England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)
His Honour Judge Mole QC and P R Francis FRICS
[2013] UKUT 0231 (LC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		22nd May 2015

Lord Justice Patten :

Introduction

1. The Appellant, the Homes and Communities Agency ("HCA"), is the acquiring authority under the North West Development Agency (Kingsway Business Park, Rochdale) Compulsory Purchase Order 2002 ("the CPO"). It took over the property rights and liabilities of the North West Development Agency ("NWDA") under a Transfer Scheme on 19 September 2011 and is therefore now responsible for the payment of the compensation due to the Respondent, J S Bloor (Wilmslow) Limited ("the Claimant"), in respect of the compulsory acquisition of two plots of land comprised within the CPO. These are Plot 13 (9.71 acres) and Plot 14 (17.14 acres) which were acquired by the Claimant in May 2003 for a total cost of £1.3m. The sale price included a further area of some 0.4 acres adjoining Plot 14 (referred to as the Nib) which is land that divides Plot 13 and Plot 14 from a public highway called Buckley Hill Lane, which could be used to provide a means of access from those plots to the highway.
2. These parcels of land were until May 2003 in the ownership of various members of the Nall family who had submitted a planning application for residential development on the site with highway access via the Nib but had been refused planning permission on 18 January 2002. After its purchase, the Claimant took over the objections to the CPO in respect of Plots 13 and 14 ("the reference land") and appeared at the 2003 public inquiry in order to seek the removal from the CPO of the part of the reference land that fell within the area of the order land designated for residential development as part of the Kingsway Business Park ("KBP"). On 5 October 2004 the Secretary of State confirmed the CPO subject to various immaterial modifications and a general vesting declaration was made in respect of the reference land on 4 January 2006. This is the valuation date for the purpose of determining the compensation payable to the Claimant. I should emphasise at this point that the reference land does not include the Nib which has always remained outside the boundaries of the order land and therefore remains in the Claimant's ownership.
3. In 2010, the Claimant made an application to Rochdale Metropolitan Borough Council, the local planning authority, under s. 17 of the Land Compensation Act 1961 ("the 1961 Act") for a certificate of appropriate alternative development in relation to the reference land ("the s.17 application"). By this application the Claimant sought a certificate of the opinion of the Council under s. 17(4) that planning permission might have been expected to be granted for, amongst other things, residential development if the land had not been made subject to compulsory purchase. In December 2010 the application was withdrawn after the Council's planning officer had drafted a report recommending refusal because the proposed alternative development did not comply with relevant planning policies in relation to the area designated for development of the KBP and with national and regional planning policies. The report observed that the reference land was a greenfield site and that, outside the context of development of the KBP, residential development there would be contrary to the sequential approach to housing development as set out in Planning Policy Guidance 3 ("PPG3"), which gives priority to such development on brownfield sites.
4. The reference land is poor quality grazing land with an existing use value which the HCA estimated to be about £2,000 per acre. But the Claimant sought compensation in the sum of £2,593,000 on the basis that the reference land had significant hope value based on the prospect of planning permission for a residential development on part of the reference land with highway access via the Nib.
5. The determination of the amount of compensation was referred to the Upper Tribunal (Lands Chamber) ("UT") (HH Judge Mole QC and Mr P R Francis FRICS) which, in a decision dated 28 May 2013, awarded compensation in the sum of £746,000. This was based on there being a 50% chance of planning permission being granted for a 74 unit development on 4.88 acres of the reference land (with access via the Nib) subject to a deferred period of 5 years. HCA challenges this valuation but not in terms of its methodology nor in respect of the values placed upon the reference land given the relevant valuation assumptions which the calculation of compensation adopts. These are largely matters of planning and valuation evidence and expertise which the UT, as a specialist tribunal, is almost uniquely qualified to determine.
6. The principal ground of appeal is that, in assessing the prospect of planning permission being granted for a residential development on the reference land in accordance with s.14(3) of the 1961 Act, the UT misapplied the statutory disregards contained in s.6 and Schedule 1 to the Act. In particular, it was wrong to treat the planning policies applicable to the reference land and the planning history based upon them as being in any way modified by the notional cancellation of the CPO in respect of the reference land which forms the first part of the valuation construct under s.16(7) of the 1961 Act or by the statutory disregards under s.6. What it is said that the UT has done wrong is to have based the calculation of compensation upon an assumption that the KBP scheme has been cancelled in its entirety so that, at the date of valuation, the requirement in the development plan that there should be a comprehensive and unified development of the order land was required to be treated as more likely to be relaxed in favour of an independent development on the reference land than it would have been while the KBP scheme was in contemplation. For the same reason, it was wrong, they say, for the UT in that hypothetical situation to have attached less weight than would otherwise be the case to the earlier refusal of planning permission for a housing development on the reference land.
7. If these criticisms are well-founded then the Appellant's case is that the valuation exercise proceeded upon a misdirection as to the relevant statutory test to be applied which vitiates the decision on compensation. They therefore seek an order setting aside the decision and remitting the reference back to the UT to be re-considered upon a correct application.

