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Cite as: [2012] UKUT 8 (LC)

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UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2012] UKUT 8 (LC)

UTLC Case Number: ACQ/329/2008

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

COMPENSATION – compulsory purchase – land required for road widening and access to development – the form of planning permission to be assumed on the basis that land allocated in the Development Plan – whether in the alternative land had ransom value – valuation – compensation determined at £650,000 - Land Compensation Act 1961 s.16(3)

IN THE MATTER OF A NOTICE OF REFERENCE

BETWEEN ISRAEL ISAAC KAUFMAN

CHAIM YEHUDA ALEXANDER KAUFMAN Claimants

and

THE BOROUGH COUNCIL OF GATESHEAD Acquiring

Authority

Re: Land west of Mill Road and north of Hawks Road forming part of land known as the Lumsden Site, Hawks Road, Gateshead, Tyne & Wear NE8 3AD

Before: Her Honour Judge Alice Robinson and N.J. Rose FRICS

Sitting at: South Tyneside Magistrates Court, Millbank, Secretan Way, South Shields, Tyne & Wear NE33 1RG and 43-45 Bedford Square, London WC1B 3AS

on 19-23 and 28 September 2011

Guy Roots QC and Alexander Booth instructed by Sintons Solicitors of Newcastle upon Tyne for the Claimants

Richard Drabble QC instructed by Mike Barker Solicitor for the Acquiring Authority

The following cases are referred to in this decision:

Thomas Newall Ltd v Lancaster City Council [2010] RVR 223, UT(LC)

Hall & Co Ltd v Shoreham UDC [1964] 1 WLR 240, CA

City of Bradford v Secretary of State for the Environment (1987) 53 P&CR 55, CA

Newbury District Council v Secretary of State for the Environment [1981] AC 578, HL

Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759, HL

Jumbuk Ltd v West Midlands Passenger Transport Executive [2008] RVR 186, LT

Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565, PC

Transport for London v Spirerose Ltd [2009] 1 WLR 1797, HL

Batchelor v Kent County Council (1989) 59 P&CR 357, CA

Stokes v Cambridge Corporation (1961) 13 P&CR 77, CA

Waters v Welsh Development Agency [2004] 1 WLR 1304, HL

The following cases were also referred to in argument:

LCC V Tobin [1959] 1 WLR 354, CA

Potter & Potter v London Borough of Hillingdon [2010] UKUT 212 (LC)

Bwllfa and Merthyr Dare Steam Colleries (1891) Ltd v Pontypridd Water Works Company [1903] AC 426, HL

Sainsbury’s Supermarkets Ltd v Wolverhampton City Council [2011] AC 437, SC

Sutton v Secretary of State (1984) 50 P&CR 147, QBD

Rooff Group Ltd v Secretary of State [2011] EWCA Civ 435

DECISION

Introduction

1. This is a reference to determine the compensation payable to Israel Isaac Kaufman and Chaim Yehuda Alexander Kaufman (the Claimants) by the Borough Council of Gateshead (the Acquiring Authority) in respect of the compulsory acquisition of freehold land west of Mill Road and north of Hawks Road forming part of land known as the Lumsden Site, Hawks Road, Gateshead, Tyne and Wear NE8 3AD (the reference land) pursuant to The Borough Council of Gateshead (Land at Mill Road) Compulsory Purchase Order 2001 (the CPO).

2. Mr Guy Roots QC and Mr Alexander Booth of counsel appeared for the Claimants and called three expert witnesses: Christopher Checkley BA (Hons) MRTPI (planning), Allan Short BSc MSc CEng MICE MCIHT (transport) and Jason Wall BSc (Hons) MLE LLM MRICS ACI Arb (valuation). Mr Richard Drabble QC of counsel appeared for the Acquiring Authority and also called three expert witnesses: Cliff Ayton BSc DipTp MRTPI (planning), Andrzej Szandrowski BEng (Hons) (transport) and Kevin Bramley BSc FRICS (valuation).

Facts

3. The parties produced a Statement of Agreed Facts and Matters in Dispute. From these together with the evidence and our accompanied inspection of the reference land on 22 September 2011 we find the following facts. The reference land comprises an area of 1635 square metres on the north western corner of the junction of Mill Road and Hawks Road in Gateshead, Tyne and Wear. At the valuation date it was unused, undeveloped and unoccupied industrial land largely covered with trees, bushes and scrub and sloped gently down towards the north and east. The land lay above the level of the adjoining highways and was retained by stone walls on the Mill Road and Hawks Road frontages. The retaining wall to Mill Road was mainly 4m high reducing in height to 3m on the corner with Hawks Road.

4. The reference land formed part of and lay at the eastern end of a larger area of land known as the Lumsden site of which it formed the eastern boundary. There was no direct access from the highway to the reference land, access to which could only be gained through the Lumsden site which is itself accessed from Hawks Road. The whole of the Lumsden site comprises 1.75 hectares, the Lumsden site excluding the reference land comprises 1.586 hectares. At the valuation date there were a number of buildings on the Lumsden site comprising factory premises, workshops, offices and stores. There was also some vacant land. Units on the Lumsden site were occupied by a number of businesses pursuant to tenancies, some oral, others written. In particular, three businesses occupied pursuant to leases protected by the Landlord and Tenant Act 1954 Part II which did not expire until 2005 (Microtech), 2007 (BEL) and 2009 (Acrol).

5. To the south of the Lumsden site including the reference land lies Hawks Road, to the west a pedestrian walkway known as Maidens Walk, to the east Mill Road and to the north former industrial land previously known as the Ropeworks site owned by the Acquiring Authority. To the north of the Ropeworks site lies South Shore Road and beyond that the River Tyne. The Lumsden and Ropeworks sites form part of a larger area identified in the Gateshead Unitary Development Plan adopted in 1998 (the UDP) as the Central Riverside Area which the UDP proposed for regeneration for mixed uses. At the valuation date a number of sites in the Central Riverside Area close to the reference land had been or were in the process of being redeveloped.

6. West of the Ropeworks site, the Sage Gateshead was under construction, a large music venue. It opened in December 2004. North and east of the Ropeworks site, a former flour mill had been converted into the Baltic Centre for Contemporary Art which was open. Also north of the Ropeworks site, a footbridge linking Gateshead to Newcastle on the other side of the river had been completed and was open, the Gateshead Millennium Bridge. On 25 June 2002 a traffic regulation order was made creating a pedestrian zone on South Shore Road north of the Ropeworks site which was available for buses but not private cars.

7. On 7 May 1999 outline planning permission was granted (1334/98) in respect of the whole of the Lumsden and Ropeworks sites (including the reference land) for leisure, food & drink and hotel uses with associated car parking. The illustrative plans envisaged that vehicular access to the development would be provided from Mill Road and an improved Maidens Walk. On 30 April 2001 detailed planning permission was granted (580/00) in respect of the eastern part of the Ropeworks site (and some additional land) which became known as Zone A to provide 237 residential apartments, car parking and landscaping. On 15 November 2001 the Acquiring Authority entered into an agreement for a building lease of Zone A with Bryant Homes Northern Limited. At the valuation date the development of Zone A in accordance with permission 580/00 was under construction and most of the structural steelwork had been erected. The main vehicular access was to be from South Shore Road and two secondary accesses were proposed from Mill Road, one adjacent to the reference land although there is an issue as to when the detail of this was approved pursuant to condition 27 of the planning permission.

8. On 4 July 2001 approval of reserved matters was granted (581/00) in respect of the western part of the Ropeworks site (and some additional land) which became known as Zone B for a cinema, leisure outlets, restaurant and bar units and a hotel with associated car parking. The reserved matters approval included the reference land and part of the western edge of the Lumsden site adjacent to Maidens Walk in order to provide the approved vehicular access to the site from Mill Road and an improved Maidens Walk. The permission was not implemented.

9. On the valuation date Zone B comprised a cleared site on a number of different levels. There was a narrow strip at the northern end parallel with and at the same level as South Shore Road and south of that a further narrow strip at a slightly higher level. Both these areas were in use as a temporary car park accessed from South Shore Road. Land to their south lay at a much higher level, in the order of 6 metres higher, contained by a retaining wall that ran east/west across almost all of Zone B and extending partly into Zone A. Much of the land south of the retaining wall was in use as a contractors compound for the development of Zone A. The land sloped still higher towards the south western corner of Zone B which lay at the same level as Maidens Walk, Abbotts Road and the Lumsden site.

10. On the valuation date a further outline planning application with some details fixed had been made but not yet validated and registered (997/02) in respect of the same land as the existing approval of reserved matters (i.e. Zone B, the reference land and part of the western edge of the Lumsden site adjacent to Maidens Walk) for leisure, retail, food & drink, hotel and residential uses together with car parking. Vehicular access was again proposed from Mill Road and an improved Maidens Walk. Planning permission was granted on 8 November 2002.

