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England and Wales Lands Tribunal
You are here: BAILII >> Databases >> England and Wales Lands Tribunal >> Rank Leisure & Ors v Castle Vale Housing Action Trust [2001] EWLands ACQ_168_1999 (13 August 2001)
URL: http://www.bailii.org/ew/cases/EWLands/2001/ACQ_168_1999.html
Cite as: [2001] EWLands ACQ_168_1999
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- This is a reference to determine the compensation payable for the compulsory acquisition of seven shop units in the former Castle Vale Shopping Centre, on the Castle Vale Estate on the outskirts of Birmingham.
- The claimants say that by the valuation date in the no scheme world a developer-purchaser would have acquired all the interests in the Castle Vale Shopping Centre and adjoining land except the claimants' interests. These would therefore have had a ransom value of £8,893,725 in total divided equally between the claimants. The acquiring authority say that in the no scheme world there would not have been a developer-purchaser engaged in site assembly for redevelopment. The purchases of land and interests in the Centre and the redevelopment were carried out in the real, or scheme world, in pursuance of the scheme for the redevelopment of the Centre. In the no scheme world compensation is not more than the existing use value of the claimants' occupational interests plus consequential loss (disturbance). Compensation on this basis for each of the claimant's interests is offered at sums of between £3,300 and £35,000.
- Mr Meyric Lewis appeared for the claimants and called Mr Anthony Paul Broad BSc MRICS, a partner in Wright Silverwood, chartered surveyors of Birmingham, and Mrs Janet Brown, a claimant, formerly tenant of unit 46.
- Mr Nicholas Nardecchia appeared for the acquiring authority, Castle Vale Housing Action Trust, and called Mr David Robert Warwick Checkley FRICS IRRV, a director of Jorden Salata Asset Management Plc of Birmingham and elsewhere.
- The parties have prepared a statement of agreed facts. From this statement and the evidence I find the following facts.
- The Castle Vale Estate ("the Estate") is situated approximately 6 miles to the north-east of the centre of Birmingham. It was the largest post-war housing estate in Birmingham. It covered 200 hectares (495 acres) and included about 5,000 dwellings in 34 high rise tower blocks, medium rise blocks of three-storey flats and four-storey maisonettes and low rise flats and houses, five schools, health centre, two shopping centres and corner shops and two industrial/business areas. It was built by Birmingham City Council between 1964 and 1968 to rehouse people displaced from the inner city due to the Council's slum clearance programme. The Estate was built on the former Castle Bromwich Aerodrome. It had a clearly defined peripheral location in Birmingham bounded by the A38 Kingsbury Road to the north, the A452 Chester Road to the west and railway lines on the southern and eastern boundaries.
- During the 1970s and 1980s social conditions on the Estate deteriorated with problems of crime, vandalism and arson. The Castle Vale HAT Feasibility Study prepared in 1992/93 described the position as follows (para 3):-
- The main shopping centre on the Estate, with which these references are concerned ("the Centre"), was and, as redeveloped, still is, situated at the western end of the Estate close to Chester Road. It was built in the 1970s and comprised 54 shop units, public house, multi-storey car park, a tower block of flats and open space. The units were arranged around two hard landscaped courtyards with inter-connecting malls. The 15-storey tower block of flats, Albert Shaw House, was in the south-eastern corner. The Centre was connected to Chester Road by a service road but had no other frontage to this road. The Centre became very run down, vandalised and dilapidated with many vacant units. The Feasibility Study described the position as follows (para 3.31):-
- The freehold of the Centre was held by Birmingham City Council until April 1994. The long leasehold interest in the Centre, 99 years from April 1972, was held by Universal Land Developments Limited ("Universal Land") until September 1996. On these dates the freehold and long leasehold interests respectively passed to the Castle Vale Housing Action Trust ("the Trust") (paras 11 and 17 below).
- On 19 November 1991 Universal Land applied to Birmingham City Council for outline planning permission for the "refurbishment and extension of [the Centre], including new filling station, restaurant, shops, car parking and access." This development included the demolition of the multi-storey car park, the provision of a new surface car park for 297 vehicles, 7 new shops and the refurbishment of the Centre. On 30 April 1992 the Planning Committee of the City Council recommended that favourable consideration be given to the proposed development provided that a planning agreement is completed within 12 months. On 9 December 1992, a planning agreement having been completed, planning permission was granted by the Committee under delegated powers. This development did not proceed.
- Following a ballot of local residents the Trust was established on 30 June 1993 under the Castle Vale Housing Action Trust (Area and Constitution) Order 1993. The designated area comprised 195 hectares of the Estate, including the Centre. In April 1994 the freehold interest in this land was transferred to the Trust under the Castle Vale Housing Action Trust (Transfer of Property) Order 1994. It took over full responsibility for the refurbishment and regeneration of the houses and land from Birmingham City Council.
- The Birmingham City Council Unitary Development Plan (The Birmingham Plan) was adopted by the City Council on 6 July 1993. Para 11.31 refers to the Centre as follows:-
- On 25 August 1994 Universal Land applied for outline planning permission for the "refurbishment and extension of existing shopping centre – new filling station, restaurant, bingo hall, shops and car parking." This development included the demolition of the multi-storey car park, the provision of a new surface car park for 297 vehicles, 7 new shops and the refurbishment of the Centre. Birmingham City Council advised the applicants on 8 December 1994 that favourable consideration would be given to the proposed development provided a planning agreement is completed within six months. The Trust, as freeholders, declined to be a party to this agreement. Planning permission for the proposed development was not granted.
- On 28 July 1995 the Trust instructed William J Marshall and Partners, consulting engineers, to prepare a schedule of dilapidations for use in negotiations with Universal Land as headlessees. On 28 November 1995 Marshall and Partners produced a Report on Condition Survey, including a Schedule of Dilapidations which estimated the cost of the works to be in the range of £1.5 to £5 million (para 5.4).
- In September 1995 the Trust published the Castle Vale Master Plan. Proposal R1 referred to the demolition of 17 of the 34 high rise blocks on the Estate, including Albert Shaw House. Proposal E1 refers to the redevelopment of the Centre:-
- In March 1996 the City Council produced a development brief, The Centre 8 Site and Shopping Centre off Tangmere Drive and Yatesbury Avenue, Castle Vale, to provide a framework for the redevelopment of this land, which lies between Chester Road and Reed Square and is bounded on the north and south by Yatesbury Avenue and Tangmere Drive respectively. It includes the Centre. Paragraph 4.2 describes the Centre as follows:-
- In March 1996 Universal Land went into administrative receivership and liquidation. Grimley of Birmingham were instructed to sell by tender the long leasehold interest in the Centre. This was purchased by the Trust on 23 September 1996 for £2,010,000.
- On 3 December 1996 the Trust issued a press release, New Shopping Centre at Castle Vale, announcing plans for the complete redevelopment of the Centre to provide over 130,000 square feet of new retail space. Development was proposed in two phases, including vacant land between the Centre and Chester Road.
- On 13 January 1997 the Trust applied for planning permission for the demolition and replacement of the Centre. On 4 June 1998 Birmingham City Council granted outline planning permission for:-
- Early in 1997, on instructions from the Trust, the Centre and land fronting Chester Road were marketed by Grimley for comprehensive redevelopment. Paragraph 5 of the Marketing Pack states:-
- On 15 June 1998 the Trust made the Castle Vale Housing Action Trust (Castle Vale Shopping Centre) Compulsory Purchase Order 1998 under section 77 of the Housing Act 1988 for the purposes of the redevelopment of the Centre. The order was submitted for confirmation to the Secretary of State for the Environment, Transport and the Regions on 17 July 1998. Following a public local inquiry held on 1 to 3 December 1998 it was confirmed on 5 May 1999. The claimants' interests as lessees or reputed lessees in units in the Centre are included in the order as follows:-
- Notices to treat were served in respect of units 3, 4, 18, 21, 22 and 25 on 9 July 1999 and in respect of units 40/41, 44, 46 and 51 on 30 July 1999. Notices of entry were given for all units on 11 October 1999.
- The Trust took possession of all units between 19 and 22 November 1999. It is agreed that the date of valuation is 19 November 1999.
- The claimants referred the determination of compensation to this Tribunal on the following dates: 12 May 1999, units 40/41, 46 and 51; 19 May 1999, unit 3; 12 August 1999, units 21 and 25; 6 March 2000, unit 44. On 28 November 2000 it was ordered by the Tribunal that an earlier direction providing for consolidation of these references be revoked and that the seven references be heard together pursuant to rule 30(1) of the Lands Tribunal Rules 1996.
- On 17 June 1999 Birmingham City Council granted conditional planning permission to J Sainsbury Developments Limited for the "erection of shopping centre comprising retail supermarket, retail warehouse units, petrol filling station, retail units, betting office, restaurant, dental surgery, offices, public square, parking and access roads at Yatesbury Avenue, Castle Vale Shopping Centre, Castle Vale." This development has now been completed.
- On 7 June 1999 the Secretary of State for the Environment, Transport and the Regions made the Stopping Up of Highways (City of Birmingham)(No.5) Order 1999 under section 247 of the Town and Country Planning Act 1990 authorising the stopping up of areas of highways at the Centre to enable development to be carried out in accordance with the planning permission granted on 4 June 1998 subject to the provision of new highways and the improvement of areas of highway at the Centre by the developer, J Sainsbury Developments Ltd.
- Between March 1997 and November 1999 the Trust negotiated and agreed terms for the surrender of occupational interests in 21 of the units in the Centre.
- The claimants' interests in units 3, 21, 25, 40/41 and 44 are agreed as follows:-
- The parties have agreed that Mrs Brown held an underlease for 23 years from 24 June 1991. Clause 11 gave her the right to determine the tenancy on 25 December 1994 by giving not less than 12 months notice to expire on that date. Notice to determine was given by Mrs Brown's solicitors on 27 October 1993. Thereafter she remained in occupation by agreement paying only a service charge. Arrears accumulated, although the precise amount is in dispute. On 19 January 1998 a landlords' notice under section 25 of the Landlord and Tenant 1954 was served terminating the tenancy on 25 December 1998. A tenant's counter-notice was served on 11 March 1998 and application for a new tenancy was made to Birmingham County Court on 15 May 1998. Mrs Brown was in occupation at the date of possession.
- Mrs Brown gave evidence. She said that she was persuaded to take a lease of unit 46 due to the proposed refurbishment of the Centre to commence in 1991. She insisted on a break clause. The unit had previously been a café. She refitted the premises. Trade was disappointing and refurbishment did not take place. She discussed with the landlords' agent renegotiation of her lease to reduce rent and overheads. On the advice of her solicitors notice to break the lease was served. In further negotiations Mrs Brown said that she would proceed with the break notice and vacate the property unless a compromise was reached on her overheads. It was subsequently agreed that she should have a rent-free holiday, that the break clause would not be implemented and she would continue in occupation under her lease. No separate licence was entered into for her continued occupation. Her solicitors were unaware of these negotiations. The break clause was never implemented and she remained in occupation under her lease. When the Trust acquired the headlease Mrs Brown explained the position to them. No rent demands were sent to her. In cross-examination Mrs Brown said that she was in arrears of rent and service charge from 1993 onwards.
- Mr Lewis submitted that Mrs Brown had agreed not to determine her lease but no new agreement was prepared. Her lease was not replaced by some other arrangement. There is no evidence that her lease was transformed into a periodic tenancy. A letter from the Trust's solicitors dated 22 December 1998 referred to the forfeiture of her lease. This letter post-dated service of the landlords' notice to terminate. Mrs Brown continued to occupy unit 46 under a lease which expires in 2014 but without obligation to pay rent. Mr Nardecchia said that Mrs Brown determined her lease and continued in occupation under an arrangement requiring her make payments on which she persistently and substantially defaulted.
- Decision – I look first at the notices and correspondence. I start with the letter dated 27 October 1993 from Mrs Brown's solicitors giving notice to determine her lease on 25 December 1994. There was then correspondence between the landlords' agents and Mrs Brown giving her a rent holiday to 25 December 1994. On 19 October 1994 the landlords' agents wrote to Mrs Brown's solicitors noting the proposed determination of her lease on 25 December 1994. On 27 June 1995 they wrote to Universal Land asking for approval for Mrs Brown to trade under licence from 25 December 1994 and to instruct solicitors to prepare this document. No licence was prepared.
- This correspondence, in my judgment, indicates that Mrs Brown's lease terminated on 25 December 1994, following her notice to determine, and that she continued in occupation after that date under a rent-free oral licence but with responsibility for the payment of service charge and insurance. A few years later, however, in 1998, the Trust's solicitors served a notice to terminate under section 25 of the 1954 Act and, in a letter of 22 December 1998, referred to the right "to forfeit the lease" for arrears and to interest under that lease on those arrears. I do not think that I should treat this notice and the Trust's solicitors' response to Mrs Brown's counter-notice and application for a new tenancy and their letter of 22 December 1998 as constituting an admission that Mrs Brown was still in occupation as tenant under her original underlease. They appear to have misunderstood the position which was unclear and not documented.
- I find that Mrs Brown was occupying unit 46 at the dates of notice to treat and entry on an oral licence on terms that she was to make no payment in the nature of rent but was responsible for the service charge and insurance payments she would have paid if she had continued to occupy under the underlease dated 24 June 1991. Mrs Brown was in occupation at the date of possession.