Planning history

8. In order to understand the issues raised by this appeal I must begin by outlining the planning background and, in particular, the development policies relevant to the KBP. These are based on the agreed statement of facts produced by the parties for the UT.
9. The CPO was made by NWDA on 10 May 2002 for the purpose of assembling some 420 acres of land at Milnrow, Rochdale as the site of the KBP. The order lands are located about 1 mile east of Rochdale and to the north-west of junction 21 on the M62 motorway. Prior to their inclusion in the KBP scheme, the order lands consisted, for the most part, of low-grade equestrian and grazing land with a number of isolated buildings and farmsteads. The site is traversed by Stanney Brook, a site of biological importance and a nature conservation area.
10. The possibility of developing land in this area as an industrial estate has been mooted since the 1960's but was not the subject of a feasibility study until 1979. In 1980 the Kingsway Industrial Park Feasibility Study Interim Report was published with a final report in November 1983 which identified the site as suitable for major commercial development. In August 1998 planning permission was granted for the proposed business park but this was subsequently overturned as a result of an application for judicial review.
11. In November 1999 the developers published the KBP Development Framework ("the Framework") to support a revised planning application. The Framework stated:

"The Kingsway Business Park, although primarily a focus for business and employment uses, will be a high quality mixed use development, for business, light industry and distribution complemented by hotel and leisure facilities with small scale retailing, local services and residential areas.

and

Residential facilities are proposed in their limited form compatible with the requirement of criterion (p) of the [1999] UDP Policy EC/6, located on a site to the north of Buckley Hill, and within the integrated canalside development on Plot S".

12. The framework also included a Master Plan layout for the KBP and provided for its phased development. Parts of Plots 13 and 14 were included in what is described as Plot X in the Master Plan. This is an area designated for residential development. The remainder of the reference land is located within Plots P, Q and R, all of which are designed for B1 Office and Floor space.
13. Planning consent for the KBP based on the Framework and the Master Plan was granted on 19 December 1999. As at the valuation date there were planning consents, still extant, for the KBP (over the whole of the reference land); the construction of a principal spine road linking the M62 to the development via a remodelled and improved junction 21; and the construction of two main loop roads leading from the new spine road and providing access to individual areas within the KBP. Parts of the reference land were to be used for the construction of one of these loop roads which would serve the residential development planned for Plot X. The permitted development in respect of the order land was for some 3.6m sq ft of B1 commercial and business accommodation; 300 residential units; about 15,000 sq ft A1 retail and 9,000 sq ft A3 retail; together with provision for a hotel and public open space. Stanney Brook was to be retained and landscaped as part of the scheme.
14. By the valuation date NWDA as acquiring authority had entered into a joint venture agreement and a collaboration agreement which provided for the phased development of the KBP beginning with the infrastructure works. The contract for the first phase of the remodelling of Junction 21, the construction of the main spine road and part of the southern loop road had also been let and these works were under way.

Planning Policy

15. Since 1989 the order land has been allocated for large-scale general and light industrial use, offices, distribution and storage, research and development and other complementary uses by policy E7 of the South Rochdale local plan. At the valuation date, Regional Planning Guidance for the North West (RPG13) (approved in March 2003) listed the KBP as one of eleven sites stated to be critical to the effective implementation of the strategy for the region. Policy UR7 stated:

"Local planning authorities should monitor and manage the availability of land identified in development plans to achieve the annual average rates of housing provision set out in Table 5.1 [240 units pa within Rochdale] and in doing so must seek to minimise the amount of land needed for new housing:

…

Maximising the re-use of vacant and underused land and buildings within Policy UR4

…"

16. The KBP was also allocated in policy EC/6 of the Rochdale Unitary Development Plan adopted in March 1999 ("the 1999 UDP") which set out sixteen criteria which would "strictly apply". These included:

"(j) Vehicular access to the site to be from the A664 Kingsway and from Junction 21 of the M62 Motorway only; significant improvements to the geometric layout of the layout of the M62 Junction 21 will be necessary;

…..

(l) Any individual development within the site must be compatible with the overall objective of a strategic business park development and must not constrain either a comprehensive overall development or the provision of a satisfactory highway link between the A664 and junction 21 of the M62;

…..

(p) Limited residential development may be acceptable provided it is part of a comprehensive development scheme for predominantly business uses and would not undermine the site's primary role as a business park."

17. As at the valuation date, a draft replacement UDP was quite well advanced, although it was not formally adopted until June 2006. It was agreed at the hearing in the UT that the draft revised UDP would, however, have been relevant to any planning application made at the valuation date. The draft (which allocated the KBP land in Policy EC/7) preserved a number of policies from EC/6 including (j) quoted above. But at the public inquiry into the draft UDP consideration was given by the Inspector to draft criterion (p) which replaced criterion (l) in EC/6 and emphasised in the form of a number of sub-criteria the need for any development within the KBP to be compatible with and not a constraint upon the comprehensive development of the whole site in accordance with the Master Plan. Some of these conditions were criticised at the inquiry for their apparent inflexibility and the Inspector recommended the deletion of criterion (p) and its replacement with paragraph 8.40 of the reasoned justification as follows:

"8.40 Development of the site is likely to be phased and it is essential that any development is compatible with the overall objective of a strategic business park and does not constrain a comprehensive overall development that meets all the criteria set out in the policy. Any development within the site will therefore be expected to accord substantially with an approved Master Plan for the comprehensive development of the whole site; and in any event to:

i. Be compatible with the overall strategic objectives of strategic business park development, which are primarily to attract major inward investment to the Region and sub region to support economic regeneration;

ii. Comply with, or allow and enable an overall scheme to comply with, all the criteria in this policy;

iii. Not constrain a comprehensive and satisfactory overall development of the entire site;

iv. Not hinder the provision of a satisfactory highway link between the A664 and Junction 21 of the M62; and

v. Contribute to the total cost of all on and off site infrastructure works, including highways and services, necessary for the development of the entire site. Such contributions will be secured through planning conditions or other legal agreements."

