Case No: LATRF/1999/1161/A3
 
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL  DIVISION)
ON APPEAL FROM THE LANDS TRIBUNAL
Royal Courts of Justice
Strand, London, WC2A 2LL

Wednesday 19th April, 2000

B e f o r e :

LORD JUSTICE STUART-SMITH
LORD JUSTICE MUMMERY
and 
LORD JUSTICE TUCKEY
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	BOLTON METROPOLITAN BOROUGH COUNCIL		Appellant	
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	TUDOR PROPERTIES LTD & ORS	Respondents	

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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040,  Fax No:  0171 831 8838
Official Shorthand Writers to the Court)
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Mr David Holgate QC (instructed by  Nabaro Nathanson for the Appellant)
Mr Andrew Gilbart QC (instructed by  Messrs Kippax Beamont Lewis for the Respondent)
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Judgment
As Approved by the Court

Crown Copyright ©

Lord Justice Mummery:

	This is an appeal  on a point of law by Bolton Metropolitan Borough Council (the Council) against the award by the Lands Tribunal (Mr NJ Rose FRICS) on 28 June 1999 of £2,211,202 compensation to Tudor Properties Limited (Tudor) and £60,186 to Messrs McGrath and Walsh (trading as McGrath Plant Hire) in respect of the compulsory purchase of 11.186 ha (27.64 acres) of freehold land on the outskirts of Bolton by the Bolton (Watersmeeting) Compulsory Purchase Order (the CPO). The hearing took place at Bolton Town Hall on 24-27 November and 22 December 1998.

	The Tribunal, having refused permission to appeal, stated and signed a case on 16 August 1999 at the request of the Council. Permission to appeal was granted by this Court on 20 October 1999.

	The Facts 

	The land in question consists of  more than a dozen plots in the northernmost part of the Tonge Valley about 1.25 miles from Bolton town centre. I shall refer to it as the Tudor Land. It is immediately south of the A58 (Crompton Way) from which there is no  access by road.

	In 1980 the Tonge Valley was established as a project area with the object of reclaiming derelict land and premises, improving access, landscaping and re-generation as a major area of industrial development and employment.

	In 1987 the aims of the project were reviewed. A strategy statement was produced confirming that the area was suitable for industry and employment purposes in a parkland setting taking advantage of the water features.

	In 1990 the Council approved the “Tonge Valley Development Framework” to improve the landscape quality of the valley; to enhance undevelopable land; to provide informal recreation space; and to achieve “the comprehensive and integrated redevelopment of the Tonge Valley Project Area, primarily for industrial and other appropriate employment.. generating uses ....through an active partnership between the public and private sectors.”

 	About £4.1m of public funds has been spent  since then in carrying out new and improved highway infrastructure to improve access within the valley and for land assembly and reclamation projects. From 1993 most of this progress was led and delivered by the Council and by Bolton City Challenge Partnership Limited. These activities encouraged development throughout the valley. In particular, road access to and from the A666 (Blackburn Road) was achieved  by the widening and extension of a cul de sac (Tippings Lane) between 1993 and 1995 to create a crescent called Watersmeeting Road  at the northern end of the valley. In the Spring of 1995 a cross valley link (Britannia Way) was completed to release the development potential of the Union Road area. 

	In 1991 the Council had approved a planning brief specifically for the Watersmeeting area, within the context of the Tonge Valley project area and as part of the Council’s City Challenge strategy. The re-development was expected to be achieved through negotiations between interested parties. (No compulsory purchase orders have been made elsewhere in the Tonge Valley).

	In 1992 the project envisaged a Watersmeeting leisure and craft village initiative, including leisure space for a multi-screen cinema, health club, night club, restaurant and garden centre.
	
	In October 1992  Tudor obtained outline planning permission to redevelop its land by the erection of industrial, business or warehouse buildings. In June 1995 it also obtained outline permission for a mixed use development of business, leisure and housing. This was followed in December 1995 by planning consent for commercial/leisure development, a revised scheme to meet the planning authority’s desire for a mixed leisure redevelopment for the site.   

