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United Kingdom Upper Tribunal (Lands Chamber)
You are here: BAILII >> Databases >> United Kingdom Upper Tribunal (Lands Chamber) >> Graham v The Council of the City of Newcastle Upon Tyne [2009] UKUT 281 (LC) (20 January 2010)
URL: http://www.bailii.org/uk/cases/UKUT/LC/2009/ACQ_46_2007.html
Cite as: [2010] RVR 144, [2009] UKUT 281 (LC)
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UPPER TRIBUNAL (LANDS CHAMBER) |
UT Neutral citation number: [2009] UKUT 281 (LC)
LT Case Number: ACQ/46/2007
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
COMPENSATION – compulsory purchase – open storage land acquired as part of Morrisons foodstore – whether Case 2 of First Schedule to Land Compensation Act 1961 applies where other land not developed in accordance with current development plan – whether demand for foodstore existed – whether land required for foodstore would have been made available – development value – apportionment between freeholder and lessee –whether Pointe Gourde should be applied and, if so, the extent of the scheme to be disregarded – compensation awarded £79,200.
IN THE MATTER OF A NOTICE OF REFERENCE
BETWEEN KEITH WALL GRAHAM Claimant
and
THE COUNCIL OF THE CITY Acquiring
OF NEWCASTLE UPON TYNE Authority
Re: Land at Roger Street
Byker
Newcastle upon Tyne
Before: N J Rose FRICS
Sitting at: South Tyneside Law Courts
on 10-12 March 2009 and at
Newcastle Combined Court on 3-5 November 2009
Robert Fookes, instructed by Watson Burton LLP, solicitors of Newcastle for the Claimant
Charles Morgan, instructed by Legal Services Division, Newcastle City Council, for the acquiring authority.
The following cases are referred to in this decision:
Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565
Waters v Welsh Development Agency [2004] 1WLR 1304
Transport for London v Spirerose Ltd (In Administration) [2009] 1 WLR 1797
Viscount Camrose v Basingstoke Corporation [1966] 1 WLR 100
Wilson v Liverpool Corporation [1971] 1 WLR 302
The following cases were referred to in argument:
Gregg v Scott [2005] AC 176
Sutton v Secretary of State for the Environment [1984] 1 EGLR 173
Abbey Homesteads (Developments) Ltd v Northamptonshire CC (1992) 64 P &; CR 377
Mon Tresor & Mon Desert Ltd v Ministry of Housing and Lands [2008] 38 EG 140
Optical Express (Southern) Ltd v Birmingham City Council [2005] RVR 230
Chapman Lowry & Puttick Ltd v Chichester DC (1984) 47 P & CR 674
Batchelor v Kent CC (1989) 59 P & CR 357
Urban Edge Group Ltd v London Underground Ltd LT Ref: ACQ/186/2005 (not reported) [2009] UKUT 103 (LC)
DECISION
Introduction
1. This is a reference to determine the compensation payable by the Council of the City of Newcastle upon Tyne (NCC) to Mr Keith Wall Graham (the Claimant). The claim relates to the value of the leasehold interest in 2,672 sq m (0.66 acre) of open storage land at Roger Street, Byker, Newcastle upon Tyne (the reference land). The land was compulsorily acquired under the Council of the City of Newcastle upon Tyne (Shields Road/Heaton Park Road) Compulsory Purchase Order 1999 (the CPO).
2. The Claimant’s case is that the market value of the reference land at the valuation date, 24 April 2001, was £819,738. NCC contend for a figure of £79,200. In addition the Claimant claimed the cost of professional advice in preparing the claim, but no evidence was submitted to support this item.
3. Mr Robert Fookes of counsel appeared for the Claimant. He called one witness of fact, Mr David Slesenger. Mr Fookes also called three expert witnesses: Mr Nigel Dyson BA, MSc, MILT, MIHT, of Mayer Brown Ltd, Newcastle office (transport and highway matters); Mr Jonathan Wallace BA, MSc, MRTPI, a director of Nathaniel Lichfield and Partners Ltd, based at their Newcastle office (planning) and Mr Martyn Lytollis BSc, FRICS, managing director of Storeys: ssp, based at their Newcastle upon Tyne office (valuation).
4. Counsel for NCC, Mr Charles Morgan, called two factual witnesses: Mr Christopher Evenson and Mr Robert Newton. He also called two expert witnesses: Mr M D Firth, Citywide Projects Group Manager with NCC (regeneration) and Mr Ranald Harris BSc (Hons), MRICS, a partner in Knight Frank, practising from his firm’s Newcastle upon Tyne office (valuation).
5. I inspected the large foodstore, which now stands on the site of the reference land, and the surrounding area, in company with Mr Lytollis and Mr Harris following an adjournment on the fifth day of the hearing.
Facts
6. In the light of a statement of agreed facts and the evidence I find the following facts.
7. The reference land forms part of the Shields Road District Centre. Shields Road is located in Byker, in the East End of Newcastle. It is the largest and most important district centre in the city, with many shops and associated facilities serving a large catchment population. The District Centre is well served by public transport. It forms the hub of the local bus network and it has a Metro rail station two stops from the city centre. The centre is bounded to the south by the Shields Road Bypass (A187), which takes through traffic away from the shopping area and the northern boundary is formed by the east coast main railway line.
8. The CPO land is located at the western end of the District Centre, approximately one mile east of the city centre. It is bounded by Shields Road to the south, the railway line to the north, Robson Street and Wilfred Street to the west and industrial properties to the east. The eastern boundary has a frontage to Roger Street and access from North View. The CPO land comprised a mix of retail, service, commercial, industrial and residential uses. There were 10 retail units fronting Shields Road and Wilfred Street, some with upper floor residential flats; 2 public houses; a club; derelict and partially demolished industrial buildings located north and east of Robson Street; industrial buildings and a vacant industrial site off Roger Street; NCC’s Cityworks depot; dismantled railway land and areas of highway (Roger Street and Toward Street).
9. The reference land was described in the CPO as Plot 28. The Claimant enjoyed full access rights to it over land between CPO Plots 23 and 27, amounting to an additional area of 365 sq m (0.09 acre). The land was cleared of buildings at the valuation date. It was accessed from Roger Street via Heaton Park Road. As at the valuation date, the reference land was bounded by NCC land to the north and east, land owned by Wm Morrison Supermarkets Plc (Morrisons) to the west and south, and land owned by Holme Dodsworth Metals Ltd and Mr John Saint to the east and south.
10. The Claimant owned the residue of a long leasehold interest in the reference land terminating in March 2037. There were thus approximately 36 years unexpired at the valuation date. The lease was on full repairing and insuring terms at a fixed rent of £350 per annum exclusive. In common with the lessor and the occupiers of the adjoining premises to the west, the lessee had full access rights over the access road. The lessee was responsible for meeting one half of the cost of maintaining this road. No building or structure could be erected on the premises, and no buildings could be altered, without the prior written consent of the lessor. The use of the premises was restricted to that of “(a) public garage and repair shop and lock-up motor houses and (b) open storage and sale of caravans (except by auction)”. There was a qualified covenant against assigning or sub-letting the premises in whole or in part.
11. Since the valuation date the reference land, together with adjoining land together referred to as the Roger Street site (the Site), has been developed as a retail food supermarket with associated car parking and a petrol filling station and car wash, operated by Morrisons.
