England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL
LANDS TRIBUNAL
(MR GEORGE BARTLETT QC and MR AJ TROTT)

		28th November 2012

Lord Justice Pill:

1. This is an appeal against a decision of the Upper Tribunal, Lands Tribunal, Mr George Bartlett QC, President, and Mr AJ Trott, dated 19 July 2011, [2011] UKUT 269 LC MWH Associates Limited ("the appellants") sought compensation from Wrexham County Borough Council ("the council") under section 107 of the Town and Country Planning Act 1990 ("the 1990 Act") by reason of modifications by the council of planning permissions granted by them in 1995 and 1998. Subject to the claim being established, compensation was agreed at a sum representing the depreciation of the value of the land. That was assessed on the basis of loss of effective profit from mineral extraction and landfill.
2. Section 107 of the 1990 Act provides:

"(1)Subject to section 116, where planning permission is revoked or modified by an order under section 97, then if, on a claim made to the local planning authority within the prescribed time and in the prescribed manner, it is shown that a person interested in the land or in minerals in, on or under it—

(a) has incurred expenditure in carrying out work which is rendered abortive by the revocation or modification; or

(b) has otherwise sustained loss or damage which is directly attributable to the revocation or modification,

the local planning authority shall pay that person compensation in respect of that expenditure, loss or damage."

3. The background to the reference was stated by the Lands Tribunal:

"1. The claimant in this reference, MWH Associates Limited, is a waste management company that acquired ownership in February 2005 of a substantially excavated quarry known as Hafod Quarry and Landfill Site, Johnstown, near Wrexham, as a site for the disposal of waste. The quarry and areas adjacent to it contain a population of great crested newts (GCN), a European protected species under Council Directive 92/43/EEC of 21 May 1992 on the Conservation of Natural Habitats and of Wild Fauna and Flora (the Habitats Directive). Part of the quarry and adjacent areas were designated as a Site of Special Scientific Interest (SSSI) in June 2001 and a Special Area of Conservation (SAC) in December 2004.

2. The quarry had been worked under a planning permission granted in October 1988. The Environment Act 1995 required the periodic review of mineral planning permissions and, where necessary, the imposition of revised planning conditions. The compensating authority, Wrexham County Borough Council (WCBC), as the mineral planning authority (MPA) approved revised conditions in respect of the 1988 permission on 4 September 2006. Condition 4 of the revised conditions required the claimant to submit details showing that no mineral extraction would take place within any area notified as a SSSI/SAC or within any adjacent area where the integrity of the SSSI/SAC?s ecological features would be affected.

3. Under the 1995 Act a restriction of working rights under conditions imposed under the review procedure has effect as if a modification order under section 97 of the Town and Country Planning Act 1990 had been made; and under section 107 of the 1990 Act a person interested in the land affected by a modification order is entitled to compensation in respect of any loss or damage which is directly attributable to the modification. The claimant claimed compensation under this provision for expenditure, loss and damage incurred as a result of being unable to win and work minerals from the area of the site affected by the new condition 4 and, as a direct result thereof, for the expenditure, loss and damage incurred as a result of losing void space for landfill.

4. The compensating authority resist the claim for compensation on two principal grounds. They say, firstly, that the claimant did not in fact intend to work the minerals in the land or to use the void space for landfill; and, secondly, that it would in any event have failed to obtain the necessary derogation licence to permit the translocation of the GCN living on the land, so that it could not lawfully have worked the minerals.

5. There is agreement on the amount of the compensation, on the assumption that the council fails in both these contentions, except that the cost of relocation of the GCN is dependent upon the date chosen to assess the size of the GCN population."