	In June 1995 the Council and Bolton City Challenge Partnership undertook a competitive process to select a development partner to carry out a re-development of Watersmeeting for commercial leisure purposes. One of the 5 schemes for redevelopment of the Watersmeeting site was submitted by Tudor in August 1995. (The City Challenge Partnership was a vehicle used by the Council to administer City Challenge funds awarded to it by government and to carry out its City Challenge strategy).

	In November 1995 THI plc was approved by the Council as the preferred developer of the Watersmeeting site. THI offered to acquire the Tudor Land under an option agreement of 19 December 1995 for £1.3m. The option was not exercised. In December 1995 THI obtained outline planning approval for commercial leisure purposes-cinemas, ten pin bowling, bingo, night club, health and fitness club, family entertainment centre, comprising restaurants and associated car parking.

	On 20 December 1995 the Council made the CPO with certain stated objects:  to ensure the comprehensive redevelopment of the site within the timescale of Bolton’s City Challenge under one ownership; in order to avoid piecemeal development; to achieve the proper planning of the area; to resolve problems of complex land ownership and to overcome complex physical constraints to development.

	The CPO was confirmed on 24 July 1996 and implemented by a general vesting declarations on 28 July 1997. The land was then transferred to THI (Bolton)Limited who commenced work on the project. The entry date was 28 May 1997. That is the agreed date  for the  valuation. 

The Dispute

	The dispute over the assessment of compensation centres on the application to this case  of the Pointe Gourde principle (see [1947] AC 565 at 572 ) that

 “....compensation for  the compulsory acquisition of land cannot include an  increase in value which is entirely due to the scheme underlying the acquisition.”

	The critical question of fact for the decision of the Tribunal was: what was the scope of the scheme underlying the acquisition of the  land under the CPO? 

	The Tribunal’s  factual answer to this question must be examined with the following points in mind. 

 	1.	The Pointe Gourde principle is not a principle of valuation. It is a principle of law. If the principle was not applied by the Tribunal or was misinterpreted  or if the Tribunal reached a conclusion which no reasonable tribunal could reach (e.g. because there was no evidence to support it), the decision is erroneous in law. But a decision is not legally wrong simply because this court, if it had been the decision making body (which it is not), would have taken a different view of the evidence and arrived at a different conclusion on the scope of the underlying scheme. 

	2. 	The purpose of the principle is to prevent the compensation for the value of the land on compulsory acquisition from being inflated by the very scheme which gives rise to the acquisition. (See Widgery LJ in Wilson -v- Liverpool Corporation [1971] 1WLR 302 at 310A.) An enhancement in value resulting entirely from the underlying scheme has to be ignored. The principle does not, however, require the valuer to ignore an increase in value attributable to factors other than the underlying scheme, such as the pre-scheme value of the land for development.  

	3. 	In order to ascertain what is to be ignored by the valuer it is first necessary to delimit the scope of the scheme. The compulsory acquisition itself cannot be the scheme which underlies it: JA Pye (Oxford) Limited -v- Kingswood BC [1998] 2 EGLR 159 at 162M. The compulsory acquisition of the relevant land presupposes  that there was an underlying scheme of development, in consequence of which the CPO was made.
	4.	 The underlying scheme need not, as a matter of law, be confined to the area of land compulsorily acquired or to the specific purposes of the CPO. The acquisition may be only a small part of the underlying scheme: Bird and Bird  -v- Wakefield MBC (1976) 33 P&CR 478. Nor is it necessary for the underlying scheme to provide for the compulsory acquisition of any land for the purpose for which the CPO is ultimately made: see p 487.     

	5.	A “scheme” (also referred to in some of the authorities as a “project” or “undertaking”) is neither a technical term  nor a legally precise concept. A scheme may take shape over a number of years. It may be regarded as a scheme even before it is fully fledged. Its impact on land values may therefore increase as it passes through various stages from vague beginnings to a final form.