12. At the valuation date the operative Development Plan was The Newcastle upon Tyne Unitary Development Plan, adopted in January 1998. The reference land, and most of the CPO land, formed part of the area known as Shields Road West which, by policy ED3.1, was allocated for industrial and business use, where
“development will be restricted to Classes B2, B1 and B8 of the Use Classes Order 1987.”
The reference land and most of the CPO land was outside the area, to the east, which was identified in the UDP as the Shields Road District Centre shopping area.
13. The reference land and most of the CPO land was within an area delineated in the UDP as an Action Area. However, no specific action area policies or guidance were set out, apart from emphasising that the District Centre (that is, not the reference land) was the second most important shopping street within the city. Para 6.26 of the UDP said that regeneration of the Shields Road Action Area
“will be implemented through encouraging development and redevelopment, achieving an efficient pattern of access and circulation and environmental improvements.”
14. The reference land formed part of a larger site which had outline planning permission on the valuation date for
“Erection of foodstore (6,317 sqm), retail store (2,777 sqm), High Street retail accommodation (3,700 sqm), drive through restaurant (185 sqm), public house and restaurant (464 sqm), extension to St Silas Church to provide resource centre for church (743 sqm), health centre (929 sqm), public square, car parking and associated infrastructure and landscaping works”.
15. NCC resolved that it was “minded to approve” this application on 5 September 1997. The application was passed to the Secretary of State, who referred it back for decision and the formal approval was dated 12 December 1997.
16. In reaching the decision to grant planning permission, the provisions of the emerging UDP were a material consideration, but the proposed uses for the reference land, which were carried forward into the adopted UDP, were overridden. An application for retail development of the St Silas site within the District Centre, which had been proposed in the emerging plan, was rejected. Shields Road West remained subject to ED3.1 in the adopted UDP, despite the fact that permission existed for a superstore to be erected upon it.
17. The need to regenerate the Shields Road District Centre was first recognised by NCC in the Shields Road Area Local Plan, produced in 1982 with the following objective:
“to improve both the appearance and functioning of Shields Road as an important social and economic centre for the Inner City by consolidating existing investment in the area and stimulating new investment in a co-ordinated way to provide as many jobs and services as possible.”
18. In 1995 NCC resolved to prepare a bid for funding for Round 2 of the Government’s Single Regeneration Budget (SRB) which represented a multi-faceted approach to the regeneration of the East End of Newcastle, including Shields Road. The Regeneration Strategy for the East End, as set out in the SRB bid document submitted to the Government Office for the North East in September 1995, comprised six inter-related strategic objectives, the first of which was the regeneration of Shields Road District Centre.
19. In December 1995 the SRB bid was successful and £25m was awarded towards an overall seven year regeneration programme totalling £60m. The other £35m was identified from various public and private sector sources. It was envisaged that, largely through the attraction of investment into Shields Road via the partnership with a developer, some £15m would come from the private sector. The SRB rules required there to be a “partnership” with local businesses and the community. This led to the creation of the East End Partnership – an unincorporated body comprising NCC elected Members, local business people and representatives from the community and voluntary sectors. One of the conditions of the East End Partnership receiving the SRB finance was that it delivered the promised private sector funding. From a regeneration point of view, NCC considered that a food superstore was an essential element in upgrading Shields Road. It would attract considerable numbers of additional shoppers to the Centre. It would also provide, through a joint venture agreement between NCC and a commercial developer, surplus finance which could be channelled into other non-profitable elements of the regeneration strategy. As the development of the superstore had slipped considerably from its original programme the Partnership had to obtain Government Office approval to amend its proposed funding profile on more than one occasion. Meeting the deadline for development of the superstore therefore became of increasing importance in terms of delivering the agreed SRB programme.
20. On 24 April 1996 NCC appointed Centros Miller Ltd and Rokeby Developments Ltd (Centros-Rokeby) as preferred development partners for the regeneration of Shields Road. A planning application for the Site was submitted by Centros-Rokeby and formal consent issued on 12 December 1997. On 2 February 1998 a joint venture agreement was entered into between NCC and Centros Properties Ltd, Rokeby Developments Ltd, Centros Miller Ltd and Bowey Group Ltd. Clause 1 of the agreement defined the expression “Development Programme” as follows:
“the Programme of development agreed between the parties to achieve the regeneration of Shields Road in accordance with the Masterplan and the Development Brief which shall be broadly in the following Phases but not necessarily in sequential order or such other Phases as may be agreed between the parties…
Phase 1 - Superstore development to the west of Shields Road.
Phase 2 - 8,000 sq ft public house, a 5,000 sq ft retail development, drive-through or other restaurant/fast food outlet, together with 30,000 sq ft retail or leisure development.
Phase 3 - 30,000 sq ft High Street retail development.
Phase 4 - If Centros-Rokeby is selected as the PFI partner by the Newcastle City Health Trust a Health Centre and Public Square.
Phase 5 - Any other infill High Street retail or other development opportunity which the parties may cause to be identified and agreed from time to time to be included during the Regeneration.”
21. In April 1999 a further outline planning permission was granted, incorporating a petrol filling station in the proposed development on the Site. In June 1999 a reserved matters application was submitted. It was revised in October 1999 and approved on 26 November 1999. The CPO was made by NCC on 21 July 1999. The reserved matters approval constituted the scheme which formed the basis of the CPO and which was the subject of a public inquiry in February/March 2000. The CPO was confirmed by the Secretary of State in August 2000.
22. NCC advertised its intention to make a general vesting declaration (the GVD) on 19 December 2000. The GVD was executed on 19 February 2001 and the reference land vested in NCC on 24 April 2001.
23. The Morrisons scheme world development covers the whole of the CPO land and extends to some 2.62 hectares (6.47 acres). The development itself comprises a superstore of 6,317 sq m (68,000 sq ft) gross, a petrol filling station and car wash and 495 car parking spaces. The developed site has a frontage to Shields Road of approximately 135m. The store occupies some 85m (63%) of the overall frontage. The building line of the store is in alignment with the building line of the Shields Road frontage.
Statutory provisions
24. It is agreed that the valuation of the reference land should be based on rule (2) of section 5 of the Land Compensation Act 1961 (the 1961 Act), namely the amount which the land if sold in the open market by a willing seller might be expected to realise.
25. Under section 14(2) of the 1961 Act the outline planning permissions issued in December 1997 and April 1999, together with the detailed approvals under the latter, are to be taken into account. It is agreed that these permissions could not have been implemented in the absence of compulsory purchase powers.
26. Section 6 of the 1961 Act provides:
“Disregard of actual or prospective development in certain cases
6 (1) Subject to section eight of this Act, 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.”
Cases 1 and 2 of the First Schedule are expressed in these terms:
|
Case |
Development |
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1. Where the acquisition is for purposes involving development of any of the land authorised to be acquired. |
Development of any of the land authorised to be acquired, other than the relevant land, being development for any of the purposes for which any part of the first-mentioned land (including any part of the relevant land) is to be acquired. |
|
2. Where any of the relevant land forms part of an area defined in the current development plan as an area of comprehensive development |
Development of any land in that area, other than the relevant land, in the course of the development or redevelopment of the area in accordance with the plan. |
|
|
|
27. It is common ground that Case 1 applies to the current reference. It is also agreed that the reference land formed part of an area defined as an area of comprehensive development, but the applicability of Case 2 is not agreed.