4. The sum claimed, subject to possible variation the variation referred to in paragraph 5, is between £4.2 million and £4.4 million. As appears from that summary there were, in addition to the 1988 mineral permission, permissions for the infilling of the land. The modification order with respect to the mineral permission took effect in September 2006, and modifications with respect to landfill permissions in 2007. The agreed valuation date for present purposes is 4 September 2006. By the mineral modification, no mineral extraction was to take place within an area notified as an SSSI/SAC (Site of Special Scientific Interest and Special Area of Conservation), or in any adjacent area which might affect the integrity of the SSSI/SAC's ecological features. Landfill rights were excluded by the landfill modifications. The issues have been considered on the basis that only a lawful use of the site would be, or would have been made, and should be contemplated.
5. The tribunal set out in very considerable detail the history of the conduct in relation to the site of the appellants and their predecessors-in-title since the permissions were granted, and also the statutory regimes are fully set out. The issues on the appeal are such that no narrative in such detail is required.
6. Hafod Quarry is located about five kilometres southwest of Wrexham City Centre, and has an area of about 33 hectares. The site was acquired by MWH's holding company in 2005, following a due diligence report issued by consultants in April 2002. The previous owners were Shropshire Waste Management Limited ("SWML"). The tribunal held that MWH had consistently sought to retain its working rights at the quarry, while recognising that, given the European importance of the site, it was likely that statutory powers would be exercised to reduce the area in which the rights could be exercised. MWH consistently declined the council's requests to agree to surrender those working rights, or to negotiate their elimination. The appellants claim that there has been a real and compensatable loss upon the removal of the working rights has been maintained throughout. The protected status of Great Crested Newts ("GCNs") arises from Habitat Directive 92/43/EEC of 21 May 1992, transposed in Wales by the Conservation (Natural Habitats) Regulations 1994, now replaced by 2010 regulations.
7. Following action by the European Commission, the National Assembly for Wales ("NAW") designated the claim site as the Johnstown Newts Site SAC in December 2004. The site had been designated an SSSI in 2001. Article 12(1) of the Directive, transposed by regulations 39 and 41, requires Member States to take the requisite measures to establish a system of strict protection for animal species listed in Annex 4 to the Directive, which includes GCNs. Under Article 16(1), transposed in regulation 44, Member States are permitted to derogate from the protection for particular specified purposes and subject to safeguards. It was accepted as being open to MWH to seek a licence from the council, known as a derogation licence, which would permit them to work on the site. In present circumstances, in the absence of such a licence, it would be an offence under regulation 39 to work the site.
8. The provision relied on by the appellants is in regulation 44(2)(e), though there had been an earlier reliance on 44(2)(c). 44(2)(e) provides that a licence may be issued for reasons including:

"Other imperative reasons of overriding public interest, including those of a social or economic nature, and beneficial consequences of primary importance for the environment."

Reliance is placed by the appellants on the need for landfill facilities in North Wales. That need has been accepted by the NAW, and in the development plan and other policy guidance, as well as in a planning officer's report to the council. Regulation 44(3) provides:

"The appropriate authority shall not grant a licence under this regulation unless they are satisfied (a) that there is no satisfactory alternative, and (b) that the action authorised will not be detrimental to the maintenance of the population of the species concerned and a favourable conservation status in their natural range."

Under Article 1 of the Directive, the conservation status of a species will be taken as "favourable" when "population dynamics data on the species indicate that it is maintaining itself on a long-term basis as a viable component of its natural habitat and the natural range of the species is neither being reduced nor is likely to be reduced for the foreseeable future and "there is and will probably continue to be a sufficiently large habitat to maintain its populations on a long-term basis."

9. The appellants' claim had been put to the tribunal as a claim that profits had been lost by reason of the modification orders. At a late stage during counsel's closing speech, the claim was also put on the alternative basis of a diminution in value of the land. The tribunal permitted that point to be put at that stage. Much of the evidence had been devoted to the profits issue, and the tribunal found that it failed for the basic reason that the appellants had never intended to do business on the site. The tribunal stated at paragraph 121:

"The designation of the SSSI and subsequently the SAC meant, even in the absence of a modification order, that the claimant faced statutory obstacles to implementing the Mineral and Landfill Permissions. It could only have worked the claim area by applying for a derogation licence on terms that ran contrary to the approach first put forward in their second derogation licence application, or by invoking the exception under regulation 40(3)(c) and "hard-nosing" ahead with the lawful operation defence under Newsum. Realistically the claimant could not be confident of success under either of these strategies. The claimant might have thought it desirable to work the claim area at the valuation date given the possibility of favourable returns but it did not, in our opinion, intend, plan or propose to do so at that time or at any time before or after its acquisition of Hafod Quarry."

