England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LANDS TRIBUNAL

		Royal Courts of Justice Strand London WC2
		6 April 1998

LORD JUSTICE BUXTON: This appeal concerns the valuation by the Lands Tribunal of a small area of land [the reference land], a mere 276 sq metres, under a transfer from the respondent [Kingswood] as vendor to Avon County Council [Avon] as purchaser. The local authorities just mentioned, and other local authorities that became involved in the matter, now have different names, or have been reorganised into different authorities, from those that obtained during the period with which we are concerned. Nothing turns on those changes of name or structure. The actual appellant, J.A. Pye (Oxford) Limited [Pye], is a developer who is involved in these proceedings and in this appeal because it was in connection with a development undertaken by Pye that Avon entered into the transfer agreement. That agreement provided that in the reference to the Lands Tribunal whereby the purchase price was to be determined Pye would be permitted to act on behalf of Avon.

In that reference, from the Determination in which this appeal is brought, the Lands Tribunal valued the reference land at £756,500. On the basis of assumptions unsuccessfully urged before them by Pye the Lands Tribunal would have valued the reference land at £650, and it is that figure that Pye says should be substituted by this court. Pye have a further and subsidiary ground of appeal, to the effect that if they fail on their main ground, and it is held that the Lands Tribunal adopted the correct approach, nevertheless the Tribunal erred in applying that approach in one particular respect, or alternatively did not sufficiently explain their reasoning on that point. Pye submits that the decision should in any event be remitted to the Lands Tribunal on that issue.

I set out the background facts as shortly as is possible for the understanding of the issues in the case.

The general area and its development

The case has as its setting plans for the development, and the actual development, of a substantial area of land on the outskirts of Bristol, proposals that date back to as long ago as 1970. Although by no means all of the area was owned by Pye, I will for convenience call it the Pye land. The Pye land extends towards the A420 London/Chippenham road to its north, and to open land to its south. More precisely, the Pye land is bounded to its east by the A4175 Bath Road, and to its west by a disused railway line, running approximately south to north-west. To the west of that railway line lay a substantial area, centred on the village of Warmely, that had been the subject of extensive additional residential development in the 1960s and early 1970s. A road called Mill Lane ran from Warmley Village towards the southern end of the Pye land. Some way short of the railway line, and thus short of the Pye land, Mill Lane divided at a junction into two roads, both of which continued in a generally easterly direction across the railway and across the Pye land, and eventually into Bath Road. Of those roads, Poplar Road ran northeastwards from the junction, crossed the railway by a bridge and ended in Bath Road. Victoria Road ran due east from the road junction until very shortly before the railway, when it turned southeast, again crossed the railway by a bridge, and equally ended in Bath Road.

In February 1970 Gloucestershire County Council, as the planning authority responsible for the structure plan, published the Bristol East Fringe Study, which identified as suitable for development two very substantial parts of the Pye land. A Development Brief published in 1971 in connection with those proposals envisaged a new link road between Victoria Road, as it ran through the area already under development west of the railway line, and Bath Road. That road [the link road] would start from Victoria Road at the point where that road turned southeastwards before the railway line, and would run virtually due east from there across the railway line, to connect directly with Bath Road. It would cross the railway line at the point where the reference land is located, the latter land forming part of that former railway line. The Development Brief envisaged that the part of Pye land south of the link road would be devoted to industrial use, the part of the Pye land area north of the link road to residential use.

Pye strongly urged in the appeal before us that the construction of the link road was always regarded as a general highways project. The link road was seen by the highway authority as having substantial highway advantages in eliminating the sub-standard railway bridge and the sub-standard entry on to the Bath Road of the original access to Bath Road via Victoria Road. As a means of access it would principally benefit the residential development west of the railway line, which was not on any part of the Pye land nor part of the Pye development. To the extent that, as became the case, construction of or contribution to the link road was an obligation of Pye, that requirement thus had a strong element of "planning gain", as opposed to being required to provide access to, or even to facilitate, the Pye development. I did not understand that analysis to be substantially contested by the respondents.

Pye's planning applications

Between 1971 and 1974 Pye purchased the greater part of the area identified for development in the Bristol East Fringe study; which thus became "the Pye land". In April 1973 Pye submitted a planning application [SG1180] for the development of the Pye land, the proposals being in accordance with the 1971 Development Brief. The then Highway Authority agreed to provide the link road. It was however envisaged that in connection with that provision Pye would construct that part of the link road that ran through its site from the railway to the Bath Road.

In June 1973 the then planning authority resolved to grant planning approval for application SG1180, subject to Pye giving undertakings with regard to the off-site roadworks and the provision, as part of the scheme, of public open spaces. That proposal was confirmed by Kingswood as the new planning authority after local government reorganisation in 1974. However, the permission was conditional on the completion of the procedures to implement Pye's undertakings, which included the signing of an agreement under section 19 of the Gloucestershire County Council Act 1956. Avon, the successors to that Council, apparently refused to contemplate such an agreement unless it was entered into by the owners of all the land affected by the undertakings. That included the reference land which, as part of a disused railway, was owned by the British Railways Board [BRB].

Pye agrees to construct the whole of the link road

While attempts were being made to resolve this impasse, there was a meeting between officers of Kingswood and Avon and Pye on 1 September 1977, at which Avon said that it had no funds, and no prospect of funds, for highway construction. Pye thereupon agreed to undertake the construction of the link road west of the railway line, as well as east of the railway line, and acquired land west of the railway line for that purpose. A new planning application, K448/11, was then submitted, on 8 November 1977. That differed from SG1180, and from other applications only slightly modifying SG1180 that had been submitted in the interim, in that it showed the whole of the part of the Pye land south of Poplar Road as an industrial area, the part of the Pye land north of Poplar Road being allocated to residential development. In a letter to Kingswood of 15 November 1977 accompanying the proposal Pye said that in view of the increased cost to them of the road improvements (which included some matters other than the link road itself), that had previously been regarded as being the financial responsibility of Avon, the scheme would not be viable unless permission was granted for the whole of the development, including all the residential development.

