United Kingdom House of Lords Decisions

HOUSE OF LORDS

Lord Steyn Browne-Wilkinson Lord Nolan Lord Hoffmann Lord Hobhouse of Woodborough

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

ON 22 JUNE 2000

LORD STEYN

My Lords,

    I have had the advantage of reading in draft the speech of my noble and learned friend Lord Hoffmann. For the reasons he gives I would also make the order which he proposes.

LORD BROWNE-WILKINSON

My Lords,

    I have had the benefit of reading in draft the speech of my noble and learned friend Lord Hoffmann. For the reasons which he gives I would restore the opinion of the Lands Tribunal on question 3 of the preliminary points of law but otherwise would dismiss the appeal.

LORD NOLAN

My Lords,

    I have had the advantage of reading in draft the speech of my noble and learned friend Lord Hoffmann. For the reasons he gives I would also make the order which he proposes.

LORD HOFFMANN

My Lords,

    The Harrow Hotel is a family business. It consists of some converted houses in the Pinner Road, a section of the main A404 road from central London to Harrow. A short distance south of the hotel, the road crosses the Metropolitan Line by Roxborough Bridge. Between 1989 and 1994 the London Borough of Harrow ("the Council") carried out improvements to the bridge and its approaches. The work was done under statutory powers which incorporated the Compulsory Purchase Act 1965. Although a compulsory purchase order was confirmed in 1986, none of the land belonging to the hotel was taken.

    The owners of the hotel ("the claimants") say that during the period of the works they were subjected to various forms of interference with their use and enjoyment of the hotel. Hoardings were erected which obscured the hotel and prevented or restricted access by themselves and their customers. For long periods the roads and pavements leading to the hotel were totally or partially obstructed or closed. The works caused continual noise, dust and vibration. All this was very detrimental to business. The claimants say that in the absence of statutory protection, they would have had an action for public and private nuisance. Therefore their land was "injuriously affected by the execution of the works" so as to entitle them to compensation under section 10 of the Compulsory Purchase Act 1965:

"(1) If any person claims compensation in respect of any land, or any interest in land, which has been taken for or injuriously affected by the execution of the works, and for which the acquiring authority have not made satisfaction under the provisions of this Act, or of the special Act, any dispute arising in relation to the compensation shall be referred to and determined by the Lands Tribunal.

(2) This section shall be construed as affording in all cases a right to compensation for injurious affection to land which is the same as the right which section 68 of the Lands Clauses Consolidation Act 1845 has been construed as affording in cases where the amount claimed exceeds fifty pounds."

    The question of compensation was referred to the Lands Tribunal. After service of pleadings the parties agreed that the Tribunal should decide certain preliminary points of law. The tribunal member (Judge Rich Q.C.) gave a decision and then, at the request of the claimants, stated a case for the Court of Appeal. The questions formulated for the court (as amended by consent in the Court of Appeal) were as follows:

"1. Whether the Lands Tribunal erred in law in deciding that compensation is not payable under section 10 of the Act of 1965 where an interference to some legal right, public or private, is not a direct physical interference to land or a right appurtenant to land.

2. Whether the Lands Tribunal erred in law in deciding that where there has been interference with some legal right, public or private, which is capable of giving rise to a claim for compensation under section 10 of the Act of 1965, the quantum of damages recoverable as compensation does not include all injurious affection attributable to and caused by the execution of the works whether or not caused by an interference, physical or otherwise, with some public or private legal right.

3. Whether the Lands Tribunal erred in law in holding that compensation is payable under section 10 of the Act of 1965 where the interference with a legal right in respect of land or an interest in land is only temporary and where after such temporary interference the value of the land or the interest in the land has ceased to be affected at the valuation date."

    The Court of Appeal, by a majority (Peter Gibson and Pill L.JJ; Ward L.J. dissenting) [1999] Q.B. 634 said that the tribunal's answer to question 1 was right. No compensation was recoverable for the noise, dust or vibrations. Such matters did not constitute "direct physical interference" with land or an interest in land. The same majority disagreed with the answer to question 3. In their view, no compensation was recoverable for temporary interference which was no longer reflected in depreciation in capital value at the valuation date. On question 2 the tribunal was unanimously affirmed. Compensation was payable only for damage which, in the absence of statutory powers, would have been actionable at common law. Thus all three questions were decided adversely to the claimants, who appeal to your Lordships' House.