10. That finding of fact is not challenged, but it is submitted by the appellants that an important aspect of the case was not considered when the implications of the finding of fact were stated. The tribunal also found that the decision not to work the claim site had been reached at an earlier stage by the predecessors-in-title of the appellants:

"its decision was a clear expression of its intent not to work and subsequently landfill the claim area and one that was based on commercial and economic considerations."

11. On the issue of value, the tribunal found that the claim failed because no derogation licence to permit the site to be worked would have been obtained. The tribunal stated at paragraph 151:

"Our conclusion is that WAG, as advised by CCW, would have refused to grant a derogation licence at the valuation date to translocate GCN from R2 to R1. The depreciation of the value of the claim area was therefore not directly attributable to the deemed modification order arising from the imposition of the ROMP conditions."

12. When opening his submissions, Mr Price Lewis for the appellants defined the issue as to whether a landowner whose rights to work a quarry were expected to be restricted for the benefit of a particular species, and where cooperation with the public authorities in protecting the species was provided, loses his right to compensation under section 107 of the 1990 Act. Mr Price Lewis also submits that in considering whether a derogation licence would have been issued, the tribunal applied the wrong test, and not the test required by regulation 44(3).
13. I consider the second submission first, because the finding on the issue whether a derogation licence would have been issued appears to me to be central to the case. The claim was that, on the evidence, a derogation licence would have been granted. The appellants relied on the facilities available on another part of the quarry, R1, and submitted that its availability met the statutory requirements. The GCN on the appeal site could be transposed to R1. Mr Price Lewis relied on the expert evidence of Ms Wilkinson. The site already designated R1 "would be the most favourable receptor site" for the GCN population. It was acceptable to move newts to an area which already supported a population; moving newts which had been relocated to the claim site back to R1 was reasonable, and unlikely to harm them or their population. Ms Wilkinson's evidence was that R1 was "the most appropriate receptor site" and was part of an extensive mosaic of terrestrial and aquatic habitats capable of further enhancement. The favoured conservation status of the GCN would not be adversely affected.
14. For the council, evidence was given by Dr Howe. She submitted that R1 had received many more newts than had originally been contemplated, and the carrying capacity of the site would be exceeded. The claim site had a major advantage over R1 as a receptor site. Removal of GCN from the claim site would "further fragment the range and functionality of the population". CCW "would not have been able to recommend a grant of a derogation licence in 2006 or subsequently".
15. The tribunal considered the evidence most carefully. It approached the evidence on the basis that the only receptor site which could seriously be considered was R1. In 2005, a minimum of 183 GCN were translocated there. The minimum population in the claim site in 2006 was 130. The tribunal stated at paragraph 149:

"149. Under regulation 44(3)(b) WAG would need to be satisfied, before granting a derogation licence at the valuation date, that the proposed translocation of at least 130 GCN from R2 to R1 would not be detrimental to the maintenance of the population of GCN at a favourable conservation status in their natural range. In our opinion that criterion requires WAG to compare the donor (R2) and receptor (R1) sites in order to determine which of them is best able to maintain the GCN population in that status. If the answer to that analysis is that it is R2 that best achieves this desideratum then translocation of GCN to R1 would, in our opinion, be detrimental for the purposes of regulation 44(3)(b)."