11. On 29 November 2000 an outline planning application was submitted (1272/00) in respect of the Lumsden site including the reference land for residential development. It had not yet been determined on the valuation date, but on 2 January 2003 the Acquiring Authority resolved to approve the application subject to conditions and completion of an agreement under section 106 of the Town and Country Planning Act 1990 (the 1990 Act) which would provide for access from an improved Maidens Walk.

12. The Acquiring Authority using its powers as highway authority carried out improvements to the northern half of Mill Road to re-align and widen the carriageway and provide footways and cycle lanes on both sides. The works started in February 2000 and were completed in December 2001. On 20 June 2001 the Acquiring Authority made the CPO under section 226(1)(a) of the 1990 Act the stated purpose of which was

“for the purpose of securing the carrying out of development, redevelopment or improvement by:-

a) widening Mill Road and

b) providing an access into the proposed mixed use leisure development on the adjacent site known as the Ropeworks Site.”

On 12 July 2001 an objection was lodged on behalf of the Claimants but following negotiations this was withdrawn on 16 November 2001. The CPO was confirmed by the Secretary of State on 14 December 2001.

13. On 10 June 2002 the Acquiring Authority executed a general vesting declaration which had the effect of vesting the reference land in the Acquiring Authority on 16 July 2002, the valuation date.

Issues

14. The claim for compensation is for (a) the value of the reference land and (b) the cost of preparing the claim. The latter has been agreed at £1,800.99. The claim for the value of the reference land is put on two alternative bases. First, the value of the reference land for residential development, it being agreed that this would be more valuable than any other form of development for which planning permission might be granted. Second, the value of the reference land as a ransom strip for access to Zones A and B and the widening of Mill Road. In their written evidence the Claimants also relied on the ransom value of the reference land for the purpose of widening Mill Road to two developments in South Shore Road. However, at the hearing this argument was abandoned as on any view such ransom value was less than that for Zones A and B.

15. As to residential value, it is common ground that at the valuation date the Lumsden site formed part of the Central Riverside Area in the UDP which is allocated in policy R4 for “residential, B1 uses (offices/light industrial) and leisure.” Further, planning permission might reasonably have been expected to be granted for the reference land in conjunction with the rest of the Lumsden site (but not on its own) for residential development pursuant to section 16(3) of the Land Compensation Act 1961 (the 1961 Act). The dispute between the parties is as to the form that planning permission would take and the consequent value of the reference land on the assumption of such a planning permission pursuant to section 14(1) of the 1961 Act.

16. As to ransom value, the Acquiring Authority accepted that part of the reference land was needed to construct the approved access to Zones A and B but submitted that any consequent ransom value should be ignored in accordance with the Pointe Gourde principle as it was entirely the product of the scheme underlying the CPO. The main issue between the parties was as to how that principle should be applied to the facts of this case. If the reference land had a ransom value a further issue arose as to how this was to be valued having regard to rule 2 of section 5 of the 1961 Act namely “the amount which the land if sold in the open market by a willing seller might be expected to realise.”

Residential value – the planning permission

17. On behalf of the Claimants Mr Checkley produced a number of sketches showing potential layouts of residential accommodation on the Lumsden site. After some criticisms of these were made by Mr Ayton on behalf of the Acquiring Authority, Mr Checkley produced a revised layout in his Addendum Report showing that 303 units could be built on the site as a whole compared with 253 without the reference land. Thus the inclusion of the reference land enables a further 50 units to be accommodated. The Claimants’ approach to valuation was then to value what the owner of the rest of the Lumsden site would pay to obtain the reference land and build a further 50 units.

18. The Acquiring Authority accepted that the Lumsden site including the reference land could have been developed for about 300 units of residential accommodation but argued that Mr Checkley’s revised layout would not have obtained planning permission on design grounds. In addition, it argued that the developable area of the Lumsden site was significantly reduced by the need to provide various forms of infrastructure which would have been required by condition and/or section 106 obligation of any planning permission. The Acquiring Authority’s valuation approach was to deduct the areas required for infrastructure and calculate the percentage of the balance of the Lumsden site formed by the reference land, then apportion the residential site value accordingly on an area basis.

19. In our judgment planning permission could not reasonably have been expected to be granted for Mr Checkley’s most recent layout without removing all or most of the retaining wall to Hawks Road and Mill Road. Our reasons are as follows.

20. For the purpose of deciding the form of the section 16(3) planning permission it has to be assumed that the scheme, whatever that is, is cancelled on the valuation date, see section 16(7) of the 1961 Act and Thomas Newall Ltd v Lancaster City Council [2010] RVR 223 paragraphs 19 to 21. At the very least this includes the widening of Mill Road adjacent to the reference land. The photographs of the reference land taken in April 2002 show very clearly the looming and unattractive presence of the retaining wall which dominates the street scene in Mill Road and Hawks Road until it reaches the frontage building and steps down considerably in height. Mr Checkley himself described Mill road as “narrow, gloomy and canyon-like” (report paragraph 3.12). He also recognised the merit of Mr Ayton’s concern that placing 8-12 storey blocks on top of the wall would result in an overbearing effect on the users of Mill Road, which is why his revised layout shows these blocks considerably set back (Checkley Addendum report paragraph 4, first bullet point), a point he repeated orally.

21. The UDP contains a number of policies which seek to maintain and improve the environment, removing its worst aspects (policy E1) and to handle the spaces between buildings and the spaces between and around them in a sensitive manner (policy E3). The plan recognises the importance of environmental enhancement to regeneration which is reflected in policy R3’s stated intention to carry out works to improve the landscape and built environment. In addition the East Gateshead Environmental Strategy’s overall strategy for Gateshead Quays is to create a high quality public realm. Removal of the retaining wall, or at least its reduction to a height of no more than one metre, and introduction of a landscaped batter would significantly improve the visual appearance of development on the Lumsden site as well as the environment of the area, whereas its retention would perpetuate an unattractive feature of the site contrary to these policies and objectives.

22. When asked why his layouts showed the retaining wall remaining Mr Checkley said that it was part of his instructions (to assume cancellation of the scheme). He added that removing the wall was a possibility but he thought his revised scheme would still get planning permission. The fact that the scheme must be assumed to be cancelled does not constrain the form of development for which planning permission could reasonably have been expected to be obtained. We do not consider that Mr Checkley’s response was as robust as was submitted in closing, rather that he had not previously considered the position if the retaining wall could be removed and was trying to recover his position. We consider that, had he not felt so constrained by his instructions, he would in all probability have produced a layout showing the retaining wall removed. It is to be noted that where Mr Ayton criticised the site levels (Addendum Report paragraph 2.2) that was in the context of the retaining wall. At the hearing he said it would be quite acceptable if the wall was removed to a height of one metre and an appropriately landscaped batter provided.

23. Mr Ayton’s only other design criticism of Mr Checkley’s revised layout (as opposed to failure to make provision for infrastructure) was that the blocks should not step in storey height from 12 to 8 to 10 going down Mill Road. However, he recognised that this could easily be overcome by reversing the order of blocks so they were 12, 10 and 8 storeys. In his Addendum Report Mr Ayton also said there should be further information as to ground levels. This was not a point he had made before despite other detailed criticisms of Mr Checkley’s layouts in his Rebuttal statement which appeared to assume that the buildings would be constructed at ground level. Mr Checkley also stated in oral evidence that levels would remain broadly as they are. We accept Mr Checkley’s evidence, not challenged in cross examination or contradicted by Mr Ayton at the hearing, that the amount of detail provided is sufficient to give us an idea of what would get approved for the purposes of section 16(3) and s.14(1) of the 1961 Act. It is not necessary for the amount of detail to be provided that would be appropriate for a planning application when the purpose of the section 16(3) assumed permission is to enable land to be valued. We note that the Lands Tribunal, as it then was (P.R. Francis FRICS), reached a similar conclusion in Jumbuk Ltd v West Midlands Passenger Transport Executive [2008] RVR 186. (We further note that, when information as to ground levels was produced as part of the information sought by us as to the cost of removing the retaining wall and consequent regrading, the Acquiring Authority itself produced two schemes, options 1 and 3, which it did not dispute would have been acceptable in planning terms and would have enabled about 300 units to be developed (see paragraphs 40 to 48 below.)

24. Turning to infrastructure, the Acquiring Authority’s case is that provision would have to be made as part of the development of the Lumsden site for the following: (1) an improved Maidens Walk to provide access to the Lumsden site and Zone B, (2) a footway on the western side of Mill Road adjacent to the site, (3) a pedestrian/visual corridor through the site (the crucible), (4) a footway on the northern side of Hawks Road adjacent to the site, (5) a set back at the junction of Hawks Road and Mill Road (the cirque) and (6) safeguarding for the widening of Mill Road. Although not relied upon by Mr Ayton, Mr Bramley also referred to a requirement for an east/west link along the northern boundary of the Lumsden site. We deal with each of these in turn.