Planning permission was however refused for all Pye's applications. Pye appealed. In the meantime, Avon had been advised that the undertakings sought from Pye were too extensive to be secured merely by planning conditions, and therefore sought an agreement between Avon, Kingswood and Pye under section 52 of the Town and Country Planning Act 1971. That agreement [the section 52 agreement] was entered into on 19 July 1979; a draft of it was placed before the Inspector at the enquiry into the refusal of Pye's planning applications.

The section 52 agreement was all subject to the grant of permission on any of Pye's applications (clause 1). So far as is relevant to the present appeal, it provided that an area of the old railway, including the reference land, was owned by BRB, who were in negotiation for its sale to Kingswood (recital 3); if it appeared that either Kingswood or Pye would not be able to acquire the reference land, or to acquire it sufficiently promptly to permit the development to proceed according to its programme, Avon would use its best endeavours to acquire the reference land, and would be reimbursed by Pye for the cost thereof (clause 6); Pye would construct the link road within three years of planning permission being granted on its applications or, if by then the reference land was not available to Pye, would by that date construct the link road apart from that part crossing the reference land (clause 7); only 40 per cent of the land south of Poplar Road would be permitted to be developed by Pye before the completed link road had been dedicated to public vehicular traffic (clause 9). By a further provision, clause 15, limitations were placed on Pye's development of the land north of Poplar Road, intended for residential development, until the link road had been completed. The exact terms of this clause affect a particular issue in the appeal, and I will therefore return to them in more detail later in this judgment.

With regard to clause 6 of the agreement, it is to be noted that no specific reference is made to the use by Avon of compulsory purchase powers in acquiring the reference land; though no doubt, and Pye gave evidence before the Lands Tribunal to the effect that, the availability of that power on the part of Avon was well in the minds of the parties to the agreement. Further, Pye placed emphasis before us on a further section 52 agreement, entered into between itself and Avon in October 1979, relating to the industrial land only, in which the obligations in the section 52 agreement were reinforced. I do not however see, any more than did the Lands Tribunal, that the October 1979 agreement added anything to the position relevant to this appeal that was already established by the section 52 agreement of July 1979, and, like the Lands Tribunal, I will continue to refer principally to that latter agreement.

On 23 July 1979 the Secretary of State allowed Pye's appeal in respect of application K448/11, subject to conditions. The conditions relevant to the present matter were (condition c, echoing clause 9 of the section 52 agreement) that no more than 40% of the industrial development (south of Poplar Road) should be brought into use until the link road had been completed to the satisfaction of the local planning authority; and (condition g, echoing clause 15 of the section 52 agreement) that the development of the land north of Poplar Road should not be commenced before the completion of the link road.

Pye's acquisition of the reference land

This grant of permission fulfilled the precondition for the operation of the section 52 agreement. On 22 January 1982 Kingswood purchased from BRB, for £5, 6 miles of the old railway, including the reference land. There were however further difficulties about the progress of the development, including the need for further applications for planning permission. Pye wrote to Kingswood on 8 August 1986 acknowledging that the section 52 agreement remained in force. That agreement was by consent of the original parties amended on 30 September 1987 to take account of the new applications, and to offset the delay in starting the development. Prior to that Kingswood had written to Pye's solicitors in January 1987 acknowledging that Pye and Kingswood had been in dispute for some time as to the sum to paid by Pye for acquiring the reference land from Kingswood, and recording that Kingswood was now negotiating with Avon for the transfer of the reference land to Avon in accordance with clause 6 of the section 52 agreement.

On 13 January 1988 Kingswood entered into a contract [the 1988 agreement] to sell to Avon the freehold interest in the reference land, the agreement reciting in clause I that it was made to enable the development contemplated by the section 52 agreement to be carried out. The 1988 agreement further provided that the purchase price was to be determined by a reference to the Lands Tribunal, in which reference it would be assumed that Avon had made an unopposed compulsory purchase order for the acquisition of the reference land for highway purposes. That is the reference with which this appeal is concerned. Pye was not formally a party to the 1988 agreement, but as we have seen the agreement provided that Pye should be permitted to act on behalf of Avon in the valuation proceedings.

The valuation date under that reference was 13 January 1988. On that date Pye had already constructed the link road to adoptable standards from the railway line eastwards to the Bath Road, and also from the railway line westwards to the junction with Victoria Road. The link road was therefore complete, apart from the short section, nor more than some 25 metres long, as yet unbuilt crossing the reference land. Since the valuation date Pye have completed the link road across the reference land and it is open to traffic for its entire length. Pye have also proceeded with their industrial and residential development.

The reference to the Lands Tribunal

The function of valuing the reference land was conferred on the Lands Tribunal by an agreed reference made by the parties under the 1988 agreement. That agreement recited, as we have seen, that the transfer of the reference land from Kingswood to Avon was to enable the development contemplated by the section 52 agreement to be carried out. The parties to the 1988 agreement further agreed that in the reference the Lands Tribunal should assume that Avon had made an unopposed compulsory purchase order for the purchase of the reference land for highway purposes, and had taken possession of the reference land on the date of the 1988 agreement, that is to say on 13 January 1988. The Lands Tribunal accordingly considered that it was obliged to apply to this case of deemed compulsory purchase the general rules applying to valuation on compulsory acquisition of land, including that

(i) the valuation should be the amount that a willing seller of the reference land would have achieved in the open market on 13 January 1988;

(ii) any increase in such valuation that was attributable to the underlying purpose of the acquisition should be disregarded.

These general principles have not been disputed before us. Their proper application to the facts of this case has been the subject of strenuous disagreement. The second principle is that which is conventionally known as the "Point Gourde" rule or principle. Since it is that principle that is the source of the dispute in this case, and which produces the very striking difference in valuation terms between the parties, it will be convenient to set out the law binding us as to its content and application before dealing further with the Lands Tribunal's determination.