- On 8 July 1996 Mr Richards was granted an underlease for 10 years from 24 June 1995 at an initial rent of £20,000 per annum, rising to £25,000 per annum after two years and with a rent review at the fifth year. The parties agreed that sections 24-28 of the Landlord and Tenant Act 1954 shall be excluded in respect of this tenancy. Under clause 12 of the lease, if the landlords wished to determine the lease to enable them to redevelop or refurbish the Centre, they could serve six months notice at any time to determine the lease. Simultaneously the landlords were required to use their reasonable endeavours to offer the tenant alternative accommodation within the Centre on similar terms. On the grant of a lease of alternative accommodation the landlords were under an obligation to pay compensation to the tenant equal to the rateable value of the unit. On 15 September 1999 the solicitors to J Sainsbury Developments Limited served on Mr Richards a six months notice determining his lease on 22 March 2000. There was no mention of alternative accommodation.
- Mr Lewis said that there is scant recognition by the Trust of the need to offer alternative accommodation under the landlords' break clause. The Trust say that this matter is outside the jurisdiction of the Lands Tribunal and wash their hands of it. With this matter to be resolved it is untenable to suggest that Mr Richards could have been induced to part with his interest on any basis other than marriage value. Mr Nardecchia contended that the landlords' notice terminated Mr Richards's lease on 22 March 2000. There was no challenge to the validity of this notice.
- Decision – there is no reference to alternative accommodation in the landlords' notice dated 15 September 1999 and no evidence was given that Mr Richards was ever offered alternative accommodation. In my judgment paragraphs (a) (landlords' six months notice to determine) and (b) (offer of alternative accommodation) in clause 12 of the underlease must be read together. A notice to determine where the landlord does not "simultaneously use its reasonable endeavours to offer to the Lessee alternative accommodation" is, in my view, defective and does not operate to determine the lease. I find that the notice dated 15 September 1999 did not determine Mr Richards's underlease. At the date of valuation therefore he held unit 51 on an underlease dated 8 July 1996 at a rent of £25,000 per annum terminating on 24 June 2005 with no rights of renewal under the 1954 Act.
- Mr Broad said that in the no scheme world consideration may be given to the ability of a developer to assemble land adjoining the Centre to promote a retail development. The Trust had done nothing out of the ordinary at the valuation date. They had acted in the same way as a private developer. Land assembly by such a developer would have been more rapid.
- At the valuation date the position was or would have been as follows:-
- The value of an occupational interest should have regard to existing use value and the enhanced development value. This latter could only be released with the occupiers' co-operation. A tenant's liability for dilapidations is illusory; any dilapidations claimed would be restricted to the diminution in the reversionary value of the landlords' interest which would be small.
- The redevelopment and sale of the Centre has released a substantial development gain. A substantial part of this gain was due to the location of the Centre, the planning history and government policy on retail development leading to demand for retail sites. The Centre was unusual in having a substantial difference between a low existing use value and a high development value. This would have encouraged site assembly in the no scheme world.
- The claimants have agreed to act as one in demonstrating the integrity of their actions in the no compulsory purchase order world, simultaneously surrendering their interests in return for a premium payment commensurate with case law, market evidence and development value. The claimants were, in the absence of compulsory purchase powers, able to prevent the Trust from obtaining vacant possession of the Centre and thus could prevent the onward sale and redevelopment. Any one claimant could achieve this by refusing to sell. In the absence of the designation of Castle Vale as a housing action trust area the retail development of the Centre and adjoining land would still have taken place.
- Mr Broad referred to the past history of the Centre, particularly the attempts by Universal Land to promote development in 1991 and 1994, and the Trust's development scheme, and to examples of land assembly elsewhere (which he referred to as comparables). These comprised land in Birmingham (six examples), Liverpool, Coventry, Stoke-on-Trent and Keighley (Yorkshire). These showed, said Mr Broad, that developers often take a considerable time to assemble a site and will continue to do so where they have a reasonable prospect of planning permission and provided they are not financially exposed.
- At the Centre the planning history had crystallised at the valuation date with the grant of planning permission. There is evidence of demand from food store operators in the past, including Morrisons in 1995. Government policy in PPG6 and PPG13 resulted in a scarcity of sites for retail development leading to increased values. Castle Vale was an ideal opportunity to secure a retail development site with freehold ownership, leaving the seven claimants' interests to be acquired. They had long expressed a willingness to treat as one in surrendering their interests. In assessing the value to be paid to the claimants in the no scheme world regard must be had to past planning policy, physical circumstances and economic factors. There was developer interest before the Trust, including Universal Land and Morrisons. There was a substantial difference between existing use value and development value.
- In November 1999 the Trust owned the freehold and had obtained vacant possession of many units but the interests of the seven claimants had not been acquired. They were in a position to prevent development and to ask for ransom value. It is not the Trust's scheme which has created this value, it is the location of the Centre and the fact that it was ripe for redevelopment. The land had substantial development value over and above existing use value. There was an encouraging planning history and retailer demand which pre-existed the Trust's ownership. At Castle Vale, because of the time scales and planning history, the real world and the no scheme world were the same. The scheme world of the Trust is not specific to itself. The development was undertaken by Sainsbury's under a planning permission which was substantially different from the Trust's permission.
- To produce his figures of compensation Mr Broad valued the Centre as a development site, using a residual valuation, at £21,797,471. This value was entirely created by the position of the Centre, fronting Chester Road. Retail development value pre-existed the Trust's involvement and, in the absence of designation as a housing action trust area and the Trust's investment in housing on the Estate, the Centre would still have commanded a retail development value. In the no scheme world a market existed for the Centre for redevelopment and therefore by definition for the claimants' interests. The freeholder would have taken a commercial view and paid 50% of the net development value realised by merging the claimants' interests with the freehold for onward sale. In assessing the value of the claimants' interests in the open market a developer would have had to buy them by agreement and the prices would have reflected the full development value realisable. Mr Broad also had regard to: market practice (including his experience that developers will often buy a low existing use value interest at a price reflecting development value), rents for food superstores and non-food warehouses, yields and the purchase of the completed investment at Castle Vale for £50,000,000. From the development value of the site Mr Broad deducted the price paid by the Trust for the headleasehold interest (£2,010,000) and £2,000,000 for other leasehold surrenders, management and associated costs between October 1996 and November 1999. These deductions produced a net development gain of £17,787,471. Mr Broad allocated 50% (£8,893,735) for the purchase of the claimants' seven interests. This represented £1,270,533 for each claimant. (There appear to be some minor arithmetical errors in Mr Broad's figures which I have corrected). This is the compensation payable.
- In answer to questions from me Mr Broad said that:-
- Mr Lewis said that the claimants' interests are to be valued with all their potentialities in accordance with rule (2) of section 5 of the Land Compensation Act 1961 and having regard to the principle of equivalence (Horn v Sunderland Corporation at page 42). The value of leasehold land may be enhanced by "marriage" with the freehold interest. The willing seller is a hypothetical character. (Trocette Property Co Ltd v Greater London Council at page 416). The interests to be valued are fixed at notice to treat and valued as at the date of possession (Birmingham Corporation v West Midland Baptist Trust Inc) with all their existing advantages and all their possibilities (Wilson v Liverpool Corporation at page 308H and Fraser v Fraserville).
- The assumptions as to planning permission in sections 14-16 of the 1961 Act are to be taken into account in addition to any planning permission in force at the date of notice to treat. Detailed planning permission for retail development was granted to Sainsbury's on 17 June 1999. The relevant assumption is for planning permission for development in accordance with the proposals of the acquiring authority (section 15(1) of the 1961 Act). The actual planning permission in these references relates to the whole of the Centre and is not restricted to the relevant land (i.e. the claimants' units).
- Value due to the scheme underlying the acquisitions is to be disregarded (Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendment of Crown Lands at page 572). Section 6 and case 4B in Part I of the First Schedule to the 1961 Act may also be referred to although these provisions are not applicable to these references. They are statutory expression of the Pointe Gourde principle. They apply to the part of the housing action trust area outside the Centre but not to the Centre itself: the redevelopment of the Centre is not "development or redevelopment of the area as a housing action trust area". There is, however, no conflict between the Pointe Gourde principle (or any statutory expression of it as in section 6 of the 1961 Act) and the planning assumptions contained in sections 14 – 16 (see Myers v Milton Keynes Development Corporation at pages 704C-F and 705A-B). Myers also established that, in looking at the no scheme world, one is looking forward and not looking backwards to construct an imaginary world at the valuation date (see page 704G and also Margate Corporation v Devotwill Investments Limited at page 868h and Trocette at page 420). In Batchelor v Kent County Council, following remission to this Tribunal by the Court of Appeal, the member (T Hoyes) found that the valuation should have regard to the facts at the date of valuation and not to a different factual matrix (a different no scheme world). He based his decision on West Midland Baptist Trust and Devotwill (page 222H-J). His decision was upheld by the Court of Appeal (Wards Construction (Medway) Limited v Barclays Bank plc). The situation as to planning permission and the no scheme world should have regard to the realities of existing conditions and actual facts.
- The value of land may be enhanced by the prospect of marriage with other land ripe for development. If this premium value is due to the scheme it must be disregarded but if it pre-existed the acquisition it may be taken into account. Ransom value which existed independently of the scheme (as in these references) may be taken into consideration when assessing compensation (Batchelor v Kent County Council at page 361, Wards Construction and J A Pye (Oxford) Limited v Kingswood Borough Council at pages 162F and 165K).
- It appears to be common ground that the scheme underlying the acquisitions is the comprehensive redevelopment of the Centre in accordance with the planning permissions granted in June 1998 and 1999. The scheme comprises the whole of the Centre and is not restricted to each of the claimants' units. The Trust contend that their activities in acquiring the headlease and occupational leasehold interests are to be disregarded as activities under the scheme. This is inconsistent with the authorities referred to above which require the position at the relevant date to be ascertained having regard to the realities of the situation. The reality is that the freehold and long leasehold interests had been merged and planning permission granted for comprehensive retail development. All but seven tenants (the claimants) had relinquished possession of their units. The Trust relies on North Eastern Housing Association Limited v Newcastle-upon-Tyne Corporation but this decision established no more than that direct effects of the scheme in increasing values due to scarcity created by the implementation of the scheme fall to be disregarded.
- The evidence demonstrates that the claimants' interests enjoyed an enhanced value which existed independently of the scheme. Mr Lewis reviewed the history of the Centre from 1983 to the sale to British Land. He referred in particular to the proceedings regarding the compulsory purchase order. He said that the Trust sought to distance itself from these proceedings. This is an untenable position because the evidence given at the CPO inquiry was the justification for their expropriation of the claimants' units in the public interest.
- Mr Checkley's evidence was that there were many obstacles to the realisation of development value by the claimants in the no scheme world. But these obstacles admit of resolution and have been resolved in the scheme world.
- Mr Lewis said that some of the tenants were holding over following the expiration of their leases but no action had been taken by the Trust to gain possession under the section 25 notices which had been served. This reflected the precariousness of the Trust's position having regard to Cunliffe v Goodman at pages 253-4 and Reohorn v Barry Corporation at page 850. There is no basis for distinguishing between the different interests of the claimants: all tenants would have to be persuaded to vacate their units. Each claimant is entitled to an equal share of the marriage value.
- Mr Lewis said that there are failings in the Trust's approach to this case. They have failed to acknowledge the concept of marriage value. They have failed to recognise that value may exist independently of the scheme and is not therefore excluded under Pointe Gourde. The Trust have purported to rely on section 6 of the 1961 Act when its application is wholly questionable.
- In arriving at figures of compensation it may be necessary to ignore the Trust. It is not necessary to do so, but if it is done then the freeholder and purchaser of the claimants' interests becomes a hypothetical purchaser.
- In conclusion, the position in the no scheme world is assumed to have been as it was in the real or scheme world at the valuation date. A purchaser of the claimants' interests would not have been put off by the prospect of sharing development value. There was a long standing agreement between the claimants to claim in equal shares. Although this agreement was not formally concluded this does not change the basis on which they were acting. He referred to Haron Development Co Ltd v West Sussex County Council.
- Mr Checkley referred to the history of the Centre and particularly the proposed development schemes of Universal Land in 1991 and 1994. It became clear that Universal Land were unable to redevelop the Centre. The Trust took advice as to the form of development required. This included the need for a redevelopment scheme which included a large food-store, to draw trade from a wider area than the Estate, and medium size non-food stores and smaller retail and service units. Such a scheme would only be viable and of interest to a developer if vacant possession could be guaranteed by the Trust through the use of compulsory purchase powers and outline planning permission had been granted for comprehensive redevelopment, including the frontage land to Chester Road. On this advice the Trust prepared a scheme which received outline planning permission in June 1998. It put the Centre and adjoining land out to tender and then used compulsory purchase powers to obtain vacant possession.
- Mr Broad's valuation assumed that in the no scheme world there would have been a developer prepared to redevelop the Centre because it was ripe for such development. Mr Broad referred to schemes attempted by Universal Land. They failed for many reasons including lack of ownership of the frontage land, the 15-storey tower block (Albert Shaw House) with 60 tenants and which forms part of the Centre, ownership of only a long leasehold interest and the need to obtain vacant possession from numerous occupational tenants. The frontage land and the merger of the freehold and leasehold interests were essential to any redevelopment. With regard to Albert Shaw House there were 59 tenants before rehousing took place. Some rehousing took place but at the time of outline planning permission there was still 30 tenants in occupation. In the no scheme world (i.e. in the absence of rehousing by the Trust as part of the scheme) it would have been necessary for 45 to 50 tenants to be rehoused to allow the block to be demolished as part of the redevelopment of the Centre. This would not have been possible in the no scheme world. At the valuation date in the scheme world the block was believed to have been empty.
