeological fees
Post construction costs
FINANCE
Debit Rate 6.25% Credit Rate 0.00% (Effective)
Land
Construction
Letting Void
Total Finance Cost
TOTAL COSTS
PROFIT
Performance Measures
Profit on Cost%
15.00%
Profit on GDV%
13.04%
Profit on NDV%
13.41%
Development Yield% (on Rent)
4.57%
Equivalent Yield% (Nominal)
8.00%
Equivalent Yield (True)
8.42%
Gross Initial Yield%
8.31%
Net Initial Yield%
8.31%
IRR
16.36%
Rent Cover
3 yrs 3 mths
Profit Erosion (finance rate 6.250%)
2 yrs 3 mths
52

ACQ/41/2005
APPENDIX 4
LANDS TRIBUNAL
ALTERNATIVE VALUATION
64-67 HOLYWELL LANE, LONDON EC2
Appraisal Summary for Part 1
REVENUE
Sales Valuation
ft2
Second floor
1,638
Third floor
1,638
Totals
3,276
Rental Area Summary
ft2
Lower ground
1,736
Ground
1,703
First
1,638
Reception
250
Totals
5,327
Investment Valuation
Lower ground
Market Rent
21,700
(6 mths Rent Free)
Ground
Market Rent
38,318
(6 mths Rent Free)
Market Rent
36,855
(6 mths Rent Free)
Reception
Market Rent
2,813
(6 mths Rent Free)
Rate ft2
Gross. Value
£400.00
655,200
£400.00
655,200
1,310,400
Rate ft2
Gross MRV
£12.50
21,700
£22.50
38,318
£22.50
36,855
£11.25
2,813
99,685
YP @
8.0000%
PV (6 mths) @
8.0000%
YP @
8.0000%
PV (6 mths) @
8.0000%
YP @
8.0000%
PV (6mths) @
8.0000%
YP @
8.0000%
PV (6 mths) @
8.0000%
1,310,400
12.5000
0.9623
261,010
12.5000
0.9623
460,888
12.5000
0.9623
443,297
12.5000
0.9623
33,829
1,199,024
GROSS DEVELOPMENT VALUE
NET REALISATION
OUTLAY
2,509,424
ACQUISITION COSTS
Residualised Price
583,395
Stamp Duty
4.00%
23,336
Agent Fees
1.00%
5,834
Legal Fees
0.50%
2,917
CONSTRUCTION COSTS
Construction
ft2
Rate ft2
Costs
Lower ground
2,105
£105.00
221,025
Ground
2,560
£105.00
268,800
First
1,965
£105.00
206,325
Second floor
1,965
£105.00
206,325
Third floor
1,965
£105.00
206,325
Totals
10,560
1,108,800
615,482
1,108,800
53

Contingency
PROFESSIONAL FEES
Architect
Quantity Surveyor
Structural Engineer
Mech./Elec.Engineer
Project Manager
C.D. Manager
MARKETING & LETTING
Marketing
Letting Agent Fee
Letting Legal Fee
DISPOSAL FEES
Purchaser’s Costs
Sales Agent Fee
Sales Legal Fee
Additional Costs
Archaeological fees
Post construction costs
5.00%
55,440
55,440
5.00%
1.00%
1.00%
1.00%
1.00%
1.00%
55,440
11,088
11,088
11.088
11.088
11.088
110,880
20,000
14,953
4,984
39,937
69,064
24,404
12,202
105,669
10,000
5,000
15,000
72,389
35,907
22,603
130,900
2,182,108
327,316
15.00%
5.00%
5.76%
1.00%
0.50%
FINANCE
Debit Rate 6.25% Credit Rate 0.00% (Effective)
Land
Construction
Letting Void
Total Finance Cost
TOTAL COSTS
PROFIT
Performance Measures
Profit on Cost%
15.00%
Profit on GDV%
13.04%
Profit on NDV%
13.41%
Development Yield% (on Rent)
4.57%
Equivalent Yield% (Nominal)
8.00%
Equivalent Yield (True)
8.42%
Gross Initial Yield%
8.31%
Net Initial Yield%
8.31%
IRR
13.09%
Rent Cover
3 yrs 3 mths
Profit Erosion (finance rate 6.250%)
2 yrs 3 mths
54


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