	6.	The Tribunal must ascertain the existence and extent of the underlying scheme from a consideration of all the relevant evidence about the past, present and future activities. It must then determine, as a matter of fact, whether those activities are properly to be regarded as part of the underlying scheme: Wilson -v- Liverpool Corporation [1971] 1 WLR 302 at 310B. Only when that factual question has been decided is it possible to answer the next question which is one of valuation: what part of the market value of the land acquired is entirely attributable to the enhancing effect of  the scheme underlying the acquisition? Answering that question involves imagining a state of affairs antedating the scheme-a “no scheme world” (as it was described in Wards Construction (Medway) Limited -v- Barclays Bank plc (1994) 68 P&CR 391 at 396, 397) and ascertaining what  “bargain....would have been made between the claimant and a prospective developer-purchaser had the acquiring authority not intervened.” 

	7.	 These fact finding and valuation questions have been entrusted by Parliament to 
“...a specialist and expert tribunal, well able to understand the realities of a complicated factual and transactional situation.....a finding by a  tribunal....cannot be shown to be perverse just because a possible alternative was open to the tribunal but not adopted by it” : per Buxton LJ in Pye (supra) at 163A-B.

	The Possible Underlying Schemes.
	 Before the Tribunal only two possible underlying schemes were canvassed in evidence and argument.

	1. 	The Wider Scheme.
	The Council’s case is that the underlying scheme to be disregarded is the regeneration project or undertaking  for the Tonge Valley as a whole since 1980, including, in particular, the public infrastructure and reclamation works carried out in the 1990s at public expense  through City Challenge funding mechanisms, such as the North/South Watersmeeting Road Link. It was all a single scheme. Without  those works the land would only have been suitable for low grade industrial and storage purposes. It would not have been suitable for leisure development and would only have been worth £250,000.

	2. 	The Narrower Scheme.
	Tudor’s case is that the underlying scheme to be disregarded is limited to the leisure development to be carried out by the Council’s selected development partner, THI, and the assembly of land for that purpose. Even disregarding  the enhancement of value attributable to that scheme, Tudor’s land was worth £6.415 million on the claimants’ case (£172,000 for the McGrath land) and £1,253,438 on the Council’s case (£23,027 for the McGrath land ).

	Decision of the Lands Tribunal

	The  Tribunal accepted Tudor’s case on the scope of the underlying scheme. It found as a fact that the scheme to be disregarded in assessing the compensation payable was the narrower scheme described as “the leisure development of the Watersmeeting site by THI.”  It was common ground that the value of the property was to be as at 28 May 1997 with the benefit of the planning permission granted to THI in December 1995.

	The Tribunal set out all the relevant factual background, summarised the rival  contentions and evidence and gave three reasons for its conclusion on the scope of the  underlying scheme.

	The Council submits that no one of the three reasons constitutes in itself a sufficient ground to support that conclusion reached by the Tribunal.

	An appeal only lies to this court on a point of law. It must be established by the Council that, in finding for the narrower scheme, the Tribunal misconstrued the relevant law or reached a perverse decision-one which no reasonable Tribunal properly directing itself could have reached.

	Does the Tribunal’s  finding of fact on the scope of the underlying scheme disclose an error of law? 

	Mr Holgate QC, who appeared for the Council, did not contend that the Tribunal’s decision on this point was perverse and insupportable in the sense that the only decision which a reasonable tribunal could reach was the wider scheme advanced by the Council. His case was that none of the three reasons  given by the Tribunal was legally valid, that the Tribunal had not indicated that any one reason was sufficient in itself to support its conclusion on the identification of the underlying scheme and that, if any one of the three reasons was legally  erroneous, the decision of 28 June 1999 must be set aside: Simplex GE (Holdings) Limited -v- Secretary of State (1989) 57 C& PR 306. He also submitted that the Tribunal had failed to comply with its duty to give reasons explaining how it had applied the Pointe Gourde principle to this case.