The Point Gourde principle

In Point Gourde Quarrying and Transport Co Ltd v Sub-Intendant of Crown Lands [1947] AC 565 at p 572 the House of Lords said that

"It is well settled that compensation for the compulsory acquisition of land cannot include an increase in value."

which is entirely due to the scheme underlying the acquisition.

In Wards Construction (Medway) Ltd v Barclays Bank Plc [1994] 68 P&CR 391 at p 396 this court, per Nourse LJ, summarised the way in which that principle should be applied in practice:

"In order correctly to apply the Point Gourde principle it necessary, first, to identify the scheme and, secondly, its consequences. The valuer must then value the land by imagining the state of affairs, usually called "the no-scheme world", which would have existed if there had been no scheme."

How in this process the "scheme" is to be identified was explained by this court in Wilson v Liverpool Corporation [1971] 1 WLR 302, in particular in the judgment of Widgery LJ at p.310A:

"Whenever land is to be compulsorily acquired, this must be in consequence of some scheme or undertaking or project. Unless there is some scheme or undertaking or project, compulsory powers of acquisition will not arise at all, and it would, I think, be a great mistake if we tended to focus our attention on the word "scheme" as though it had some magic of its own. It is merely synonymous with the other words to which I have referred, and the purpose of the so called Pointe Gourde rule is to prevent the acquisition of the land being at a price which is inflated by the very project or scheme which gives rise to the acquisition.

The extent of the scheme is a matter of fact in every case, as is shown by the decision in Fraser v Fraserville City [1917] AC 187 to which Lord Denning M.R. has referred. It is for the tribunal of fact to consider just what activities-past, present or future-are properly to be regarded as the scheme within the meaning of this proposition."

It was not contested before us that that guidance given by Widgery LJ applies to this case.

The "ransom value" of the reference land

The dispute, and the importance to the dispute of the Point Gourde principle, is best introduced by pointing to the feature of the reference land that was alleged to give it the very substantial value found by the Lands Tribunal.

In the actual world as it existed on 13 January 1988 there was, in the open market, a purchaser who would, as found by the Tribunal, have been prepared to pay a premium or ransom value for the reference land. That purchaser was Pye, or any owner of the Pye land who was the beneficiary of the planning permission that attached to that land. The Tribunal put it thus, at page 69 of its determination:

"We are not in doubt that at the valuation date (13 January 1988) the reference land possessed a premium value in the hands of the vendors. By that date, the construction of the link road had been carried out to east and west, and possession of the strip which is the reference land was necessary in order to complete the link. By reason of the 1979 agreement and the conditions imposed by the Secretary of State on the grant of planning permission, Pye (or indeed any owner of the Pye land) could not develop 60% of the industrial area nor carry out any of the residential development in the area north of Poplar Road until the link road was completed. Thus the reference land was the key to this development."

Such a person would have been prepared to pay a very large price for the reference land, far in excess of its value to any other purchaser, in order to unlock or "ransom" the value of the Pye land, which by the terms of the section 52 agreement and of the planning permission could not be developed until the owner of the Pye land had completed the link road: for which he must have the reference land. Unless therefore the hypothetical open market that the Tribunal had to assume excluded that purchaser, they would be obliged to award the vendor the price that that purchaser would be willing to pay.

Hence the importance of Point Gourde. Pye argued that the purchaser willing to pay a ransom price had to be excluded because the ransom price was generated by, and was attributable to, the scheme underlying the acquisition of the reference land. That "scheme" was, according to Pye, the construction of the link road, as a highway scheme, which had been envisaged as such, in very much the same terms, since the original Development Brief in 1971, and whose construction was the underlying purpose of the acquisition of the reference land. The section 52 agreements and the conditions in the planning permission that had been found by the Tribunal to have created the ransom value could not be looked at independently of that scheme, because they only came into existence because of the prior existence of the scheme. Point Gourde therefore required that the "no scheme world" in which the reference land had to be valued was a world in which the link road did not exist, and therefore in which of necessity the section 52 agreements and the conditions in Pye's planning permission did not exist either. On that hypothesis the reference land had no ransom value.

The Lands Tribunal's decision: the "scheme"

The Tribunal dealt with this contention originally in comparatively brief terms at page 69 of its determination. It set out the steps to be taken in applying the Point Gourde principle as summarised in Wards Construction and then said:

"We find as a fact that the scheme or project for the furtherance of which the reference land was acquired was the completion of construction of the link road...The "scheme" is the completion of the link road by acquiring the reference land."

For my part, I would think that that finding of fact by the Tribunal was in any event conclusive against Pye's contentions. The Tribunal found, in terms that in themselves have not been challenged, that the actual ransom value of the reference land sprang from the existence of the section 52 agreement. That agreement was made in 1979, and extended in 1987, in both cases well before the completion of the link road by the steps adopted in 1988 was contemplated. Similarly, the planning permission that required the link road to be completed dated from 1979. Neither as a matter of chronology nor as a matter of logic could it be said that the value of the reference land that was conferred by the existence of the section 52 agreement and the conditions in the planning permission was due, let alone entirely due, to the scheme as found by the Tribunal.