16. Mr Price Lewis's submission on this point was succinctly put: the test is not which is the best site, but whether the appellants' proposals met the requirements of regulation 44(3) so that a derogation licence could and would have been issued. That, it is submitted, was an error of law. Considered in relation to paragraph 149 alone, I see force in that submission. But the paragraph must be read with paragraph 150, in which detailed and careful consideration was given to the evidence before the tribunal. It stated:

"150. On the evidence there are several reasons for concluding that, at the valuation date, the habitat at R2 was best able to support and maintain the population of GCN at a favourable conservation status in their natural range:

(i) R1 was at or close to its carrying capacity. Between 1999 and 2005 more than 2000 GCN had been translocated from Hafod Quarry, the majority of which (we estimate 1,830) were moved to R1 (although an unknown number of these are likely to have been double counted following their return to the quarry after previous translocations). These numbers were higher than originally anticipated and therefore the habitat of R1 had to be improved. The translocation of at least another 130 GCN from R2 would have required yet further improvements, especially the provision of aquatic habitat. This in turn would have reduced the amount of terrestrial habitat available. Dr Howe described R1 in cross-examination, fairly in our opinion, as being "under pressure" and the translocation of GCN from R2 as putting "all the GCN into one basket."

(ii) The habitat at R2 had been significantly improved to allow the translocation of GCN to it in 2005.

(iii) Unlike R1, R2 was, at that time, free from predatory fish and the invasive Crassula helmsii. The site was defensible from the incursion of the public and therefore future management of this problem would have been easier than at R1.

(iv) Removal of R2 would potentially lead to the isolation of the area of the SSSI/SAC to the south (New Hall Farm) and thereby risk reducing the natural range of the GCN. Its retention would ensure a more geographically diverse range of habitat.

(v) The claimant said that under the first derogation licence it was intended (in a later phase) to translocate the GCN from the claim area to R1. But this did not happen and the circumstances materially changed following the designation of the extended SSSI and the SAC."

17. In that fact-finding and reasoning, the tribunal appears to me to have had in mind, and to have applied, the regulation 44(3) test, and I do not accept Mr Price Lewis's submission that the tribunal in that paragraph considered the evidence through the prism of an erroneous test based on paragraph 149. In paragraph 150, the tribunal considered the evidence on the basis of the correct test, and that is whether the appellants' proposal's reliance on R1 was detrimental to the maintenance of GCNs at a favourable conservation status as defined in the directive. The tribunal was entitled to go on to reach the conclusion stated in the first sentence of paragraph 151, which I have already cited, without having erred in law.
18. Mr Price Lewis's other submissions must be considered in the light of that finding. He goes on to challenge the second sentence in paragraph 151, cited at paragraph 10 above.
19. A finding that a derogation licence would not have been issued would not be decisive on this claim, if the appellants' loss was directly attributable to the modification orders under regulation 44(3). There had in this case been a review of the mining permissions lawfully conducted to preserve the planning permission. The appellants' predecessors had sought a modification order, and orders were made. Mr Price Lewis submits that the loss of over £4 million was directly attributable to the modifications. He relied on a document entitled "Planning Policy Wales, Technical Advice Note 5, Nature Conservation and Planning", dated September 2009. Annex 4 is entitled "The Review of Outstanding Planning Permissions and Deemed Planning Permissions Likely to Affect an Internationally Designated Nature Conservation Site". Guidance was given as to the ways in which the problem could be met. Other ways of dealing with it are set out; however, at paragraph 3 it is stated that if they are not successful:

"The authority must take appropriate action to remove the potential for harm unless there is no likelihood of the development being carried out or continued."

Paragraph 4:

"If the local planning authorities consider that planning obligations restricting or regulating the use of the land or would safeguard the integrity of the site, they must invite those concerned to enter into them."

I interpose that that invitation was made to the appellants, was declined, and the appellants were entitled to decline it. Continuing the quote:

"Insofar as the adverse effects are not overcome by such obligations, local planning authorities must modify or revoke the permission, or make a discontinuance order in a manner which is sufficient to avoid the potential threat to the integrity of the site."

The tribunal put it in this way at paragraph 63:

"63. In reviewing any planning permission under regulations 50 and 51 the competent authority shall consider, under regulation 56, whether any adverse effects could be overcome by planning obligations under section 106 of the 1990 Act being entered into, and, if they consider that those effects could be so overcome, shall invite those concerned to enter into such obligations. As far as the adverse effects are not thus overcome the competent authority shall make such a modification order under section 97 of that Act as may be required."