Issues
28. As I have said, the parties agree that the Morrisons foodstore which has been erected on the Site would not have existed in the absence of a CPO, because of the difficulty of assembling a site in so many different ownerships. In his expert report Mr Wallace produced a potential alternative layout (PAL), which he had prepared in consultation with Mr Dyson and Mr Lytollis. This showed a store of approximately the same size and in approximately the same location as the as built Morrisons unit. It would, however, have required the acquisition of only seven freehold and long leasehold interests, compared with sixteen interests required for the scheme world development.
29. There were two main differences between PAL and the layout which was approved and implemented. The first was the level of car parking resulting from the difference in site area (PAL had 447 spaces, compared with 495 in the real world layout). The second was the location of the store within the site. In order to minimise the number of landholdings to be acquired, and particularly those relating to land directly fronting Shields Road, PAL was set back from Shields Road, in contrast to the Morrisons store which has one elevation directly facing onto that street.
30. By the commencement of the hearing NCC had accepted that the market would have perceived it as highly probable that something akin to PAL would obtain planning permission. They were content for the matter to be decided on the basis that, in valuation terms, this probability was so high as to be perceived by the market as a certainty. They did not accept, however, that such planning permission should be taken to have been in place at the valuation date in the no scheme world. The issues to be determined are these:
1) Does Case 2 of the First Schedule to the 1961 Act apply?
2) Would there have been demand from operators for a food superstore along the lines of PAL?
3) Would NCC have been prepared to make the land in its ownership available to enable PAL to be constructed?
4) Would the remaining land required for PAL have been assembled by the valuation date?
5) What was the freehold development value of the PAL site?
6) What price would have been paid in the open market for the reference land as part of the PAL development site?
7) Is there a scheme underlying the acquisition that increased the value of the reference land and should be ignored?
Issue 1 – Does case 2 of the First Schedule to the 1961 Act apply to this case?
31. Mr Morgan emphasised on behalf of NCC that the reference land was at the valuation date within an Action Area within the meaning of section 12(8) of the Town and Country Planning Act 1990, being the area defined in paragraphs 6.17 to 6.21 of the Newcastle upon Tyne Unitary Development Plan (the UDP). By virtue of the provisions of section 6 of the 1961 Act, and Case 2 in Part 1 of the First Schedule to that Act, in valuing the reference land no account should be taken of any increase or diminution in the value of the reference land attributable to any development within the Action Area in the course of the re-development of the Action Area in accordance with the UDP.
32. Thus, any valuation should be on the basis that the scheme to be disregarded was that created by the joint venture agreement dated 2 February 1998 between NCC and Centros- Rokeby. It followed that any valuation of the reference land should be on the basis that, in the no scheme world, NCC had no plans for any re-development or regeneration for any part of the Shields Road Action Area. Thus, contrary to the position in the real world, no SRB grant had either been sought or obtained by NCC and there was therefore no pressure of time to qualify for its payment. The need to treat the existence of the SRB grant as an element of the no-scheme world would offend against broad principles of equivalence, since the grant was a direct consequence of the designation of the Action Area in the UDP and the promotion of a supermarket development was a pre-requisite of the payment of funds. The need to meet the SRB timetable was a matter expressly advanced in support of the making of the CPO. It should therefore be treated as a purpose of the scheme and ignored in the no-scheme world. Furthermore, in the no-scheme world Morrisons would not have acquired any of the scheme land. They did so only for the purposes of the scheme once it had come into existence.
33. For the Claimant, Mr Fookes submitted that Case 2 did not apply. He relied on the fact that the UDP did not provide for any development in this part of the Action Area apart from industrial and business uses. In those circumstances Class 2 did not have any effect, because it did not apply to development which was not in accordance with the development proposals or Action Area proposals of the UDP.
34. I accept Mr Fookes’s submission on this issue. I find that, for the reasons he gave, Case 2 does not apply in this reference.
Issue 2 - Demand
35. I now consider the demand that would have existed for PAL in the no scheme world. Mr Lytollis said that Morrisons were clearly committed to gaining representation in the East End. The Site represented the only possible location following a succession of planning refusals for foodstores on three other sites in the area, namely Walkergate Works, Walkergate Hospital and the old Byker bus garage. As a result Morrisons would not have turned down an opportunity to buy their way into a development on the Site particularly when, “and crucially”, it already had planning permission for a foodstore of some 68,000 sq ft.
36. Mr Lytollis also cited the following matters which, he said, clearly showed that operator demand for PAL would have been strong. Firstly, the fact that Morrisons actually occupied a foodstore – “the most prized planning permission possible” – on the Site itself. Secondly, the fact that the two other planning permissions which were granted for retail uses in 2000/2001 – Newcastle Shopping Park (227,842 sq ft on 13.6 acres) and the Lidl unit at Watergate Works (14,100 sq ft on 1.6 acres) – were both taken up and the sites developed and occupied.
37. Mr Lytollis’s view was supported by Mr Wallace. Mr Wallace said that there was strong interest in developing a new food superstore in the East End of Newcastle in the mid-to late 1990s. Morrisons had no representation in Newcastle at the time, and the other retailers who expressed interest in the Roger Street opportunity, ASDA and Tesco, were not represented in the south or east of the city. Taken together with the need to apply the PPG sequential approach to site selection, and the fact that the Site was the only development opportunity in the East End which was related to an existing shopping centre, these factors would have resulted in demand emerging for an alternative scheme such as PAL.
38. Mr Harris strongly disagreed with the views of the Claimant’s experts as to the strength of the demand. He said that, although his firm had contacted seven of the largest foodstore operators in the country, only ASDA and Morrisons had expressed real interest; the bid from
Tesco was discounted at the outset because it related to a size of site which was incapable of delivery. There was, in reality, only one compliant bid, which was hardly indicative of a strong market.
39. In my judgment, the picture of widespread, buoyant demand painted by the Claimant’s experts is not supported by the outcome of Knight Frank’s marketing campaign in the scheme world which followed the grant of outline planning permission on 12 December 1997. Three days later, Knight Frank wrote to seven foodstore operators whom they felt might be interested in the Site, as follows:-
“Further to Ben Middleton’s letter to you of 16 September our clients, Centros and Rokeby Developments have now received planning consent in respect of the regeneration of Shields Road.
I attach a copy of the planning consent. As you will see there is no requirement for a section 106 agreement. The consent is for 138,000 sq ft of retail space which includes a 68,000 sq ft foodstore and comprises the master plan for the town centre.
Under the terms of the partnership document between Centros Rokeby and the City Council, the Council have undertaken to use such compulsory powers as may be necessary. An extract from the minutes of the Regeneration Sub-Committee meeting dated 18 September 1997 is enclosed. As you will see it confirmed that the Council is minded to seek a compulsory purchase order to facilitate the implementation of the master plan.
Newcastle City Council has been awarded a £25m Single Regeneration Budget grant to regenerate the Byker area of which £7,500,000 is specifically allocated to the Shields Road regeneration strategy. Most of this grant is allocated for infrastructure and environmental improvements on the remainder of Shields Road but please note that no money is available towards the development and construction of the superstore.
As part of the partnership agreement my clients are seeking to reach agreement with a foodstore operator to purchase, by way of a site and shell conditional contract, a foodstore and car park which will be developed by Centros Rokeby.
In respect of the proposed timetable, negotiations have been concluded with some of the existing site owners and it is envisaged that vacant possession will be obtained within twelve months if a negotiated acquisition is successful. If a CPO is required to assemble the site then vacant possession will take a little longer to achieve.