Section 10(1) of the Act of 1965 is a modernised version of section 68 of the Land Clauses Consolidation Act 1845. Subsection (2), which says that subsection (1) shall be construed as affording a right to compensation "which is the same" as that which section 68 had been construed to provide, is an unusual provision which suggests some anxiety on the part of the legislature to discourage the courts from taking a fresh look at the statutory language. As Lord Wilberforce pointed out in Argyle Motors (Birkenhead) Ltd. v. Birkenhead Corporation [1975] A.C. 99, 129, the effect which had been given to section 68 was not always easy to justify on normal rules of statutory construction. For example, in Hammersmith and City Railway Co. v. Brand (1869) L.R. 4 H.L. 171, 217-218 Lord Cairns observed that section 68:

"does not define the conditions under which the person whose land has been injuriously affected is to be entitled to compensation. It rather assumes that the right to compensation has been given in some other enactments, and it contents itself with pointing out the manner in which that compensation shall be obtained."

    Nevertheless, despite its procedural appearance, the courts treated section 68 as creating a substantive right to compensation on principles which were worked out in a series of cases without reference to other enactments. These principles were established after much travail and section 10(2) shows that whatever their logic or merits, Parliament did not want them re-examined.

    My Lords, I shall start by stating certain principles which are settled by decisions of high authority and were not as such in dispute before your Lordships, although there was argument over their application.

    (1) Despite the reference in section 68 of the Act of 1845 (and now in section 10 of the Act of 1965) to land being "taken," the section gives a right to compensation to anyone whose land, or interest in land, has been injuriously affected by the execution of the works. It is not necessary that any of his land should have been taken. If land has been taken, the compensation for injurious affection of his remaining land is calculated on different principles under section 7 of the Act of 1965 (formerly section 63 of the Act of 1845).

    (2) The term "injuriously affected" connotes "injuria," that is to say, damage which would have been wrongful but for the protection afforded by statutory powers. In In re Penny and South Eastern Railway Co. (1857) 7 E. & B. 660-669 Lord Campbell said:

"unless the particular injury would have been actionable before the company had acquired their statutory powers it is not an injury for which compensation can be claimed."

    In practice this means that a claimant has to show that but for the statute he would have had an action for damages for public or private nuisance. As a general proposition this again is not in dispute. But a public nuisance, such as an interference with the use of a public highway, is a wrong to the public as a whole and the ordinary common law remedy was a prosecution on indictment. To support an action for damages, the plaintiff has to prove that he suffered particular damage greater than that suffered by members of the public in general. This rule offers considerable scope for dispute on the facts and some of the decisions on injurious affection reflect different judicial views on what amounts to particular damage.

(3) A corollary of the last principle is that no compensation is payable under section 10 of the Act of 1965 if the company or statutory authority acted outside its powers. It was again Lord Campbell, this time in Imperial Gas Light and Coke Co. v. Broadbent (1859) 7 H.L.Cas. 600, 612, who made this point:

"it has been determined over and over again, in every court in Westminster Hall, that under [section 68] there is no ground for seeking compensation except for that which is done under the powers conferred by the legislature. If there is wrong which is not authorised by those powers, the common law right of action exist for it . . ."

(4) Compensation is payable only for damage to the plaintiff's land or interest in land. He is not entitled to any compensation for loss caused to him in a personal capacity. This rule also provides scope for a great deal of argument about whether, for example, interference with the utility of the land for the purpose of carrying on a business is damage to the land or a personal loss by the proprietor of the business. On this point the authorities also reveal divergent opinions.

(5) Section 68 gave compensation for injurious affection caused by the "execution" of the works. In Hammersmith and City Railway Co. v. Brand, L.R. 4 HL 171 the House of Lords (with Lord Cairns dissenting) decided that this meant that there could be compensation only for the effects of the construction of the railway and not for its operation. If an embankment unreasonably obstructed the claimant's light or access, he could claim compensation. But he could not claim for what would otherwise have been a nuisance caused by the noise, vibrations or smell of passing trains.

    The construction of the railways, which gave rise to most of the 19th century cases on injurious affection, involved massive changes in the urban and rural landscape of the United Kingdom and the disruption of the lives and businesses of very large numbers of people. It is not surprising that strong views were held about the respective claims of the winners and losers in this revolution and the judicial decisions often reveal the opinions of individual judges on questions of economic and social policy. Some were in favour of full compensation for all whose property had been adversely affected by the railway and others thought that the public interest required that liability should be kept within narrow bounds. Lords Bramwell and Westbury fell into the first category and Lords Cranworth and Chelmsford and Erle C.J. into the second. I cite two characteristic examples, one on each side. Giving the leading judgment in the Exchequer Chamber in Hammersmith and City Railway Co. v. Brand, (1867) L.R.2 Q.B. 223, 230-231 Baron Bramwell said:

"By the ordinary working of a railway line. . . a nuisance was created to the occupiers of the plaintiff's premises, which would have been actionable at common law. As presumably this nuisance will continue, the premises are permanently depreciated in value to sell, let, or occupy. . . . It seems impossible that it can have been enacted that this damage can be done without any compensation. . . . It is said that the railway and the working of it are for the public benefit, and therefore the damage must be done and be uncompensated. Admitting the damage must be done for the public benefit, that is no reason why no compensation should be given. It is to be remembered that that compensation comes from the public which gets the benefit. It comes from those who do the damage, but ultimately from the public in the fares they pay. If the fares will not pay for this damage, and a fair profit on the companies' capital, the speculation is a losing one, as all the gain does not pay all the loss and leave a fair profit. Either, therefore, the railway ought not to be made, or the damage may well be paid for."

    In modern economic terms, Baron Bramwell thought that the railways should not create externalities; that is, costs involuntarily borne by other people which were not taken into account in assessing the profitability of the enterprise. The contrary view is exemplified by Erle C.J. in Ricket v. Metropolitan Railway Co. (1865) 5 B. & S. 149, 163-164, 169-170:

"The public has a valuable interest in and derives much advantage from the works of public companies; the capital invested in them is, therefore, protected within certain limits, and we are to see that those limits are not exceeded. . . . [E]xpediency seems strongly on the side of the view that we take, namely that companies which the legislature has sanctioned on account of their public convenience should be relieved within certain limits from liability to action as well as to indictment in respect of their works."

    Judges who took this view tended to rely upon a floodgates argument: unless the right to compensation was rigidly confined, everyone whose economic interests had been damaged by the construction of the railways would be entitled to compensation. Post houses and coaching inns were favourite examples.

    My Lords, I mention these ancient controversies not only because they still have some resonance today but also because they are an aid to the understanding of the old cases to which your Lordships were referred in the course of the argument. The 19th century authorities on this subject do not display a steady development of the law but the shifting ascendancies of one view or the other. For example, Mr. Mole Q.C. for the council particularly relied upon passages in the judgments of Lord Chelmsford and Lord Cranworth in Ricket v. Metropolitan Railway Co. (1867) L.R.2 H.L. 175. This case, in which the House of Lords by a majority of two to one (Lord Westbury dissenting) deprived the landlord of the "Pickled Egg" in Clerkenwell of the £100 compensation which a jury had awarded him for loss of trade caused by street closures and diversions during the construction of the Metropolitan Railway, was thought at the time to lay down narrow and artificial limits on the compensation which could be claimed for anything other than actual physical damage to the premises. Two years later the advocates of a restrictive approach had an even greater success when the House of Lords in Hammersmith and City Railway Co. v. Brand, L.R. 4 HL 171 decided by a majority of two to one (Lords Chelmsford and Colonsay; Lord Cairns dissenting) that no compensation whatever was payable to persons whose interests in land were damaged by the actual operation of the railway. This case made it apparent that the arbitrary rules stated by, for example, Lord Cranworth in Ricket, were not necessary to keep the floodgates shut. The construction of the railways would have caused no loss to post houses or coaching inns if the trains had not run. So after Brand the cases on injurious affection caused by the construction of the works returned to more logical principles. Ricket v. Metropolitan Railway Co., L.R.2 H.L. 175 was explained and distinguished in later cases in your Lordships' House until it became very difficult to say for what proposition, if any, it remained authority.

    My Lords, with this introduction I turn to the three issues which were before the Court of Appeal and are now before your Lordships.

    The first question as formulated in the case stated was whether the Lands Tribunal erred in law in deciding that compensation was not payable where "an interference to some legal right, public or private, is not a direct physical interference to land." In the Court of Appeal, Pill L.J. [1999] Q.B. 634, 648 rightly commented that this formulation was not the most illuminating way of defining the issue between the parties. To some extent it begged the question. The real issue was whether the claim for damage caused by noise, dust, vibration and the like could be the subject of compensation. The term "direct interference," as used in the question, was intended to mean the same as "material injury to the property" in the distinction which Lord Westbury L.C. drew in St. Helen's Smelting Co. v. Tipping (1865) 11 HLCas 642, 650:

". . . it is a very desirable thing to mark the difference between an action brought for a nuisance upon the ground that the alleged nuisance produces material injury to the property, and an action brought for a nuisance on the ground that the thing alleged to be a nuisance is productive of sensible personal discomfort."