The Tribunal did not, however, leave the matter there, but reasoned the matter out more fully in the light of the facts of the case, at pp70-71 of the Determination:

"What is known as the Pye industrial land was identified by the planning authorities as suitable for development originally in the Study, and in the 1971 development brief there first appeared a proposed "link road" between Bath Road and Victoria Road in the approximate position of the road that has now been built. Had the highway authority at that stage taken steps to obtain the land to construct such road, then doubtless the Pointe Gourde principle would have applied to restrict the value to the owner or owners of the land taken so as to prevent them from benefitting from the scheme underlying that acquisition, namely the project to open up this large area of Bridge Yate to development. That, however is not what happened. The sequence of events following upon the entry of Pye on to the scene in about 1970-71 is set out in great detail in the planning Inspector's report to the Secretary of State dated 11 December 1978 and need not be repeated here. In essence the intention of the authorities to construct the link road had by 1978 been abandoned on a change of policy by Avon; instead of seeking contributions where possible towards the cost of highway construction by the council, it became the policy of Avon that the cost of highway works directly required by a development be met by the developer. It was as a direct consequence of this policy that Pye was unable ultimately to obtain planning permission for industrial development of the land south of Poplar Road and residential development of the area north of Poplar Road without undertaking the construction at Pye's expense of the link road. The inference from the attitude of the planning and highway authorities at that time must be that the link road was considered by them to be "directly required" for purpose of industrial development of Pye's land. Hence the entry by Pye into the section 52 agreement dated 19 July 1979 under which development of 60% of the industrial land and all the proposed residential development north of Poplar Road was prohibited unless and until Pye had constructed the link road. We accept Mr Cochrane's submission that planning permission for any development would not have been granted unless Pye undertook to build the link road. That seems clear from the Inspector's recommendation that execution of the agreement "should be a pre-requisite of any planning permission" and from the fact that the Secretary of State imposed conditions on the grant of planning permission to the same effect.

In our judgment it was the obligations thus undertaken by Pye which conferred a premium value on the reference land. The owner of the former railway line was at that point in time in a position to hold to ransom any owner of the Pye land seeking to develop that land to its full potential and to proceed with residential development on the land north of Poplar Road. It is clear to us that the obligation and its effect in creating a premium value was not attributable to any scheme of the authorities to construct a link road, but was attributable to the needs of Pye to obtain the land and build the link road in order to develop the Pye land fully. In other words, the premium value of the strip of railway land was not entirely due to any scheme or project underlying the acquisition. It was due at least primarily to the fact that acquisition of the strip was the key which unlocked the development value latent in the Pye land, and similarly in the land owned by Pye north of Poplar Road."

So viewed, it will be noted, the Tribunal considered that the premium value of the reference land was not entirely due to any scheme or project underlying the acquisition; they do not appear to have confined themselves to the scheme as found by them.

Pye's attack on the Tribunal's finding as to the "scheme"

Mr Purchas QC, for Pye, frankly recognised that he was faced with a serious problem, in that he had to displace the Tribunal's finding, held by this court in Wilson v Liverpool Corporation and other cases to be a finding of fact, that the relevant scheme for the purposes of applying Point Gourde was the completion of the link road. I deal later with the implications of Mr Purchas's positive case as to the identification of the "scheme", that I have already set out in summary. Here I address his criticisms of the Tribunal's finding.

Mr Purchas argued that the Tribunal's decision was flawed on two, separate, grounds. First, the Tribunal had erred in law in failing to appreciate the distinction between the acquisition and the scheme underlying the acquisition. Second, the decision was perverse, because given that the link road had been a proposal since 1971 the only reasonable finding for the Tribunal was that the link road as a whole was the reason for the acquisition of the reference land.

As to the first of these criticisms, I agree that the "scheme" cannot be the acquisition itself. So to hold would not only be logically inconsistent with Point Gourde, but also inconsistent with statements, such as that in Wilson, and in Point Gourde itself, that the scheme must underlie the acquisition. But that is not what the Tribunal did hold. They held in terms that the scheme for the furtherance of which the land was acquired was the completion of the link road. The acquisition was a necessary pre-condition to that completion, but on no view was it, or was it held by the Tribunal to be, the same thing as the scheme of completion.

As to the second criticism, it is in my view quite impossible to contend that the Tribunal was perverse in its finding. I venture to suggest that lying behind the persistent view that such findings are ones for the tribunal of fact is the realisation that the tribunal of fact is a specialist and expert tribunal, well able to understand the realities of a complicated factual and transactional situation such as the present. No doubt the Tribunal could have found that the scheme was the whole of the link road plan, as Pye urged, but it did not do so. But a finding by a tribunal such as the present cannot be shown to be perverse just because a possible alternative was open to the tribunal but not adopted by it.

That in my view is sufficient to dispose of this point. There is in addition a further consideration. I have demonstrated that in determining the second question that it posed itself under Point Gourde, whether any increase in value of the reference land was wholly attributable to the scheme, the Tribunal did not stop short at the logical implications of a finding that the scheme was the completion of the link road, but explained how the particular situation of Pye caused the accretion of value to the reference land. Although the Tribunal did not say so in terms, the implication of its reasoning, set out above, is that the completion of the link road that it was discussing was the completion of that road by Pye. Mr Purchas said that such an approach was not open to the Tribunal, because it infringed the principle that once the scheme had been identified the fact that it was implemented by a different person was irrelevant. That argument, as applied in this case, however presupposes what it seeks to establish, that the "scheme" was the link road proposal, unchanged since 1972. But the Tribunal found otherwise, in the substantial passage analysing the implications of the change of policy on Avon's part in 1977 that I have cited above. So to find, and to find that the obligations undertaken by Pye that conferred the premium value on the reference land sprang from that change of policy, was very well within the vires of the Tribunal as a fact-finding body.

The "scheme" as contended for by Pye

I have already indicated that Pye argued that the relevant scheme was, and could only be, the link road proposal as originally formulated in 1972. Mr Purchas argued that if that were the scheme, the sequential approach as set out in Wards Construction required the valuation exercise to be conducted in a "no scheme world". In that no scheme world there was no link road, and therefore of necessity no obligation on Pye to construct such a road. In such a world, the section 52 agreement that created the premium value simply did not exist.