I have attached herewith a 1:1250 Ordnance Survey extract plan showing the master plan proposals for the town centre and a 1:500 Ordnance Survey extract showing the proposed store layout. Please note from these plans the Local Authority’s desire to close Heaton Park Road to through traffic and to re-route the traffic along the new road around the periphery of the foodstore car park.
I have also attached herewith a desk top study carried out by Hutter, Jennings & Titchmarsh, consulting engineers on soil conditions.
My clients are seeking an offer for the purchase of a site and shell store on two alternative bases: -
(1) The site in accordance with the outline consent on the basis of the legal interest being a 125 year ground lease at a peppercorn.
(2) Your preferred site, building size and location and also the increase in offer your company may make for a freehold interest.
If you feel that you would prefer to discuss a rack rental basis this is also a matter which my clients will be willing to consider. My clients would be happy to meet with you and/or your advisers to discuss the matter should you so wish.
Would you please submit your offers on the above basis to this office by 12 noon on Friday 30 January 1998.”
40. On 2 February 1998 Knight Frank sent details of the proposals they had received in response to this invitation to their clients, Centros Rokeby. I shall describe each in turn.
41. The response from ASDA was contained in a letter dated 30 January 1998, which said:
“The ASDA proposal is not wholly in accordance with your requirements. ASDA require a store which is larger than the one for which you currently have planning permission. ASDA’s view is that to make a store trade profitably in this location then we must be able to give the customers the full range ASDA offer which includes the sale of food and non-food goods. The smallest store we are prepared to trade is 45,000 sq ft of net sales area. The store must also be served by ample surface level car parking. A petrol filling station also forms part of our trading offer and one will be required in this case.
We have looked at a number of ways in which we can accommodate the above requirements. Copies of our proposals are attached hereto.”
42. ASDA submitted four bids ranging from £4.2m to £6.5m. None was for a store smaller than 86,000 sq ft gross. The letter from ASDA added:
“ASDA are still nervous about trading a store in this location. In our view, the store lacks sufficient visibility, prominence and accessibility to compete against other sites. It is therefore a condition of our bid that we will proceed only when we are satisfied that there are no other competing foodstore schemes in the area.”
43. Sainsbury’s reply was dated 23 January 1998. It said:
“I confirm that the above proposal was considered at our Board this week and unfortunately was rejected. Basically, it is not a suitable trading location for Sainsbury’s and the financial viability was poor.”
44. On 30 January 1998, Messrs. M D Cahill & Associates, commercial property consultants, wrote to Knight Frank on behalf of Tesco. They said:
“I am responding on the instructions of my client Tesco to let you know that they would only be interested to take the matter further on a non-compliant basis which would offer a non-compromised layout for a store of circa 109,000 sq ft alongside a minimum of 900 surface car parking spaces controlled as a shoppers car park by Tesco and a petrol filling station.”
45. Knight Frank summarised the reactions of three of the other retailers who were approached in the following terms:
“North East Co-op. Initial enquiries but no offer received.
Somerfield. Not interested – unit size is too large.
Safeway. Despite several telephone conversations no offer received.”
46. On 30 January 1998 Morrisons submitted offers of £4,500,000 (125 year lease) and £5,250,000 (freehold), subject to securing a satisfactory planning consent for either of two layouts. The first provided for a superstore of 83,000 sq ft located at the back of the site, together with a petrol filling station, car wash, 560 car parking spaces and access on the Shields Road frontage. Their second option was a 70,000 sq ft store located at the front of the site with 615 car parking spaces, filling station and car wash. If planning permission could not be obtained for a filling station and car wash both bids would be reduced by £300,000.
47. On 9 March 1998 Knight Frank reported to their clients with the results of various meetings and telephone conversations which had taken place with Morrisons and ASDA subsequent to receipt of their original proposals. They said that both companies had now provided the final amendments to their offers, which enabled them to be compared on a like for like basis. Morrisons had put forward two proposals, both including a premium of £5,015,000, for a lease for 125 years at a peppercorn. Scheme A was for a building of 68,000 sq ft gross fronting Shields Road, a petrol filling station and car wash plus 596 car parking spaces. Scheme B was for a building of the same size, situated to the rear of the site and with 560 spaces. If the filling station and car wash were excluded these bids would be reduced by £500,000.
48. ASDA had suggested four alternative schemes:
86,000 sq ft gross plus 690 car spaces - £6,500,000
86,000 sq ft gross plus 690 car spaces - £5,500,000
90,000 sq ft gross plus 590 car spaces - £4,200,000
86,000 sq ft gross plus 475 car spaces - £4,700,000
49. In each case the building would be provided to shell finish and the proposed tenure was a 999 year lease at a peppercorn. Only the third of the four stores would have fronted Shields Road.
50. Knight Frank added that Tesco were still interested in a store of approximately 110,000 sq ft and had submitted a rental proposal on that basis. But Knight Frank had:
“discounted their interest due to the size of store required and its total incompatibility with the Shields Road Regeneration Master Plan.”
51. In the light of this marketing history, there is in my view no justification for Mr Lytollis’s assertion in his supplemental report that:
“you cannot overstate the scarcity value of the planning permission for a food superstore development on the Roger Street site.”
52. Including Roger Street, only one out of seven planning applications for food superstore developments covering four different sites in the East End of Newcastle was successful between October 1996 and August 1999. Despite the clear difficulty of obtaining such a consent in the area, Morrisons were the only operator prepared to submit a bid for a store of 68,000 sq ft gross on the Site, when it was marketed in late 1997/early 1998. PAL would have provided a store of similar size, but on a significantly smaller site with only 447 car spaces – 48 less than in the Morrisons scheme. In those circumstances, I am satisfied that Morrisons would have been the only conceivable purchaser of the reference land, had it been offered for sale in early 1998 with planning consent for PAL. There was no suggestion that the level of demand would have been significantly different at the valuation date.
53. Mr Evenson has been responsible for all Morrisons’ site acquisitions and property management since he joined the company in 1988. He considered that PAL would not have been acceptable to Morrisons. His objections related to the lack of prominence, due to the masking of the store behind the retained buildings fronting Shields Road; the insufficiency of car parking provision and trolley bays; the shared bus and taxi lay-by; the inadequate space for large buses to turn round within the site; the tight service access from Heaton Park Road and Roger Street; the difficulty of achieving the proposed service access and service yard arrangement because of level differences across the site; and the absence of a petrol filling station.
54. Although he was a witness of fact, Mr Evenson was expressing an opinion on how his company would have reacted in a hypothetical situation. I intend no disrespect to him when I say that I believe that he was mistaken.
55. When he gave evidence to the CPO inquiry in March 2000, Mr Evenson said that the proposed superstore was markedly different from his company’s ideal design. Central Government planning policy, however, was having a major effect on the number of sites where superstores could be developed. Morrisons were having to become increasingly flexible if they were to continue their expansion plans. At Byker they had compromised on a number of detailed matters including the size of the store; the internal layout of the store; the position of the entrances; the delivery arrangements, both internal and external; the size of the car park; shared service and customer entrance/exit; and the position of the petrol filling station.