18. The UT summarised the effect of these changes in [28]-[29] of the Decision:

"28. In regard to this paragraph, the planning experts agreed that the local planning authority would have continued to ensure that any development on the KBP accorded substantially with an approved Master Plan. They also agreed that the Inspector had specifically considered the possibility of individual development coming forward within the planning process and that the provision of the proposed criterion (p) to Policy EC/7 did not place an embargo on such development although it was accepted that planning permission would not have been granted for any employment development on the reference land with vehicular access from Buckley Hill Lane. Any individual development that might have been permitted would, it was agreed, have had to contribute to the onsite and offsite infrastructure costs of the KBP by means of a s.106 obligation or other appropriate mechanism.

29. As to what had been criterion (p) in EC/6 relating to residential development and was reworded as criterion (o) in the draft to: "limited residential development may be acceptable provided it is appropriate in scale, location, access and design", the Inspector continued at paragraph 8.56 of his report in response to an objection on the grounds that any such development would be contrary to the sequential test set out in PPG 3 and would restrict the flexible use of the site:

"…KBP is a greenfield site although the areas identified in the masterplan for housing are reasonably well located in terms of their connections to local services and public transport links. I can see that the limited housing may well be necessary as enabling development, particularly in terms of the significant infrastructure costs that the development of the site may accrue. It may also assist the vitality of mixed-use areas on the Park. However, beyond this fairly limited contribution, the development of extensive housing would be inappropriate under PPG 3 and would restrict the flexible use of the site. The wording of criterion (o) is clear in that extensive redevelopment would not be acceptable and that the design and siting of limited residential development must be such that it would not compromise the overall objective of the Business Park."

The proposed wording of criterion (o) was thus confirmed."

Highways

19. The other background matter dealt with in evidence before the UT was road access to a development on the reference land within Plot X. The expert witnesses were agreed that the Council's highway officers would not recommend refusal of permission for a residential development on this site on highway grounds:

"Mr Wall and Mr Wooliscroft agreed, in respect of a limited residential development on the reference land with access off Buckley Hill Lane, that whilst the independent development of the reference land for these purposes had not been formally accepted by Rochdale Borough Council, the advice given by the council's highway officers was that it could not be recommended for refusal on highways grounds. If such a development were to achieve planning consent (whether for residential only on the 4.88 acres comprising part Plot X (Mr Wooliscroft's Option 2) or for a mixed use scheme incorporating business use on the remainder of the reference land with access for that off Kingsway (Option 3), section 106 contributions in the region of £115,000 would have been required. These were improvements to the traffic light control system beyond the junction of Buckley Hill Lane with Elizabethan Way where the latter meets Bridge Street and Rochdale Road (the Bridge Street Junction), bus stop upgrades and footway improvements to the Buckley Hill Lane Bridge over the Metrolink railway line."

Valuation

20. The relevant provisions of the 1961 Act have been replaced and re-cast by the provisions of the Localism Act 2011. But for the valuation date in this case the provisions of the 1961 Act continue to apply.
21. Under the 1961 Act compensation for any compulsory acquisition is required to be assessed in accordance with the rules set out under s.5. Rule 2 provides that the value of land shall be taken to be the amount which the land, if sold in the open market by a willing seller, might be expected to realise. Section 6 then sets out certain disregards. So far as material to this appeal, section 6 and Part I of the First Schedule to the 1961 Act provide:

"(1) ….. no account shall be taken of any increase or diminution in the value of the relevant interest which, in the circumstances described in any of the paragraphs in the first column of Part I of the First Schedule to this Act, is attributable to the carrying out or the prospect of so much of the development mentioned in relation thereto in the second column of that Part as would not have been likely to be carried out if—

(a) (where the acquisition is for purposes involving development of any of the land authorised to be acquired) the acquiring authority had not acquired and did not propose to acquire any of the land; …..

Part I

Description of Development

Case	Development
1. Where the acquisition is for purposes involving development of any of the land authorised to be acquired.	Development of any of the land authorised to be acquired, other than the relevant land, being development for any of the purposes for which any part of the first-mentioned land (including any part of the relevant land) is to be acquired."

22. These are not easy provisions to read or to construe but, in summary, they require the valuation of the land that is acquired for development under the CPO to ignore any increase or diminution in the value of that land which is attributable to the development of the other land which is also acquired for development under the CPO that is not likely to have been carried out but for the CPO. The purpose of these provisions is therefore to exclude compensation for increases or reductions in value attributable to the scheme involving the compulsory acquisition in conformity with the application of the principle in Pointe Gourde Quarrying & Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565 which continues to inform the construction of the 1961 Act: see Transport for London v Spirerose Ltd [2009] 1 WLR 1797. As Lord Nicholls explained in Waters v Welsh Development Agency [2004] 1 WLR 1304 at [18]-[19]:

"18. ....When granting a power to acquire land compulsorily for a particular purpose Parliament cannot have intended thereby to increase the value of the subject land. Parliament cannot have intended that the acquiring authority should pay as compensation a larger amount than the owner could reasonably have obtained for his land in the absence of the power. For the same reason there should also be disregarded the 'special want' of an acquiring authority for a particular site which arises from the authority having been authorised to acquire it.