25. (1) Mr Checkley accepted that access could be provided to the Lumsden site via an improved Maidens Walk and his layouts made provision for this. He also said that it was not the only way to provide access but no alternative means of access has been examined in the evidence. Mr Checkley’s layouts also safeguarded land for the access to be extended to Zone B. The effect of the need for this access on value was disputed and is dealt with later.

26. (2) & (3) It is convenient to deal with these together as they both relate to pedestrian access to the north of the Lumsden site. Although it post dates the valuation date there was no dispute that the resolution to approve application 1272/00 on 2 January 2003 was relevant as an indication not very far from the valuation date as to the terms of any assumed planning permission under s.16(3). Apart from a requirement that vehicular access be from Maidens Walk the resolution does not refer to pedestrian access save in general terms that “Works to accord with public realm requirements.” It was common ground that this is a reference to ‘Gateshead Quays The Public Realm’ prepared between 1999 and 2001 though never formally adopted. This document refers to the importance of pedestrian routes between Gateshead town centre and Gateshead Quays (including the Millennium Bridge) and requires footways to be provided on both sides of Hawks Road and Mill Road. It contains a number of plans with indicative pedestrian routes using such footways, including to the west of the Lumsden site but no route through the Lumsden site. There is no reference to any visual link to the Millennium Bridge from land to the south of it.

27. Planning permission 581/00 for Zone B condition 34 required a pedestrian link to the south from the multi-storey car park but the approved plans show this linking to Mill Road to the east between the Lumsden site and Zone A, not directly through the Lumsden site. However, condition 33 appears to require the multi storey car park to be designed in such a way that in the future a footbridge link could be provided into the Lumsden site. The later application 997/02 had not been validated by the valuation date and was therefore not in the public domain. It provided as part of the outline proposals a “central pedestrian mall south through the development with the potential to extend southwards as a strategic walkway to other sites including Baltic Business Park” (officer’s report to the development control panel dated 6 November 2002). The Baltic Business Park lies south east of the reference land on the opposite corner of the junction of Mill Road and Hawks Road. Condition 47 of the planning permission subsequently granted was similar to condition 33 on 581/00.

28. In the draft section 106 obligation dated May 2003 prepared by the Acquiring Authority for the planning application for the Lumsden site a 20m wide visual and 5m wide pedestrian corridor is required across the site from the Mill Road/Hawks Road junction in a north westerly direction linking with Zone B. In November 2003 draft urban design guidelines for development of the Lumsden site prepared by an urban design officer also sought this visual and pedestrian link.

29. Against this background we consider that at the valuation date there were sound planning reasons for the provision of some form of pedestrian link from Hawks Road northwards through or around the Lumsden site to link land to the south including Gateshead town centre with Gateshead Quays to the north. However, for the reasons which follow we do not consider that the section 16(3) assumed planning permission would require provision of a footway along Mill Road or a crucible style link through the Lumsden site.

30. It is necessary to assume cancellation of the scheme which included the widening of Mill Road and provision of a footway on its western side by virtue of the required assumption in section 16(7) that ‘no part of the relevant land were proposed to be acquired by any authority possessing compulsory purchase powers’. To require provision of a public highway by condition or section 106 obligation instead of by CPO would be unlawful because it would require the developer to provide at his expense and without compensation a public benefit that should properly be provided by the local authority, see Hall & Co Ltd v Shoreham UDC [1964] 1 WLR 240, CA and City of Bradford v Secretary of State for the Environment (1987) 53 P&CR 55, CA. This would not prevent such a footway being required if it was necessitated by development of the Lumsden site itself because then it would directly relate to the development, see Newbury District Council v Secretary of State for the Environment [1981] AC 578, HL and Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759, HL.

31. In our judgment provision of a footway on the western side of Mill Road would not be necessitated by development of the Lumsden site provided occupants of the Lumsden site could access Hawks Road and the riverside to the north. Mr Checkley’s revised layout envisages a pedestrian access from Hawks Road into the site. Moreover, it would be possible to access the Sage and riverside along Maidens Walk. In the light of the clear guidance in ‘Gateshead Quays The Public Realm’ of the need for pedestrian links to the riverside and indication in the planning permission 581/00 of a proposed access through the middle of Zone B we consider that a reasonable planning authority could require a pedestrian link to join the Zone B pedestrian access point either through the Lumsden site or along Mill Road or even along the eastern edge of the Lumsden site. This is consistent with conditions 31 and 32 of the draft decision notice dated 18^th May 2005 which requires pedestrian links within the site and to link to Zone B.

32. However, the purpose of such a pedestrian link would be to facilitate movement and could be achieved without difficulty on Mr Checkley’s revised layout either through the car park as proposed in planning permission 581/00 or along the internal road spur to the right of it and from there along the east/west link between the sites. There is no evidence that at the valuation date the Acquiring Authority had any intention of adopting a crucible style 20 metre visual link to the Millennium Bridge. The letter dated 1 August 2002 from the Acquiring Authority to the Claimants’ agent in connection with their planning application 1272/00 refers only to an emerging proposal for a pedestrian axis with no mention of visual links. There is no plan showing the full extent of the visual corridor the authority had in mind. Moreover the idea is wholly unsupported by any analysis such as of levels and the visual corridor that would be required in order to obtain the necessary views. We noted on the site visit that the Millenium Bridge cannot be seen from Quarryfield Road or from the Baltic Business Park unless one walks a substantial way into the Business Park and looks across land which appears to be identified for building development (see for example the draft Quays Masterplan at the back of the draft Urban Design Guidelines for the Lumsden site). The assertion that such a link would enable one to see the Millenium Bridge is wholly untested other than by drawing a line on a map.

33. The fact that the Claimants may have been willing to consider provision of such a link in the section 106 obligation as part of a package deal does not necessarily mean it could be required if opposed as it is for present purposes. Further, Mr Snowden, the Claimants’ former planning expert who withdrew owing to ill heath, has not given evidence or been questioned as to the basis on which he assumed the crucible would be included in any planning permission.

34. Given the lack of any support in policy or guidance for the crucible link and given the lack of any analysis which could support such a link as a design consideration as well as the fact that it would sterilise development of a substantial part of the Lumsden site, we do not consider that the reasonable planning authority would have required it at the valuation date.

35. (4) Mr Checkley accepted that the development would require provision of a footway adjacent to Hawks Road. Examination of the land ownership plan in the draft section 106 obligation shows that there was a strip of land within the Claimants’ ownership along the southern boundary of the Lumsden site that lay south of the retaining wall and north of the public highway. Mr Checkley’s layouts showed a footway south of the retaining wall and the Acquiring Authority did not dispute that it could be provided there. In fact Mr Checkley produced a further revision of his layouts, Option A: SK-500 Rev D, with very minor changes showing exactly how a footway adjacent to Hawks Road could be provided. This does not affect the number of units which could be developed on the site consistently with Mr Checkley’s revised layout.

36. (5) As to the cirque, this was even less of a proposal at the valuation date than the crucible as a visual corridor. It is not referred to in the letter dated 1 August 2002 which refers to the emerging pedestrian axis (see paragraph 32 above) nor in any document other than the draft section 106 obligation and draft Urban Design Guidelines for the Lumsden site which post date the valuation date. The latter document says no more than that the cirque is the main traffic junction and nodal point, it contains no requirement that buildings fronting it be set back in any way. We agree with Mr Checkley that this proposal simply did not exist at the valuation date and would not have been a requirement of the section 16(3) planning permission.

37. (6) The Acquiring Authority clarified that although it considered land within the Lumsden site should be safeguarded for the widening of Mill Road, it did not say the Claimants should be required to construct the widened road or give up their land for it without receiving its open market value. The Acquiring Authority also accepted that this part of the Lumsden site would otherwise be available for residential development and this requirement would not reduce its value in the compensation claim. For this reason it is not in fact necessary to decide whether such safeguarding could be required as a condition of a residential planning permission. The same applies insofar as widening Mill Road was required to provide a footway along the west side of Mill Road for the proper planning of the area, as opposed to being necessitated by the development of the Lumsden site.

38. Finally, as to an east/west link along the northern edge of the site, the need for this was disputed in evidence on behalf of the Claimants but Mr Ayton did not criticise Mr Checkley’s revised layout on this ground and indeed the layout would appear to enable a walkway to be provided.