    Lord Westbury's purpose in marking the difference was to distinguish between those cases in which a landowner might have to accept interference with his amenities in the interests of reasonable give and take between neighbours in the district in which he lived and those cases in which the damage was unacceptable anywhere. Mr. Mole said that no compensation was payable under section 10 of the Act of 1965 for damage which was not "material injury to the property" in this sense. He said that Lord Cranworth (who was a party to the decision in the St. Helen's Smelting Co. case) had in mind the same distinction when he said two years later in Ricket v. Metropolitan Railway Co., L.R.2 H.L. 175, 198:

"The injury must be actual injury to the land itself, as by loosening the foundation of buildings on it, obstructing its light, or its drains, making it inaccessible by lowering or raising the ground immediately in front of it, or by some such physical deterioration. Any other construction of the clause would open the door to claims of so wide and indefinite a character as could not have been in the contemplation of the legislature."

    This, said Mr. Mole, excluded the effect of noise, dust or vibrations which did not cause damage to the structure of the hotel but affected the comfort of the people who used it. He said that this might be an arbitrary rule but Lord Wilberforce had said in Argyle Motors (Birkenhead) Ltd. v. Birkenhead Corporation [1975] A.C. 99, 129-130 that the old law was not altogether logical. Nevertheless, it had to be taken as it was: "the most powerful considerations of policy would need to be present before so strong a current of authority could be turned back."

    Lord Cranworth's dictum was said in the context of a case involving obstruction of the public highways giving access to the premises. I doubt whether he had the St. Helen's Smelting Co. v. Tipping dichotomy in mind. In any case, the dictum can no longer be regarded as authoritative. It was overtaken by the decision of the House of Lords in Metropolitan Board of Works v. McCarthy (1874) L.R. 7 H.L. 243, in which compensation was awarded to the owner of a warehouse near Blackfriars because the construction of the Victoria Embankment cut off his access across the public highway to a dock on the river. In the later case of Caledonian Railway Co. v. Walker's Trustees (1882) 7 App. Cas. 259, 296, in which compensation was awarded for the closing of an access to a main street in Glasgow at some distance from the premises, Lord Blackburn said that if Lord Cranworth's dictum was still law, the case would have to be decided differently. But in his opinion it was not.

    Mr. Mole also relied upon a formulation of the rule by Mr. Thesiger Q.C. (afterwards Thesiger L.J.) as counsel in Metropolitan Board of Works v. McCarthy (1874) L.R. 7 H.L. 243, which was adopted by their Lordships. As quoted by Lord Cairns L.C. at p. 253, Mr. Thesiger said:

"Where by the construction of works there is a physical interference with any right, public or private, which the owners or occupiers of property are by law entitled to make use of, in connection with such property, and which right gives an additional market value to such property, apart from the uses to which any particular owner or occupier might put it, there is a title to compensation, if, by reason of such interference, the property, as a property, is lessened in value."

    Mr. Mole said that the words "physical interference" show that the House, in adopting this formula, intended to exclude matters like noise, dust and vibrations. But I do not think that they had the present point in mind at all. They were concerned only with the principle on which compensation could be claimed for interference with "any right, public or private, which the owners or occupiers of the property are by law entitled to make use of," that is, rights appurtenant to the property, such as public or private rights of way. The House was not concerned with damage to the property itself, whether physical or otherwise. This is plain from the report of Mr. Thesiger's argument, at p. 249, in which he explained what he meant by "physical interference."

"The word 'physical' is here used in order to distinguish the case from cases of that class where the interference is not of a physical, but rather of a mental, nature, or of an inferential kind, such as those of a road rendered less agreeable or convenient, or a view interfered with, or the profits of a trade, by the creation of a new highway or street, diminished in the old one. And in like manner the words 'a right, public or private, which the owner of property is entitled to make use of,' apply to this case and distinguish it from such cases as Hammersmith Railway Co. v. Brand. There no right, public or private, was interfered with, and the claim for compensation was made in respect of the injury to the enjoyment of the property . . ."

    The Brand case was of course very much concerned with damage to the property itself by vibrations, noise and smells. So the last sentence makes it clear that he was not concerned with injury of that kind. Mr. Thesiger wanted to emphasise that although the works had been completed, he was complaining of their physical presence across the former public highway and not their operation.

    As for the comment of Lord Wilberforce in Argyle Motors (Birkenhead) Ltd. v. Birkenhead Corporation [1975] A.C. 99, 129-130, which I have quoted, I do not think it has any application to the present case. He was addressing the rule that injurious affection is an injury to land and not to the profits of a trade carried on upon the land. This, he said, was established by authority and (despite the powerful contrary arguments of Lord Westbury in Ricket v. Metropolitan Railway Co., L.R.2 H.L. 175) could not no be questioned. In these proceedings, the principle is not in dispute. I shall return to its application in connection with the third question.