19. This approach is encapsulated in the time-hallowed pithy, if imprecise, phrase that value in this context means value to the owner, not value to the purchaser. In Stebbing v Metropolitan Board of Works (1870) LR 6 QB 37, 42, the graveyards case, Cockburn CJ said:

'When Parliament gives compulsory powers, and provides that compensation shall be made to the person from whom property is taken, for the loss that he sustains, it is intended that he shall be compensated to the extent of his loss; and that his loss shall be tested by what was the value of the thing to him, not by what will be its value to the persons acquiring it.'"

23. In order, however, to apply these rules of valuation, it is necessary first to determine what is the planning status of the reference land. In the present case, the existing use value of the land is low and there is no planning permission for any independent housing development on the site linked to Buckley Hill Lane. The planning policies and the grant of permission relating to the KBP all assume a co-ordinated development (including residential development on Plot X) linked via the spine roads to junction 21 of the M62.
24. Sections 14-16 of the 1961 Act contain a series of assumptions about planning permission which require to be made for the purpose of valuing the reference land as part of the assessment of compensation. These assumptions are additional to any actual planning permission in force (s.14(2)) and do not exclude hope value based on the prospect of permission for a development outside the developments for which planning permission is to be assumed under ss.15 and 16: see s.14(3). An assumed permission under these sections is not to be treated as an assumption that permission for some other kind of development would not be granted. That is a matter for expert evidence in each particular case.
25. Section 15 assumes the grant of permission for development in accordance with the proposals of the acquiring authority and the same assumption is made under s.16(1)-(3) if the relevant land forms part of a site defined in the current development plan as the site for development in accordance with the plan. In each case the valuation assumption is that planning permission would be granted subject to such conditions as might reasonably be expected to be imposed: see s.16(6). But all these provisions have to be read subject to s.16(7) which provides:

"Any reference in this section to development for which planning permission might reasonably have been expected to be granted is a reference to development for which planning permission might reasonably have been expected to be granted if no part of the relevant land were proposed to be acquired by any authority possessing compulsory purchase powers."

26. This is commonly referred to as the cancellation assumption. It operates to limit the scope of any assumed planning permission to a counter-factual scenario in which the KBP scheme has been cancelled in respect of, but only in respect of, the reference land: i.e. as if the landowner had succeeded at the public inquiry in persuading the Inspector to omit Plots 13 and 14 from the CPO. There is no requirement to assume that the CPO would not have gone ahead in respect of the remainder of the order land or that the development of the KBP would not have proceeded: see Thomas Newall Ltd v Lancaster City Council [2010] UKUT 2 (LC).
27. The impact of the cancellation assumption upon the planning prospects for any particular scheme will very much depend upon the nature of the relevant proposal. There will obviously be cases, such as linear transport proposals, where the notional exclusion of the reference land may require an assumption to be made that the scheme would not go ahead. But it is common ground in the present case that the cancellation assumption does not lead to an assumed cancellation of the whole KBP scheme or to the abandonment by the local planning authority of the criteria contained in policy EC/6 and emerging policy EC/7. Indeed, it was part of the Claimant's case before the UT that EC/6 continued to apply to the reference land even on the cancellation assumption.
28. The other point to be made about s.16(7) is that although it is not in terms a valuation disregard, it is part of the valuation process. It operates, as I have explained, to limit the extent to which planning permission for the reference land is to be assumed to be granted and it may in some cases require the assumption that planning permission for the relevant development will not be granted. The task of the UT is therefore to decide what planning permissions are to be treated as in place in respect of the reference land and what other planning permissions have some prospect of being granted in those circumstances. Once these matters are determined the process of valuing the reference land under s.5 can then begin. The application of disregards in order to eliminate the positive or negative impact of the development scheme on the value of the reference land, whether under s.6 or the Pointe Gourde principle, is necessarily contingent upon establishing the relevant planning assumptions. But, as was pointed out in Thomas Newall, it does not determine what those assumptions should be:

"30. In our judgment the Pointe Gourde principle does not permit a further statutory assumption to be made, namely that in addition to the assumption that 'no part of the relevant land were proposed to be acquired' there are no proposals to acquire any land pursuant to the relevant scheme.  To do so would introduce a new assumption which is not warranted by the language of section 16(7) nor by any recognised purposive principle of statutory construction as envisaged by Lord Walker in paragraph 36 of Spirerose.  It would also result in applying the Pointe Gourde principle to the ascertainment of the interest to be valued rather than the value of the interest contrary to Rugby Joint Water Board case and see also Myers v Milton Keynes Development Corp  [1974] 1 WLR 696 at p.702.  It will be at the subsequent valuation stage that Pointe Gourde is potentially applicable not at this preliminary stage of determining whether the reference land is assumed to have planning permission."