39. To summarise, planning permission could reasonably have been expected to be granted for residential development of the Lumsden site subject to certain requirements. These include removal of the retaining wall or its reduction in height to no more than one metre and an appropriately landscaped batter, provision of vehicular access via an improved Maidens Walk, provision of a walkway along the northern edge of the site and a pedestrian link through or around the site from Hawks Road to Zone B to link with the Zone B proposed pedestrian access point. For the reasons already given, we are satisfied that these requirements can be met on Mr Checkley’s revised layout subject to one matter.

40. Because he assumed the retaining wall would remain, Mr Checkley did not provide a layout showing the number of units which could be accommodated on the Lumsden site including the reference land if the wall were removed or reduced in height. However, during the hearing the Tribunal sought written evidence from the parties as to the costs of removing/reducing the retaining wall so that they could be taken into account in the valuation, if appropriate. As part of that exercise both parties have submitted further revised schemes which take into account 2002 level surveys of the Lumsden site. These show a central plateau at about 25m AOD sloping down towards the highway frontages to between 21m and 22m AOD. The levels information was not previously put in evidence by either party.

41. The Claimants show a split level scheme so as to take account of the increase in levels from the boundaries towards the centre of the site. The blocks are in the same location as shown on Mr Checkley’s revision D layout but include a lower ground floor on the frontages at between 21m and 22m AOD raising these elevations by one storey. The cost of removing the retaining wall and consequent regrading is given as £41,550 (2002 prices).

42. The Acquiring Authority submitted that to construct Mr Checkley’s revision D layout at 25m AOD (i.e. raising ground levels at the front of the blocks) would be unacceptable visually. The Claimants do not disagree and submit that importing large amounts of fill for this purposes would be wholly unrealistic. Therefore the Acquiring Authority put forward two schemes with a single ground floor: either maintaining the building line and lowering ground levels to between 22m and 24m AOD (option 1) or moving the building line back with a building ground floor level of 25m AOD (option 3). In both cases a further option of adding a footway to Mill Road was included but as we have already concluded this is not necessary those options are not considered further. The costs of removing the retaining wall and consequent regrading is given as £354,580 (option 1) and £64,480 (option 3) (both 2002 prices).

43. The Acquiring Authority criticised the Claimants’ approach on the grounds that there would be an increase in the perceived height of the blocks, the elevations would be visually confusing and no information as to the differing slopes at the flanks of blocks F and H has been provided. Further, it was submitted that the cost would be £327,029 because insufficient allowance has been made for removal of material, retaining walls would be required for the split levels that have not been costed, there is no allowance for dealing with contamination, no cost has been included for removal of the boundary wall and regrading within the Lumsden site outside the reference land and the cost of constructing the footway on Hawks Road has been omitted.

44. The Claimants criticised the Acquiring Authority’s approach on the grounds that any developer would seek to minimise costs and maximise development value and work within the site levels rather than either importing large quantities of fill or removing more material than necessary. Any developer would build to existing ground levels as far as possible at the front and rear, incorporating single aspect apartments on the frontages. Further, it was submitted that the valuation evidence already makes an allowance for the cost of contamination.

45. We agree with the Claimants that any developer would seek to minimise costs and maximise development value and work within the site levels as far as possible. Comparing options 1 and 3, on the basis of Mr Wall’s valuation that one unit is worth £20,000, the difference between, say, £60,000 and £340,000 costs of removing the retaining wall and regrading would be the equivalent of 14 units. There is no suggestion that an additional 14 units could be included as a result of the substantial excavations required by the Acquiring Authority’s option 1 and this option is unrealistic.

46. When putting forward option 3 the Acquiring Authority do not suggest that moving the building line back as shown in Appendix 10 to its Supplemental Statement would be unacceptable in planning terms or reduce the number of units the site could accommodate below the ‘about 300’ figure which formed the basis of their approach at the hearing. On the other hand, neither it nor the Claimants have put forward any evidence to indicate that more than this number of units could be accommodated in option 3. Therefore we consider the evidence shows that in principle £64,480 represents the cost of removing the retaining wall and consequent regrading to achieve a development of about 300 units. We would make one adjustment to that figure. The landscaping works of trimming, topsoiling and seeding are not abnormal costs as both residential comparables have areas around the buildings that require either hard or soft landscaping. These costs (£5,398.40 and £1,518.30) should therefore be deducted and a consequent adjustment made to the 7.5% preparation and supervision costs. On the other hand, the cost of constructing the Hawks Road footway is an abnormal cost not reflected in the comparables and should be included. The cost should therefore be reduced to £57,045.42, say £57,000.

47. As to the Claimants’ split level scheme, whether or not it would be acceptable in planning terms we consider that the costs of it have been underestimated for some of the reasons given by the Acquiring Authority, namely insufficient allowance has been made for removal of material, retaining walls would be required for the split levels that have not been costed and it would be necessary to remove the boundary wall and regrade within the Lumsden site outside the reference land. Again adopting Mr Wall’s value of £20,000 per unit, the increased cost of these items would negate the benefits of the extra 7 units which the Claimants say can be accommodated by the split level scheme by a very substantial sum. Even making a generous allowance for uncertainty or disagreement with some of the Acquiring Authority’s costs, on the evidence we do not consider this option would be realistic.

48. It follows that on the evidence we are not satisfied that more than about 300 units could be developed on the site nor is there a layout which shows how many of these would be located on the reference land. The Acquiring Authority’s option 3 suggests it would be very few.

Valuation for residential development – evidence

49. In his initial expert report Mr Bramley said that he was aware of two comparable transactions to be used in considering the value of the reference land for residential development. The first was the sale of a long leasehold interest in Zone A. Mr Bramley said that the sale price was £3m, and payment was deferred until 18 months after 15 November 2001, the date the lease was completed. He calculated that the price paid was equivalent to an immediate payment of £2,160,000 net per ha (£840,466 net per acre).

50. The second comparable was the sale of part of the Bottle Bank site, now known as Curzon Place, a short distance to the west of the Lumsden site. The site lies close to three of the Central Tyne bridges and immediately south of the newly-developed Hilton hotel. The freehold interest was sold for £2,937,500, equivalent to £4,512,280.00 net per ha, or £1,826,803 per acre. The sale was completed on 30 July 2002, shortly after the valuation date.

51. Mr Bramley considered that the difference in the prices per acre paid for these two sites reflected the superior location of Curzon Place, closer to the town centre, with the benefits of good public transport accessibility and historic bridge links to Newcastle. At the time Zone A was in a more remote residential location, further from the town centre and severed from it by both the railway line and the A167 Gateshead Highway. In addition it adjoined operational industrial properties. Although Zone A was close to the Millennium Bridge, the bridge had only recently opened and its impact on the area was relatively unknown.

52. Mr Bramley said that both comparables enjoyed a number of advantages compared to the reference land. Detailed planning permission was available, not an outline consent that was being applied for by the Claimants. They were both offered for sale with vacant possession. Ground investigation requirements had been carried out. Some remediation had taken place and the sites were generally clear and ready for development to begin.

53. Before applying the net prices per acre which had been derived from his two comparables to the reference land, Mr Bramley considered it necessary to deduct the following areas from the gross area of the Lumsden site (namely 1.748 ha, or 4.32 acres):

	ha	acres
Allowance for land dedicated for New Maidens Walk highway	0.299	0.74
Allowance for new footway to Hawkes Road	0.036	0.09
Proposed east west link	0.158	0.39
North south link and building setback	0.113	0.28
New footway to Mill Road	0.023	0.056

54. The effect of these deductions was to produce a net developable area of the Lumsden site of 1.119ha, or 2.764 acres. The areas deducted reflected the requirements of the draft section 106 agreement. Although this was prepared after the valuation date, Mr Bramley considered that its requirements, or similar ones, could and would have been anticipated at that date. It was also reasonable to assume that there would have been a requirement to provide a new footway to Mill Road.

55. Using the prices paid for the two comparables, Mr Bramley arrived at the following gross site values for the Lumsden site.

	Curzon Place Comparison Hectares	Curzon Place Comparison Acres	Zone A Comparison Hectares	Zone A Comparison Acres
Net price per ha/acre	£4,512,289	£1,826,803	£2,076,923	£840,467
Net site area of Lumsden site	1.119	2.764	1.119	2.764
Gross site value	£5,049,251	£5,049,283	£2,324,076	£2,323,050

56. In order to compare the Lumsden site directly with the two comparables, Mr Bramley made the following deductions from the above figures of gross site value in order to reflect abnormal and other costs:

Archaeological site investigations, additional planning reports and reserved matters and/or detailed consent	£150,000
Demolition – 75,189 sq ft @ £4	£300,756
Reclamation and remediation say	£500,000
Allowance for landlord and tenant cooperation to secure vacant possession, say	£ 75,000
	_________ £1,025,756
Add for developer’s profit @ 25%	256,432
	£1,282,160 _________

57. The effect of making such deductions was to produce the following range of net site values for the Lumsden site:

Range of Values	Based on Curzon Place	Based on Zone A
Gross site value	£5,049,251	£2,324,076
Less aggregate of abnormal and other costs plus profit	£1,282,160	£1,282,160
Net site value	£3,767,091	£1,041,976

58. Having arrived at this range of values, Mr Bramley applied it to the reference land in proportion to site areas. The area of the reference land was approximately 9.35% of that of the entire Lumsden site. Its value was therefore £352,222 based on the Curzon Place comparable, or £97,420 based on the Zone A comparable.