	He accepted  that, if he was right in his criticisms of the Tribunal’s reasons, this court could not itself determine the scope  of the scheme. As that is a question of fact the proper course would be to remit the matter to the Lands Tribunal, as the fact finding body, for re-determination in accordance with this court’s opinion on the questions of law raised by the appeal.

	The Three Reasons.
 
	The three reasons  given by the Tribunal (on pages 15 and 16 of its decision) for rejecting the Council’s case were these.

	1. 	Other Tonge Valley Improvements.

	The Tribunal concluded that

“ there is no evidence to suggest that other parts of the Tonge Valley improvements, such as road infrastructure, were dependent on the development of the Watersmeeting site for leisure or any other purpose. Indeed that work was committed and carried out before the acquiring authority resolve to seek compulsory powers for the subject land.”

	Mr Holgate QC contended that this was an immaterial consideration and that the Tribunal had adopted a legally incorrect test in order to decide whether public sector works pre-dating the CPO are to be taken into account as forming part of the underlying project. There is no legal principle that justifies or authorises the exclusion of such earlier works from the concept of a scheme to be disregarded on the Pointe Gourde principle. It was also inconsistent with the authorities. A scheme, which is not a precise concept and which could have an  evolutionary aspect, might cover a much wider area and include purposes going beyond those of the CPO. It was unnecessary for the underlying scheme to provide for or to be dependent on the compulsory acquisition of any land affected by the scheme.

	He argued that the Tribunal had failed to have regard to the material consideration, made out in the unchallenged evidence of the Council’s expert witness, Mr Hubbard, that it was the earlier works in other parts of the Tonge Valley which had enabled the leisure development on the Watersmeeting site to go ahead. This point was not dealt with by the Tribunal in its reasons. The Tribunal therefore failed to comply with its duty under Rule 50(1) of the Lands Tribunal Rules 1996 to explain how it had applied the Pointe Gourde principle to this case.

	2.	Private Sector Point

	The Tribunal concluded that 

“ ...the objectives for the Watersmeeting site were expected to be achieved by the private sector assembling the land required through	discussion between the relevant owners.”

	Mr Holgate QC contended that this was also an immaterial consideration to the identification of the underlying scheme and whether it was limited to the leisure development of the Watersmeeting site or comprised a much wider area of the Tonge Valley. It ignored the fact that the underlying scheme can be wider than the CPO and need not have envisaged that the Tudor land might be compulsorily acquired. This approach  was in conflict with the authorities.

	It also disregarded material considerations in the evidence  namely a statement   in December 1992 that the Council would investigate the making of a CPO on the Watersmeeting site as from April 1993; the availability of funding to enable the Council to acquire land on the site; and land acquisitions which the Council had, prior to the CPO, already undertaken in the Tonge Valley pursuant to its  scheme for the regeneration of the area, including the Watersmeeting site.

	3. 	The Expert Evidence Point
	The Tribunal concluded that
“....the evidence of the experts in this case points to the narrower no-	scheme as being the more appropriate. Mr MA  King FSVA [the 	claimants’ expert] did not refer to the wider no-scheme world at all; Mr CC Hubbard BSc FRICS [the Council’s expert] dealt with both 	worlds. At the commencement of his cross examination Mr Hubbard was asked which of the two bases he preferred. He replied that he was not a lawyer and that it was for the lawyers to argue which of the no-scheme worlds was relevant. Later it was put to him that the narrower no-scheme world was the only proper approach. To this he replied:

“When I prepared my valuation it was the preferred route, but I considered a wider no-scheme world had to be on the agenda too.”

"The identification of the scheme is a matter of fact, not  law. In my judgment it is significant that the only evidence in support of the wider scheme was given by Mr Hubbard, but when he prepared his valuation Mr Hubbard preferred the narrower scheme...” 	 