I am minded to accept that, granted the premise of this argument, its conclusions follow. They would, if adopted, demonstrate an artificiality striking even by the standards of the jurisprudence of valuation: not least because they would oblige the Tribunal in conducting the valuation exercise imposed on it by the 1988 agreement to assume the non-existence of the section 52 agreement, even though the 1988 agreement had recited that it had been made in order to enable the development contemplated by the section 52 agreement to be carried out. Somewhat similarly, in the present reference the only relevance of the basic principle as stated in Point Gourde is to determine whether the premium value of the reference land, that the Tribunal found to exist as a matter of fact in the real world, was entirely due to the scheme. But there was nothing in the scheme as it was formulated in 1972 that conferred any premium value on the reference land; that premium value only arose from the section 52 agreements and the conditions on the planning permission.

Those problems are, however, set aside by the Tribunal's finding that, whatever may have been the position in 1972, the facts had changed with the change of policy by Avon and the need for Pye to agree to complete the link road. The Tribunal made that finding as matter of fact, and not in order to avoid the difficulties discussed in the preceding paragraph. That those difficulties would otherwise arise does however at least demonstrate that the Tribunal's findings of fact, and its conclusions as to the nature of the relevant scheme, are difficult to characterise as perverse.

The decisions in Wards and Batchelor

The Tribunal considered at some length the actual decisions in this court in Wards Construction v Barclays Bank, already referred to above, and also in its predecessor case, Batchelor v Kent County Council [1989] 59 P&CR 357. That was because the present respondents urged on the Tribunal that it was bound by those cases to hold that the ransom value of the reference land was not attributable to any scheme, but was a reflection of the latent value of the latent development value of the Pye land, that was unlocked or released by the completion of the link road.

The Tribunal appears to have accepted those submissions. It explained the matter thus:

"In our view the relevant law is clear, having been much clarified by the Court of Appeal in the recent case of Batchelor v Kent County Council. That case was concerned with the valuation of land acquired by an actual Compulsory Purchase Order, but in other respects the facts are similar to those of the present case. Those facts included planning permission for large scale development which could not be fully implemented until "off-site road works" had been completed; roadworks which involved construction of a roundabout on the claimant's land; and agreement between the parties that construction of the roundabout was the scheme underlying the acquisition. When the Batchelor case first came before the Court of Appeal [59 P & CR 358] Mann LJ said at page 360:

"The [Point Gourde] principle enjoins the tribunal to ignore "an increase in value which is entirely due to the scheme underlying the acquisition". The scheme underlying the acquisition was here stated by the tribunal to be "the construction of the roundabout and the associated roadworks". The roundabout and associated works when they were completed removed the inhibition imposed by...the planning permission...the removal of the inhibition was a removal naturally to be desired by the landowners whose development was otherwise curtailed. The critical question as it seems to me, is whether the scheme underlying the acquisition as found, did enhance the value of the order land. The question is a question of fact. If there were found to be an enhancement, its dimension was a matter of valuation. It is to be observed, and critically so, that the tribunal must search for an increase in value "entirely due to the scheme".

The Pointe Gourde principle cannot diminish a pre-scheme value. Was there a particular value prior to the scheme underlying the acquisition? As it seems to me the tribunal found that there was."

On that basis the Tribunal concluded:

"We are unable to detect a distinction in principle between the Batchelor case and the present case. In our judgment, on similar facts we are bound to follow and apply the reasoning of the Court of Appeal in the Batchelor/Wards cases, and to hold that the reference land had a premium value in the hands of the vendors which is not entirely due to the scheme underlying the acquisition and therefore is not to be left out of account by reason of the Pointe Gourde principle. It follows that we find that the reference land is to be valued by reference to the factual matrix in the relevant area at the valuation date."

Mr Purchas criticised the Tribunal's view that it was bound to reach the conclusions that it did by the reasoning of this court in Batchelor. I think that he was right to do so. I do not think that the actual decision in Batchelor establishes anything more than, as Mann LJ said in the passage cited by the Tribunal, that it is a question of fact as to whether the underlying scheme as found enhanced the value of the acquired land. That principle necessarily cannot dictate in any particular case what that finding of fact should be. So far as Batchelor additionally emphasised, as it did, that the increase in value, to be discounted under Point Gourde, must be entirely due to the scheme, that was already the law, valuable though it was to have the matter reviewed and re-emphasised in the particular factual situation that obtained in Batchelor.

I cannot therefore support all of this part of the Tribunal's reasoning. I do not think, however, that that is in any way fatal to the Tribunal's conclusion, and it is fair to say that Mr Purchas did not suggest that this point would avail him even if he were unable to make good his other submissions: as I hold that he indeed is unable to do. Well before embarking on its consideration of Batchelor the Tribunal had already reached the conclusions that I have quoted earlier in this judgment, by exercise of its fact-finding powers that were confirmed in Batchelor, and uncompelled by any authority. In so doing it properly followed the process set out in Batchelor, and subsequently in Wards. There is however absolutely no indication that it felt constrained by those cases to reach any particular factual result other than that it would have arrived at without reference to the factual results in those cases.

It therefore followed, as the Tribunal said, that the reference land had to be valued according to the actual facts existing at the valuation date. That followed inevitably from its earlier finding that the ransom value was not to be discounted under Point Gourde: a conclusion that the Tribunal had already reached before it turned to detailed consideration of Batchelor.

Pye's evidence to the Tribunal

The foregoing considerations are in my view sufficient to dispose of Pye's main ground of appeal, and to uphold the principal reasoning of the Tribunal. However, out of deference to the argument addressed to us I mention one other matter.

Pye gave evidence before the Tribunal, relied on also before us, that Pye itself would never have contemplated acquiring the reference land at a "ransom" or other inflated value, and that Pye had not sought a different planning permission without the obligations of the section 52 agreement because they believed that the reference land would be made available at a reasonable cost. Pye only entered into the section 52 agreement because it anticipated that the purchase price, based on Avon's powers of compulsory acquisition, would be a small sum of money.