29. The UT (at [46]) accepted the need to apply this two-stage approach. They said that it was important not to elide the stages of first identifying the planning status of the reference land and then, as part of the valuation on that basis, of applying the disregards to the result. The difference between the parties on stage one was also relatively small. As I have said, it was common ground that policy EC/6 continued to apply. The disagreement lay in whether there was any, or any appreciable, prospect of obtaining consent for a residential development that was not dependent for access on the spine road leading to junction 21. The HCA's case was that the need to apply criterion (j) in policy EC/6 strictly would continue to rule out planning permission for a development with access via the Nib, as confirmed by the earlier refusal of the Nall planning application. The Claimant's evidence was that, in the light of the emerging policy EC/7, the imperative for a comprehensive development should not be regarded as excluding any individual development; that the reference land was suitable for residential development being on the edge of an urban location; that there was no issue about viability nor any highway objection to access via the Nib; and that, although a greenfield site, the reference land was not in a green belt but in an area allocated for mixed use development since 1989.
30. The UT found that on the cancellation assumption, the KBP scheme with its partly built infrastructure was likely to proceed as a coherent development as much in accordance with the Master Plan as could be achieved: see [81]. The owner of the reference land would perceive himself to be in a relatively strong position with regards to contributions to the loop roads and other service connections. The land would therefore have a substantial value based on an expectation of planning permission for a residential development linked to the spine road. But this value is all attributable to the development of the KBP on the adjoining land and therefore falls to be disregarded under s.6(1) and the First Schedule:

"89. We think that simply on the cancellation assumption there would have been a reasonable prospect of some residential development on the reference land with access from a northern loop. However, it would seem that such an increase in the value of the relevant interest would have to be disregarded. It would be unequivocally attributable to the development of part of the land authorised to be acquired other than the relevant land, and it would not have been likely to be carried out in the absence of the acquiring authority's proposals to acquire the land for such a road.

90. The next challenge for us is to decide whether that question is answered on the basis of what was on the ground at the valuation date, or whether ignoring the increase in value brought about by the development of the "other land" means in effect ignoring the development of the "other land" altogether. To take the example of the KBP: if there had been no development at all on any of the KBP area, so that the reference land was not physically surrounded by development or the prospect of development (subject to arguments about the effect of the planning policies), development of the reference land might be thought less likely to be carried out. Is the conclusion to be drawn from that that, to a degree, the carrying out of development on the "other land" has increased the value of the relevant interest, and that increase must be disregarded? We think the answer to that must be yes.

91. We remark at this juncture that it does not seem to us to be a case where the Pointe Gourde principle has anything much to add. This is not a case where the statutory disregards would produce a much narrower answer than the Pointe Gourde principle (as, for example, in the RMC case). That is because the "other land" included in the compulsory purchase order does encompass all the land that could be described as "the scheme". There is little point, therefore, in considering whether it would make a difference to the extent of the disregards whether the Pointe Gourde principle is given a wide or a confined meaning. In this case so far as the Pointe Gourde principle has any application it would only be as a supplement to the section 6 code and as such it is not needed. The statutory code, it seems to us, in the circumstances of this case, gives the whole answer. The Pointe Gourde principle cannot operate to narrow the statutory code."

31. There is no challenge on this appeal to any part of this reasoning. Both sides accept that the value created by the prospect of a development on the reference land linked to one of the loop roads falls to be disregarded under s.6(1) and (so far as necessary) the Pointe Gourde principle. The appeal by HCA therefore centres on the treatment by the UT of the other planning possibility: namely a permission for an independent residential development on the site accessed via the Nib. The UT considered that any hope value generated by the possibility of development on the reference land which did not utilise any of the KBP infrastructure would not fall to be disregarded under s.6(1). Given that both parties accepted that policy EC/6 would continue to govern the planning status of the reference land notwithstanding the cancellation assumption, that left the UT to consider the disagreement between the planning experts (referred to in [28] above) as to whether the EC/6 / EC/7 policy regime was likely to be a complete obstacle to an independent housing development on the site. But in assessing the planning evidence, the UT considered that it was also necessary to discount any diminution in value attributable to the wider KBP development. This necessitated a further counter-factual construct in the form of what they referred to as the "no KBP universe" as a tool to eliminate or ameliorate what might be described as the planning blight on the reference land created by the strict application of policy EC/6 and the criteria it contains and emerging policy EC/7. The critical part of the UT's reasoning is contained in [93]-[96]:

"93. The only development that would produce an increased value on the reference land which would not have to be disregarded under the statute would be a 'likely' development that took no part of the "other land". In other words that would have to be a development which took its access from the existing Buckley Hill Lane.

94. In arguing that there would have been little prospect of permission for residential development on the reference land taking access from Buckley Hill Lane, the acquiring authority put a lot of weight on the refusals of the Nall planning application and section 17 certificate application. They argued that the same policy objections based upon EC/6 and emerging EC/7 would carry weight. There are, of course, specific arguments to the contrary which were raised by Mr Frampton, based upon the planning authority's failure to explain with any particularity or persuasiveness why such a permission would damage the underlying objectives of the policies. But there is, it seems to us, another point that requires consideration in the context of the disregards. The statute requires that what should be left out of account in assessing the value of the reference land is any increase or diminution attributable to the acquisition of the other land for the purposes of the order. Point Gourde is to similar effect so far as the "scheme" is concerned. It is to try and understand what valuation effects do flow from the scheme that it is necessary to visualise a 'no KBP' universe.

95. When it comes to considering a residential development with access from Buckley Hill Lane no increase in value due to KBP should be taken into consideration. For example improved access to the area due to the KBP infrastructure should be left out of account, as should, perhaps, any claimed advantage that the proposed residential development would have in screening the KBP development from the existing houses. But, by the same token, any disadvantages arising from the KBP development should also be left out of account. Thus, it seems to us, that it cannot be said against an independent residential development in the "no KBP world" that it would face a traffic objection because the KBP traffic would need and use up existing highway capacity. To take that into account would be to permit a diminution of the value of the reference land which would be attributable to the scheme. In the same way, a policy objection based upon a failure to make a substantial contribution to the infrastructure of the KBP scheme or a failure to comply with the KBP development plan is also something that, it seems to us, must be left out of account. That is not to say that there might not be a broader and more general policy objection along the lines that development of the reference land could potentially prejudice the conception of some future scheme, but such an objection would be very different in weight to the situation where the planning authority is seeking to relate the policy and the objection based upon it to a specific scheme which is just starting to get off the ground.