- Mr Checkley said that he spoke to interested parties regarding development but, with one exception (Stockbrook) none pursued the matter. Several developers said that the scheme was not viable. Their reasons included: failure to agree terms with Universal Land, the cost and difficulty of purchasing occupational tenancies, the demolition of Albert Shaw House and the rehousing of the tenants, the need to incorporate frontage land to Chester Road and to stop up roads. There were other less complicated development opportunities in the area. Without vacant possession developers were not interested in the redevelopment of the Centre.
- In January 1996 Stockbrook approach the Trust with a view to redevelopment and were invited to work up proposals for discussion. They raised three points: current leases, dilapidations and the impact of a nearby Retail Park. After further research Stockbrook withdrew. William Morrison Supermarkets expressed some interest in the Centre. In negotiations it became clear that they were not prepared to undertake site assembly and were only interested subject to vacant possession of the whole being given. When the site was subsequently marketed with vacant possession they submitted a bid.
- The evidence shows that the redevelopment of the Centre was not viable in either the scheme or the no scheme world without the co-operation of the freeholders in bringing together the relevant interests, making use of the frontage land and having fall-back compulsory purchase powers to secure vacant possession. The time needed to assemble the site and therefore the development profit were unquantifiable.
- The Trust were uniquely able to implement viable redevelopment due to its ownership of the frontage land, the Centre and rear land, control over the tenants in Albert Shaw House and the ability to secure their rehousing. The Trust could promote a scheme which would satisfy commercial requirements and local residents; it could obtain vacant possession of the Centre by the use of compulsory purchase powers. Without these powers the Trust would have had a redundant shopping centre of little interest to the market. By incorporating the frontage and other land and by giving vacant possession the Trust were able to secure developers' interest. The preferred developer, Sainsbury's, were influenced by the ability of the Trust to agree terms for the relocation of core trades. The ability of the Trust to give vacant possession was essential to the developer interest which arose from the marketing brief. It was part of the agreement between the Trust and Sainsbury's that the Trust would use its compulsory purchase powers to obtain vacant possession from occupiers within their time scale. This was fundamental to Sainsbury's redevelopment.
- For the reasons given above no private developer in the no scheme world would have been prepared to take on the site. When the Trust bought the headleasehold interest from Universal Land there was only one other bidder.
- Mr Broad asserted that it is the location of the Centre, its ripeness for redevelopment and the substantial difference between development value and existing use value which have created the value he claims, and not the Trust's scheme. This overlooks the long history of failed redevelopment proposals and the considerable difficulties in obtaining vacant possession.
- The planning permission obtained by Sainsbury's was based on the Trust's scheme and the differences between the two planning permissions are insignificant.
- Sainsbury's were not the highest bidders but were chosen due to promises they gave regarding employment. The top bid from a speculative developer was unsound.
- Mr Checkley said that initially the Trust had hoped to acquire all occupational interests by agreement. Many occupying tenants agreed terms for giving vacant possession. Mr Checkley included in his evidence a schedule of prices paid to existing tenants for the surrenders of their leases. He emphasised, however, that these figures do not represent market value in the no scheme world. They were prices paid in the real or scheme world. In 1997 certain tenants banded together under Mr Broad's representation and would only agree to surrender their interests in return for substantial sums, well in excess of market value. The breakdown of negotiations with these tenants meant that the Trust were unable to progress redevelopment without resort to compulsory purchase powers.
- There are two categories of claimant: those holding over under the Landlord and Tenant Act 1954 (short tenancies) (units 40/41, 44, 46 and 51) and those with unexpired terms (units 3, 21 and 25).
- The short tenancies are within section 20 of the Compulsory Purchase Act 1965. The unexpired interest is the period which would elapse if notice to quit had been served on entry, i.e. expiring on 31 March 2000. The tenants would have had the right to apply for new tenancies (section 47 of the Land Compensation Act 1973). Subject to these provisions compensation should be assessed under section 5 of the 1961 Act taking into account actual or assumed planning permission but disregarding any effect on value attributable to the Trust's scheme and activities in accordance with section 6 and Schedule 1 case 4B of the 1961 Act and the Pointe Gourde rule. Under section 39(2) of the Landlord and Tenant Act 1954 compensation is not to be less than that payable under section 37 of the 1954 Act.
- Having regard to these matters, the value of the unexpired term in each case was small or nominal. In the no scheme world these interests could not have been sold in the open market for any significant sum due to the depressed, run down and commercially unsuccessful nature of the Centre and the onerous repairing obligations on the tenants and accrued dilapidations. If the Trust's scheme had not existed a hypothetical developer or investor would not have bid for these interests. The only viable development was that brought about by the Trust's scheme, which relied on compulsory purchase powers for implementation. For the same reasons the grant of a new tenancy would not have increased value in the no scheme world.
- There is no legal or valuation basis for a claim to a share of the development sale value of the Centre. Such a claim fails to take into account section 6 of the 1961 Act and Pointe Gourde. It also ignores the fact that a large proportion of any development value lay in the frontage land to Chester Road.
- The claimants with short tenancies failed to supply any information regarding losses due to disturbance. Mr Checkley has therefore made his own estimates. These sums are so small that the compensation is that payable under section 37 of the Landlord and Tenant Act 1954. With regard to disturbance in respect of the tenancies with unexpired terms, two of the claimants were not in occupation at the valuation date and therefore suffered no loss by disturbance (units 3 and 25). These claims have been valued at one years' purchase of the passing rent. Mr Verma (unit 21) was trading at entry. He could have relocated to Reed Square but did not do so and looked elsewhere. Mr Checkley approached his compensation on a total extinguishment basis. He said there is no evidence to show that the seven claimants had long expressed a willingness to treat as one in surrendering their interests.
- Mr Checkley assessed the compensation payable to the claimants as follows:-
- Mr Broad's examples of site assembly in Birmingham and elsewhere are not of direct relevance to Castle Vale. None have the particular characteristics of the Centre, including separate freehold and leasehold interests, dilapidations, separate ownership of adjoining land, Albert Shaw House, occupational tenancies and the need to provide local and community facilities.
- Mr Checkley prepared an alternative valuation on the assumption, which he emphasised was unlikely, that a private sector developer would assemble the site in the no scheme world. He rejected Mr Broad's approach that the developer would have paid 50% of net development value to the remaining seven occupiers (the claimants) to obtain vacant possession. The developer would have considered what "pot" would have been available to him as a maximum and would apportioned it between the seven claimants having regard to various factors. This apportionment would have produced figures ranging from £10,600 for unit 44 to £100,000 for unit 21.
- Mr Nardecchia said that the assessment of compensation in these references must have regard to the existence of any planning permission in force for the relevant land (sections 14(1)(2) and 39(2) of the 1961 Act) and to the planning permission assumed to exist under section 15(1). He drew attention to the definition of "relevant land" in section 39(2). Any effect on value attributable to development of land other than the relevant land in the course of the development or redevelopment of a housing action trust area is to be disregarded (section 6 and Schedule 1 case 4B to the 1961 Act. This is fundamental to the assessment of compensation in these references and rules out the effect of the acquisition of land by the Trust and the definition of the housing action trust area. Mr Lewis's submission that section 6 does not apply was made unsuccessfully by the claimants as objectors to the compulsory purchase order (see paras 49 and 50 of the inspector's report). The redevelopment of the Centre is within the powers of the Trust (see section 63(1) and (2)(b) and (2A) of the Housing Act 1988). No challenge was made to the validity of the compulsory purchase order. Section 6 and case 4B in Schedule 1 of the 1961 Act apply to the Centre and land outside the Centre within the Trust's designated area (i.e. the remainder of the Estate). Any effect on value which is entirely due to the scheme underlying the acquisition is to be disregarded (the Pointe Gourde rule). The relationship between this rule and the statutory provisions was explained in Camrose v Basingstoke Corporation at pages 1110-1.
- Subject to the above, the legal basis of valuation for short tenancies is section 20 of the Compulsory Purchase Act 1965 and for the other claimants, section 5 of the 1961 Act. Other relevant provisions are: section 47(1) of the Land Compensation Act 1973 and sections 37 and 39(2) of the Landlord and Tenant Act 1954.
- In order to apply the scheme rule it is first necessary to identify what activities comprise the scheme or project (Wilson v Liverpool Corporation at page 310). The scheme is the complete demolition and redevelopment for primarily retail purposes of the Centre and adjoining land. It was first indicated in the Castle Vale Master Plan 1995, subsequently announced in the press release of December 1996 and was the subject of planning permissions granted in 1998 and 1999. The scheme is not to be narrowly limited to the layout on the plans accompanying the outline application in 1997. The scheme differed from previous proposals by its comprehensive nature. The activities comprising the scheme, including land acquisition by the Trust, represent the scheme in action (North Eastern Housing Association Limited v Newcastle-upon-Tyne Corporation at pages 196-7). Their effect on value is to be disregarded. Accordingly, it is necessary to value each claim by imagining the state of affairs which would have existed if there had been no scheme (Wards Construction (Medway) Limited v Barclays Bank plc at page 34 and Bolton Metropolitan Borough Council v Tudor Properties Limited at page 294).
- Mr Nardecchia said that there is no disagreement with the decision in Batchelor but it is denied that there was any pre-scheme value in these references. Batchelor established that it is a question of fact whether the scheme has enhanced the value of the acquired land (see Pye). Here there is no evidence of developer demand in the no scheme world. Batchelor is therefore distinguishable on the facts. Furthermore, Batchelor was not concerned with a housing action trust area: section 6 of the 1961 Act did not apply.
- It was submitted by Mr Lewis that Batchelor stated that the existing pattern of land ownership at the valuation date must be taken into account (page 222F-J). This part of the Tribunal's decision, however, cannot be relied upon: it conflicts with decisions of the Court of Appeal in Myers, Wards Construction and Tudor Properties. These make it clear that a state of affairs antedating the scheme must be imagined. The scheme is not to be conceived narrowly but in terms of all relevant activities, past, present and future (see Tudor Properties at page 294 para 6). The claimants' argument is not supported by the West Midland Baptist Trust and Devotwill decisions, neither of which involved section 6 of the 1961 Act or the Pointe Gourde rule. In Devotwill Lord Morris recognised that it may be necessary on the evidence to imagine a different factual matrix to that which existed at the valuation date (see pages 869c – 870h). Furthermore, although the Tribunal's decision in Batchelor was upheld on appeal in Wards, the Court of Appeal did not approve (or comment on) the Tribunal's decision at page 222F-J.
- On the other cases referred to by Mr Lewis, Mr Nardecchia submitted that Trocette only decided that a hypothetical purchaser would take into account the known intentions of the freeholder when bidding for the leasehold interest. Reohorn and Cunliffe must be considered in the light of recent decisions that interpret a reasonable prospect as no more than a real chance as a opposed to a fanciful one (see Gatwick Parking Services Limited v Sargent). Haron was decided on its own facts: the claimants all held equal interests.
- There is no evidence that in the no scheme world any other developer would have been prepared to implement an alternative scheme involving the redevelopment of the Centre, including the acquisition of the various occupational interests. The difficulties of site assembly would, and did, deter prospective developers. There was no serious or sustained interest before the Trust brought forward its own scheme, which included the use of compulsory purchase powers to give vacant possession. It was only by this means that serious developer interest was created and maintained.
- The claimants' case rested on two propositions: that a hypothetical purchaser existed who would have been prepared to purchase their interests in the no scheme world; and that the prices he would have paid were substantially in excess of existing use value, calculated as a share of the development gain. These propositions are not supported by the facts. There is no evidence of any market interest in the claimants' units in the pre or no scheme world. No offers were made to purchase their interests. This is remarkable having regard to the claimants' case. The development plan policy of 1993 favoured development but there was no interest in the redevelopment of the Centre. Universal Land's schemes did not involve acquisition of the claimants' interests. In particular, in the no scheme world, no food store retailer was interested in the site. The Sainsbury's involvement post-dated the Trust's scheme. There is no evidence of interest by Tesco except as a bidder for the Trust's scheme. Morrisons were initially interested but did not proceed. Lidl were only interested in one unit on the frontage land.
- The Trust cannot be assumed to be a purchaser in the no scheme world: this would conflict with section 6 of the 1961 Act. The Trust would not have acquired land unless it had a scheme. Sections 14(2) or 15(1) of the 1961 Act provide no basis for inferring developer or market interest where none previously existed: the grant of planning permission was on offer since at least 1993. Furthermore, the planning permission to which regard is to be had relates to the "relevant land" (the claimants' units) and not to other land.
- As there is no evidence that any developer would have taken on site assembly in the no scheme world there is no basis for assuming that the land ownership pattern would have altered. The claimants' first proposition has not been proved and therefore it is not necessary to consider whether offers based on development value would have been made. The correct basis of valuation is existing use value. Mr Checkley's figures should be accepted.
- Each claim must be valued separately. The interests of those claimants holding over under the Landlord and Tenant Act 1954 are to be valued as if notice to quit had been served at entry (Greenwoods Tyre Services Limited v Manchester Corporation at page 254). A notice to quit served on 19 November 1999 would have taken effect on 24 March 2000. The claimants' interests must be valued having regard to section 47(1) of the Land Compensation Act 1973 and section 39(2) of the Landlord and Tenant Act 1954. In the no scheme world the Centre was run down and unsuccessful. There were problems regarding repairs and dilapidations. Each of the claimants' interests had a nil or nominal value not increased by any right of renewal. If a developer had existed in the no scheme world he would have been able to oppose new tenancies under section 30(1)(f) and, in Mrs Brown's case, also paragraph (b), of the 1954 Act . Even if the landlord unsuccessfully opposed a new tenancy the court would have granted a short tenancy so as not to impede development (see Reohorn at pages 850, 851 and 857). A developer would have brought about the termination of the short tenancies before he needed to take possession. He would not have been able to enter sooner by notice of entry as the Trust did.