The reason for citing this evidence, which was not commented on by the Tribunal in its Determination, and in respect of which it made no finding, was that set out in Ground 4 of Pye's Grounds of Appeal: that the Tribunal erred in law

"In taking account of the section 19 agreements dated 19 July 1979 and 26 October 1979, by which the Purchaser as Highway Authority was obliged to use its statutory powers as such to acquire land including the reference land for the link road, that approach was not consistent with the principle in Pointe Gourde in that the statutory powers of acquisition are required to be ignored: in particular failing to consider or state any reason for rejecting (if that was the case) the unchallenged evidence of the Appellant that the agreements would not have been entered into in the absence of the statutory powers of acquisition."

I leave aside whether we should consider matters upon which the Tribunal has made no finding of fact, since the argument is in any event misconceived. First, Pye plainly accepted the terms of the 1988 agreement, and thereby contemplated that the valuation of the reference land should be on the basis there set out, of a notional compulsory purchase by Avon to further the section 52 agreement. Pye's explanation of its decision to enter into the section 52 agreement was not simply that it was influenced by the ability of Avon to use compulsory purchase powers, but rather that it assumed that acquisition on the basis of use or notional use of those powers would result in a low price. It was that assumption that Pye relied on when it consented to the 1988 agreement, as an alternative to resolving its dispute with Kingswood as to the price for the reference land. The Tribunal's task was to value the land according to the objective terms of the 1988 agreement, not according to what one of the parties hoped to achieve from the 1988 agreement. Second, and in any event, Ground 4 assumes that all that the section 52 agreement provided or, rather, envisaged was that Avon would or might use compulsory purchase powers. But it equally importantly placed obligations on Pye. Even therefore if it were correct that in performing the valuation exercise the Tribunal had to ignore Avon's compulsory purchase powers, that would not in any way constrain it to ignore the whole of the section 52 agreement, including Pye's obligations thereunder.

Conclusion

I would accordingly dismiss the main part of this appeal. I turn to consider Pye's complaint about the Tribunal's application of the method of valuation adopted by it.

The Tribunal's valuation

I accept the submissions of Mr Cochrane QC, for the respondents, that, first, the actual valuation exercise is a matter for the expertise of the Tribunal, in which this court will not interfere; and second that in conducting the valuation in this case the Tribunal had of necessity to reach broad and robust conclusions about hypothetical events in a setting now long in the past. The difficulty that I now address however exists despite the adoption of both of those principles or assumptions.

The Tribunal approached its task, on the basis of the general assumptions that I have held to have been correct, by asking, first, what was the development value of the Pye land; and then considering what the owner of the reference land could have obtained for that land from a developer of the Pye land who wanted to unlock that development value. The Tribunal concluded that the starting point for calculating that, "ransom", price for the reference land would have been 50 per cent of the development value of the Pye land. However, the Tribunal acknowledged that there were alternative solutions for the developer of the Pye land other than the completion of the link road. He could apply for fresh planning permissions, without the condition as to construction of the link road. The Tribunal concluded that in the changed conditions of 1988, with a different policy attitude as to the legitimacy of conditions aimed at "planning gain", such permissions might well have been granted and, if they were not, an appeal to the Secretary of State might well have succeeded. Further, as the Tribunal found, an amendment to the section 52 agreements would also have been required, but that might well have been obtained. The successful achievement of those alternatives would have robbed the reference land of its premium value, and the threat of that would have been present to the mind of the hypothetical owner of the reference land: to the extent, as the Tribunal found, that he would have accepted substantially less than the starting figure of 50 per cent of the development value of the Pye land.

The Tribunal continued:

"One of the factors which would clearly be present to the minds of both parties to the negotiations would have been the delay, costs and uncertainty inherent in the pursuit of a revised planning permission and amended section 52 agreements by the purchaser. In this context we have carefully considered the alternative valuations. We think that a potential purchaser would be likely to have estimated that the time taken to achieve the potential alternative solutions would have been about two years."

On that basis the Tribunal calculated a cost to the developer imposed by that necessary delay in releasing the development value of his land. It would be that cost that he would seek to avoid by purchasing the reference land. Such a cost was substantially less than the full value of the development land. That reduced cost led the Tribunal to conclude that a vendor of the reference land, realising that that was the alternative available to the purchaser, would have accepted substantially less than the starting hypothesis of 50 per cent of the full development value of the Pye land. The Tribunal therefore reduced that figure from 50 per cent to 25 per cent.

All of the foregoing turns on the judgement and expertise of the Tribunal, and is not and cannot be challenged before us. The point of difficulty is however the following. It was accepted before us, and we understood that it was accepted in argument before the Tribunal, that the section 52 agreement imposed different limitations on the Pye industrial land on the one hand and on the Pye residential land on the other. Put briefly, the position is that by clause 9 of the agreement only 40 per cent of the industrial land could be developed at all before the link road was completed; whereas by clause 15 of the agreement what was inhibited before the completion of the link road was the residential development contemplated by Pye's then current planning applications. I consider the respondents' concession that that was the meaning of clause 15 to have been correctly made. The terms of the conditions in the planning permission granted on application K448/11 were not so clearly distinct; but I conclude that "the development" of the residential land referred to in condition g was the development to which that permission related and no other.

The significance of this is as follows. Even if new planning permissions would have been forthcoming, because the local authority would have appreciated that it had to apply the new policy on planning gain, that latter policy would not have applied to inhibit the local authority in its willingness to release Pye from the section 52 agreement. It might have had a reason for trying to maintain Pye's obligations, in order to secure the completion of the link road. If the local authority took that attitude, an application to the Lands Tribunal for release of the covenants in the agreement would have been required, with consequent delay. The Tribunal no doubt had that well in mind, though it did not distinguish in its reasoning between delay in relation to planning permission and delay in relation to the section 52 agreement covenants. However, on the true construction of the section 52 agreement as set out above, any difficulty in securing the release of that agreement would not prevent Pye from developing the residential land, provided that it could obtain a new planning permission, since all that was inhibited by the section 52 agreement was development of that land under the existing planning permission.