59. Mr Bramley observed that the range of values based on the comparables assumed that vacant possession could have been achieved at the vesting date. This was not a realistic prospect at the Lumsden site, as various buildings were occupied by tenants with protected tenancies and vacant possession could not be guaranteed until the last tenancy expired in 2009. In addition further planning work, site investigations, demolition, reclamation and remediation would all take further time before the site could be developed. Mr Bramley considered it would be reasonable to reflect these matters by making a 50% deduction. This produced values of £176,111 based on Curzon Place and £48,710 based on Zone A.

60. Mr Bramley said that an alternative approach would be to defer the values derived from the comparables for eight years at 8%. On this basis the value would be £190,199 if based on Curzon Place or £52,606 based on Zone A. In Bramley’s opinion it would be reasonable to consider the reference land as being more comparable to Zone A than Curzon Place in terms of its attraction as a residential location. Nevertheless he rounded the Zone A derived value up to £75,000 to reflect the fact that the Curzon Place sale took place closer to the valuation date than the sale of Zone A.

61. Like Mr Bramley, in his first report Mr Wall relied on the sales of Zone A and Curzon Place in arriving at the value of the reference land. He expressed the view that Zone A might have been sold at less than market value, given that the site had not been offered generally on the open market. The most relevant transaction in considering whether the Zone A sale price was at market level was the Curzon Place sale. Mr Wall said that, according to the developer of Curzon Place, sale prices achieved for completed flats there between 2004 and 2007 were less than those paid at Zone A in 2003, even though residential values were rising throughout that period.

62. Mr Wall analysed the sale of Curzon Place, one month after the valuation date, to show approximately £1,500,000 per acre for a remediated development site at a density of 77 units per acre, or approximately £20,000 per unit. He observed that this transaction resulted from a full marketing exercise. It suggested that Zone A was either sold for less than market value, or its purchase price reflected more significant abnormal costs, or values had increased by approximately 50% between November 2001 and August 2002. He thought that a combination of all three factors was probably responsible. It was therefore arguable that the market value of Zone A at the valuation date was £4,740,000, based on an assumed planning permission for 237 residential units, equivalent to £20,000 per unit or £1,580,000 per acre. In considering the market value of Zone A at the valuation date, Mr Wall had regard to both comparable transactions. He adopted a rate of £16,000 per unit, giving a site value for Zone A of £3,792,000.

63. Mr Wall said that he had been advised by the Claimants’ then planning consultant, Mr Snowdon, that permission would have been granted for a minimum of 300 residential units on the Lumsden site. He prepared an appraisal of such a development assuming sale prices for completed apartments of £200 per sq ft (which he considered was probably conservative), building costs of £90 per sq ft and finance costs of 6.5% per annum. He made the following allowances for abnormal costs:

Land assembly	£ 250,000
S106 payments (sustainable transport)	£ 90,000
Land remediation at £400,000 per acre	£1,500,000
Planning costs	£ 100,000
	£1,940,000

64. This residual calculation produced a site value of £5,392,000, or £17,973 per plot net or £355 per square metre. On that basis the market value of the reference land would be £580,425 assuming a pro rota apportionment. Since the reference land was located at the eastern end of the Lumsden site, however, and the Acquiring Authority had expressed support for a landmark building in that area, the reference land would have provided more developable space and would therefore be likely to justify a higher site value.

65. After the expert reports had been exchanged Mr Wall discovered that his reservations as to the reliability of the Zone A comparable were justified. The figure of £3m previously referred to as the purchase price was in fact a base price. The agreed terms included a mechanism for “overage payments” in the event that the revenues achieved from the sales of the apartments exceeded certain thresholds. In the event the Acquiring Authority has received overage payments totalling £11,192,092 in addition to the base price. Mr Wall felt that this information reinforced his opinion that the Curzon Place transaction was the best comparable available. He disagreed with each of the reasons put forward by Mr Bramley to suggest that the location of Curzon Place was superior.

66. In his rebuttal report Mr Wall said that he had now been advised that the Tribunal was likely to attach more weight to evidence drawn from comparables, when available, than to a residual appraisal. He had also been instructed that on the basis of rule 2 he must envisage the reference land being offered for sale by a willing seller and that he should seek to identify the likely hypothetical purchasers. In his opinion the owner of the remainder of the Lumsden site would have been a potential purchaser. Mr Snowdon had by then withdrawn and Mr Checkley had advised that the incorporation of the reference land would enable the owner of the Lumsden site to obtain planning permission for an additional 56 apartments. Mr Wall therefore assessed the bid that the owner of the Lumsden site would make by multiplying the price paid for Curzon Place – equivalent to £20,000 per apartment – by 56, producing a gross value, from which any abnormal costs should be deducted, of £1,120,000.

67. Mr Wall said that, without the reference land, the owner of the remainder of the Lumsden site would have had the opportunity of developing the existing site for residential use. To do so he would first have had to secure vacant possession, demolish the existing buildings, reclaim/remediate the site, obtain archaeological reports and undertake site investigations, produce additional planning reports and obtain reserved matters or detailed planning approval. The owner of the Lumsden site would have had regard to the fact that the reference land would provide the opportunity to develop a further 56 apartments with relatively limited additional abnormal costs. The only elements of the abnormal costs suggested by Mr Bramley which would need to be considered were the £500,000 reclamation and remediation costs and the cost of archaeological investigations, which would be part of the £150,000 which had been assessed on the gross area of the site including the reference land. On a pro rota basis the remediation costs of the reference land would be 9.35% of £500,000, or £46,750. Assuming that £50,000 of the £150,000 estimated by Mr Bramley was for the archaeological investigation, the cost for the reference land would be £4,675. The total to be deducted would thus be a maximum of £51,425. Deducting this figure from the gross development value of £1,120,000 produced a net site value of £1,068,575, say £1,050,000.

68. In his rebuttal report, Mr Bramley corrected the information he had previously provided about the sale of Curzon Place, having ascertained that the price paid included VAT. He now accepted that the net price was £2,500,000 as indicated by Mr Wall, which he said was equivalent to £1,554,726 per acre.

69. Mr Bramley still did not refer to the overage provisions in the sale of Zone A. He said, however, that he now considered that he had placed insufficient weight on the change in values between the date of the Zone A transaction and the valuation date. He now agreed with Mr Wall that the market value of Zone A at the valuation date was £1,500,000 per acre. From this figure he made the same deductions for abnormal expenses as in his first report, but he followed Mr Wall in deducting £90,000 as a contribution towards the cost of sustainable transport. He again deducted 50% to reflect the need to obtain vacant possession and arrived at a site value of £1,375,000, of which the amount apportioned to the reference land was £127,933, say £130,000.

70. Mr Wall further amended his valuation in the course of cross-examination. He said that he had been advised that Mr Checkley now considered that 50 additional units could have been erected on the Lumsden site if the reference land were included, not 56. In addition Mr Wall accepted that he had been wrong not to allow for the delay in securing vacant possession. The effect of these changes was to reduce his valuation from £1,050,000 to £755,000, as follows:

Gross site value - 50 units at £20,000 £1,000,000

Less remediation 9.35% of £500,000 £ 46,750

£ 953,250

Less 3 years holding costs at 6.5% of £ 198,180

£953,250

£ 755,070

say £ 755,000

Residential development value – conclusions

71. In its final form, Mr Wall’s valuation was based on the assumption that the addition of the reference land would have enabled the owner of the balance of the Lumsden site to increase the size of the overall development by 50 residential units. That assumption was in turn based on a revised layout drawing produced by Mr Checkley, which contained no provision for regrading works to the eastern section of the Lumsden site and the reduction in the height of the retaining wall, which we have found would have been required as a condition of any residential planning consent. After considering the parties’ further submissions on this issue, we have found that the only realistic scheme which identifies the cost of removal of the retaining wall and consequent regrading is the Acquiring Authority’s option 3 which does not include a detailed layout or identify the additional number of units which inclusion of the reference land would add to the development.