- Mr Nardecchia considered the terms of the standard leases of the Centre and said that Mr Broad is wrong to assert that the claimants' rights over common parts gave them a ransom value and a right to compensation under the leases. The leases contemplate that rights may be changed. The claimants were in a weak bargaining position.
- I have inspected the Centre (now redeveloped) and the adjacent part of the Estate.
- The claimants' case is that the no scheme world at the valuation date would have been the same as the real world. A purchaser-developer would have been assembling a freehold site for the redevelopment of the Centre. Site assembly would have reached an advanced stage (as in the real or scheme world). The freehold and long leasehold interests would have been merged, the residential tenants in Albert Shaw House rehoused or bought out, frontage land acquired, planning permission obtained and all occupational interests purchased except those held by the seven claimants. Thus, at the valuation date the only obstacle to the redevelopment of the Centre would have been the occupational interests held by the claimants. They would have acted together to obtain ransom value from the purchaser. This value existed independently of the scheme: it was created by the location and development potential of the Centre.
- The Trust's case is that at the valuation date the no scheme world would have differed greatly from the real world. This was due to the establishment of the Trust and their promotion of a redevelopment scheme with the compulsory purchase and other powers needed to provide a development site with vacant possession. In the no scheme world there would not have been a purchaser-developer engaged in site assembly prior to redevelopment. The obstacles to site assembly (including frontage land to Chester Road), the difficulties of the merger of interests and the obtaining of vacant possession (particularly at Albert Shaw House) would have been too great in the no scheme world. Even if ransom value had existed in the claimants' interests it did not exist independently of the scheme but was created by it. It must be disregarded when assessing compensation, which should be based on existing use value plus disturbance (where applicable).
- The following issues arise out of the parties' cases:-
- The first question is what is the scheme underlying the acquisition of the claimants' interests? The Pointe Gourde rule and its statutory equivalent in section 6 and the First Schedule to the Land Compensation Act 1961 require that any increase or decrease in value which is caused by the scheme under which the land is acquired is to be disregarded when assessing compensation. I consider the scheme rule, common law and statutory, in more detail in the next part of this decision. Under this heading I identify the scheme.
- In Wilson v Liverpool Corporation Widgery LJ said (page 310 A-D):
- There is much common ground between the parties as to the scheme under which the claimants' interests have been acquired. Mr Lewis said that it is the comprehensive redevelopment of the Centre in accordance with planning permissions granted on 8 June 1998 and 17 June 1999. Mr Nardecchia said the scheme is the demolition and redevelopment primarily for retail purposes of the Centre and adjoining land.
- The planning permissions granted to the Trust in June 1998 and to Sainsbury's in June 1999 are almost identical in layout. The wording of the permissions differs slightly but this is not material. The Centre has been redeveloped under the June 1999 permission. I find that the scheme underlying the acquisition of the claimants' interests is the demolition of the Centre and the redevelopment of the site and adjoining land for predominantly retail use in accordance with the planning permission dated 17 June 1999.
- The next issue is what are the consequences of the scheme? Two questions arise, relating to the position at the date of valuation – real or imaginary – and the possible existence at that time of a purchaser-developer engaged in site assembly for redevelopment.
- In Pointe Gourde Quarrying and Transport Limited v Sub-Intendent of Crown Lands Lord MacDermott said (page 572):-
- In these references we are also concerned with the scheme rule in statutory form. Section 6(1) of the Land Compensation Act 1961 provides that:-
- The effect of section 6(1) and case 4B in Part I of the First Schedule is that no account shall be taken of any increase or diminution in value of the claimants' interests which is attributable to actual or prospective development of land, other than the land acquired, in the course of the development or redevelopment of the area as a housing action trust area, unless that development or redevelopment might have taken place in the absence of the designation of such an area.
- Mr Lewis contended that section 6(1) of the 1961 Act does not apply to these references because the redevelopment of the Centre is not redevelopment as a housing action trust area, it is redevelopment as a shopping centre. This argument was used to oppose the compulsory purchase order which has led to these proceedings. It was rejected by the inspector. I also reject it for the following reasons.
- It is not in dispute that the land designated as a housing action trust area under the 1993 order and the land transferred to the Trust under the 1994 order included the Centre. Section 77(1) of the Housing Act 1988 gives the Trust power to acquire land within its designated area for the purpose of achieving its objects. Those are contained in section 63. The primary objects include "generally to secure or facilitate the improvement of living conditions of those living in the area and the social conditions and general environment of the area" (section 63(1)(d)). Subsection (2)(b) of section 63 allows the Trust to "facilitate the provision of shops, advice centres and other facilities for the benefit of the community or communities who live in the designated area." Under subsection (2A) it is immaterial whether the action taken by the Trust under subsection (2) also benefits other persons or improves the social conditions or general environment of an area outside the designated area. Having regard to these provisions I am satisfied that the redevelopment of the Centre is the development of land in the course of redevelopment of the area as a housing action trust area. This redevelopment is within the powers of the Trust and is within section 6(1) and case 4B of Part I of the First Schedule to the 1961 Act.
- The relationship between the Pointe Gourde rule and section 6(1) of the 1961 Act was considered in Camrose v Basingstoke Corporation. Lord Denning MR said (page1107 D-G):-
- In a recent decision of this Tribunal, Walters v Welsh Development Agency, the President (George Bartlett QC) referred to the basis of the scheme rules as follows (para 54):-
- Against this background I look at the consequences of the scheme. In Wards Construction (Medway) Limited v Barclays Bank plc Nourse LJ said (page 34D):-
- The first of my questions under this heading is, having regard to the scheme, should the assessment of compensation reflect the actual position at the valuation date, i.e. the real or scheme world or an assumed position in a notional no scheme world?
- Mr Lewis urged me to adopt the real world as the no scheme world, Mr Nardecchia advocated a notional no scheme world. Mr Lewis said that for the purpose of making assumptions as to planning permission and as to the position in the no scheme world one should have regard to the realities of the conditions that existed and to the actual facts. He referred to Batchelor v Kent County Council at page 222 H-J, Margate Corporation v Devotwill Investments Limited at page 868h & Trocette Property Co Limited v Greater London Council at page 420). Mr Nardecchia said that valuation must be carried out in a no scheme world which would not have been the same as the real or scheme world at the valuation date. The Tribunal's decision in Batchelor at page 222 H-J was not specifically approved on appeal (Wards), it conflicts with the decisions of the Court of Appeal in Myers and Tudor Properties. It is not supported by the West Midland and Devotwill decisions. A state of affairs antedating the scheme must be imagined: all relevant activities under the scheme – past, present and future – are to be considered.
- In Batchelor (1991) the member (T Hoyes) said (page 222 H-J):-
- The member relied on the West Midland and Devotwill decisions to support his decision that one should not "cast aside the actual facts and substitute a different factual matrix founded upon speculation and supposition."
- The West Midland decision concerned the date of valuation in an equivalent reinstatement case. There is no reference to the no scheme world and I do not find it find it of assistance.
- The Devotwill decision requires more detailed consideration. I agree with Mr Nardecchia that the observations of Lord Morris must be read in the context of the facts and the decision of the Tribunal. The claimants were owners of residential land fronting Canterbury Road, Birchington. They applied for planning permission for residential development. It was refused on the grounds that part of the site would be required for improvement works to Canterbury Road and that residential development would be premature until details of the road improvement had been finalised. No such road improvement scheme was shown on the development plan. The claimants served a purchase notice. Compensation was to be assessed on the assumption that planning permission would have been granted for residential development so far as then reasonably to be expected and that no authority possessing compulsory purchase powers would acquire the land. The Tribunal (J S Daniel QC) determined compensation on the assumption that, while no part of the claimant's land could be taken for the by-pass, it was an inevitable corollary that a by-pass would be provided on some other line and in some different position taking traffic away from Canterbury Road, so that planning permission might reasonably have been expected for the immediate development of the land. The case was remitted to the Tribunal by the House of Lords. The Tribunal had erred in law in assuming, as a corollary of the assumption that the reference land was not to be acquired for a by-pass which it was required to make, that there would inevitably be a by-pass in some other position. The possibility of a by-pass elsewhere was a matter which could not rest on an assumption but should rest on an examination of all relevant factors.
- Mr Lewis relied on the following part of the speech of Lord Morris (page 868h):-
- I do not agree with Mr Lewis that Devotwill is authority for the proposition that land must necessarily be valued having regard to the actual conditions at the valuation date. The error by the Tribunal was the decision that it was an inevitable corollary of the assumption that the land was not to be acquired, that a by-pass would be built in another position. This was a matter of evidence. Lord Morris said (pages 869h-870a):-
- There is, in my view, ample authority for saying that the no scheme world may differ from the real or scheme world at the date of valuation. This is a question of fact to be decided on the evidence. In Myers v Milton Keynes Development Corporation Lord Denning MR said (page 704G-H):-
- In my judgment, it is not, correct, as Mr Lewis contends, that the no scheme world must be the same as the real world. Whether or not it is the same is a question of fact to be decided on the evidence. I must look at the activities under the scheme – past, present and future – and, by constructing a no scheme world at the date of valuation, assess the effect of the scheme on values at that date. I am not required to value the claimants' interests in the real or scheme world but in the no scheme world at that date.
- My second question is whether in the no scheme world at the date of valuation there would have been a purchaser-developer assembling a site for redevelopment, willing to buy the claimants' interests at prices reflecting a share of net development value? Mr Broad confirmed in answer to a question from me that the claimants' case and his valuations stand or fall on whether or not there would have been such a purchaser. This question is the nub of the case.
- As Lord Denning MR observed in Myers (page 704G) I must cast aside my knowledge of what has happened due to the scheme and "conjure up a land of make-believe" where there has been no scheme for the demolition and redevelopment of the Centre and no housing action trust area. I must decide "what activities – past, present or future – are properly to be regarded as the scheme" (per Widgery LJ in Wilson at page 310B).
- I find that the following were activities under the scheme:-
- These activities under the scheme are to be disregarded when considering the no scheme world. The position regarding the grant of planning permission is that the planning permissions in force at the date of notice to treat may be taken into account (see section 14(2) of the 1961 Act). In July 1999, when notices to treat were served in these references, two planning permissions for the redevelopment of the Centre had been granted and may be taken into account: the planning permission dated 4 June 1998 granted to the Trust and the similar permission dated 17 June 1999 granted to J Sainsbury Developments Limited (paras 19 and 25 above). Having regard to the above, I find that the position in the no scheme world at the date of valuation (19 November 1999) was very different from the position in the real world. The old order, which existed before the establishment of the Trust in 1993, would have continued. Birmingham City Council would have continued as freeholders of the Centre and the Estate but would have been unable to bring about the redevelopment of the Centre in the way that this has been accomplished by the Trust. Universal Land would have continued as head leaseholders until they went into administrative receivership and liquidation in March 1996. In the absence of the Trust it is unlikely that the headlease would have found a buyer. There was only one other bid when it was purchased by the Trust. The Centre would have continued to decline with further disrepair, vandalism and vacant units. Occupational tenants would have vacated and, in view of the continued decline, some would have been willing to surrender but no programme of surrenders as carried out by the Trust would have occurred. There would have been no marketing of the centre for redevelopment and therefore no redevelopment as has now occurred in the real world. Planning permissions for the redevelopment of the Centre would have existed but, for the reasons given below, would not have added to the value of the claimants' interests or at all due to the unattractiveness of the Centre and the lack of demand for redevelopment.
- It is against this background that I consider the question whether there would have been a purchaser-developer assembling a site for redevelopment at the valuation date. I consider the possible purchasers suggested by the claimants.
- I start with the Trust. It is clear from Mr Broad's reports that he envisaged the Trust as the purchaser willing to pay ransom value in November 1999. He said that the valuation position at that time was clear. The Trust owned the freehold of the Centre and had obtained vacant possession of numerous units but the interests of the seven claimants prevented redevelopment and therefore commanded ransom value. At the close of his evidence he said that he envisaged the Trust as acting as a private developer without compulsory purchase powers.
- I agree with Mr Nardecchia that the Trust cannot be considered as a possible purchaser due to the operation of section 6(1)(b) and case 4B in Part I of the First Schedule to the 1961 Act. The effect of these provisions is that no account shall be taken of any increase in value of the claimants' interests due to the prospect of the redevelopment of the Centre as would not have been likely to be carried out if (a) there had not been and would not be the acquisition of land by the Trust, and (b) the land had not been designated as a housing action trust area. If there had been no designation as a housing action trust area there would have been no Trust and no purchases or demand by the Trust. The Trust is part of the scheme: disregard of the scheme is the exclusion of the Trust as a possible purchaser.
- In his closing submissions Mr Lewis suggested that, if the Trust is not to be assumed to be a purchaser, then Birmingham City Council would take their place. There was no evidence before me to indicate that the Council would be a possible purchaser, willing to pay ransom values.