96. For those reasons it does not seem to us that we should attach much weight to the refusals of either the Nall application in 2002 or the section 17 application. The reasons for those refusals rely almost exclusively upon policy EC/6 and the need to bring about a comprehensive and properly funded KBP scheme. In a universe where there is no such scheme, while accepting that the planning authority would not wish to do anything to impede a substitute plan, those reasons for refusal would have to be very carefully reconsidered and might carry much less weight. The possible exception is the reason for refusal based upon the sequential development of a greenfield site, which might gain more force in the absence of any active scheme for a business park. However such a reason would have to consider very carefully the extensive policy support for residential development on part of the reference land. There would be a reasonable argument, in our view, in favour of permission in those circumstances."

32. HCA's primary submission is that the UT has done the very thing which in [46] of the decision they had said was to be avoided: namely eliding the identification of the planning status of the reference land with its valuation. They submit that once the planning status is determined by the application of ss.14-16 of the 1961 Act the valuation exercise has to proceed on that basis and that the application of the s.6 disregards does not involve any further alteration in the assumed planning permissions or policies which have previously been determined to apply. The operation of the disregards may necessitate ignoring value generated by a permission which is referable to the development of the other land within the CPO scheme. But it does not require or justify the UT modifying the planning status of the reference land so far as that remains relevant to the valuation exercise. Section 6 is a disregard of the effects on value of the development of the other land as a result of the CPO. Those effects fall to be determined by reference to the actual and assumed planning status of the reference land under ss.14-16, not by a re-casting of that planning status under s.6.
33. This is essentially a dispute about the methodology necessary to implement s.6(1). I accept Mr Humphries' submission (as did the UT) that the planning status of the reference land and the prospect of some other permission being granted (hope value) are both matters for the first stage which, even taking into account the cancellation assumption under s.16(7), should conform as far as possible to reality. The planning permissions (if not already granted) are assumed on the basis of the actual development plan and policies then in existence. The cancellation assumption may in some cases require the UT to assume the cancellation of the development project but this is not one of those cases.
34. The s.6 exercise is more complicated because it is designed to neutralise the effects on the value of the site of the CPO scheme so as to produce a fair valuation of the reference land which recognises what would otherwise be its inherent development value but does not over-compensate the landowner by reference to development value which is entirely the product of the CPO or the development proposals of which it forms part, nor under-compensate the landowner by reason of diminution in development value attributable to those proposals (since the Pointe Gourde principle applies in relation to decreases in value due to the proposed scheme as well as increases in value: Melwood Units Pty Ltd v Comr of Main Roads [1979] AC 426; Thomas Newall Limited v Lancaster City Council [2010] UKUT 2 (LC), [25]). But, in order to exclude the effect on value of the CPO and its attributable development (in this case the KBP), it may be necessary for the valuers to exclude some of the planning assumptions as the only way of providing a valuation of the land unaffected by the KBP scheme. If an assumed (s.16) or possible planning permission (s.14(3)) for the reference land depends upon the KBP and the planning status of that land then its effect on the value of the reference land is excluded by ignoring that planning permission in the valuation process. This is what the UT did in respect of the possible development of the reference land linked to the loop road. The hypothetical planning status of the reference land is modified for the purpose of the valuation by positing what is commonly referred to as the "no scheme world". Similarly, if the KBP development is to contain some feature on the adjoining land which will enhance the value of the reference land then the valuers must assume that the development of the KBP proceeds without that feature as part of the development.
35. It seems to have been common ground between the parties, and the UT accepted in [93] of its decision, that any value due to a possible development using the Nib was not attributable to the scheme of the adjoining KBP land so as to require it to be disregarded under s.6. But in seeking to exclude any diminution in value attributable to that development the UT considered that an adjustment was necessary to the planning policies such as EC/6 that it was common ground continued to apply to the reference land at the valuation date. Mr Humphries has not submitted that the continuation of the KBP scheme in accordance with policy EC/6 will not have an adverse effect upon the prospect of developing the reference land other than as part of a comprehensive development accessed via the loop and spine roads. Indeed, his case before the UT was that policy EC/6 all but guaranteed a refusal of any planning application for a development accessed via the Nib so that the reference land had no hope value for such a development. This case was strongly supported by the refusal of the Nall application for planning permission in 2002 and the outcome of the s. 17 application in 2010, which both failed by reason of incompatibility with policy EC/6.
36. Once it is accepted that in the planning environment determined in accordance with ss.14-16 the KBP scheme will severely diminish the planning prospects for an independent development on the reference land the task for the valuers and the UT is to devise a way of excluding or disregarding its impact on value. It is difficult to see how that can be done except by some further modification to the actual planning situation whereby the valuers assume that the KBP scheme and its supporting policies are no longer in place. This is not the elision of the first and second stages in the assessment of compensation. It is the use of a different construct as a necessary tool of valuation in order to isolate the elements of development value in the reference land which survive the application of s.6(1) and the Pointe Gourde principle.
37. The real issue therefore in my view is not whether the UT was correct to adopt the "no KBP universe" as a means of valuing the reference land free from the planning restrictions which the KBP scheme has produced, but whether the UT struck the balance between the "no KBP universe" and the planning actualité in the right place. The Claimant's case was that in the no scheme world policy EC/6 fell to be applied more liberally so as not to have an adverse effect on the value of the reference land. Mr Kingston QC submits that the UT was right not to assume the total abandonment of policy EC/6 or emerging policy EC/7 but to regard them as modified to the point at which a planning application for an independent development via the Nib would be assessed on its own planning merits relative to location and housing need. Mr Humphries' primary position remained that the application of the disregards did not entitle the UT to assume any modification of the planning status determined in accordance with ss.14-16.
38. Neither of these arguments seems to me to be correct. The UT considered that the value from a development using the Nib would not fall to be disregarded under s.6 because it was not attributable to the development of the other land in accordance with the KBP scheme. This was because it used no part of that other land, unlike a development linked to the spine road which fell to be disregarded for that reason. But, in my view, the reference in s.6(1) to the prospect of the development of (in this case) the KBP land has to be construed as referring to more than simply the physical development of that land. It must denote the scheme of development itself with the development plan strategy and policies it contains and the implementation of those policies in the form of the grant of planning permission and the making of the CPO. This reading of s.6(1) is consistent with the Pointe Gourde principle of construction which is designed to ensure that the legislation operates in conformity with that principle as explained in Waters v Welsh Development Agency. Although as the House of Lords made clear in that case, the application of the Pointe Gourde principle to supplement the 1961 Act should not be pressed too far, it would, in my view, be completely unrealistic to regard the scheme as not including the planning policies and objections which underpin it and dictate its form and scope.
39. Looked at in this way, the prospect of a development of the reference land using the Nib is potentially affected both negatively and positively by the development of the KBP and with it the value of the reference land. If policy EC/6 and emerging policy EC/7 have the degree of inflexibility contended for by the HCA and continue to operate unmodified in the no KBP universe, it must follow, as the UT has found, that they do have an adverse effect on valuation. But if that is to be addressed (as it was) by the modification but not the exclusion of the development policies then it gives to the Claimant the benefit of those policies so far as they designate the reference land as suitable for development but without the restrictions to which policy EC/6 and emerging policy EC/7 are in fact subject. In the scenario adopted by the UT the Claimant therefore benefits from the KBP scheme in terms of the value of its land which is precisely what s.6 is designed to avoid.
40. In my view, the UT was right to hold that the planning status of the reference land did have to be modified for the purposes of valuation in accordance with the "no KBP universe" methodology. But it was wrong to do so by simply downgrading the strict application of the existing and emerging development plan but otherwise leaving the allocation of the land for development in place. What it should have done was to consider the planning potential of the reference land without regard to the development scheme and its underlying policies and therefore its effect on value. In that no scheme world it should have examined what wider no scheme specific policies (including but not necessarily limited to PPG3) would have applied to a planning application at the valuation date had there been no KBP and so struck a fair balance between the public interest and those of the Claimant in relation to the valuation of the reference land. The assumption relied on in both parties' submissions that policy EC/6 and developing policy EC/7 continued to apply was based on a wrong application of s.6(1) and the valuation calculated on that basis must be set aside.