20. The council made modification orders, it is submitted, having considered that it was necessary to do so and that it must do so. Having consciously made that decision, it was not now open to the council to argue that the failure to work was other than attributable to the modification orders, within the meaning of regulation 44(3). Reliance is placed on citations within the decision of this court in Smout v Welsh Ministers and Wrexham CBC [2011] EWCA Civ 1750 of statements made by the Inspector and by the CCW in that case. The Inspector stated, as cited at paragraph 6 of the judgment of Laws LJ:

"...subject to the submitted modifications, each Order is necessary and sufficient to safeguard: the integrity of the SAC, and populations of great-crested newts and other amphibians within the SAC, the SSSI and the amphibian compensation areas."

At paragraph 8, Laws LJ recorded the CCW as having observed:

"To conclude, we wish to affirm that the outcome of the Modification orders will be to reduce any adverse effects on the environment and will prevent any significant effects on landfill or mineral extraction on statutory sites, their associated features and on the conservation status of European protected species."

21. While it is accepted that the Inspector and CCW in that case were dealing with the same quarry in the same area, the issues in that case were quite different from those in the present case. It is not suggested that this court is bound by statements by the Minister or the CCW, or that the effect of those statements on analysis supports the appellants' submissions in this case. Mr Price Lewis submits that it is a further indication that it was the modification orders, which were necessary, that were the cause of the loss, which was directly attributable to them.
22. I do not accept that submission. A decision that it was appropriate on the present facts to make modification orders, and indeed that there may have been an obligation to do so, does not preclude a finding by the tribunal that, on the facts, the real cause of the inability to work the claim site was the status of the land and its inhabitants as a result of the Directive and the Regulations. Without a derogation order under the Regulations, there could be no working on the claim site. What prevented working was the presence of the GCNs, and the designation of the claim site as an SSSI and SAC. The council was entitled, as Mr Sauvain QC for the council put it, to make the modification orders as a recognition in a planning context of what environmental legislation prohibited; it did not, in my judgment, preclude the council from arguing, or the tribunal from finding, that as stated in paragraph 151:

"The depreciation of the value of the claim area was therefore not directly attributable to the deemed modification order arising from the imposition of the ROMP conditions."