    In the Court of Appeal, Peter Gibson and Pill L.JJ. accepted Mr. Mole's submission that the concept of injurious affection to land had been so narrowly construed in the 19th century cases as to exclude injury caused by matters which cause "sensible personal discomfort" to the occupants. This conclusion was very much reinforced by the opinion of the same judges on question 3, namely that temporary injury is also excluded from compensation. Injury caused by noise and so forth in the course of construction will almost by definition be temporary and injury caused in the same way by the operation of the road, railway or other work will be excluded by the rule in Hammersmith and City Railway Co. v. Brand, L.R.4 HL 171. So the conclusions of the majority were entirely consistent with each other. Conversely, Ward L.J. disagreed on both points.

    For reasons which I shall explain when I come to question 3, I agree with Ward L.J. that temporary damage is not excluded from compensation. So that cannot be a reason for excluding damage caused by noise, vibrations and so forth. And for the reasons which I have given, I do not think that it is excluded by the construction given to section 68 in the Victorian cases. I agree with Ward L.J. that damage to the amenity of land caused by nuisances involving personal discomfort, having the effect of reducing the value of the land to let or to sell, is damage to the land just as much as physical injury. So much was accepted by this House in Hammersmith and City Railway Co. v. Brand, L.R.4 HL 171, when the claim was for a reduction in the value of the land by the noise and pollution of the trains. The House accepted that the claimant had suffered damage to his land but held that the statute made no provision for compensation. If, therefore, compensation cannot be recovered for damage caused by noise, dust and vibrations, it is not because it does not constitute damage for the purposes of section 68.

    It is nevertheless a remarkable fact that there is no case in which such damage has been held to be the subject of compensation. The only reference in the cases to the possibility of recovery is a brief dictum of Lord Campbell in In re Penny and South Eastern Railway Co., 7 E. & B. 660, where he said obiter that compensation could be awarded for damage caused by vibrations during the execution of the works but (anticipating Hammersmith and City Railway Co. v. Brand, L.R.4 HL 171) not by the operation of the railway afterwards.

    Why is there so little authority? It is not, as I have said, because such damage is in principle excluded from compensation. Nor is it because the construction phase of the railways seldom caused such nuisances to neighbouring properties. My Lords, in my opinion the reason is to be found in the interaction of three of the basic principles of compensation to which I have drawn your Lordships' attention. In the first place, claims are restricted to damage caused by the construction of the works. Secondly, the damage must have been caused by the lawful exercise of statutory powers. And thirdly, the damage must have such that in the absence of statutory protection it would have been actionable at common law.

    In my view it will be almost impossible for any claim for damage caused by noise, dust or vibrations to satisfy all three of these rules. Being things "productive of sensible personal discomfort" within the meaning of Lord Westbury's dichotomy in St. Helen's Smelting Co. v. Tipping, 11 HLCas 642, 650, the claim is subject to the principle that a reasonable use of land, with due regard to the interests of neighbours, is not actionable. The implications for building operations were spelled out by Sir Wilfred Greene M.R. in Andreae v. Selfridge & Co. Ltd. [1938] Ch. 1, 5-6:

"when one is dealing with temporary operations, such as demolition and re-building, everybody has to put up with a certain amount of discomfort, because operations of that kind cannot be carried on at all without a certain amount of noise and a certain amount of dust. Therefore, the rule with regard to interference must be read subject to this qualification, and there can be no dispute about it, that in respect of operations of this character, such as demolition and building, if they are reasonably carried on and all proper and reasonable steps are taken to ensure that no undue inconvenience is caused to neighbours, whether from noise, dust, or other reasons, the neighbours must put up with it."

    Actionability at common law therefore depends upon showing that the building works were conducted without reasonable consideration for the neighbours. On the other hand, immunity from liability arising out of the construction of works authorised by statute is subject to a condition that the undertaker will "carry out the work and conduct the operation with all reasonable regard and care for the interests of other persons" (per Lord Wilberforce in Allen v. Gulf Oil Refining Ltd. [1981] AC 1001, 1011.) Mr. Mole said that there was no daylight between these two rules: the damage was either not actionable at common law or else outside the protection of the statute: in either case it was not compensatable under section 10 of the Act of 1965. If the landowner wishes to recover for such damage, he must assume and discharge the burden of proving in an ordinary action for nuisance that the undertaker exceeded his statutory powers. My Lords, I am reluctant to say that no claim for dust, noise or vibration can escape this dilemma because one cannot foresee all cases. But the argument seems to me very compelling and I would normally expect it to apply. I can see no answer to it in this case. I therefore agree that question 1 was correctly answered by the Lands Tribunal in the negative, although I do so for the reasons succinctly stated by the tribunal rather than for those given by the Court of Appeal.