- I now consider J Sainsbury Developments Limited as a possible purchaser in the no scheme world. Sainsbury's were the successful bidders when the Centre was marketed by the Trust and have carried out the redevelopment. They occupy a food superstore and petrol filling station on the land. Clearly, Sainsbury's were interested in redevelopment in the real or scheme world. The claimants say that Sainsbury's would also have been interested and therefore a purchaser of their interests in the no scheme world. Mr Lewis referred to the evidence given by Mr Kevin MacMillan, a regional development executive of Sainsbury's Supermarkets Limited, at the compulsory purchase order inquiry. I agree with Mr Nardecchia that evidence included in proofs of evidence for that inquiry should carry little, if any, weight in these proceedings. It is hearsay, the witness did not appear before me to explain his evidence and be cross-examined on it, it was given for a different purpose and the evidence in a proof is only part of the total evidence given by that witness. Nevertheless, I consider Mr MacMillan's evidence, which I do not think supports Mr Lewis's submissions.
- Mr Lewis relied on paras 2.8 and 2.10 in Mr MacMillan's proof:-
- 10 Sainsbury's is keen to increase its representation in Birmingham, and in the Castle Vale area in particular. The area offers us a unique opportunity to marry a commercial development opportunity with a community wide regeneration initiative. We will be able to provide a valuable local service as well as serving a role in the wider community. The Castle Vale centre clearly needs redevelopment and the scheme that I will now describe represents the best means of securing a significant improvement to the local environment and the provision of a valuable local retail and employment opportunities."
- I do not accept that these statements show that Sainsbury's would have been interested in the no scheme world. Looking at Mr MacMillan's proof as a whole it is clear that Sainsbury's interest was linked to the regeneration of the Centre and the Estate by the Trust, i.e. the scheme. In para 1.4 of this proof Mr MacMillan said: "The development will remove an outmoded and unlovely centre, and will be a powerful symbol of both the public and the private sector committed to the regeneration of the Castle Value area." In para 2.1 he referred to new Sainsbury's stores in other areas acting "as a catalyst for regeneration". In para 2.7 he spoke of the valuable lessons learnt by Sainsbury's from other developments on which to draw "to ensure that the redevelopment of Castle Value Shopping Centre plays the role it should in the ongoing regeneration of the area." In one of the paragraphs relied upon by Mr Lewis, para 2.10, Mr MacMillan referred to Castle Vale as "a unique opportunity to marry a commercial development opportunity with a community wide regeneration initiative." In paras 3.4 and 3.5 Mr MacMillan made it clear that the Sainsbury's development was part of the redevelopment initiative started by the Trust as part of the regeneration of Castle Vale. Para 3.5 stated:-
- Mr Checkley said that Sainsbury's interest post-dated the Trust's redevelopment scheme. They did not approach the Trust before the Centre was marketed. This marketing was done on the basis that the Trust would use its statutory powers to assemble the site, including compulsory purchase. The Trust made it clear that the redevelopment of the Centre was only one element in an overall programme of works of improvement, development and redevelopment to bring about the regeneration of the whole of the designated area. It was in this way that the Trust hoped to attract private developers to invest in the Centre. The choice of Sainsbury's as preferred developers was influenced by the Trust's ability to agree terms with them for specific tenants to be re-sited to protect core trades, i.e. dentist, solicitor, post office, chemist and bookmaker. The extent of developer interest was a reflection of the fact that it was stated at the outset by the Trust that vacant possession will be provided subject to a time-scale to be agreed with the appointed developers. It was part of the Trust's agreement with Sainsbury's that the Trust would use their compulsory purchase powers to secure vacant possession if agreement could not be reached with all occupiers within their time-scale.
- I accept this evidence and Mr Checkley's conclusion that Sainsbury's, or indeed any private developers, would not have been prepared to take on the redevelopment of the Centre in the no scheme world. It was clearly fundamental to Sainsbury's that the Trust provide them with vacant possession of the site as a single freehold interest so that their redevelopment objectives would not be frustrated.
- I find that Sainsbury's would not have been interested in the redevelopment of the Centre in the no scheme world and would not have undertaken site assembly and made bids for the claimants' interests.
- The next possible purchasers of the claimants' interests are Wm Morrisons Supermarket plc. They were unsuccessful bidders when the Centre was marketed by the Trust. They also expressed some interest before this marketing took place. Correspondence with them in 1995 was put in evidence, which I now consider.
- On 9 August 1995 agents to Universal Land wrote to Morrisons referring to the proposed redevelopment of the Centre. On 23 August Morrisons replied stating that they were negotiating for the purchase of a nearby site considered to be a more viable superstore site. They wished to keep their options open and requested confirmation that Universal Land and the Trust had the ability to deliver the freehold interest in the whole of the site. On 20 September Universal Land wrote to Morrisons confirming that the Trust were prepared to sell the freehold of their site. There was no further correspondence with Morrisons at that time. Mr Checkley said that there were negotiations with Morrisons. It became evident that they were not prepared to undertake site assembly. They would only be interested if vacant possession of the whole site could be given.
- I am satisfied on this evidence that Morrisons would not have carried out site assembly for redevelopment at the Centre in the no scheme world and would not have bid for the claimants' interests.
- Tesco were unsuccessful bidders when the Centre was marketed by the Trust but there is no evidence that they would have been interested in the no scheme world in redevelopment prior to this marketing.
- Mr Checkley gave evidence that a development company, Stockbrook Limited, said that they had an agreement with Universal Land and requested that the Trust allow them to negotiate with occupiers in the Centre and funders prior to making an offer to the Trust. Stockbrook were invited to work up proposals for redevelopment and continue discussions with Mr Checkley's firm. Following a meeting they raised three points which they considered significant: the position of the current tenants, dilapidations and the impact of a nearby retail park. Following further research, particularly with regard to vacant possession of the occupied units, Stockbrook decided that the scheme was not viable and withdrew. I find that Stockbrook would not have been possible purchasers of the claimants' interests in the no scheme world.
- In 1995 there was some indication that Lidl were interested in a unit on the frontage land (Chester Road) but no evidence that they might have been prepared to buy out the claimants' interests in the no scheme world.
- I have now considered the evidence regarding possible purchasers of the claimants' interests in the no scheme world. I am not persuaded that there would have been such a purchaser. I find that in the no scheme world at the date of valuation there would not have been a purchaser-developer assembling a site for the redevelopment of the Centre willing to buy the claimants' interest at prices reflecting ransom value or a share of net development value, or indeed at all.
- The interest in the Centre following marketing was solely due to the scheme and, in particular, the ability of the Trust to give vacant possession of the whole of the land needed for a viable development. In the no scheme world the obstacles to the assembly of a large enough site with vacant possession for redevelopment would have been considerable, involving: the merger of the freehold and long leasehold interests; purchase of frontage land and other land; surrenders of the occupational tenancies and, in some cases, the relocation of tenants; the securing of vacant possession of Albert Shaw House, involving rehousing on other parts of the Estate; and the stopping up of highways in and near the Centre. The improvement of the Estate, particularly the demolition of many tower blocks, has undoubtedly assisted the success of the Centre. These are all activities under the scheme, carried out by the Trust as a public body using statutory powers, particularly powers of compulsory purchase. In the no scheme world all these activities would have had to be undertaken by a private developer without the backing of the statutory powers possessed by the Trust. I am satisfied that no private developer would have embarked on this task.
- Mr Broad included in his evidence examples of site assembly by developers in Birmingham and elsewhere. He referred to them as comparables, to show that a developer would have undertaken land assembly for the redevelopment of the Centre. I do not draw this conclusion from them. These examples show that, in certain circumstances, developers will spend time and money assembling a site prior to development. This is not an issue. The examples, however, do not show that a developer in the no scheme world would have assembled land and obtained vacant possession for the redevelopment of the Centre. The obstacles I have referred to at Castle Vale would have deterred site assembly for redevelopment. Those obstacles were removed under the scheme, leading to interest and redevelopment in the real world.
- My third question is did the claimants' interests possess a ransom or development value in the no scheme world which existed independently of the scheme?
- In Tudor Properties Mummery LJ said (page 294 para 2):-
- It is not in dispute that these are correct statements of the law. The claimants rely on the existence of a ransom or development value which existed independently of the scheme. Mr Broad referred as evidence of a pre-existent or independent ransom or development value to the location of the Centre, planning policy which encouraged redevelopment and the grants of planning permission and the interest shown in the redevelopment of the Centre. The Trust dispute that, on the facts, there is any evidence of such values existing independently of the scheme.
- I accept that the location of the Centre, particularly if the frontage land, is included, and the planning permissions for redevelopment at the date of valuation might point to a development value existing at the site. Location and planning permission in themselves, however, are not enough to create ransom or development value for the claimants' interests. There must have been demand. As Lord Denning MR observed in Camrose (page 1106G):-
- Before moving on to the question of compensation I should draw together my findings on the scheme and make some general observations. I have found the scheme underlying the acquisition is the redevelopment of the Centre and the adjoining land for predominantly retail use under the planning permission dated 17 June 1999. The claimants' interests are to be valued in the no scheme world which, at the date of valuation, was very different and much less attractive to developers than the real or scheme world. In the no scheme world there would not have been a purchaser-developer assembling a site for redevelopment willing to pay ransom value or a share of development value to obtain vacant possession of the claimants' units. Furthermore, if that value did exist, it did not exist before, or independently of, the scheme.
- Clearly, any increases on Mr Checkley's primary valuations, which are on an existing use plus disturbance basis, to his alternative figures or the valuations of Mr Broad are due to the scheme underlying the acquisition. In my view, these proceedings are a good example of the scheme in action and its effect on values. A comparison between the run down nature of the Centre and the Estate, from the descriptions in the evidence, and the redeveloped Centre I saw on my inspection, fully occupied and apparently trading well, and the surrounding parts of the Estate, largely now devoid of tower blocks and with further attractive housing, were the results of the scheme in action. Much has already been achieved by the Trust since 1993. This has inevitably increased values associated with the Centre. These increases are due to the scheme underlying the acquisition, the redevelopment of the Centre. These increases are not compensatable due to the scheme rule, statutory or common law, for two related underlying reasons. First, it would conflict with the fundamental principle of equivalence. In Horn v Sunderland Corporation Scott LJ said (page 49):-
- If the Trust have to pay compensation based on Mr Broad's figures or Mr Checkley's alternative figures they would be paying prices inflated by the scheme giving rise to the acquisitions and their use of compulsory purchase powers.
- The claimants have been encouraged by Mr Broad to hold out for large sums in compensation on the assumption that the Trust is making a substantial profit out of the redevelopment of the Centre and should be treated as a private developer who could be held to ransom. The true position is that, in the absence of the scheme, these inflated sums would not have existed. If they did exist at the valuation date they have been created by the scheme and the activities of the Trust in pursuance of that scheme. In assessing market value under section 5(2) of the 1961 Act the willing seller is assumed to be a hypothetical character (see Trocette at page 416), not necessarily the claimants holding out mistakenly for substantial ransom values. In a no scheme world comprising a part empty, vandalised, run down centre, the sellers would have been likely to have been anxious to rid themselves of their units for modest sums, having regard to this environment, than be sellers holding out for substantial ransom values.
- I now deal with the final issue. In the light of the answers to the above questions, what amounts of compensation should be awarded to the claimants? It follows from my answers that I reject Mr Broad's basis of valuation and his valuations. It is not necessary for me to consider Mr Checkley's alternative valuations. I am left with Mr Checkley's primary valuations. Mr Broad did not put forward alternative figures on Mr Checkley's basis nor provide any evidence which would enable me to vary to a material extent Mr Checkley's figures.
- I look first at the statutory provisions governing the assessment of compensation in these references. The interests held by the claimants fall into two categories: leases with unexpired terms (units 3, 21, 25 and 51) and short tenancies where the claimant is a periodic tenant, or holding over on the expiration of a term of years or occupying under licence (units 40/41, 44 and 46). A tenant holding over following the expiration of his lease has a short tenancy within section 20 of the Compulsory Purchase Act 1965 (Newham London Borough Council v Benjamin).
- Compensation for an unexpired term of years comprises the market value of the unexpired term (section 5(2) of the Land Compensation Act 1961), having regard to the tenant's right to apply for a new tenancy under the Landlord and Tenant Act 1954 (section 47(1) of the Land Compensation Act 1973), and, where the claimant was in occupation and was dispossessed from the premises, compensation for disturbance.
- Compensation for the extinguishment of short tenancies is assessed under section 20 of the 1965 Act, having regard to the tenant's right of renewal (section 47(1) of the 1973 Act) and subject to minimum compensation provisions (section 20(6) of the 1965 Act and sections 37 and 39 of the Landlord and Tenant Act 1954). Compensation under 20(1) of the 1965 Act comprises: (a) the value of the tenant's unexpired term or interest in the land, (b) any just allowance which ought to be made to him by an incoming tenant, and (c) any loss or injury he may sustained. The length of an unexpired term is calculated on the assumption that notice to quit had been given on the date of entry. The unexpired term will be the period from that date to the date when the deemed notice to quit would have expired (Greenwoods Tyre Services Limited v Manchester Corporation). Compensation under section 20 shall not be less than the compensation which would have been payable under section 37 of the Landlord and Tenant Act 1954 if the tenancy had come to an end in circumstances giving rise to compensation under that section (section 20(6) of the 1965 Act and sections 37 and 39(2) of the 1954 Act). The compensation under section 37 is:-
- Before considering Mr Checkley's valuations I should deal with the question whether the claimants' interests are to be valued as one consolidated interest or seven separate interests. In Mr Broad's proof of evidence he asserted that the claimants had contracted with each other to act as one in pursuing their claims. They would therefore present a united front in the agreement of compensation. He originally assessed their compensation as one global sum. At the hearing no evidence was produced to support this assertion. At the dates of notice to treat and entry the claimants held separate interests and any agreement to act together was at best informal and, on the evidence, uncertain as to effect. The position seems to have been that Mr Broad acted for the seven claimants and others who eventually agreed terms with the Trust. I was given a copy of an unsigned agreement between all the claimants which I was told had been entered into a week or so before the start of the hearing, long after notice to treat and entry. This agreement refers to a joint application and a consolidated application to this Tribunal and records agreement to share equally any global sum of compensation awarded on the basis of marriage or development value.