Ground 2

41. In these circumstances, I can deal with HCA's second ground of appeal quite shortly. They say that, as part of the assessment of the value of the reference land, the UT took into account the existence of the re-modelled junction 21 and thus failed properly to apply the Pointe Gourde rule. This is a reference to [97] of the decision where the UT says:

"It was evident from our site visit that there has been development off Buckley Hill Lane in the comparatively recent past on its eastern side. The long history of the identification of the land of which the reference land forms part for substantial development would weaken a PPG 3 greenfield objection to a residential development on the west side of the lane, incorporating the nib. It was agreed between the highway witnesses that a substantial number of houses could take an access on to Buckley Hill Lane although the witnesses differed as to whether the maximum would be 60 or 74. For the reasons we have just given we think we should give less weight, in considering the prospects of this hypothetical permission, to an objection based upon policy EC/6 or emerging policy EC/7 and no weight to a highway objection based upon traffic flows from the KBP development. On the other hand the motorway junction itself was a fact on the ground at the valuation date. It was not part of the compulsory purchase order and it does not seem to us that it would be right to extend the definition of the scheme to include it."

42. The basic point which Mr Humphries takes is that the UT should have treated the partly built improvements to junction 21 as part of the scheme even though it fell outside the CPO. The UT should therefore have excluded any increase in value attributable to its existence. If the correct valuation assumption, he submits, is that the KBP scheme is not proceeding then the criterion of improved motorway access as part of the KBP scheme should be ignored.
43. The short answer to this point is that none of the expert witnesses considered that the improved junction had any effect on the value of the reference land based on an independent scheme with road access from the Nib. It does not therefore matter whether one treats it as part of the scheme for the purpose of the s.6 disregards or the Pointe Gourde rule. The valuation is not therefore open to challenge on this ground.

Conclusion

44. For the reasons I have given, I would allow the appeal on ground 1, set aside the decision of the UT, and remit the assessment of compensation back to the UT to be decided without regard to the scheme of development as defined in this judgment.