23. On the tribunal's findings on those two issues, which I would uphold, first that a derogation licence would not have been issued, and, secondly, that in the circumstances the depreciation of the value of the land was as stated in paragraph 151, the significance of arguments about the intentions of the appellants fall away. Mr Price Lewis does not challenge the findings of fact in paragraph 121 as to present intentions; his submission is that the conduct of the appellants and their predecessors must be considered in a context of knowledge during the shadow period before exercise that powers to protect a claim site would be exercised (Director of Buildings and Lands v Chenfeng Iron Works Limited 2 AC 111, Privy Council). Their actions were coloured by the knowledge that the claim site could not be worked because of the presence of GCN. The appellants did not, as the tribunal found, give up their rights, having knowledge of the powers available and subsequently exercised by the authorities on environmental grounds. The appellants cooperated with the authorities to the mutual advantage of both the parties. That should not deprive them of their right to compensation, it is submitted. It should not be defeated either by their cooperation or by their realistic acceptance of the inability to work the site.
24. The appellants submit that in the real world, it is unrealistic to suggest and unjust to require a claimant to demonstrate at any time after the nature conservation importance of a site has been publicly recognised that it intended to work the claim area. It would put a premium on lack of cooperation with public authorities, if cooperation is taken to demonstrate the absence of an intention to implement the permission. A present intention to work the claim site at the valuation date does not need to be proved, especially in a case where the planning permission will subsist for many years. The submission is, and I accept it was put to the tribunal, that the appellants would have had a genuine intention to work the site but for the statutory powers available and to be exercised by NAW, CCW and the council. The council, Mr Price Lewis submits, should have taken that into account.
25. I accept Mr Price Lewis's submissions, to the extent that viewing the claim as a whole, it should not fail because the appellants realistically did not form an intention to work the claim site. But on the findings of the tribunal already considered and approved, that gets the appellants nowhere. The focus on intention was generated by the claim having been put on a loss of profit basis. Belatedly, it was put on a diminution of value basis, the better ground in my view, because there never had been an intention to work the claim site, and there is obvious force in the council's submission that the intentions of the owner are an essential consideration when considering a claim for loss of profit.
26. In the event, the claim valuation was based on a notional loss of profit, and by agreement that was taken as representing the diminution in value. Whatever lack of appreciation of the appellants' state of mind the tribunal may have had, it does not follow that an erroneous conclusion was reached. What defeated the claim was not the lack of a current intention to work the site, or the cooperation of the appellants with the respondents in newt preservation; what defeated the claim were the findings that no derogation licence would have been issued, and, environmental orders having been made to protect, the loss was not directly attributable to the modification orders within the meaning of regulation 44(3). The law does not provide compensation for a loss of value caused by a designation following the Directive of an SAC.
27. I do not consider it necessary in the circumstances to consider in detail Mr Sauvain's further submission about the activities of the appellants and their predecessors. They demonstrate, it is submitted, a positive decision not to work the claim area. In March 2000; when the derogation licence was sought, it was proposed that the claim area be set aside as a nature reserve for amphibians; later a permanent newt-proof fence was constructed between the claim area and the remainder of the quarry. Works were carried out to approve the habitat for GCNs on the claim site, and GCNs were relocated there under licence from the NAW. An undertaking was given to manage the claim area for a 21-year period for the benefit of the GCNs relocated there. It was on the appellants' refusal to give undertakings not to carry out any work within the claim area that the council imposed an appropriate condition in a modification order. Those facts and submissions are a part of the background to the tribunal's essential findings, and are consistent with them, but they are not crucial to them.
28. At the hearing of this appeal, Mr Price Lewis has rightly referred to the duration of the duration of the planning permission until 2048. That does not assist him, however, because the case was not put to the tribunal on the basis that at some unspecified future date, but before 2048, the protected status of the claim site might be relaxed. Such a suggestion would, in any event, have been extremely speculative, and rightly it is not relied on at this stage. At paragraph 87, the tribunal found a purchase on the valuation date would have been a mere speculation, based on the hope that, despite the jurisprudence of the CJEU, extraction would not have been met with prosecution, or alternatively that a derogation licence would be granted. There is no evidence, however, as to what such a speculative value, if any, might have been, so that the claim has failed to establish any claim for compensation based on the depreciation of the value of the claim area. That finding is repeated at paragraph 151, which I have already cited.
29. For those reasons, I would dismiss this appeal.

Lady Justice Arden:

30. I agree with my Lord, Lord Justice Pill, on issue one. This failed on its facts; the tribunal was not satisfied that the landowner had a genuine intention to realise the mining rights. Given the detailed nature in which the tribunal set out the facts in its decision, this court cannot interfere with its factual conclusions. The position might have changed over the remaining term of the grant. The owner might have decided genuinely to realise the mineral rights; but that point, as Lord Justice Pill has held, was not argued below. My provisional view is that section 107 of the Town and Country Planning Act was not dealing with contingent loss of that nature, but I leave that question open.
31. On this technical issue, I would have rejected the appeal on that ground as well. The evidence which the tribunal set out showed that the GCNs could actually survive in either site. The statutory question set out in Regulation 44(3) of the Habitat Regulations was whether the translocation would be detrimental to the maintenance of a population of the species concerned and a favourable conservation status in their natural range, which was then R2. So it seems to me that the tribunal had to make some form of comparison between the two sites in order to answer this statutory question. They came to the conclusion for the reasons set out in paragraph 150 of their decision that the translocation would be materially adverse to the GCNs, for the reasons there set out. Those reasons are, as Lord Justice Pill has explained, in any event sufficient to dispose of there being any error on this point, even if their interpretation in paragraph 149 of their decision were wrong.
32. Accordingly I agree with Lord Justice Pill that this appeal should be dismissed.

Lord Justice Lloyd Jones:

33. I would dismiss the appeal, for the reasons given by my Lord, Lord Justice Pill, with which I agree.

Order: Appeal dismissed.