72. In the absence of a detailed layout of the potential development following such works which identifies the precise number of additional units that could be provided, we are unable to conclude that a development on the entire Lumsden site would have incorporated a greater density on the reference land than on the remainder. In these circumstances and given that the reference land could not be developed at all except as part of a scheme utilising the rest of the Lumsden site we prefer Mr Bramley’s approach, which was to calculate the value of the entire site and then apportion it to the reference land in line with the respective site areas. That had been the approach adopted by Mr Wall in his first expert report.

73. In estimating the price he could afford to pay for the reference land, we consider that the owner of the balance of the Lumsden site would first have calculated the value of the entire site, assuming it was ready for immediate development, and then deducted all the costs which would be incurred in bringing the site up to that condition. So far as the latter related to the exercises of securing vacant possession and demolishing the existing buildings, we consider that the total allowance would be spread across the whole site. It was in our view unrealistic of Mr Wall to suggest that the reference land would have been valued on the basis that vacant possession was available immediately. Whilst that approach accorded with the strict factual position – there were no buildings or tenancies on the reference land at the valuation date – since it is agreed that the reference land could only be redeveloped in conjunction with a larger area, its residential development potential could only be realised once the remainder of the site was fully vacant and cleared of buildings.

74. We start, then, with the site value of the entire Lumsden site, for which purpose we assume planning permission for a development at a density similar to that permitted on Curzon Place which is consistent with the planning evidence that the site could accommodate about 300 units. Mr Bramley suggested a number of reasons why the Curzon Place site was in a more valuable residential development location than the Lumsden site. In the light of the evidence and our inspection of the two sites we have no hesitation in rejecting that proposition. We find that the views from flats to be constructed on the Lumsden site and the layout of the site generally would be significantly better than at Curzon Place, and that Mr Bramley’s description of the location of the latter overstated its positive qualities. The relative merits of the two locations are in our view illustrated by the sale prices achieved when the Curzon Place and Zone A apartments were first marketed close to the valuation date. In answer to a question from the Tribunal Mr Bramley said that the developers of Zone A agreed to forward sell various flats at an average price of approximately £204 per sq ft when they were first placed on the market at the beginning of August 2002. At about the same time the proposed apartments at Curzon Place were being offered for sale at an average price of only £193 per sq ft.

75. The prices paid for Zone A flats reflected, among other matters, the existence of an industrial estate on the adjoining Lumsden site, a disadvantage which would not apply if the Lumsden site itself were being offered for sale for residential development. In our view the potential sale value of apartments on the Lumsden site was approximately £210 per square foot. We bear in mind that, other things being equal, an increase in the value of completed flats is likely to result in a more than proportionate increase in site value, because of the gearing effect which operates in residual valuations. We find that the price paid for the Curzon Place site (which was eventually agreed to be £1,554,726 per acre) should be increased by approximately 20 per cent to £1,850,000 per acre to reflect the superior location of the Lumsden site.

76. There is in our view no justification for reducing the area of the Lumsden site to reflect our finding that the planning consent for its residential development would require the provision of a walkway along the northern edge of the site and a pedestrian link from Hawkes Road to Zone B. Since internal circulation routes and open spaces have been provided in the Curzon Place development, there is in principle no material difference between the two sites in this respect assuming, as we have found, that a similar density of development would be permitted on each. The improved access to the Lumsden site at Maidens Walk would, however, be more substantial in nature than any of the internal roadways at Curzon Place. Although the similarity in the permitted densities does not generally justify a reduction in the area of the Lumsden site which falls to be valued, we consider that the cost of constructing this roadway would be viewed as an exceptional development cost. We refer to this further below.

77. We have not overlooked the fact that the overage formula agreed on the sale of Zone A would produce a site value for the Lumsden site well in excess of £1,850,000 per acre if the level of apartment sales at £204 per sq ft achieved on Zone A were applied to it. Although we felt at one time that assistance might be obtained from such an exercise (or, indeed, from one using the value of £210 which we have concluded would have been achieved on the Lumsden site), on reflection we agree with Mr Wall that the straightforward contemporaneous sale of Curzon Place is a more reliable indicator of site value than the complicated transaction that was entered into in respect of Zone A. (The negotiations for the sale of Zone A were conducted on behalf of the Acquiring Authority by Mr Bramley. His failure to disclose the full terms of the agreement in his reports was, in our judgment, a breach of his professional duty to the Tribunal).

78. We turn to the deductions to be made for abnormal costs. Our conclusions are as follows. We have found that the cost of lowering or replacing the retaining wall was £57,000. There is no need to allow for the costs of further planning advice since, in our judgment, the planning permission which is to be assumed pursuant to section 16(3) of the 1961 Act is a detailed one. No allowance should be made for archaeological investigations because Mr Wall said, and we accept, that there had been a similar requirement in the Curzon Place planning consent. We accept Mr Bramley’s estimated costs of demolition (£300,756, say £300,000) and reclamation and remediation (£500,000). The contribution which would be required in a section 106 agreement towards the cost of sustainable transport is agreed at £90,000. For the reasons already given we consider that the cost of constructing the Hawks Road footway is also an abnormal cost which should be deducted. However, this sum is already included in the cost of lowering or replacing the retaining wall.

79. As we have said, we think that a purchaser of the Lumsden site would consider that the cost of constructing a new Maidens Walk access road to service residential development of the site was an abnormal cost which should be deducted from the site value derived from the Curzon Place comparable. Mr Bramley estimated this cost at £350,000, a figure which Mr Wall considered to be high on the basis of his experience of the cost of a major roundabout (£500,000) and a mini roundabout (£250,000). In the absence of any further evidence on this matter, we find that the appropriate reduction would be £300,000. We accept Mr Wall’s opinion that, having made a deduction to cover all the abnormal costs, a purchaser would not make an additional allowance for profit on such costs.

80. A further adjustment is to be made for the cost of obtaining vacant possession. In its final form Mr Wall’s valuation reflected the need to secure possession by deferring the dead ripe value for 3 years at 6.5% per annum. Whilst we consider that this approach reasonably reflects the time likely to be taken before possession of the entire site would be available, it ignores the legal costs and statutory compensation payments that would be required to secure the termination of the short-term lettings. More importantly, it fails to take account of the fact that two of the leases had more than three years unexpired and that the tenants of those properties would have had to be persuaded to agree to early surrenders. In particular, the tenant of unit 3B, Acrol Modular Buildings Limited, requested a premium of £600,000 for surrendering its lease expiring in August 2009. There could be no certainty that payments at or in excess of this figure would not be demanded by the two tenants who were in a position to demand a ransom payment.

81. Mr Bramley made a deduction of 50% from the net development value to reflect the need to secure vacant possession. Mr Wall’s suggested deferment for three years at 6.5% is equivalent to a reduction of approximately 17%. In our judgment an additional allowance of 33% is not excessive to reflect the risks and costs of securing possession, given the consequences if Acrol and BEL could not be persuaded to surrender. In this connection we accept Mr Bramley’s evidence that the main housebuilders are risk averse, especially when embarking on complicated development schemes such as this which, once started, are difficult to halt in response to a change in market conditions. Mr Bramley also allowed £75,000 for what he termed “landlord and tenant cooperation to secure vacant possession”, but we do not consider that any further deduction in excess of 50% is appropriate in respect of this issue.

82. We conclude that the value of the reference land for residential development is £315,000, calculated as follows:

Dead ripe value of entire Lumsden site – 4.32 acres

@ £1,850,000 per acre £7,992,000

Deduct

Demolition £300,000

Reclamation/Remediation £500,000

Lowering retaining wall £57,000

Section 106 costs £ 90,000

Maidens Walk access road £300,000

£1,247,000

£6,745,000

Less allowance for obtaining possession - 50% £3,372,500

Net value of entire Lumsden site, say £3,370,000

Apportion to reference land: 9.35% of £3,370,000 = £315,095

say £315,000

Ransom value – access to Zones A & B

83. By the end of the case the parties were largely in agreement about the correct legal approach to adopt to the valuation of the reference land for ransom purposes. Different considerations apply here as compared with when looking at planning assumptions. In particular it was common ground that it is necessary to apply the Pointe Gourde principle.

84. The classic formulation of this principle is that “It is well settled that compensation for the compulsory acquisition of land cannot include an increase in value which is entirely due to the scheme underlying the acquisition”: Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565, 572 per Lord MacDermott. Although the ambit of the principle has been restricted by the House of Lords in Transport for London v Spirerose Ltd [2009] 1 WLR 1797 we accept the submission of Mr Roots that this authority was concerned with the application of the planning assumptions in the 1961 Act and is of only peripheral relevance to our decision.