- I find that there is no evidence to show that the claimants had entered into a binding agreement to act as one in pursuing their claims for compensation, other than possibly the agreement allegedly entered into a few weeks before the hearing. At the dates of notice to treat and entry the claimants each held separate interests. Separate references were made to this Tribunal. They were consolidated in error. Under an order dated 28 November 2000 this consolidation was revoked and the references directed to be heard together. The value of the several interests of the claimants must be separately assessed (see section 3 of the Land Compensation Act 1961).
- I now consider Mr Checkley's valuations. I start with the interests comprising unexpired terms of years, units 3, 21, 25 and 51, where the measure of compensation is market value plus disturbance.
- Unit 3 (Fleming) – The claimant held the residue of a term expiring on 24 June 2014. He was not in occupation at the dates of notice to treat and entry. Mr Checkley assessed compensation at 1YP of the passing rent of £3,300 per annum. Mr Fleming's compensation is the market value of the unexpired term of the lease. He was not in occupation and was not therefore dispossessed; no claim for disturbance can be made. Mr Checkley appears to be in error in taking the rent at £3,300 per annum. The initial rent in the lease is £7,600 per annum subject to review at the third and then at the eighth, thirteenth, eighteenth and twenty-third years of the term. By the valuation date the rent would have been reviewed in June 1994. The statement of facts produced by the claimants puts the rent at £7,600 per annum, the initial rent in the lease. In the absence of other evidence I accept Mr Checkley's multiplier of one years purchase and apply it to the rent of £7,600 per annum to find the value of the lease. I award compensation of £7,600 in respect of unit 3.
- Unit 21 (Verma) – The claimant held an unexpired term expiring on 25 December 2004. He was in occupation at the date of entry. Mr Verma made a claim for £554,383 but this was not the figure spoken to by Mr Broad and I heard no evidence in support of it. Mr Checkley's estimate of compensation, based on limited information, is £35,000 comprising: forced sale of fixtures and fittings, £5,000; value of lease (1YP of rent), £4,100; extinguishment of business and other disbursements, £15,000; and an ex-gratia payment for agreement in full and final settlement, £10,900. Mr Verma's compensation should comprise the value of the unexpired term of the lease and compensation for disturbance. An ex-gratia payment for agreement forms no part of compensation on compulsory purchase but I will treat Mr Checkley's total figure of £35,000 as his estimate of compensation. Although Mr Verma's trading accounts were mentioned several times during the hearing they were not produced in evidence. I was given no information regarding Mr Verma's trading position nor as to any losses incurred on the closure of his business. Mr Broad did not claim or put forward figures on this basis. In the absence of information to enable me to calculate Mr Verma's losses, I base my determination of compensation on Mr Checkley's figures. I believe him to be in error again regarding the rent. Mr Checkley refers to an initial rent of £4,100 per annum. There were rent reviews in 1989 and 1994. The claimants say the rent was £6,900 per annum which I accept. I agree with Mr Checkley's approach to the value of the lease by taking one 1YP of the rent. This gives £6,900 for the lease. I accept Mr Checkley's other figures totalling £30,900 as disturbance. I award compensation of £37,800 in respect of unit 21.
- Unit 25 (Rank) – The claimants held the residue of a term expiring on 29 September 2006. They were not in occupation at notice to treat or entry. The claimants are entitled to compensation for the unexpired term of their lease but not to compensation for disturbance. Mr Checkley valued the unexpired leasehold term at 1YP of the rent, £12,000 per annum. I have no valuation from Mr Broad on this basis. I accept Mr Checkley's figure. I award compensation of £12,000 in respect of unit 25.
- Unit 51 (Richards) – The nature of Mr Richards's interest was in dispute. I have found that the notice to determine was ineffective and that Mr Richards held the unexpired term of a lease expiring on 24 June 2005 with no rights of renewal under the Landlord and Tenant Act 1954. Mr Richards was in occupation at notice to treat and entry. Mr Checkley valued Mr Richards's interest as a short tenancy. His estimate of compensation is £20,000 comprising £17,750 minimum compensation for the tenancy (once the rateable value of £17,750) plus an ex-gratia payment of £2,250. In view of my decision on Mr Richards's interest, as an unexpired term, Mr Checkley's estimate of compensation is now on an incorrect basis and too low. I adopt his general practice of using 1YP of the rent (£25,000 per annum) for the unexpired term of the lease, £25,000, plus, in the absence of other evidence, £2,250 for disturbance. I award compensation of £27,250 in respect of unit 51.
- I look now at the short tenancies, units 40/41, 44 and 46, where the measure of compensation is prescribed by section 20 of the Compulsory Purchase Act 1965.
- Units 40/41 (Wilford) – Mr Wilford was a stallholder in the indoor market holding under a periodic tenancy. He was in occupation at notice to treat and entry. Notice to terminate had been served and application made for a new tenancy. No claim for compensation under section 20 of the 1965 Act has been made. Mr Checkley said that he assumed that Mr Wilford had occupied this unit for more than 14 years. He assessed compensation for the extinguishment of Mr Wilford's interest at £7,000, comprising twice the rateable value of £2,850, plus an ex-gratia payment in respect of disturbance of £1,300 (loss on forced sale of fixtures and fittings and stock). I have no figures of compensation on this basis from Mr Broad and no evidence regarding Mr Wilford's trade or as to any losses he may have incurred on the extinguishment of his periodic tenancy and his business. In the absence of such evidence I accept Mr Checkley's figure. I award compensation of £7,000 in respect of units 40/41.
- Unit 44 (Greggs plc) – The claimants were holding over following the expiration of their lease in 1997. They were in occupation at notice to treat and entry. No claim for compensation under section 20 of the 1965 Act has been made. Mr Broad did not produce an alternative figure on Mr Checkley's basis and I heard no evidence regarding the claimants' trade or any losses incurred on the extinguishment of their short tenancy and business. Mr Checkley said that the claimants' bakery business had been carried on in the premises for more than 14 years. He assessed compensation at £20,000 comprising £18,016 for the extinguishment of the business (16 times the 1990 rateable value of £1,126) and a £2,000 ex-gratia payment in respect of the forced sale of fixtures and fittings. In the absence of any alternative evidence showing this total figure to be wrong I accept it. I award compensation of £20,000 in respect of unit 44.
- Unit 46 (Brown) – Mrs Brown's interest was in dispute. I have found that she was occupying this unit rent free on an oral licence following the determination of her lease. Mrs Brown was in occupation at notice to treat and entry. No claim for compensation under section 20 of the 1965 Act has been made. Mr Broad did not put forward an alternative figure to set against Mr Checkley's estimate of compensation. I have no evidence as to Mrs Brown's trade nor as to any losses on the extinguishment of her short tenancy and business. Mr Checkley assessed compensation on the assumption that Mrs Broad had carried on her business in the premises for more than 14 years. His total compensation is £10,000 comprising £8,200 for Mrs Brown's interest in the unit (twice the current rateable value of £4,100) plus £1,800 ex-gratia payment for disturbance (loss on forced sale of fixtures and fittings). In the absence of evidence in rebuttal I accept Mr Checkley's total figure. I award compensation of £10,000 in respect of unit 46.
- I am aware that these determinations of compensation are not wholly satisfactory. They are broad brush in approach and rely almost wholly on Mr Checkley's evidence. The causes of this situation however lie with the claimants and the manner in which Mr Broad prepared his evidence. The claimants' cases throughout have been on the assumption that the basis of compensation is ransom value or development value. I have found this to be incorrect. Mr Broad, unwisely in my view, did not put before me alternative figures on the existing use plus disturbance basis adopted by Mr Checkley, which I have found to be correct. The burden of proof is on the claimants, particularly in respect of disturbance compensation where the facts are wholly within their knowledge.
- I determine that the amounts of compensation payable to the claimants for the compulsory acquisition of their leasehold interests in units in the Centre under the Castle Vale Housing Action Trust (Castle Vale Shopping Centre) Compulsory Purchase Order 1998 are:-
- Before I conclude this decision I should refer briefly to the expert evidence. Both Mr Checkley and Mr Broad were criticised by opposing counsel. Mr Lewis attacked the reliability of Mr Checkley's evidence on many grounds. The general thrust of his argument was that Mr Checkley and the Trust had not acted fairly in their assessment of the claimants' compensation. I do not accept these criticisms. I found Mr Checkley to be a reliable and objective witness. In particular, I do not accept, as contended by Mr Lewis, that he became increasingly reluctant to answer questions and that some of his answers were obscure. Mr Checkley was asked a number of questions on matters relating to the Trust's activities and other matters of which he had no direct knowledge and, quite properly, he declined to answer. Claims for compensation were made solely on a ransom value basis, which he rejected, and he was forced to make intelligent guesses as to what the claims might have been on the correct basis. No evidence on this basis (existing use plus disturbance) was put forward by Mr Broad. I am of the opinion that Mr Checkley did his best to be fair to the claimants in these difficult circumstances. Also, the approach of the Trust was, in my view fair, bearing in mind the excessive and unsupported claims made by the claimants.
- Mr Nardecchia criticised the credibility of Mr Broad's evidence. I think that there is some substance in these criticisms. They mainly centred on Mr Broad's fee arrangements with the claimants. His explanations of these arrangements changed during the hearing and the true story was never established. I am satisfied, however, that he was looking for performance related fees based on the compensation awarded. This is an unsatisfactory fee basis for an expert witness. It must greatly diminish his credibility as an objective and impartial witness. Mr Broad's evidence, in my view, also lacked credibility in other respects. He may have genuinely held his opinion on ransom value but his evidence did not appear to be an objective opinion founded on the facts. It gave the impression of a case being advocated, often with a lack of supporting facts and sometimes a cavalier disregard of the truth, e.g. his assertion that the claimants had long contracted to act as one in pursuing their claims which was found to be without foundation and contradicted by the evidence. Mr Broad's position as an expert witness was not helped by his assumption of the role of solicitor (although not as an advocate) in these proceedings, running the case before the Tribunal. The practice of surveyors conducting a claimant's case (in the role of a solicitor) is unsatisfactory and is to be discouraged, except, of course, under the simplified procedure where this role can be accommodated in simple cases. Surveyors do not have the litigation knowledge and training of solicitors and their assumption of this role often leads to delay and administrative difficulties. Mr Broad apparently saw it as his task to explain his case at every opportunity in communications with the Tribunal, even during an adjournment of the hearing. Despite these criticisms and my doubt as to Mr Broad's credibility, however, I have considered his evidence on its merits in reaching my decision and as explained, have rejected it. If it had been a matter of balancing opinions unsupported by evidence I would have rejected Mr Broad's evidence on grounds of lack of credibility.
- This decision concludes my determination of the substantive issues in this reference. It will take effect as a decision when the question of costs has been decided and at that point, but not before, the provisions relating to the right of appeal in section 3(4) of the Lands Tribunal Act 1949 and order 61 rule 1(1) of the Civil Procedure Rules will come into operation. The parties are invited to make submissions as to the costs of these references and a letter accompanying this decision sets out the procedure for submissions in writing.
- I have received written representations on costs.
- Unconditional offers of compensation were made by the Trust to each of the claimants on 8 May 2001 at sums in excess of my awards. The Trust seek their costs from this date under section 4(1)(a) of the 1961 Act. They also asked their costs before this date, from 15 March 2000, the date when other offers were made based on the notices of claim; or, in the alternative, from the date when the claimants should have delivered supplemental evidence setting out the amounts claimed by each claimant pursuant to directions of the Tribunal dated 28 November 2000. Furthermore, the claimants failed to deliver claims in time for the Trust to make proper offers (section 4 (1)(b) of the 1961 Act).
- The claimants say that the only provision for costs should be the normal order that the Trust should pay the claimants' costs up to the date of the sealed offers. Paragraphs (a) and (b) of subsection (1) of section 4 of the 1961 Act should not both apply to this reference to impose, in effect, a double jeopardy in costs on the claimants. As to costs before the sealed offers it is not accepted that the claimants failed to deliver particulars of claim in time to enable the making of offers by the Trust.
- My decision on costs is as follows. On 8 May 2001 the Trust made unconditional offers of compensation (including the costs of the reference) to each of the claimants. Copies of the letters containing these offers were sent to the Tribunal as sealed offers under rule 44 of the Lands Tribunal Rules 1996. I have now opened these sealed offers and find that each one is in excess of my award, five out of the seven by substantial amounts. Clearly, the claimants must pay the Trust's costs from the date when these offers were made. There are no special reasons why this should not be so (section 4(1)(a) of the 1961 Act).
- As to costs before the making of these offers, the general rule is that the costs of a reference to determine compensation fall on the acquiring authority without whose resort to the use of compulsory powers there would have been no need for the owner to be compensated. The Trust, however, ask for their costs before the sealed offers from alternative dates, the earliest of which is 15 March 2000, the date of the first offers to the claimants. I accept this submission and depart from the general rule. If the Trust had not suggested 15 March 2000 as the earliest date from which liability for costs should run I would have ordered costs from the start of the reference. The following are my reasons for departing from the general rule.