56. In his witness statement prepared for the current proceedings, Mr Evenson listed a number of disadvantages of the PAL layout, which he said meant that PAL was unacceptable (see paragraph 53 above). I attach no weight to the absence of a petrol filling station. Morrisons did subsequently obtain planning permission for a petrol filling station after they had exchanged contracts for the superstore, but it is clear from the various offers they submitted to Knight Frank that this deficiency could if necessary have been overcome by adjusting the price paid for the site. In cross examination, Mr Evenson accepted that it would have been possible to amend PAL to eliminate most of its disadvantages, but he said that such amendments would have made the extent of the car parking provision even less acceptable. It is clear, however, that additional car parking could have been provided on land to the west, whose owners, Shepherd Offshore Plc, were prepared to sell on the basis of retail development value.
57. Thus, the only insurmountable problem with PAL was that it would be masked to some extent by the retail units which would remain on Shields Road. In the course of cross examination Mr Evenson identified the lack of prominence as being the principal drawback of PAL. The importance of this drawback, however, should in my judgment be considered in the context of what has happened in the real world. The south elevational drawing, which was submitted by Morrisons in October 1999 as part of the revised reserved matters application, showed a series of glazed windows with views from the street to the interior of the store. The drawing stated prominently that Morrisons reserved the right to make changes during detailed design. In the event, with the exception of the entrance area at the western end, the only windows fronting Shields Road are of obscured glass. Not all the PAL store would have been masked from Shields Road. It would, in my opinion, have been somewhat less prominent than the store which, in the scheme world, has proved to be acceptable to Morrisons. At the valuation date Morrisons had no representation in Newcastle. They were interested in acquiring the store which was to be developed on the site and they expected to face competition for it from other operators. They made a number of significant compromises to their ideal store design in order to secure the property. In my opinion, if PAL had been the only design on offer, Morrisons would have purchased some additional land from Shepherd Offshore Plc for car parking and made one further compromise, settling for a rather less prominent store, in order to secure the representation in the East End of Newcastle which they were seeking.
Issue 3 – Would NCC have been prepared to make the necessary land in its ownership available to enable PAL to be built?
58. Mr Newton is the team manager with the Property Services division of the office of the Chief Executive of NCC. He has been employed by NCC in senior surveying roles since 1987 and first became involved in Shields Road Regeneration, Phase 1, in July 2001. He has also had professional experience of the Shields Road area and been aware of regeneration plans throughout the period prior to July 2001.
59. Mr Newton said that NCC always tried to use its landowning position to support its planning aims. It did not enter into land deals which ran counter to planning proposals. Whilst he had not been the decision maker at the time, if he had been approached by someone proposing to acquire land for PAL he would have consulted planning colleagues, particularly Mr Firth as the planning officer with responsibility for the planning aspects of the regeneration of the Shields Road area. He would have taken Mr Firth’s advice as to whether the scheme was worth pursuing, or whether NCC should hold out for or indeed seek a better scheme. In the light of Mr Firth’s evidence, Mr Newton said that he would have advised NCC not to enter into the property transaction which would be necessary to allow PAL to go ahead.
60. Mr Newton said that this decision would normally have been taken at officer level rather than being referred to elected Members. It would normally only be so referred if the recommendation was to sell the land and approval was required for the terms of sale. Any matter that became politically contentious might be referred to elected Members, but a decision not to sell such as this would have been in support of existing Council policies and therefore not likely to have been contentious.
61. Mr Newton said that, if the matter did become contentious, and was referred to the elected Members, his recommendation would still have been not to sell the land for the purposes of the smaller than optimal sized development. There was no reason to believe that NCC would not have followed this recommendation in the light of Mr Firth’s advice.
62. Mr Firth has been employed by NCC since 1994, currently as Citywide Projects Group Manager. In his proof of evidence dated 20 June 2008 Mr Firth described the history of his Council’s regeneration strategy for Shields Road and its successful SRB bid for the regeneration of Shields Road District Centre and Newcastle East End. He explained that, since Centros-Rokeby were appointed as preferred development partners in April 1996, council officers had worked closely with them to implement the approved regeneration strategy, which included the redevelopment of the Morrisons superstore on the Site. The superstore occupied a position directly on Shields Road, as recommended in April 1997 by NCC’s planning consultants, Pieda. It was effectively the last retail unit on the street. NCC had always maintained that this was the optimum location, in terms of access to and from the Shields Road shopping centre, to maximise the economic benefits to the District Centre. The Council and Centros-Rokeby had considered various locations for the superstore on the Site as the design and layout of the scheme emerged prior to the planning application. After assessing the options, they agreed with the conclusions of the Pieda report. The location of the superstore was endorsed by the East End Partnership and became fixed with the approval of the reserved matters approval in November 1999.
63. Mr Firth said that the location of the superstore had also been considered by the inspector at the CPO Inquiry held in February and March 2000. The inspector had concluded that:
“126. Acquisition of the frontage properties was necessary to provide visibility for the scheme and to integrate the foodstore with the existing District Centre in line with the recommendation of Pieda…”
64. NCC and Centros-Rokeby had jointly undertaken to select an operator for the superstore. Following marketing of the site by Knight Frank and analysis of the various schemes submitted by Morrisons and ASDA, Morrisons were selected as the preferred operator. All subsequent discussions with Centros-Rokeby and Morrisons leading up to the submission of the reserved matters application were based on the superstore being located directly adjacent to Shields Road.
65. Mr Firth said that NCC’s planning control officers and highway engineers had concluded that PAL could have been worked up into a detailed planning application that would have been recommended for approval. Morrisons, however, had pointed out that they would have been unlikely to be interested in operating such a store, because it would have been situated behind retained frontage properties and there was insufficient space for a petrol filling station or enough car parking. Moreover, whilst planning permission for PAL might have been granted, it was clear in planning policy terms that the best regeneration benefits would be provided through provision of a larger foodstore and this would not have been possible with PAL. NCC would not, therefore, have been prepared to part with its land interests for anything other than the larger scheme in order to secure the optimal regeneration benefits. If a smaller proposal such as PAL had come forward, he would have advised the Estates Department not to part with its interests for such a development.
66. At my request Mr Firth prepared a supplementary proof of evidence during the lengthy adjournment that followed the third day of the hearing. This report compared the respective regeneration benefits of the location of the foodstore in its real world position and in the PAL location. He concluded that neither scheme would have had a negative effect on the vitality and viability of the Shields Road District Centre as a whole. However, the PAL food superstore located behind frontage properties of no particular architectural merit would not have been as well integrated into the shopping street as the real world scheme. He accepted that the retained Roger Street car park in PAL would be more attractive to shoppers because it was closer to the main shopping area of Shields Road. His judgment, however, was that, on balance, this did not outweigh the advantages of the real world location of the food superstore directly onto Shields Road, a view which had been endorsed by Pieda and the CPO inspector.
67. Mr Firth accepted that it was a matter of judgment. Nevertheless, in his view, whilst PAL would have had some regenerative benefits, it would not have been in the optimum location and, therefore, would not have had as great a regenerative effect as the real world scheme. In the course of his evidence in chief, Mr Firth said that there was generally no conflict between a decision by NCC to grant planning permission and the appropriateness of the proposed development for the regeneration of an area. He was unable to give any examples of a case where planning and regeneration considerations did not coincide.