The Tribunal did not distinguish in its reasoning between the limitations on development of the residential land, which made up the major part of the development value of the Pye land as a whole, and the limitations on development of the industrial land. That difference may affect the outcome of the Tribunal's valuation process, if inhibitions imposed by the section 52 agreement were regarded as more likely to cause delay than inhibitions imposed by the planning permission. We cannot however know from the Tribunal's reasoning what assumption it made about the effect of clause 15 of the section 52 agreement and whether that assumption affected its conclusion.

Mr Purchas conceded (or, more accurately, recognised that he could not offset the view expressed by the court in argument) that we cannot substitute any figure for that reached by the Tribunal. Since, however, it is possible that the Tribunal may have been misled by assuming that both clause 9 and clause 15 of the section 52 agreement had the same effect, I see no alternative to remitting the reference to the Tribunal for that point to be reconsidered. The remission should be in extremely limited terms, and will of course not involve the calling of any further evidence before the Tribunal. That will be achieved by remitting the award to the Lands Tribunal in the terms proposed by Hobhouse LJ at the end of his judgment. Should there be any difficulty in reconstituting the same tribunal as heard the original reference, the parties should agree that the jurisdiction of the Lands Tribunal for this purpose should be exercised by the President sitting alone, as is provided for by section 3(1) of the Lands Tribunal Act 1949.

LORD JUSTICE SWINTON THOMAS: I agree.

LORD JUSTICE HOBHOUSE:

This is an appeal by way of case stated from an Award of the Lands Tribunal arising from a reference by the parties to a contract for sale dated 13th January 1988. The history of this matter is fully set out in the reasoned Award attached to the case stated and has been summarised in the Judgment of Buxton LJ. It is not necessary to refer to the terms in which the questions of law are worded in the case stated. The two grounds of appeal which have been argued before us fall within the ambit of those questions

The reference land which was the subject of the contract for sale was a small rectangle of land which lay across a former railway on the line of the Link Road between Victoria Road and the Bath Road in Bristol. The agreement provided that the price for the land which the Vendor, Kingswood Borough Council, agreed to transfer to the Purchaser, Avon County Council, should be "that sum determined by the Lands Tribunal acting as arbitrator in accordance with a reference by consent". Special clause I of the agreement went on to provide that (among other things):

"The Vendor has agreed to transfer the property to the Purchaser for the purpose of enabling development contemplated by an agreement dated 19th July 1979 made between the Vendor and Purchaser and J.A. Pye (Oxford) Limited and an agreement dated 30th September 1987 between the Vendor and Purchaser and J.A. Pye (Oxford) Estates Limited, J.A. Pye (Oxford) Limited and J.A. Pye (Oxford) Homes Limited ..."

"It is further agreed that:

(a) the following assumptions will be made in the reference and arbitration namely that:

(1) the Purchaser has made an unopposed compulsory purchase order for the purchase of the property for highway purposes and the Vendor is seized in fee simple in possession of the property free from encumbrances:

(2) the Purchaser has served notice to treat in respect of the property and has taken possession thereof as of the date of this agreement

(b) J.A. Pye (Oxford) Limited shall be permitted to act for and on behalf of the Purchaser in relation to the said reference and arbitration and to argue that the property had no or only a nominal value in consequence of the said agreement dated 19th July 1979 made between the Vendor and Purchaser and J.A. Pye (Oxford) Limited or otherwise.

(c) such argument as is referred to in (b) above is not accepted by the Vendor who is at liberty to argue for such price as he contends is proper.

.......... "

These terms of reference anticipate a "Pointe Gourde" question. This is the principle of valuation affirmed by Lord MacDermott when delivering the advice of the Privy Council in Pointe Gourde Quarrying v Sub-Intendent of Crown Lands [1947] AC 565 at 572:

"It is well settled that compensation for the compulsory acquisition of land cannot include an increase in value which is entirely due to the scheme underlying the acquisition. As was put by Eve J in South Eastern Rly Co v LCC [1915] 2 Ch 252 at 258: 'Increase in value consequent on the execution of the undertaking for or in connection with which the purchases made must be disregarded.'"

Therefore it is necessary to identify what was "the scheme underlying the acquisition" (which is a question of fact for the fact finding tribunal: (Wilson v Liverpool CC [1971] 1 WLR 302, Ozanne v Hertfordshire CC [1989] 2 EGLR 18) and disregard any enhancement of the land to be valued which is to be derived from that scheme. This is the limit of the principle. It does not preclude the valuer from taking into account any enhanced value of the land which derives from any other factor, as for example, its value for development (Camrose v Basingstoke [1966] 1 WLR 1100; Myers v Milton Keynes [1974] 1 WLR 696) or its value as a "ransom strip" (Batchelor v Kent C.C. 59 P&CR 357). Indeed, it is the duty of the valuer fully to reflect such enhancing features in his valuation.

In the present case, as appears from the terms of reference and as explained in the reasons of the Lands Tribunal and the Judgment of Buxton LJ, the enhanced value of the reference land derives from the facts that -

(1) By the agreement of 19th July 1979 J.A. Pye (Oxford) Ltd (whom I will call the Company) undertook neither to "cause nor permit to be developed and brought into use more than forty percentum by area of the land south of Poplar Road ... prior to the dedication to public vehicular traffic of the Link Road ...." (clause 9) and that it would "neither cause nor permit the development to be carried out on land to the north of Poplar Road until .... the dedication to the public of the Link Road as a continuous through route from Victoria Road to Bath Road and .... the closure of the railway bridge on Poplar Road" (clause 15);

(2) The planning consents held by the Company for the development of the two blocks of land south and north of Poplar Road contained equivalent restrictive conditions.

It is not in dispute that these undertakings and conditions could not be fulfilled until the reference land had been acquired since completion of the Link Road necessitated the putting of a roadway across the reference land. At 13th January 1988, the Link Road had already been completed on each side up to the boundaries of the reference land; all that remained was to connect up the roadways on each side of the reference land. For this purpose the reference land had to be acquired.