- First, I have wholly rejected the claimants' case. It was misconceived and unsupported by law or in fact. The claims were just under £9m; I have awarded compensation totalling £121,650 based on Mr Checkley's figures with only minor adjustments to three out of the seven valuations. The excessive and exaggerated claims rendered it impossible for settlement by negotiation. This is the primary reason why I order costs against the claimants before the date of the sealed offers. Second, I also take into consideration that on 15 March 2000 offers were made to each claimant, in four cases out of the seven at figures above my award. Each offer is labelled "without prejudice" but with the reservation in the body of the letter that it could be brought to the attention of the Tribunal on the question of costs. No objection to the admission of these letters was made on behalf of the claimants and I am satisfied that I can take them into consideration. They add some weight to my primary reason for ordering costs against the claimants. I have insufficient information to enable me to decide whether or not adequate claims were made to the Trust.
- As to the apportionment of costs between the claimants, the Trust state that the total costs should be split seven ways; the claimants refer to an agreement between themselves providing for the apportionment of costs pro-rata according to the percentage represented by each award to the total. Any agreement as to the apportionment of costs by the claimants is not a matter which is relevant to an award of costs between the parties. The references were heard together and the claimants acted as one in putting their case. The way in which the claimants presented their case did not depend to any material extent on the number of claimants. In my judgment the most satisfactory way of dealing with each claimant's liability for costs is to make each jointly and severally liable for the Trust's costs.
- I order that the claimants shall be jointly and severally liable to pay the Trust's costs of these references from 15 March 2000, such costs, if not agreed, to be the subject of a detailed assessment by the Registrar of the Lands Tribunal on the standard basis. I make no order as to costs for the period before 15 March 2000.
[2001] EWLands ACQ_168_1999 (13 August 2001)
ACQ/168/1999
ACQ/172-173/1999
ACQ/175-177/1999
ACQ/117/2000
(heard together)
LANDS TRIBUNAL ACT 1949
COMPENSATION – compulsory acquisition of leasehold shop units in run-down shopping centre – redevelopment – scheme – no scheme world – whether demand from purchaser – developer in no scheme world creating ransom or development value – whether such value existed independently of the scheme – claimants' case rejected – compensation awarded on authority's figures – Land Compensation Act 1961, ss 6(1) and First Schedule; Compulsory Purchase Act 1965, s20; Land Compensation Act 1973, s47(1).
IN THE MATTER of NOTICES OF REFERENCE
BETWEEN RANK LEISURE & OTHERS Claimants
and
CASTLE VALE HOUSING ACTION TRUST Acquiring
Authority
Re: Units 3, 21, 25, 40/41, 44, 46 and 51
Castle Vale Shopping Centre,
Castle Vale, Birmingham
Tribunal Member: P H Clarke FRICS
Sitting at 48/49 Chancery Lane, London WC2
on 30/31 May, 1, 4 and 5 June and 5 and 6 July 2001
The following cases are referred to in this decision:
Horn v Sunderland Corporation [1941] 2 KB 26
Trocette Property Co Ltd v Greater London Council (1974) 28 P & CR 408
Birmingham Corporation v West Midland Baptist Trust Inc [1970] AC 874
Wilson v Liverpool Corporation [1971] 1 WLR 302
Fraser v City of Fraserville [1917] AC 187
Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendment of Crown Lands [1974] AC 565
Myers v Milton Keynes Development Corporation [1974] 1 WLR 696
Margate Corporation v Devotwill Investments Limited [1970] 3 All ER 864
Batchelor v Kent County Council (1990) 59 P & CR 357, CA; [1992] 1 EGLR 217, LT
Wards Construction (Medway) Limited v Barclays Bank plc [1994] 2 EGLR 32
J A Pye (Oxford ) Limited v Kingswood Borough Council [1998] 2 EGLR 159
North Eastern Housing Association Limited v Newcastle-upon-Tyne Corporation (1972) 25 P & CR 178
Cunliffe v Goodman [1950] 2 KB 237
Reohorn v Barry Corporation [1956] 1 WLR 845
Haron Development Co Limited v West Sussex County Council (1974) 230 EG 515
Camrose v Basingstoke Corporation [1966] 1WLR 1100
Bolton Metropolitan Borough Council v Tudor Properties Limited [2000] RVR 292
Gatwick Parking Services Limited v Sargent [2000] 2 EGLR 45
Greenwoods Tyre Services Limited v Manchester Corporation (1972) 23 P & CR 246
South Eastern Ry Co v London County Council [1915] 2 Ch 252
Walters v Welsh Development Agency [2000] RVR 93
Rugby Joint Water Board v Foottit [1973] AC 202
Re Lucas and Chesterfield Gas and Water Board [1909] 1 KB 16
Newham London Borough Council v Benjamin [1968] 1 WLR 694
Meyric Lewis instructed by Wright Silverwood, chartered surveyors, for the claimants
Nicholas Nardecchia instructed by The Wilkes Partnership, solicitors, for the acquiring authority.
DECISION OF THE LANDS TRIBUNAL
FACTS
"The current position is that Castle Vale is entering upon a vicious cycle in which poor housing and weakened social structures feed upon each other. Some of the signs are:
(a) as many as 14 of the 34 multi-storey blocks are beyond economic repair.
(b) nearly 40% of the economically active population regards themselves as unemployed, and 68% of households receive Housing Benefits.
(c) crime rates are high and 70% of residents refer to fear of crime as a major feature of life on the Estate."
"…The large 1970 shopping centre has never realised its full potential. Its poor design, accessibility and image have resulted in low usage and trading levels. The centre has 42 units of which approximately 30% are vacant. The gradual withdrawal of banks and major high street retailers has resulted in a slow spiral of decline both in the number and quality of shops."
The Centre has been demolished and redeveloped. It now comprises a retail supermarket and petrol filling station (occupied by Sainsbury's), retail warehouses, unit shops (including post office and betting shop), dental surgery, offices, public square, residents' club, car parking, service yards and access roads. Adjoining are a doctors' surgery and health centre.
"Improvements to the shopping centre would best be brought about through a complete remodelling of the existing complex. The City Council would consider favourably a redevelopment providing a visible centre fronting Chester Road and adjacent residential areas and comprising a full range of shops, offices and services, surface level car parking and direct access off Chester Road. Integrated within the centre could be a range of community facilities. Better access to the shopping centre will be encouraged (S10)."
"Redevelopment of Castle Vale Shopping Centre and lands to the east and west to provide the commercial and community focus on the estate."
On 26 October 1995 Birmingham City Council adopted the Castle Vale Master Plan (as amended) as Supplementary Planning Guidance.
"At the western end of the site, the shopping centre is in a poor state of repair and has a number of vacant units. Designed in the 1960s, the centre is inward looking and only serves the estate. It does not provide a safe or pleasant shopping environment. The range of goods and services available is limited with the anchor store being a frozen food store. The ground floor of the Albert Shaw tower block which forms part of the shopping centre, is used as a neighbourhood office."
Part 8 of the development brief deals with the Centre and refers to redevelopment and a proposed new urban square and associated community facilities.
"Erection of replacement shopping centre including food superstore, medium sized retail units, unit shops, dental surgery, solicitors office, restaurant, petrol filling station, public square, car parking and access roads."
"At the point of sale the part-tenanted existing buildings will remain on site with an agreement in place for surrenders and re-sites, where appropriate, together with a controllable position on those leases that have yet to expire but will do so by the time demolition is required. Agreements will be in place for the movement of a number of re-sites into new accommodation that can be constructed prior to any demolition taking place."
The site was marketed on the basis that the freehold will be sold subject to a detailed development agreement, the title to be conveyed on satisfactory practical completion of the development. Expressions of interest were required by 30 April 1997. Eight parties were then given the opportunity to make financial bids. Seven bids were received and four were short-listed for presentation and interview. J Sainsbury Developments Limited were chosen as the preferred developer. The Trust subsequently entered into a contract to sell the freehold in the Centre and adjoining land to Sainsbury for £18,933,249, which included a charitable fund donation. The sale was completed in April 1999.
| Parcel no. | Unit no. | Claimants |
| 1 | 3 | B J Fleming |
| 4 | 21 | S Verma (T/a Sheena) |
| 6 | 25 | Rank Seasonal Amusement Limited |
| 8 | 40/41 | T Wilford |
| 10 | 44 | Greggs Plc |
| 11 | 46 | Janet Brown |
| 13 | 51 | M Richards |
(a) Unit 3 – let to B J Fleming by an underlease dated 3 December 1992 for 23 years from 24 June 1991 at £7,600 per annum, subject to review at the third, eighth, thirteenth, eighteenth, and twenty-third years of the term. Unoccupied since 1995.
(b) Unit 21 – let to S Verma by an underlease dated 5 December 1984 for 20 years from 25 December 1984 at an initial rent of £4,100 per annum. Rent increased to £6,900 per annum at first review with further five yearly reviews. The tenant was in occupation at the date of possession.
(c) Unit 25 – let to Showboat Holdings Limited (claimants now Rank Leisure) by an underlease dated 3 March 1982 for 25 years from 29 September 1981 at an initial rent of £7,000 per annum. Rent increased to £12,000 per annum at first review with further five yearly reviews. Unoccupied since 1993.
(d) Units 40/41 – licence to T Wilford for 12 months from 1 January 1996 at £110 per week subject to increase on 28 days notice. Mr Wilford was the only remaining stallholder from the indoor market. The parties agree that he had a periodic tenancy protected under the Landlord and Tenant Act 1954. Landlords' notice to terminate under section 25 of the Landlord and Tenant Act 1954 served on 11 November 1998; date of termination 20 May 1999. Reply by tenant's solicitors on 8 February 1999 and application made to Birmingham County Court for a new tenancy on 21 April 1999. The tenant was in occupation at the date of possession.
(e) Unit 44 – let to Greggs Plc by a lease dated 3 November 1993 for five years from 29 September 1992 at £6,700 per annum. Tenants held over following expiration of tenancy on 29 September 1997. Landlords' notice to terminate under section 25 of the Landlord and Tenancy Act 1997 served on 18 December 1996 terminating the tenancy on 29 September 1997. Reply by tenants' solicitors on 24 January 1997 and application for new tenancy made to Birmingham County Court on 3 March 1997. The tenants were in occupation at the date of possession.
The claimants' interests in units 46 and 51 are in dispute.
DISPUTED INTERESTS
Unit 46 (Mrs Brown)
Unit 51 (Mr Richards)
COMPENSATION
Claimants' case
Evidence
(i) the freehold and long leasehold interests in the Centre had been acquired;
(ii) this merger of interests allowed the negotiation of surrenders of occupational tenancies; many of these had been completed;
(iii) the frontage land between the Centre and Chester Road did not have development potential in isolation;
(iv) Albert Shaw House, which was uneconomic to repair, would have been cleared of tenants.
This would also have been the position in the no scheme world. Values would reflect the price a willing purchaser would pay having regard to the release of potential development value. The viability of the development and the residual land value must be considered and account taken of the relative importance of each unit needed to allow the overall development to take place. Inability to buy out one occupational interest would prevent the redevelopment of the whole Centre. The viability of the redevelopment carried out at the Centre is shown by the purchase by British Land in May 2000 for £50,000,000.
(i) The creation of the Trust and their use of compulsory purchase powers were unnecessary because the Centre was ripe for redevelopment by a private developer due to its location. He could not explain why it was considered necessary to create the Trust.
(ii) He agreed that his valuation is wholly dependent on there having been a purchaser-developer in the no scheme world on the valuation date assembling a site for redevelopment and willing to pay ransom value to the remaining occupiers standing in the way of that redevelopment. This purchaser-developer might have been Sainsbury's, Morrisons, Tescos or another food-store operator or the Trust acting as a private purchaser-developer without statutory powers other than those available to all landlords.
Submissions
Trust's case
Evidence
Short tenancies
Units 40/41 (Wilford) £7,000
Unit 44 (Greggs Plc) £20,000
Unit 46 (Brown) £10,000
Unit 51 (Richards) £20,000
Unexpired terms
Unit 3 (Fleming) £3,300
Unit 21 (Verma) £35,000
Unit 25 (Rank) £12,000
Submissions
DECISION
(1) What is the scheme underlying the acquisition of the claimants' interests?
(2) What are the consequences of the scheme? In the circumstances this involves considering two questions. First, should the assessment of compensation reflect the actual position in the real or scheme world at the valuation date, or an assumed position in a notional no scheme world? Second, would there have been a purchaser-developer in the no scheme world at the date of valuation assembling a site for the redevelopment of the Centre and willing to buy the claimants' interests at a price reflecting a share of the net development value?
(3) Did the claimants' interests possess a ransom or development value at the date of valuation which existed independently of the scheme?
(4) In the light of the answers to the above questions, what amounts of compensation should be awarded to the claimants?
I now consider each of these questions.
The scheme
"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 has 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. …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.
The scheme will always exist in some shape or form by the time the notice to treat is served. It must, indeed, be in some shape or form at the confirmation of the compulsory purchase order itself, and then, as Lord Denning MR says, it may develop almost from day to day, and the ultimate question for the valuer is to decide to what extent the dead ripe value of the land on the day upon which the valuation is to be made has been increased by reason of the existence of the scheme."
The scheme cannot be the acquisition itself: it must underlie the acquisition (per Buxton LJ in J A Pye (Oxford) Limited v Kingswood Borough Council at page 162M).
Consequences of the scheme
"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 it was put by Eve J in South Eastern Ry Co v London County Council: 'increase in value consequent on the execution of the undertaking for or in connexion with which the purchase is made must be disregarded.'"
"… 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 that land; and
(b) (where the circumstances are those described in one or more of paragraphs 2 to 4B in the said first column) the area or areas referred to in that paragraph or those paragraphs had not been defined or designated as therein mentioned."