    The second issue is an attempt by the claimants to escape from the dilemma I have just described. Again, the issue does not emerge with great clarity from the language of the question stated to the court. As explained by Mr. Harper Q.C. for the claimants, the argument is that when a claimant has suffered injurious affection from the construction of road works which, in the absence of statutory powers, would have been a public nuisance, he can recover for all damage caused by the construction of the works, whether or not it would have been independently actionable. The principle in Andreae v. Selfridge & Co. Ltd. [1938] Ch. 1 does not protect the council from liability to pay compensation for noise and dust caused by the construction of the roads, even if it took all reasonable care.

    The Court of Appeal unanimously rejected this submission and so do I. The public nuisance which would otherwise be created by the council's interference with the highways required statutory authority. But the council, as owners of the soil of the highway, was in other respects entitled to carry on works there in the same way as any other landowner. The question of whether noise and dust created by those works was an actionable nuisance must depend upon the same considerations as would apply to any other works undertaken by a landowner upon his land. The fact that they would have been an actionable public nuisance because they interfered with passage on the highway does not create a parasitic claim to compensation for damage which has nothing to do with passage on the highway.

6. Third issue: temporary damage

    The third issue is whether temporary damage to the value of the land is excluded from compensation. Under this heading, the council wishes to exclude all compensation for the effect of the interference with access to the hotel during the construction of the works. It has been agreed that the "valuation date" for the assessment of any damage to the capital value of the hotel is the date when the works were completed. The council wishes to confine the claim for compensation to whatever loss can be proved under this head. This form of damage, which would at common law have been a public nuisance, is not subject to the rule of give and take applicable to nuisances which cause sensible personal discomfort. If the landowner cannot carry on the works without causing an obstruction of the highway which would amount to a public nuisance, he cannot without statutory authority carry them out at all. It is the statute in such a case which legitimates the public nuisance and gives rise to a claim for compensation under section 10.

    As I have said, the majority in the Court of Appeal accepted the council's argument. They did so for two reasons: first, on authority, and secondly, as something which followed inevitably from the principles upon which compensatable loss was measured.

    The question of whether damage was temporary can arise in a number of contexts. In the first place, a temporary obstruction of the highway (such as leaving a skip in the road for a few days) may not be a sufficiently serious interference with the public's right of passage to amount to a public nuisance at all. This was the principle relied upon by the court in Herring v. Metropolitan Board of Works (1865) 19 C.B. (N.S.) 510 to hold that compensation was not payable for obstruction caused by temporary hoardings. In Lingké v. Christchurch Corporation [1912] 3 KB 595 the Court of Appeal thought that the court in Herring was probably too generous to the defendants on the facts but the principle is not in doubt. The time for which an obstruction has existed can also be relevant to whether the plaintiff can show that he has suffered special damage. Or it may affect the question of whether the damage is to the plaintiff personally or to his land. The latter was the basis upon which it was held that the level crossing (which was shut only when trains were passing) caused only personal inconvenience to the house owner in Caledonian Railway Co. v. Ogilvy (1856) 2 Macq. 229. In Metropolitan Board of Works v. McCarthy, L.R.7 HL 243, 254, Lord Cairns L.C. mentioned the temporary nature of the obstruction in Ricket as a reason why the plaintiff's loss was damage to the trade without being damage to the value of the property. It may be that neither case would have been decided the same way on the facts after Caledonian Railway Co. v. Walker's Trustees, 7 App. Cas. 259 but in principle there is no reason why the temporary nature of the damage should not be relevant on both these issues.

    But none of these questions arises in the present case. The question here is whether particular damage to the claimant's land, which would have been actionable in the absence of statutory immunity, should be denied compensation because it is temporary. Your Lordships have been referred to no authority for such a proposition before Ricket v. Metropolitan Railway Co., L.R.2 H.L. 175, where the distinction between damage caused by the temporary and the permanent works of the undertaking is relied upon only by Lord Chelmsford. It will be noticed that Lord Chelmsford was concerned not so much with whether the damage was temporary but whether it had been caused by the temporary works involved in constructing the railway, such as street hoardings and excavations for tunnels which are afterwards covered over, rather than by the permanent works such as the lines, embankments and buildings. But no doubt in practice the damage caused by the temporary works was likely to be temporary, as it was in Ricket's case itself. Lord Chelmsford took the view that damage caused by the temporary works did not fall within section 68 of the Act of 1845 (or section 6 of the Railways Clauses Consolidation Act 1845, which was also relied upon) because they applied only to damage caused by the "execution of the works" and this meant the works when executed. It did not apply to damage caused in the course of execution.