68. Mr Slesenger served as an elected member of Council for NCC between 1982 and 1998 and from 2004 until the present time. He gave evidence, however, as a private citizen and not as a representative of NCC. He has at times held the offices, among others, of chairman of economic development, chairman of development, chairman of development control and vice chairman of the regeneration committee. Mr Slesenger declared a pecuniary interest, in that his property had been acquired under the CPO. He had withdrawn from any involvement in NCC’s deliberations on the matter, and he had received the compensation for his property in full. In Mr Slesenger’s opinion it was inconceivable that, without reference to Members, officers would have refused the opportunity of delivering an important development within the city. In both the real world and the PAL world, the following factors would have encouraged the Council to sell its land: the receipt of a substantial capital sum; the meeting of a deficiency of supermarket provision in the area; the creation of a large number of new jobs and the removal of the Apollo cinema building, an eyesore at the western entrance to the Shields Road shopping centre. There was strong demand for a large supermarket and the Site was the only one where it could have been located in accordance with planning policies. A blanket refusal to sell, as suggested by Mr Firth and Mr Newton, would have been highly controversial and unacceptable to many parties. Meetings frequently took place between chief officers and committee chairmen and vice chairmen to resolve any difficulties that might arise. Wherever possible a private developer would be encouraged in his endeavours.
69. Mr Lytollis said that in his opinion NCC would have been keen to see PAL implemented. The land in their control extended to some 54% of the total site area of 5.1 acres. NCC also had freehold reversionary or other proprietary interests in a further 30% of the site. They had already decided to relocate their City Works depot at Back Heaton Park Road. As well as receiving the major share of the development value of the site, NCC stood to benefit through the wider economic, planning and environmental benefits of regeneration and by securing SRB funding, which was dependent on the delivery of a commercially led regeneration of the main district shopping centre at Shields Road.
70. I am in no doubt that NCC would have been prepared to make their land available for the purpose of implementing PAL, if they had been approached by a prospective developer at or prior to the valuation date. Mr Firth suggested that NCC would not have parted with its interests in the land required for
“anything other than the larger scheme [that is, the real world scheme occupied by Morrisons] in order to secure the optimal regeneration benefits. If a smaller proposal, such as [PAL] had come forward I would have advised the estates department that the planning policy and strategy indicated that a larger scheme would bring better benefits and the Council as land owner should not part with its interests for a smaller development.”
71. Mr Firth’s reliance upon planning policy and strategy as a reason for objecting to PAL is surprising, given NCC’s acceptance that planning permission would have been granted for PAL and that, as recorded in para 7.3 of the agreed statement of facts
“There would have been no objections to the PAL from the City Council on either highway/traffic issues or upon pure strategic planning grounds”.
72. Mr Firth placed considerable weight on the following recommendation in the Executive Summary to the Pieda report:-
“We further recommend that the Partnership and the City Council seek to enhance the likelihood of dual shopping trips by requiring the store to be located closer to and ideally integrated with the existing retail frontage. In this regard we believe that priority should be given to maximising the regeneration impact of the proposals.”
73. Mr Firth considered that NCC would have insisted on the real world scheme, because it was better integrated into the shopping street than PAL and therefore had a greater regenerative potential. I am unable to accept that judgment. Firstly, it is common ground that the Morrisons as built store would simply not have been an option in the absence of compulsory purchase powers. Secondly, although the real world scheme does front directly onto Shields Road, it has actually resulted in the creation of a lengthy “dead” frontage to the road, containing as it does little or no transparent glazing. In consequence, the activity taking place within the store is not visible from the street. In contrast, PAL would have enabled the existing shops to be retained, thus maintaining the variety and diversity of the high street along most of its length. Thirdly, Mr Firth’s suggestion that the Pieda “integration” recommendation was considered by NCC to be of fundamental importance is not supported by the outline planning consent for the Site, which was granted some eight months after the Pieda report was received, and which did not impose a condition requiring compliance with that recommendation. In fact, in my view it is PAL which may justifiably be said to “enhance the likelihood of dual shopping trips” more effectively than the Morrisons store. Car-borne shoppers who wished to patronise both the foodstore and the District Centre would have been better served by PAL, because the Roger Street car park would have been maintained between the two, and would have been much more convenient for such shoppers than the parking facilities available in the real world scheme.
74. I therefore conclude that, if there had been no possibility of a CPO, Mr Newton would have been advised that there was no objection to him negotiating the sale of NCC’s land to enable PAL to be developed, and that advice would have been accepted by him and any Members or fellow officers he consulted.
Issue 4 – Would the remaining land required for PAL have been assembled by the valuation date?
75. Mr Harris considered that there was a significant risk that it would not have been possible to acquire the land required for PAL from the four remaining land owners in addition to NCC, Morrisons and the Claimant. The owners would have required very high prices for their interests and it would have been very difficult to reach agreement with all four.
76. Mr Lytollis said that there were 3½ years between the grant of planning permission and the valuation date in which to assemble the site. This was more than enough time to bring together all the land, given the small number of ownerships and interests to be acquired. He considered that the purchase of three freehold interests and one long leasehold interest would not have deterred NCC, Morrisons and the Claimant from assembling the PAL site by agreement, particularly since full vacant possession could have been obtained by giving the three occupational tenants six months notice under the Landlord and Tenant Act 1954.
77. I prefer the evidence of Mr Lytollis on this issue. Mr Harris accepted in cross examination that one of the four owners, Home Dodsworth Metals Ltd, would have had an incentive to exchange the part of its land required for PAL for other land owned by NCC which would have improved the layout of its site. I am satisfied that such an exchange of lands – which took place by agreement in the scheme world – would also have taken place in the no scheme world. I also accept Mr Lytollis’s opinion that, in view of the level of development value which would have been on offer, the 3½ year period would have been sufficient to allow agreement to be reached with the remaining three owners. I find that such agreements are likely to have taken the form of options to purchase. Thus, by the valuation date, the reference land would have been the only land, control of which had not been secured for the PAL development.
Issue 5 – The freehold development value of the PAL Site.
78. Mr Lytollis valued the 5.1 acres occupied by PAL on a freehold basis at £925,000 per acre. In arriving at this valuation he had regard in particular to three sales. Firstly, the Site itself, which was purchased by Morrisons in November 2001 for the equivalent of £880,414 per acre, pursuant to a conditional contract dated 3 December 1998. Secondly, the Stockton and Billingham College site on the edge of Billingham town centre, which Morrisons contracted to purchase in October 1999 at £846,262 per developable acre, provided planning permission was obtained for foodstore development. Thirdly, the former Vaux Brewery site on the edge of Sunderland city centre, bought speculatively by Tesco in January 2002 at a price equivalent to £901,563 per acre on a cleared site basis.
79. Mr Harris considered that it was necessary to reduce the price paid for the Site by Morrisons by one third to reflect the relative deficiencies of the PAL site. He made a further substantial deduction to reflect what he termed the three counter-factors, namely the lack of operator interest, the difficulty of land assembly and the disinclination of NCC as landowner to participate.
80. I do not obtain assistance from Mr Harris’s evidence on this aspect. There was an element of double counting in the two deductions that he made, in that the deficiencies of PAL were important reasons for the assumed absence of operator interest. Moreover, in the light of conclusions I have expressed earlier in this decision, the deduction for the three counter-factors is not justified.
81. In my judgment, the most reliable starting point for assessing the freehold value of the PAL site at the valuation date is the price which Morrisons agreed in December 1998 and paid some three years later. Morrisons obtained a 125 year lease. It is clear from their original offers dated 30 January 1998 (£5.25m freehold or £4.5m leasehold) that Morrisons were prepared to pay 16.6% more for a freehold than for a 125 year lease. The price paid of £880,414 per acre for the leasehold interest in the site was therefore equivalent to a freehold value of £1,026,562, say £1,025,000 per acre.