In Part I of the First Schedule the relevant paragraph is 4B:-
"Where any of the relevant land forms part of a housing action trust area established under Part III of the Housing Act 1988."
The development in the second column is:-
"Development of any land other than the relevant land in the course of the development or redevelopment of the area as a housing action trust area."
Section 39(2) of the 1961 Act defines "relevant interest" and "relevant land":-
"In this Act, in relation to a compulsory acquisition in pursuance of a notice to treat, 'the relevant interest' means the interest acquired in pursuance of that notice, 'the relevant land' means the land in which the relevant interest subsists, and 'the notice to treat' means the notice to treat in pursuance of which the relevant interest is acquired."
"The explanation of section 6(1) is, I think, this: The legislature was aware of the general principle that, in assessing compensation for compulsory acquisition of a defined parcel of land, you do not take into account an increase in value of that parcel of land if the increase is entirely due to the scheme involving the acquisition. That was settled by Pointe Gourde Quarrying and Transport Co v Sub-Intendent of Crown Lands, … It is left untouched by section 6(1). But there might be some doubt at to its scope. So the legislature passed section 6(1) and the First Schedule in order to make it clear that you were not to take into account any increase due to the development of the other land, namely, land other than the claimed parcel. I think that the decision in the Pointe Gourde case covers one aspect: and section 6(1) covers the other: with the result that the Tribunal is to ignore any increase in value due to the Town Development Act, both on the relevant land and on the other land."
This passage can be applied to these proceedings by the substitution of "housing action trust area" for "Town Development Act." I am required to ignore any increase in value due to the housing action trust area in relation to the claimants' units and the other land within that area.
"The basis of the Pointe Gourde rule and the rules contained in ss 5 to 9 of the 1961 Act appears to be this. The owner is to receive as compensation the equivalent in money terms of what he has lost through the compulsory acquisition of his land. He must be put into the position that he would have been in if there had been no compulsory acquisition. Compulsory powers of acquisition are only conferred in the public interest. A compulsory purchase order is only made and confirmed for a public purpose which the making authority and the confirming authority judge to be sufficiently important to warrant compulsion. The principle is that any effect on the value of the land acquired arising from the public purpose or public purposes prompting the acquisition, whether from their adoption by the authority or from their implementation, is to be disregarded. A scheme or proposal is the embodiment of the public purpose or public purposes concerned."
"In order correctly to apply the Pointe Gourde principle it is necessary, first, to identify the scheme and, second, 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."
In Bolton Metropolitan Borough Council v Tudor Properties Limited Mummery LJ said (page 294 para 6):-
"The tribunal must ascertain the existence and extent of the underlying scheme from a consideration of all the relevant evidence about the past, present and future activities. It must then determine, as a matter of fact, whether those activities are properly to be regarded as part of the underlying scheme: Wilson v Liverpool Corporation. Only when the factual question has been decided is it possible to answer the next question which is one of valuation: what part of the market value of the land acquired is entirely attributable to the enhancing effect of the scheme underlying the acquisition? Answering that question involves imagining a state of affairs antedating the scheme – a 'no scheme world' (as it was described in Wards Construction (Medway) Limited v Barclays Bank plc) and ascertaining what 'bargain … would have been made between the claimant and a prospective developer - purchaser had the acquiring authority not intervened'".
"Although the statutory provisions and authorities cause the parties to notionally reside in a world conditioned by assumption and a measure of unreality, they do not, in my judgment, require the abandonment of the actual facts as subsisting at the valuation date. To cast aside the actual facts and substitute a different factual matrix founded upon speculation and supposition is contrary to the West Midland case and the principle stated by Lord Morris in the Margate case …at page 868 …"
On appeal (Wards) the member's decision was upheld. There is, however, no reference in the decision of the Court of Appeal to the above passage. It was held that the member correctly applied the Pointe Gourde rule so as not to exclude from compensation a ransom value which pre-existed the scheme (a matter which I consider further below).
"The decisions to be made by the Lands Tribunal were decisions in the field of fact. Some of the witnesses appear to have felt that they were asked to apply their minds to situations having an unreality only to be expected in fairyland. I do not think that their approach should have been so hesitant. Their evidence had to be directed to the realities of the conditions that existed and to the actual facts of the period so that the Lands Tribunal should be assisted to reach decision on the basis of the assumptions that had to be made. Even if the appellants had concluded that the problem of road congestion was to be solved by their projected by-pass they were not precluded from expressing an informed view on the question whether if that by-pass could not be constructed there were or were not any other ways of dealing with the problem of road congestion and if so what they were."
"An assumption had to be made that the respondents' land was not going to be acquired so that a by-pass should be constructed – but it was in no way an inevitable corollary that there would be a by-pass on some other line and in some different position. If there was not to be a by-pass on the respondents' land it by no means followed that there would inevitably be a by-pass somewhere else. There might be or there might not be. It might have been possible to have another route for a by-pass; it might have been impossible. It would be a question depending on topographical and various and many other factors whether there could be a by-pass somewhere else. It would be for consideration whether any alternative by-pass was or was not possible or probable and further its construction was or was not likely. These matters could not rest on any assumptions but rather on an examination of all the evidence."
Lord Morris did not say that the land must be valued having regard solely to existing circumstances. The no scheme world might or might not include a by-pass elsewhere, this was a question of fact to be decided on the evidence, not a question of law to be decided on the basis of an inevitable corollary of an assumption of law.
"It is apparent, therefore, that the valuation has to be done in an imaginary state of affairs in which there is no scheme. The valuer must cast aside his knowledge of what has in fact happened in the past eight years due to the scheme. He must ignore the developments which will in all probability take place in the future 10 years owing to the scheme. Instead, he must let his imagination take flight to the clouds. He must conjure up a land of make-believe, where there has not been, nor will be, a brave new town: but there is to be supposed the old order of things continuing – a county planning authority which will grant planning permissions of various kinds at such times and in such parcels as it thinks best, but with an assurance that in March 1980 planning permission would be available for the residential development of the Walton Manor Estate."
In Tudor Properties Mummery LJ, in the passage set out above, referred to the answer to the question, what part of the market value is entirely attributable to the enhancing effect of the scheme, by imagining a state of affairs antedating the scheme, a no scheme world. In Wards Nourse LJ said that 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" (page 34D). It is important that this imaginary state of affairs, this no scheme world, should be based on the evidence (see Devotwill) and kept close to reality. In Trocette Lawton LJ said (page 420):-
"The assessment of compensation in cases such as this is the most difficult task calling for the judicial use of fertile imagination. Assumptions have to be made (see sections 14, 15 and 16 of the Act of 1961) and some realities disregarded (for example, any increase in value which is entirely due to the scheme underlying the acquisition – the so-called Pointe Gourde principle). It is important that this statutory world of make-believe should be kept as near as possible to reality. No assumption of any kind should be made unless provided for by statute or decided cases."
(i) Establishment of the Trust in June 1993 and the transfer of the freehold interest in the Centre and the Estate to the Trust in April 1994 (para 11 above).
(ii) Publication by the Trust of the Castle Vale Master Plan in September 1995 (para 15 above).
(iii) Purchase of the headlease in the Centre by the Trust in September 1996 (para 17 above).
(iv) Issue of a press release by the Trust in December 1996 regarding redevelopment of the Centre (para 18 above).
(v) Marketing of the Centre from early 1997, the choice of J Sainsbury Developments Ltd as the preferred developer, the redevelopment of the Centre and adjoining land and sale of the freehold to Sainsbury's (paras 20 and 25 above).
(vi) The making and confirmation in May 1999 of the Castle Vale Housing Action Trust (Castle Vale Shopping Centre) Compulsory Purchase Order 1998 and the acquisitions under that order (paras 21, 22 and 23 above).
(vii) The making in June 1999 of the Stopping Up of Highways (City of Birmingham) (No.5) Order 1999 (para 26).
(viii) The negotiation of agreed surrenders of the occupational interests in 21 units in the Centre between March 1997 and November 1999 (para 27 above).
"2.8 Sainsbury's identified an absence of adequate, modern, food retailing facilities in the Castle Vale area a number of years ago. Whilst there is an adequate range of smaller shops, apart from the free standing Asda at Minworth, there are few accessible stores that provide a full range of both branded and non-branded goods, fresh produce or meat and fish in a high quality environment.
"We reviewed the CVHAT's proposal to establish the nature of new retailing that would best serve the area, and to ensure that the scale of redevelopment proposals would be viable. We agreed with CVHAT's proposed approach. The Sainsbury's proposal for the Castle Vale site followed closely the framework that CVHAT had already established. The simple refurbishment of the existing fabric would not have been viable. Nor would it have been able to create new retail floor space really suitable to meet the needs of modern retailers. However, and equally important, it would not have represented such a valuable symbol of commitment to the regeneration and change of the area."
Value independently of the scheme?
"The purpose of the [Pointe Gourde] principle is to prevent the compensation for the value of the land on compulsory acquisition from being inflated by the very scheme which gives rise to the acquisition. (See Widgery LJ in Wilson v Liverpool Corporation). An enhancement in value resulting entirely from the underlying scheme has to be ignored. The principle does not, however, require the valuer to ignore an increase in value attributable to factors other than the underlying scheme, such as the pre-scheme value of the land for development."
In Batchelor (1989) Mann LJ said (page 361):-
"If a premium value is 'entirely due to the scheme underlying the acquisition' then it must be disregarded. If it was pre-existent to the acquisition it must in my judgment be regarded. To ignore the pre-existent value would be to expropriate it without compensation and would be to contravene the fundamental principle of equivalence (see Horn v Sunderland Corporation)."
In Pye Hobhouse LJ said (page 165 K):-
"Therefore, it is necessary to identify what was 'the scheme underlying the acquisition' ….. and disregard any enhancement of the land to be valued that 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 (Viscount Camrose v Basingstoke Corporation …; Myers v Milton Keynes Development Corporation …) or its value as a 'ransom strip' (Batchelor v Kent County Council…). Indeed, it is the duty of the valuer fully to reflect such enhancing features in his valuation."
"It is not planning permission by itself which increases value. It is planning permission coupled with demand."
Similarly, it is not location in itself which creates or increases value: it is location coupled with demand. I have considered demand in the no scheme world in some detail and have concluded that it was absent. I am satisfied that, even if the claimants' interests had possessed development value in the no scheme world at the valuation date, this did not exist independently of the scheme. The demand to create this value, if any, was created by the scheme and did not exist before or independently of the scheme. This is not a situation, as in Batchelor, where it can be shown that the ransom value existed independently of the scheme. If it existed at all it was created by the scheme and must be disregarded.
Conclusions on the scheme
"The statutory compensation cannot, and must not, exceed the owner's total loss, for, if it does, it will put an unfair burden on the public authority or other promoters who on public grounds have been given the power of compulsory acquisition, and it will transgress the principle of equivalence which is at the root of statutory compensation, the principle that the owner shall be paid neither less nor more than his loss."
Secondly, it would conflict with the basis of compensation, which is still value to the owner, as it was before 1919 when the scheme rule was developing, albeit that this value is now measured by open market value under section 5(2) of the 1961 Act. To give the claimants compensation reflecting the value to the purchaser, inflated by the underlying scheme and compulsory purchase powers, would breach the principle of equivalence and represent value to the purchaser and not to the owner. In Rugby Joint Water Board v Foottit Lord Hodson said (page 218G):-
"It is well established that the value to the owner and not the value to the purchaser is relevant in the case of the exercise of compulsory powers. Were it otherwise the use of compulsory powers would be largely frustrated."
And Lord Simon of Glaisdale said (page 241E):-
"The purpose of the Pointe Gourde rule is thus clear. You must not allow the price to be paid for property compulsorily acquired to be inflated by reason of the fact that it is acquired compulsorily under parliamentary powers; because you would then be making the acquiring authority pay, not for the value of the property to the vendor, but for its value to themselves, including the value engendered by the very powers by which they acquired the property."
Much earlier, in Re Lucas and Chesterfield Gas and Water Board, Fletcher Moulton LJ said (page 29):-
"The principles upon which compensation is assessed when land is taken under compulsory powers are well settled. The owner receives for the lands he gives up their equivalent, i.e. that which they were worth to him in money. His property is therefore not diminished in amount, but to that extent it is compulsorily changed in form. But the equivalent is estimated on the value to him, and not on the value to the purchaser, and hence it has from the first been recognised as an absolute rule that this value is to be estimated as it stood before the grant of compulsory powers. The owner is only to receive compensation based upon the market value of his lands as they stood before the scheme was authorised by which they are put to public uses. Subject to that he is entitled to be paid the full price for his lands, and any and every element of value which they possess must be taken into consideration in so far as they increase the value to him."
Compensation
(a) the product of the appropriate multiplier and twice the rateable value where the tenant was in occupation during the whole of the 14 year period before determination, and
(b) in any other case, the product of the multiplier and the rateable value.
| Unit 3 (Fleming) | £7,600 | ACQ/175/99 |
| Unit 21 (Verma) | £37,800 | ACQ/177/99 |
| Unit 25 (Rank) | £12,000 | ACQ/168/99 |
| Units 40/41 (Wilford) | £7,000 | ACQ/172/99 |
| Unit 44 (Greggs) | £20,000 | ACQ/117/00 |
| Unit 46 (Brown) | £10,000 | ACQ/176/99 |
| Unit 51 (Richards) | £27,250 | ACQ/173/99 |
A surveyor's fee under Rydes Scale will also be payable to each claimant.
DATED: 13 August 2001
(Signed) P H Clarke
ADDENDUM
DATED: 5 October 2001
(Signed) P H Clarke