85. The application of Pointe Gourde to a ransom situation was considered in Batchelor v Kent County Council (1989) 59 P&CR 357. There planning permission was granted for residential development on a plot of land subject to a condition relating to completion of off site highways works. Subsequently the local planning authority compulsorily acquired other land on which it constructed an access enabling that condition to be satisfied and the land the subject of the residential permission to be developed. After referring to the Pointe Gourde principle and the ransom case of Stokes v Cambridge Corporation (1961) 13 P&CR 77, Mann LJ said at p.361:

“It is to be observed and critically so, that the Tribunal must search for an increase in value ‘entirely due to the scheme.’ The Pointe Gourde principle cannot diminish a pre-scheme value. Was there a particular value prior to the scheme underlying the acquisition? As it seems to me the Tribunal found that there was…

If a premium value is ‘entirely due to the scheme underlying the acquisition’ then it must be disregarded. If it was pre-existent to the acquisition it must in my judgment be regarded. To ignore the pre-existent value would be to expropriate it without compensation and would be to contravene the fundamental principle of equivalence.”

86. The difficulty here arises out of the application of that approach to the facts of the present case. We consider this is complicated by the fact that the Acquiring Authority was the owner of the Ropeworks site and subsequently Zones A and B, so that the proposals to develop those sites were brought forward in tandem with the Acquiring Authority’s proposals for the improvement of Mill Road. The first, outline, planning permission (1334/98) was granted on 7 May 1999 to Taylor Woodrow Developments Ltd, the Acquiring Authority’s preferred developer. The Assessment submitted in support of the application notes that “Mill Road to the east is to be improved …” (paragraph 3.29) so it is clear that even at this early stage the development proposals envisaged the Acquiring Authority would carry out works of improvement to Mill Road.

87. Mr Szandrowski produced a plan showing the re-alignment of Mill Road including a substantial access at the point where the access on the reference land was eventually constructed dated 17 August 1999. The improvements were carried out in two stages. The northern half of the road was improved within the Acquiring Authority’s own land and highway powers, between February 2000 and December 2001. Improvements to the southern half of the road required the reference land and so were carried out after the CPO between August 2002 and April 2003. There is a potential issue as to whether the effect of the ‘scheme’ which is to be ignored comprises all of the Mill Road improvements or only those for which the reference land was acquired. We were referred to the decision of the House of Lords in Waters v Welsh Development Agency [2004] 1 WLR 1304 which contains useful guidance as to the application of Pointe Gourde where the ambit of the scheme is in issue. However, for reasons which will become apparent, we do not consider that it makes any difference which definition of the scheme is used in this case.

88. The detailed planning application for Zone A was made on 12 May 2000 by which stage the Mill Road improvements as a whole had already been designed and work had begun on the northern half. It follows that the development on Zone A was designed around the Acquiring Authority’s proposals for the improvement of Mill Road including the proposed access over part of the reference land. A similar point applies to the approval of the reserved matters relating to Zone B which was also applied for on 12 May 2000. Therefore the layout of these developments and in particular the proposed Mill Road access were a consequence of the proposed improvements to Mill Road, including those for which the reference land was required. We consider that to attribute a ransom value to the reference land as land required by the owners of Zones A and B to enable those developments as designed to go ahead would be to give it a premium value entirely due to the scheme underlying the acquisition contrary to Pointe Gourde.

89. This requires us to ignore the actual development which had taken place on Zone A by the valuation date. We fully accept the need to avoid re-writing the planning history as far as possible. But to have regard to the fact that most of the steelwork had been erected on Zone A in accordance with permission 580/00 would be to give the reference land a potential ransom value attributable to the prospect of development of it (to provide access and to widen Mill Road) which it may not have had in the absence of CPO powers. What has to be considered is whether the reference land did in fact have value attributable to the prospect of development of it for these purposes in the absence of CPO powers.

90. As indicated in Batchelor v Kent County Council, it is necessary to identify whether the reference land would have had any pre-existing value to an owner of Zones A and B. The purpose of acquisition of the reference land was to provide access and to widen Mill Road. Would the reference land have been required for either of these purposes in the absence of the scheme, however defined?

91. Dealing first with the issue of access, Mr Szandrowski’s evidence was that development of Zone A could have been designed to obtain access from various locations on Mill Road. The aerial photographs show that in the years prior to the valuation date the Ropeworks site was being accessed from Mill Road north of the reference land. This was not challenged by the Claimants whose evidence focused on the difficulties of designing an alternative access to Zone A at the valuation date to the development for which planning permission had been granted and which was under construction. For the reasons already given, we consider that the design of the development on Zone A was a product of the scheme and to attribute a premium value to the reference land by virtue of the existence of that specific development would be contrary to Pointe Gourde. In our judgment an access to a differently designed development on Zone A could have been located further north on Mill Road, especially an access that was only required for the limited purposes for which the access over the reference land was required.

92. Insofar as Mr Short objected to an access further north on the grounds that it would be close to the wine warehouse access opposite, we do not think the Acquiring Authority as local highway or planning authority would agree. He referred to the Acquiring Authority’s ‘Designers Guide for Highways & Sewers’ (September 1998) Table 2 page 34 which requires a minimum stagger of 40m “between junctions on opposite sides of the major road” where the major road is a local distributor and the minor road is a residential road with buses, an access collector or access way. These types of minor road are defined in Table 1 page 33 as follows. A residential road with buses serves less than 300 dwellings and needs to carry up to 25 public service vehicles per day in each direction, an access collector simply serves less than 300 dwellings and an access way serves not more than 50 dwellings, usually a cul-de-sac or short loop. Similar standards apply to junctions on industrial roads, see pages 4 and 5 of the Designers Guide.

93. The only evidence as to the level of use of the wine warehouse access is in the Acquiring Authority’s Statement of Case dealing with objections to the CPO paragraph 5.3. This states that the access is “heavily used” and there is no service yard or car park to the building so it is necessary to allow for the manoeuvre of vehicles servicing and accessing the building. It is clear from the aerial photographs that there has been an access from Mill Road into what is now Zone A for some years, albeit a little north of the wine warehouse access, which appears to have been used for access to car parking and for construction traffic. There is no evidence that this has caused any problems with use of the wine warehouse access. The approved access constructed over the reference land is also close to the wine warehouse access and directly opposite another access. In the light of this and the paucity of evidence as to the actual use made of the wine warehouse access, we are not satisfied that the wine warehouse access could properly be considered as even an ‘access way’ as defined in the standards. We prefer the evidence of Mr Szandrowski on this point, that while there is always a potential conflict with movements if accesses are opposite or close to each other, this is not a junction and the potential for conflict is relatively low.

94. As for access to Zone B, in order to avoid sterilising the development of part of Zone A it would be necessary to locate any access to Mill Road as far to the south eastern corner of the site as possible, but it was not suggested that this could not be designed to avoid the reference land if the constraint of the design of the Zone A development was ignored. In closing submissions it was contended on behalf of the Claimants that the best evidence of what access would have been designed to serve Zones A and B in the absence of the scheme was that which was in fact proposed. We disagree. If an access could be provided north of the reference land then we consider no sensible developer would voluntarily put himself in a position where the adjoining owner could demand a ransom. Although Bryant Homes were prepared to take a risk and start development before the CPO was confirmed, the CPO had been made.

95. Having said that, we do consider that a Mill Road access was important to the development of Zone B, even if it did not use the reference land. It was common ground that the scheme the subject of planning permission 581/00 was not being pursued because of market conditions relating to the cinema, hence the application for a revised scheme. Application 997/02 was a detailed proposal for access to 153 car parking spaces and servicing to 7938 square metres of food & drink/leisure uses from Mill Road with, in outline only, a maximum level of 750 car parking spaces in a multi storey car park to serve a further 4233 square metres of commercial floorspace, a 190 bedroom hotel and 343 units of residential accommodation. Although only in outline, it is clear that access would be from Mill Road and from an improved Maidens Walk.

96. Planning permission was granted for 997/02 but it did not proceed either. Mr Szandrowski gave evidence that later another scheme was formulated though it was never the subject of a planning application. This was for a small cinema, retail, food and drink, hotel, residential and car parking. South Shore Road was to be used for servicing with goods lifts up to the level of land above the retaining wall. A multi storey car park was proposed at the southern end of the site accessed from Mill Road. Access was also proposed from Abbotts Road (north of the Sage) to the hotel in the south western corner of the site. He could not recall if Mill Road and Abbotts Road were also to be used for servicing.

97. There was plainly scope for a revised scheme of development for Zone B to be formulated. Mr Szandrowski’s report indicates the proposals could have been revised to use alternative accesses, to reduce the quantum of traffic using the Mill Road access and make provision for some or all of the car parking to be provided off site. However, the alternative access options were limited. South Shore Road is at a much lower level than the majority of the site. Any vehicular access from this point would have required significant land take in order to achieve the necessary gradients and levels and thus been expensive. Further, it was not a through road because of the pedestrian zone along the frontage of Zone B. Similarly, Maidens Walk and Abbotts Road are at a much higher level than the majority of the site. There was no suggestion on behalf of the Acquiring Authority that the development proposed in 997/02 could be accessed wholly from Maidens Walk. Every scheme for the development of Zone B has included access for car parking and servicing from Mill Road, indicating this was clearly a preferred means of main access to the site.