Lord Justice Sales:

45. I agree with Patten LJ that the appeal should be allowed for the reasons he gives. Since we are differing from the UT, I add a few words of my own.
46. The Pointe Gourde principle is a guide to construction of the 1961 Act: its purpose is to forward Parliament's objective of providing dispossessed owners with a fair financial equivalent for their land and to ensure they receive "fair compensation but no more than fair compensation" (Waters v Welsh Development Agency, [61]). The Pointe Gourde principle and that fundamental objective inform the interpretation of s. 6 of and Schedule 1 to the 1961 Act.
47. Section 14 (read with s. 16) sets out certain assumptions to be made as to planning permission in relation to reference land, which may inform the assessment of the valuation to be given to that land. But the disregards under s. 6 and any wider application of the Pointe Gourde principle (as explained in Waters v Welsh Development Agency at [51]-[54]) to take account of the effects on value from a proposed scheme development give effect to the fundamental objective of ensuring fair compensation and are not necessarily determined by s. 14. Therefore, I am not persuaded by Mr Humphries' principal submission on the appeal, that once one has gone through the s. 14 exercise the question of the planning status of the reference land must be taken to be immutably fixed when calculating the valuation of the land for the purposes of compensation.
48. In this case, the UT considered two ways in which an application for permission for residential development on the relevant part of the reference land might have been put: as an application for development using an access route via the motorway junction, spine road and loop road within the KBP site or as an application for independent development using an access route via the Nib. The first depended entirely on the existence of the KBP scheme and so was rightly disregarded by the UT: see paras. [84] and [89]-[92] of its decision. The question on this appeal is how the UT should have approached the second possibility.
49. In relation to that possibility, if the question is posed on the assumption that policy EC/6 and emerging policy EC/7 are taken to be in place in the counterfactual world which the 1961 Act posits, it appears that there was no real prospect at the valuation date of permission being granted for such development. Those policies pointed strongly against the grant of planning permission for a residential development independent of the KBP scheme, with access across the Nib. Moreover, the fate of the Nall application and the s. 17 application showed clearly what would have been likely to happen had another similar such application been considered by reference to those policies. This was the case forcefully put by HCA to the UT.
50. In my judgment, against this, the UT was right to say that consideration was required of the disregards under s. 6 and the Pointe Gourde principle by reference to a "no KBP scheme" universe: para. [94]. However, the UT erred in its assessment of what such a universe would look like. Although it was right in para. [96] to assess the position on the footing that policy EC/6 was not in place and, on that assumption, was right to treat the outcomes of the Nall application and the s. 17 application as having less weight than the HCA submitted, the UT did not carry through rigorously the approach required by 1961 Act.
51. In relation to the possibility of residential development of the reference land independently of the KBP, with access across the Nib, it would be unfair to the Claimant to value the land on the basis of a nil chance of residential development by reason of the planning policies put in place to protect the integrity of the KBP site and to promote the KBP development, in particular policy EC/6 and emerging policy EC/7. This is because it would be unfair for public authorities to create planning blight by proposing a scheme for development of an area and putting in place planning policies to promote that development - thereby excluding the possibility of independent development of the land in the area and so depressing the value of such land to current use value only - and then acquire that land at that depressed value under a CPO. That would contradict Parliament's objective in the 1961 Act of providing dispossessed owners with a fair financial equivalent for their land.
52. In the present case, however, the UT erred by still giving weight in paras. [95]-[97] to the planning policies in relation to the KBP site, including in particular the part of the historic, current and emerging policies to promote the development of a business park which contemplated that there should be residential development on the site as part of that development (what the UT called "the extensive policy support for residential development on part of the reference land": [96]). In this respect, the UT failed to apply the s. 6(1) disregard correctly and appears to have overvalued the reference land for the purposes of compensation.
53. I consider that "the prospect of … the development" referred to in s. 6(1) was the prospect of the integrated development scheme for a business park on the KBP site. The "prospect" of such development had three elements: (i) the declared objective of the relevant public authorities to create a business park on the site to assist in regeneration of the region; (ii) the putting in place of planning policies to promote that objective; and (iii) the implementation of those policies by the grant of planning permission and the making of the necessary CPO. After those stages would come, in the words of s. 6(1), "the carrying out" of the development by building works on the ground.
54. In my view, as a matter of ordinary language and particularly in light of the fairness objective of the 1961 Act and the application of the Pointe Gourde principle of construction, the notion of "the prospect of … the development" in s. 6(1) should be interpreted to include all of (i) to (iii). In the context of this case, it would be artificial and arbitrary, and would generate unfairness, to exclude any part of that factual background. It was always contemplated that the reference land would form an integral part of this scheme of development: compare Waters v Welsh Development Agency, [58]-[63].
55. Section 6(1) provides that "no account shall be taken of any increase or diminution in the value of the relevant interest" due to the carrying out or the prospect of the scheme development. Therefore, in relation to a notional application for planning permission for independent residential development on the reference land, the UT should have ignored the policy support for residential development on the reference land which was itself an aspect of the overall scheme for development of an integrated business park over an area including that land. Aside from the policy support for such a development scheme, there was little planning policy support for independent residential development, as the report in relation to the s. 17 application explains.
56. In my judgment, the effect of s. 6(1) in the present context is that the UT should have examined what wider planning policies (which were not specific to the scheme) would have been likely to have applied in a "no scheme world", including in particular PPG3, and assessed whether there was any real chance of planning permission being granted for an independent residential development of the reference land under those policies. That seems to me to be an approach which would strike the appropriate fair balance between the general public interest and the individual interest as is required under the 1961 Act.

Lord Justice Jackson:

57. I agree with both judgments.
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