	Mr Holgate QC argued that this reason ignored the fact that Mr King did not even consider the Pointe Gourde point in his report. There was originally a challenge to the accuracy of the Tribunal’s statement of Mr Hubbard’s evidence, but this was not pursued at the hearing.

Conclusion.																
	In my judgment there was no error of law in any of the Tribunal’s reasons for its conclusion on the scope of the scheme underlying the acquisition of the Tudor land by the CPO. The reasons given by it under Rule 50(1) of the Lands Tribunal Rules 1996 were proper and sufficient for the parties and for this court to understand the grounds on which the decision on the relevant issue was reached by the Tribunal.

	It is worth repeating that the identification of the underlying scheme involves the application of a legal principle to the available material in order to arrive at a factual conclusion. Did the Tribunal, which has special expertise in matters relevant to land valuation, apply  the correct legal principle to  the evidence in this case without commission of a vitiating legal error?

	(1) 	The  available material included the opinions of experts. The function of Mr Hubbard and Mr King was to assist the Tribunal in understanding and interpreting  the documentary evidence. Although it was for the Tribunal and not for the experts to decide the factual dispute on the scope of the underlying scheme, the Tribunal was entitled, in determining that dispute, to conclude that the expert evidence supported an “appropriate bargain” on the basis of  the narrower scheme. There was no error of law in the Tribunal’s treatment of the experts’ evidence in arriving at its factual conclusion. Mr King’s opinion was that the scheme to be disregarded comprised the proposals of THI, the selected developer. Mr Hubbard referred in his evidence to two possible schemes the effects of which should be disregarded. He approached the matter firstly on the basis that the relevant scheme was the redevelopment of the land at Watersmeeting for the leisure development eventually implemented by THI. He also dealt with the alternative wider interpretation of the plans and resulting works for the Tonge Valley as a whole, including the construction of the Watersmeeting Road and other significant regeneration works in the Tonge Valley. He said in cross examination that when he prepared his valuation the narrower scheme was the “preferred route.” He did not express the wider scheme as his preferred view. The Tribunal was entitled to take account of this evidence in reaching its conclusion on the issue of the scope of the scheme to be disregarded.  

	(2)	 In determining the scope of the underlying scheme the Tribunal correctly considered  the potential relevance of earlier improvements in other parts of the Tonge Valley, such as the road infrastructure. The Tribunal was entitled to find as a fact that these works were carried out before the Council resolved to seek and use compulsory powers for the acquisition of the Tudor Land. The Tribunal was entitled to treat this  as one of the factors relevant to  the scope of this scheme. There was no rule of law  preventing the  Tribunal from taking this approach in this case. Nor did the Tribunal  incorrectly act upon or lay down any rule of law that such improvements made before  the CPO could never be relevant to the determination of the scope of the underlying scheme.

	(3)	 The fact that the objectives for the Watersmeeting site were to be achieved by the private sector was also a factor which the Tribunal was entitled to regard as relevant to the determination of the scope of the scheme underlying the CPO in this case. The Tribunal was entitled to treat the reliance by the Council on land assembly by the private sector rather than by compulsory acquisition as tending to show that there was no single overall scheme underlying the CPO. The Tribunal did not commit the legal error of assuming or holding that the scheme could never, as a matter of law, be wider than the CPO itself  or that the scheme, as a matter of law,  had to envisage the compulsory acquisition of the Tudor Land.

	In the light of these conclusions it is unnecessary to express any view on the submissions on either (a) the application to this case of the  decision in Simplex GE (Holdings) Limited -v- Secretary of State (1989) 57 P &CR 306 or (b) section 6 of and Schedule 1 to the Land Compensation Act 1961.

	 For these reasons I would dismiss this appeal.       
	
	Lord Justice Tuckey 
		- I agree
	Lord Justice Stuart-Smith
I also agree.
Order: Appeal dismissed with the detailed assessment of costs; £20,000 to be paid on account.
(Order does not form part of the approved judgment)