    My Lords, I do not find this construction very convincing and I think it is not surprising that it did not appeal to Lord Selborne L.C. in Caledonian Railway Co. v. Walker's Trustees, 7 App. Cas. 259 or to any other judge who has considered the subject. It was rejected by all members of the Court of Appeal in Ford v. Metropolitan and Metropolitan District Railway Cos. (1886) 17 Q.B.D. 12. The claimant was a tea merchant in Great Tower Street in the City. He had a lease for seven years from March 1880 of 3 rooms at the back of the building. The construction of the railway involved pulling down the front of the building and interfering with the access to the street while the works were in progress. When they were completed, access was restored. An arbitrator awarded him £600 for injurious affection. In the Court of Appeal counsel for the railway company took the point (as far as one can see, for the first time in reply) that "temporary damage cannot be the subject of compensation" and cited Ricket's case. Lord Esher M.R., at p. 20, rejected the submission. He said it was based upon Lord Chelmsford's speech, but he thought that he had probably been misreported. Cotton L.J. said that the interference with the access materially affected the value of the rooms and therefore fell within the principle formulated by Thesiger Q.C. in Metropolitan Board of Works v. McCarthy, L.R. 7 HL 243. As for the exclusion of temporary damage, he said that it would be:

"to take a very narrow view of this Act, to say that compensation for injury caused by the exercise of the powers vested in the company is to be confined to injury caused by the works when constructed. In my opinion the right to compensation ought to include also injury caused to the house, not only by the works when finished, but by the exercise of the powers of the Act in the course of putting up those works: 17 Q.B.D. 12, 24"

Bowen L.J., at p. 28, said likewise that temporary damage was not excluded:

"It is urged that the injury which was caused to the house by the taking away of the enjoyment of this hall, was an injury caused only during the progress of the works, and therefore was not such an injury as was intended to be compensated by section 6 of the Railways Clauses Act, which provides for compensation being given for an injury done to lands by the construction of a railway. But the question seems to me rather to be what is the character of the injury inflicted, than what is the period during which it occurs. I cannot help thinking that on the plain reading of the Act of Parliament an injury may be done to houses and land, (if it is an injury sufficient to lessen the value of the property,) quite as fully during the progress of work, as by the works after they have been constructed."

    25 years later, in Lingké v. Christchurch Corporation [1912] 3 KB 595, 607, Fletcher Moulton L.J. summed up the development of the law as follows:

"It is quite true that in the long line of decisions (not consistent with one another in all cases) there was a time when it was thought that there was a fundamental difference between damage caused by temporary interference with property and the user of it and permanent interference. But since the case of Ford v. Metropolitan and Metropolitan District Ry. Cos., which was decided in this court in 1886, it has been settled law that the fact that an interference is only temporary and that it takes place during the construction of the works is not fatal to the right to compensation. Where the interference would give ground for compensation if perpetual, then if it is temporary, but not for a negligible time, it will also give ground for compensation."

    In the Court of Appeal, Pill L.J. [1999] Q.B. 634, 652-656 examined Ford v. Metropolitan and Metropolitan District Railway Companies (1886) 17 Q.B.D. 12 and said that he did not think it bore out what Fletcher Moulton L.J. said. But in my opinion it plainly does and I think that the reluctance of the majority of the Court of Appeal to take it at face value was based upon a view of the principles of assessing compensation which was fundamentally mistaken. To this I now turn.

    The majority in the Court of Appeal thought that compensation for temporary damage was inconsistent with the process of valuation required by the Act. The point was put clearly by Peter Gibson L.J., at pp. 672-673:

"What in my judgment is crucial is the date at which the value of the land is to be assessed. In the present case it was accepted before the Lands Tribunal that the date by reference to which compensation must be assessed is the date when the works giving rise to the entitlement to compensation are complete. In the light of that, as well as the acceptance of the principle that there must be a loss in the value of the land for compensation to be recoverable, I do not understand how a temporary loss of value which would have been observable at earlier dates but which was no longer obtaining at the agreed date of assessment can give rise to a claim for compensation."