Subject to a point which arises on the construction of clause 15 of the July 1979 agreement, it is now accepted that, upon the findings of fact made by the Lands Tribunal, the value of the reference strip as between a willing seller and a willing buyer was, as at the valuation date 13th January 1988, £775,000 less betterment of £18,500 equals £756,500; this was the sum they awarded. How this figure is arrived at is explained at pp.58-61 of the reasons of the Lands Tribunal. The enhancing factor was the fact that the reference land was the key which unlocked for the Company the full development value in the Company's land south and north of Poplar Road. The Tribunal have held that, were it not for this enhancing factor, the value of the reference land would have been no more than £650. (See their alternative award at p.61.)

It must be observed that the enhanced value of the reference land is not an enhanced value to the Purchaser who is actually acquiring the land under the contract of January 1988. The land had no special value to the County Council and certainly not any value beyond that derived from the road improvement scheme pursuant to which the land was, notionally, being compulsorily acquired by the County Council. The enhanced value derives from the fact that there is an alternative purchaser who would in his own interests be prepared to pay the Vendor an enhanced price for the reference land.

It was the function of the Lands Tribunal as the fact finding body to find what was the scheme which underlay the deemed compulsory purchase of the reference land by the Purchaser. It was accepted by both parties that the purchase was, as the January 1988 agreement provides "for highway purposes". Accordingly, it was accepted by both parties that the underlying scheme did not extend beyond the construction of the Link Road. The Purchasers contended that the scheme was the construction of the whole of the Link Road. The Vendors contended that it was simply the completion of the Link Road. The Lands Tribunal found that the contention of the Vendors was to be preferred. No basis has been shown upon which this finding of fact can be challenged on this appeal as disclosing any error of law. It is not suggested that they misdirected themselves on the law. The most that can be said is that it is a conclusion of fact which, they submit, is legally inconsistent with the primary facts which were not in dispute. However, I have not been able to detect what that inconsistency is and I agree with Lord Justice Buxton that this challenge to the Award of the Lands Tribunal must fail.

However I consider that, even on the contention of the Purchaser, the Purchaser failed to make out that the enhanced value of the reference land to the Company should be excluded. That enhanced value derives from the value of the reference land to the Company for the Company's own purposes - to enable the Company to develop profitably its own land north and south of Poplar Road. That, on any view, was not the scheme which underlay the purchase of the reference land by the County Council. The relevant scheme was a highway improvement scheme for highway purposes. The interest of the Company in acquiring the land was precisely analogous to an interest in the acquisition of access land without which other land could not be developed. (Batchelor v Kent C.C. sup.) The mere fact that the key which unlocks the development value derives from a restrictive agreement rather than physical propinquity does not alter this conclusion. Indeed, it reinforces it: physically, the completion of the Link Road was unimportant to either part of the Company's land. The land south of Poplar Road already had good access to the Bath Road and the land north of Poplar Road had access both east and west along Poplar Road to Victoria Road and the Bath Road respectively. The highway improvement scheme was meritorious in its own terms and distinct from the question of the merit of the developments. The only link arose from the desire of the planning authority under the regime which existed prior to 1983 to obtain a collateral "planning gain" in a manner which, as the Lands Tribunal pointed out on page 59 of its reasons would not have been sustainable in 1988.

The main ground of appeal having failed, a further point has been raised on this appeal. The reasoning of the Lands Tribunal was that in order to release the development value of the land north and south of Poplar Road it would be necessary for the Company not only to obtain unconditional planning consents for the developments but also to obtain a release from the undertakings given in clause 9 and clause 15 of the July 1979 agreement. The Lands Tribunal made no distinction between the two blocks of development land (beyond recognising that it was only 60% of the development value of the southern land which was restrained by clause 9). This overlooked an argument of the Purchaser that a distinction ought to be made because clause 15 related solely to "the development" of the northern land and "the development" was defined in the July 1979 agreement as being development consequent on planning consents given pursuant to certain identified planning applications: see recitals 4 and 8 and the later supplementary agreement dated 13 September 1987. Therefore, as regards the land north of Poplar Road, clause 15 only restricted its development under those planning consents and did not affect or restrict any development of that land under fresh consents that might be applied for and obtained after January 1988. The obstacle in respect of the northern land was not the need to remove the restriction in clause 15 of the July 1979 agreement but the need to obtain a fresh planning consent.

The Lands Tribunal made no reference to this point in the critical part of its reasoning on pages 59 and 60. The development value of the northern land was financially important as is demonstrated by appendix 9 to the reasons.

How this factor would affect the valuation of the reference land is a question of fact. Maybe it would not affect it at all. There are some indications in the reasoning of the Tribunal that this was or would be their view. They were seeking to arrive at a figure which a willing (hypothetical) vendor would be likely to accept and the interested purchaser be willing to pay, rather than a precise calculation. This was a proper approach. (Rule 2) Further they clearly excluded any consideration which might arise from the fact that one or other party might also be the relevant planning authority. (See the lower part of page 59.) But it remains the position that the Lands Tribunal, as the fact finding body, has not made a finding of fact specifically on this point and it appears to be at least possible that they overlooked it.

It follows that the Award must be remitted to the Lands Tribunal with a direction that they reconsider their Award taking into account the limited effect of clause 15 of the agreement of 19th July 1979 and publish a fresh Award either confirming or varying, as they think fit, their previous assessment. I would also endorse what has been said by Lord Justice Buxton as to the desirability that, if there is any difficulty about reconstituting the same tribunal consisting of the President and Mr Hopper, the parties should concur in asking the President hear and determine the remission sitting alone.

ORDER: Appeal allowed in part; award remitted to the Lands Tribunal; appellant to pay two-thirds of the respondent's costs; one-third of both parties' costs to be costs in the remission; leave to appeal to the House of Lords refused. (Not part of approved judgment)