82. I have concluded that, whilst PAL would have been acceptable to Morrisons, the PAL store would have been less prominent than the as-built store. Moreover, the price paid by Morrisons reflected the presence of a petrol filling station and car-wash, which would not be provided in PAL. I consider that a reasonable allowance to reflect these deficiencies of the PAL Site would be 20%. I therefore conclude that the value of the freehold interest in the PAL site was £820,000 per acre. In reaching that conclusion, I have not overlooked the fact that it would have been necessary for Morrisons to pay the same price for the additional land to the west which it would have acquired from Shepherd Offshore plc, and to secure possession of the three determinable tenancies to which the PAL site was subject.
Issue 6 – The price which would have been obtained for the Claimant’s interest as part of a site for PAL.
83. Mr Lytollis considered that, in the no scheme world, NCC would have been extremely keen to acquire the Claimant’s interest in the reference land. They would have benefitted from the proposed development in three ways: the wider economic, planning and environmental benefits of site regeneration; securing SRB funding of £25m and, as principal landowner, receiving the greater part of the distributable value of the site after land assembly costs. In those circumstances, they would have been prepared to forego the value of their reversionary interest in the Claimant’s land and pay the full freehold value of both the land included in the lease and the adjoining access land, plus a ransom value element of 10%. Both areas were critical to the delivery of a food superstore development in this location.
84. Mr Harris emphasised the fact that the Claimant’s lease had a relatively short unexpired term and included an extremely restrictive user clause. He considered that NCC’s freehold interest was far more valuable. Moreover, NCC had expressed an unwillingness to participate in the inferior PAL scheme. In these circumstances, Mr Harris felt that the value of the land occupied by the Claimant should be apportioned two thirds in favour of the freeholder and one third to the leaseholder, with nothing for the access strip.
85. Mr Harris’s valuation approach was based on the assumption that NCC would not have been keen to make its land available in furtherance of the PAL scheme. I have concluded that this assumption is not justified. On the other hand, I consider that Mr Lytollis has over-estimated the Claimant’s bargaining position. He had a 36 year lease, a depreciating asset, with a very restricted user clause and an existing use value of £72,000. An approach from a potential purchaser who offered a multiple of that sum would, in my view, have been welcomed by the Claimant. Although Morrisons would have secured options to purchase the remaining land required for PAL, the experts agreed that they are likely to have had to pay substantial sums to each of the owners concerned. In my judgment, the Claimant would have been reluctant to push his negotiating position too far, lest Morrisons decided to let the options to purchase lapse and go elsewhere. It would have been in the clear interests of both parties to come to terms. I find that they would have agreed to an equal split of the freehold value of the area covered by the Claimant’s lease. No payment would have been made for the right of access, without which the Claimant’s land would have been unusable. On the assumption that the reference land falls to be valued on the basis of its retail development potential, I would assess the compensation payable at £270,600 (50 per cent of £820,000 x 0.66).
Issue 7: Is there a scheme underlying the acquisition that increased the value of the reference land and should be ignored?
86. The valuation of £270,600 has been arrived at taking account of the statutory disregards under section 6 and Schedule 1. It is now necessary to consider whether the Pointe Gourde principle – that compensation should not include an increase in value entirely due to the scheme underlying compulsory acquisition – applies (Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565).
87. Mr Morgan submitted that the scheme to be disregarded was that created by the joint venture agreement between NCC and Centros-Rokeby. It followed that any valuation of the reference land should be on the basis that, in the no scheme world, NCC had no plans for any redevelopment or regeneration for any part of the Shields Road Action Area. Thus, contrary to the position in the real world, no SRB grant had either been sought or obtained by NCC and there was therefore no pressure of time to qualify for its payment. The need to treat the existence of the SRB grant as an element of the no-scheme world would offend against broad principles of equivalence, since the grant was a direct consequence of the designation of the Action Area in the UDP and the promotion of a supermarket development was a pre-requisite of the payment of funds. The need to meet the SRB timetable was a matter expressly advanced in support of the making of the CPO. It should therefore be treated as a purpose of the scheme and ignored in the no-scheme world. Furthermore, in the no-scheme world Morrisons would not have acquired any of the scheme land. They did so only for the purposes of the scheme once it had come into existence.
88. For the Claimant, Mr Fookes submitted that the scheme was to be construed narrowly. He relied on the observation of Lord Nicholls in Waters v Welsh Development Agency [2004] 1WLR 1304 that, “when in doubt a scheme should be identified in narrower rather than broader terms” (paragraph 63).
89. Mr Fookes submitted that the scheme in this case was the CPO made for the purpose of acquiring the CPO lands to facilitate development as a superstore. That scheme became public knowledge and commenced with a resolution to make the CPO on 1 February 1999. The no-scheme world at the valuation date was essentially the same as the scheme world. Land was being voluntarily acquired and a layout had been produced. It was common ground that planning permission would have been granted for PAL at or before the valuation date. That permission represented the no-scheme world. The no-scheme development of the Site at the valuation date was fundamentally the same as the scheme world development, save that there were no compulsory purchase powers in respect of the reference land.
90. Paragraph 2.1 of the Statement of Reasons for the CPO explained the purpose of acquiring the Order land as follows:
“The development of the Order land will be carried out pursuant to the outline planning permission of February 1997.”
Paragraph 2.4 stated:
“The scheme comprises the development of a 68,000 sq ft (6,317 sq m) food superstore…”
91. Mr Fookes did not accept NCC’s contention that the scheme started on 2 February 1998, the date of the first joint venture agreement. He said the start date was a year later, on 1 February 1999, the date of the first resolution to seek a CPO for the Site. No public statement of a CPO based scheme was identified at any time before the resolution to seek one. The start of the scheme was a matter of fact, but nothing in Waters suggested that a scheme could commence when it was only known privately. Above all, it could not commence before the landowners affected had been informed of its existence. There was no evidence of any notification to the Claimant or of any document put out for public consultation or public distribution before the publication of the resolution to seek a CPO in February 1999. Before that date, there had been no published policy for retail proposals at the Site; no document called “the Masterplan” for retail development at the Site and no regeneration policy for the Site.
92. The identification of the scheme which should be ignored when assessing compensation was considered by the House of Lords in Waters. In paragraph 55 of his opinion Lord Nicholls said
“The co-existence of the section 6 code and the Pointe Gourde principle means that the problems associated with identifying the ambit of the ‘scheme’ for the purpose of the Pointe Gourde principle remain live problems.”
93. Lord Nicholls summarised the correct approach to the identification of the scheme as follows –
“[59] The extent of a scheme is often said to be a question of fact. Certainly, identifying the background events leading up to a compulsory purchase order may give rise to purely factual issues of a conventional character. But selecting from these background facts those of key importance for determining the ambit of the scheme is not a process of fact-finding as ordinarily understood.
[60] Take the present case. The purpose for which the Claimants’ land was acquired can be identified at two different levels of generality: for use as a nature reserve, or for use as a nature reserve to compensate for loss of the Taff/Ely site of special scientific interest through construction of the Cardiff Bay barrage. Factually each of these stated purposes is correct. Which of these purposes is to be regarded as the more appropriate when identifying the scheme within the meaning of the Pointe Gourde principle is a matter for the tribunal’s judgment.