    This reasoning assumes that compensation under section 10 of the Act of 1965 can only be assessed by considering the capital value of the claimant's land at a given date and deducting that sum from an estimate of what its value would have been if it had not been injuriously affected. But there is nothing in the section which says that compensation for damage to the land must be calculated in this way. The claimant is simply entitled to compensation for the damage to his land. Obviously if one is considering damage of which the effects will continue for some time into the future, such as the permanent deprivation of light or a right of way, it is sensible to take a valuation date and capitalise the value of the future loss at that date. But in respect of damage which has occurred in the past, there seems to me no reason why one should not calculate the effect which it has had upon the value of the land in the sense of reducing its letting value in the open market while the damage continued.

    There must have been many cases in which the person claiming compensation for injurious affection held the land on a short lease at a rack rent. The plaintiff in Ford v. Metropolitan and Metropolitan District Railway Cos., 17 Q.B.D. 12 had a lease of seven years from 1880, of which part must have been expired when the works took place. We are not told what rent he paid but, with so short a tenancy, the chances are that it was a rack rent. There could be no question of calculating the reduction in the capital value of his interest in the land, whether the damage to the rooms he occupied was, as I think, temporary, or, as Pill L.J. thought, permanent. His leasehold interest probably had no value at all. But the injurious affection meant that for some period his rooms were worth less on the open market than they would otherwise have been - probably less than the rent he was paying. It was for this loss that he was entitled to compensation. In Ford, 17 Q.B.D. 12, 19-20 Lord Esher M.R. illustrated this point by reference to the fact that the works made it temporarily impossible to employ a housekeeper:

". . . the absence of a housekeeper during the alteration of the building . . . is evidence to shew that the building, as business premises, was rendered of inferior value, because if a building cannot be used as a business building to the same advantage as it was before, it is an injury to the building as a business building."

    I therefore do not accept that a claim for loss of past rental value, or for or anticipated rental over a short period in the future, is an attempt, as Peter Gibson L.J. said [1999] Q.B. 634, 673, to "dress up part of the temporary loss of profits as a loss of value of land when that value has not in fact been lost . . ." The answer of Lord Westbury in Ricket v. Metropolitan Railway Co., L.R.2 H.L. 175, 204 seems to me as convincing today as it was then:

"It seems difficult to deny that the occupier of a public house, the value of which depends on its custom, has his interest in that house materially damaged by loss of custom. It may always have been used as a public house, and as such has been let to the occupier, who takes it and pays a high rent for it as a public house. When he took it, its value was ascertained and the rent fixed by reference to the custom it had; and it seems in the highest degree unreasonable to strip the house of its character, and of the use and purpose for which it has been constructed, fitted, and employed; and, having so done, to say that the interest of the occupier has sustained no damage because the building or structure has not been deteriorated. A man gives a rent of £100 per annum for a public house with good custom, long established in some much frequented thoroughfare, which house, if not used as a public house, would not be worth £50 per annum. Suppose, then, that the thoroughfare should be wholly or partially obstructed, and the custom of the house thereby diminished by one-half, is it consistent with common sense to say that the interest of the tenant in the house is not materially prejudiced?"

    What the decision of this House in Argyle Motors (Birkenhead) Ltd. v. Birkenhead Corporation [1975] A.C. 99 establishes is that one cannot make a claim for loss of profit as such. Non constat that the interference which caused such loss of profit, which may have been attributable to the special nature of the business, has had the same or indeed any effect upon the open market letting value of the premises. But there is nothing in authority or logic to say that the letting value of the premises cannot be affected by an interference which makes it less convenient to conduct the kind of business for which they would otherwise have been suitable. A plaintiff who can prove such a reduction in value, for whatever period, is entitled to compensation. So in the Court of Appeal in Argyle Motors (Birkenhead) Ltd. v. Birkenhead Corporation [1975] A.C. 99, 114 Buckley L.J. said that although no claim could be made for loss of profits:

"To avoid confusion, however, we add that this does not mean that, if injury to a business can be shown to have occasioned a diminution in the value of the land where the business is carried on, compensation cannot be recovered for that injurious affection of the land."

    In the House of Lords Lord Wilberforce also said, at pp. 130-131, that "if [the appellants] can prove that a loss of profitability affects the value of their interest in the land they can recover compensation for this loss of value." There is no reason to suppose that Lord Wilberforce was thinking only of capital values.

    I would therefore allow the appeal to the extent of restoring the opinion of the Lands Tribunal on question 3 but otherwise would dismiss it.

LORD HOBHOUSE OF WOODBOROUGH

My Lords,

    I have had the advantage of reading in draft the speech of my noble and learned friend Lord Hoffmann. For the reasons he gives I would also make the order which he proposes.