[61] A similar judgmental exercise is required with regard to the works said to comprise one scheme for the purposes of the Pointe Gourde principle. When deciding, for instance, whether a phased development constitutes a single scheme or more than one scheme the tribunal will consider all the circumstances and decide how much weight, or importance, to attach to the various relevant features. The tribunal will attach to these features the degree of importance it considers appropriate having regard to the purpose of the Pointe Gourde principle. What, then, is the purpose of this principle? Its purpose, in separating ‘value to the owner’ from ‘value to the purchaser’, is to forward Parliament’s objective of providing dispossessed owners with a fair financial equivalent for their land. They are to receive fair compensation but not more than fair compensation. This is the overriding guiding principle when deciding the extent of a scheme.
[62] This statement of general principle does no more than articulate the approach already adopted intuitively by tribunals when faced with making a choice between competing views of the extent of a scheme in a particular case. It is to be hoped that bringing this principle into the open will assist decision-making in difficult case.
[63] In applying this general principle there is of course no magical detailed formula which will provide a ready answer in every case. That is in the nature of things, circumstances varying so widely. But some pointers may be useful. (1) The Pointe Gourde principle should not be pressed too far. The principle is soundly based but it should be applied in a manner which achieves a fair and reasonable result. Otherwise the principle would thwart, rather than advance, the intention of Parliament. (2) A result is not fair and reasonable where it requires a valuation exercise which is unreal or virtually impossible. (3) A valuation result should be viewed with caution when it would lead to a gross disparity between the amount of compensation payable and the market values of comparable adjoining properties which are not being acquired. (4) When applied as a supplement to the section 6 code, which will usually be the position, the Pointe Gourde principle should be applied by analogy with the provisions of the statutory code. Thus in the class 1 type of case the area of the scheme should be interpreted narrowly, for instance, so as to embrace the property acquired under the compulsory purchase order and property which would probably have been so acquired had it not been bought by agreement. In other cases, such as case 2, Parliament has spread the ‘disregard’ net more widely. Then it may be appropriate to give the scheme a wider scope. (5) Normally the scope of the intended works and their purpose will appear from the formal resolutions or documents of the acquiring authority. But this formulation should not be regarded as conclusive. (6) When in doubt a scheme should be identified in narrower rather than broader terms.”
94. In para 42 of his opinion Lord Nicholls said this
“It is important to keep in mind that, despite its late arrival on the scene, the expression ‘the Pointe Gourde principle’ is not a reference to a principle separate and distinct from the ‘value to the owner’ principle.
Similar views on this aspect were expressed when the principle was considered further by the House of Lords in Transport for London v Spirerose Ltd (In Administration) [2009] 1 WLR 1797. It was described as an interpretation of the word “value” in rule 2 (Lord Collins at para 128, Lord Neuberger at para 56), and “value to the seller” (Lord Scott at para 9).
95. Although Lord Walker described Pointe Gourde, in para 11 of his opinion, as “an imprecise principle, in the nature of a rebuttable presumption”, Spirerose does not, I think, limit the application of Point Gourde in a Waters situation. What it does is to say that the principle does not affect the planning assumptions that can be made. The role of Pointe Gourde, if applied in the current reference, would be to fill a lacuna in section 6 and Schedule 1 (as in Viscount Camrose v Basingtoke Corporation [1966] 1 WLR 1100 and Wilson v Liverpool Corporation [1971] 1 WLR 302). On the basis of Waters two questions, which are not wholly separate, arise. Firstly, what is the scheme that would fall to be left out of account? Secondly, ought it to be left out of account?
96. On the first question the scheme that the acquiring authority say should be left out of account is the joint venture scheme. In broad terms the joint venture agreement scheme was similar to the Action Area scheme, but it provided for uses different from those in the Action Area plan in the vicinity of the reference land. I have found that Case 2 does not apply because the other land was not developed in accordance with the development plan, one of the requirements in column 2. The question is whether Pointe Gourde should be applied effectively to remove this requirement.
97. I have come to the conclusion that the scheme underlying the acquisition of the reference land consists of the proposals for the regeneration of the Shields Road District Centre. The reason is this. The only operator who would have been interested in a 68,000 sq ft food superstore at the Site, as I have found, was Morrisons. But this was not the first site that Morrisons looked at in the area. They were first contacted in respect of the Site in April 1996 by Centros-Rokeby, who had just been appointed by NCC as preferred development partners for the regeneration of Shields Road. At that time Morrisons were considering the bus depot site being proposed by Thornfield Developments Ltd at the eastern end of Byker. They were also negotiating with Shepherd Offshore Plc in respect of a site at Shields Road, Walker. The only reason Morrisons decided to proceed with the Site was that NCC, as planning authority, made it clear that it was the only location in the East End where they would grant consent for a large foodstore.
98. NCC reached that planning judgment on 7 July 1997, when their Policy and Resources Committee and Development and Regeneration Committee decided to give support in principle to a 68,000 sq ft store in the Shields Road District Centre. That decision followed a report by NCC’s consultants, Pieda, in April 1997, which favoured the proposed foodstore at the site, supported by the early use of CPO powers. Pieda had been instructed to make an independent assessment of the regeneration strategy for Shields Road District Centre. In paragraph (xiii) of the Executive Summary to their report, Pieda said that, although there was “general market interest in the provision of a major foodstore in the East End of Newcastle”, the “Centros/Rokeby proposal [for a superstore development on the Site] is not the best proposal from an operator’s point of view”. In paragraph (xxxv) Pieda said:
“In reaching our conclusions we recognise the pressing needs which exist for improved foodstore provision serving the East End. However, our assessment indicates that at most there is only sufficient expenditure to support at most one large (68,000 sq ft) and one medium sized (30,000 sq ft) foodstore. Allowing development of a major foodstore elsewhere in the East End would effectively prevent Shields Road attracting the scale of investment needed to improve its appeal as a shopping destination.
(xxxvi) We therefore recommend that if the East End Partnership and the City Council wish to pursue the regeneration of Shields Road as a primary objective of its SRB programme it must support the development of a 68,000 sq ft gross foodstore as proposed by Centros/Rokeby who have been selected through a competitive process as preferred development partner.”
99. What has created the value in the reference land is the grant of planning permission for a superstore. I am satisfied that planning permission, whether for the actual development or the PAL development, would not have been granted in the absence of the regeneration proposals embodied in the 1998 joint venture agreement; and because of those proposals NCC would not have granted planning permission for a food superstore elsewhere in the East End of Newcastle. As a matter of judgment I conclude that these proposals ought to be treated as the scheme underlying the acquisition by analogy with Case 2. Waters suggests that this points to the wider scheme as being appropriate. I consider that a valuation which reflected the effects of that scheme would not represent value to the owner. I therefore find that compensation should be assessed on the basis that there would have been no operator demand for a food superstore on the PAL site, and no planning permission sought for such development.
Conclusion
100. I have concluded that there would have been no demand for a foodstore on the PAL site in the absence of the scheme underlying the acquisition, and that that scheme should be disregarded in assessing compensation. The only valuation evidence before me which assumed no foodstore demand is Mr Harris’s figure of £79,200, which I accept. I therefore determine that the compensation payable to the claimant should be £79,200. If I am wrong, and the land falls to be valued on the basis of its retail development potential, the compensation payable would be £270,600. A decision on costs accompanies this decision, which will take effect when the question of costs is decided.
Dated: 20 January 2010
N J Rose FRICS