98. Mr Short did not dispute that some car parking could be provided off site. Indeed the scheme permitted in 1999 (1334/98) envisaged a peak parking demand of 1500 spaces of which only 1060 were to be provided on site, the balance of demand being met by shared use of other car parks in the vicinity (see the Assessment supporting the planning application paragraph 8.30). However, permission 581/00 proposed 1193 car parking spaces on site (document 42E) and application 997/02 proposed 750. This indicates the provision of a substantial amount of car parking on site was regarded as important, accessed from Mill Road, even if some could be provided elsewhere.

99. Turning to the question of whether the reference land was required for the widening of Mill Road, this was regarded by the Acquiring Authority as necessary to enable the developments of Zones A and B to proceed (Statement of Reasons, paragraph 2.11 and Statement of Case paragraphs 2.3 and 2.13) because it “will be totally inadequate for the anticipated levels of vehicular and pedestrian traffic” and “in view of the overall level of traffic which will be using Mill Road and the level of traffic that will need to access the development, a right turn lane into the site is necessary. This requires a carriageway width of 10.5 metres…” (Statement of Case, paragraph 5.5). Although these statements were made in the context of the existing planning permissions for the development of Zones and A and B, there is no indication that the need to widen Mill Road was peculiar to the design of those schemes as opposed to being required generally to service the level of development proposed.

100. It is true that the Ropeworks site had an access onto Mill Road and traffic generated by it would have used Mill Road. However, the Ropeworks site had been vacant for many years and was cleared in 1992-1994.Therefore no development of the site could have taken place without planning permission and the highways impact of any new development would need to be assessed and, where appropriate, controlled through any planning decision.

101 Thus, in our view the widening of Mill Road was regarded as necessary to cope with the total volumes of traffic that would be using Mill Road including that generated by development of Zones A and B and the level of traffic that would be using a Mill Road access. Given the secondary nature of any Mill Road access to serve Zone A, the levels of traffic generated by this development which would be using such an access would be low and the need arising from use of the access would be generated by development on Zone B. However, traffic accessing the Zone A car park would not be able to approach from the west using South Shore Road because of the traffic regulation order made on 25 June 2002 creating the pedestrian zone. Indeed it was envisaged that traffic generated by development of Zone A would use Mill Road, see the Transportation Assessment by Symonds (transport agents for Taylor Woodrow) prepared for application 997/02 relating to Zone B paragraph 4.23. Therefore traffic generated by development on Zone A would access the development along Mill Road and traffic using the Mill Road access to Zone B would also be using Mill Road.

102. Mr Szandrowski made the point that there is no evidence of any highways analysis to back up the repeated assertions by the Acquiring Authority that widening Mill Road was necessary to enable the development of Zones A and B to go ahead and that they had not been tested at a CPO inquiry. In our judgment less weight should be placed on assertions on behalf of the Acquiring Authority when seeking to reduce the compensation payable than statements contemporaneous with the making of the CPO about the need for the reference land. Further, the lack of such a highways analysis on the planning applications for Zones A and B and the lack of any highways objection in this respect could be explained by the fact that the Acquiring Authority had already decided to improve Mill Road so there was no problem which required to be analysed. The Acquiring Authority’s Executive Committee resolved to make the CPO on 19 December 2000 well before planning permission was granted for Zone A (30 April 2001) and Zone B (4 July 2001)

103. We note that as well as the Acquiring Authority’s statements referred to above, in a fax dated 21 August 2001 Symonds refer to the need for a carriageway width of 10.5 metres to accommodate a ghost right turn into the Mill Road access, the consequent need for widening Mill Road at the junction with Hawks Road and, on the second page, the need for a footway on the west side of Mill Road the absence of which “was considered to be unacceptable given the potential increase in pedestrian movements to the residential and leisure elements of the Taylor Woodrow site” i.e. Zones A and B.

104. The need for carriageway widening is also supported by the Designers Guide for Highways & Sewers. The residential standards require a local distributor road to be 7.3m wide with a 3m verge including 2m wide footways (Table 1 on page 33). The characteristics of a local distributor road are ‘distributes traffic within districts, linking district distributors with residential roads. To carry public service vehicle traffic in the order of 25-50 PSV per day in each direction.’ Note 1 indicates that roads serving more than 300 dwellings will be assumed to be local distributors and should be designed as such. The development of Zones A and B would likely involve significantly more than 300 units of residential accommodation (237 were being built on Zone A alone) as well as a significant quantity of commercial floorspace on Zone B. Mill Road was also used to access industrial areas to the east and on the valuation date was used by two bus services. Further, the Acquiring Authority was promoting an improved bus service using Mill Road, the Quayside Transit System. Although these standards relate to the design of new roads, we accept Mr Short’s evidence that the standards would be applied where they could be achieved i.e would be taken as a starting point.

105. Further, we accept Mr Checkley’s evidence that for any development of Zone A it would have been essential to provide a footway on the west side of Mill Road in order to access Hawks Road, the bus stops there and Gateshead town centre for which this would have been much the most convenient route. The provision of adequate pedestrian access and facilities is supported by UDP policies T5 and T6. The Acquiring Authority officers who considered the planning application for Zone A also considered pedestrian linkages to be important, including to the south, see Mr Short’s Report paragraph 7.10.

106. Reliance was also placed by the Acquiring Authority on the fact that the CPO was made under section 226 of the 1990 Act rather than highways powers in support of the argument that the widening was required for general environmental reasons rather than highway reasons associated with the development of Zones A and B. However, in our judgment this does not necessarily follow. Section 226(1) as it stood in 2002 provided as follows:

“A local authority to whom this section applies shall, on being authorised to do so by the Secretary of State, have power to acquire compulsorily any land in their area which—

(a) is suitable for and required in order to secure the carrying out of development, redevelopment or improvement; or

(b) is required for a purpose which it is necessary to achieve in the interests of the proper planning of an area in which the land is situated.”

107. It is to be noted that the CPO was not made under sub-section (b), “in the interests of the proper planning of the area.” The reference land was therefore required “in order to secure the carrying out of development, redevelopment or improvement.” Land may be required to secure the carrying out of development (or improvement) for many purposes, including a road needed to serve development.

108. There is no doubt that environmental improvements in the area were an important theme of policies in the UDP and East Gateshead Environmental Strategy but neither of them required the widening of Mill Road. The ‘Gateshead Quays The Public Realm’ document requires improvements to Mill Road to be carried out including footways on both sides of the road. However, this guidance was being developed at the same time as development proposals were coming forward on the Ropeworks site which was owned by the Acquiring Authority who may well have had an eye to the needs of such development. This guidance cannot therefore be taken as showing that any need for improvements to Mill Road was not generated by development of Zones A and B.

109. None of Mr Szandrowski’s options 1 to 7 make provision for widening in accordance with the Designers Guide standards (or as envisaged by Symonds or to the standard of improvement which in fact took place). In any event he stated that these were only designed to “indicate the type of pragmatic solution that I consider would have been acceptable to the Council for the very low volume of traffic proposed to use this access” i.e. access to Zone A (Report paragraph 4.29). This is not surprising as Mr Szandrowski did not accept that the widening was required to enable the development of Zones A and B to go ahead and his evidence focused on alternative strategies to achieve access from Mill Road, not widening as such. We note that Mr Szandrowski accepted that Zone B would have to be developed differently if Mill Road was not widened (Rebuttal paragraph 9.10) and at the hearing he said that if access to Zone B was required in accordance with any of the permitted schemes his access options were not sustainable.

110. It was a repeated theme of the Acquiring Authority’s evidence that absent the CPO, improvements to Mill Road could be achieved through any planning permission for the Lumsden site which would require the safeguarding of the reference land for this purpose. However, even if that could be required by planning condition, for reasons already given the owners of the reference land could not be required to dedicate their land or construct works which were not necessitated by development of the Lumsden site without appropriate compensation. Therefore the ability to widen Mill Road would have depended on their consent which would only have been given after compensation had been agreed. The compensation would have reflected the parties’ negotiating positions, including any ransom value the reference land had.

111. Nevertheless, Mr Szandrowski’s options 5, 6 and 7 show that Mill Road could be widened using land owned by the Acquiring Authority to provide a 6.75m carriageway and 2m footways either side. Mr Short’s objections to these options (apart from carriageway width) relate to the access so would not apply because we have concluded that it would have been possible to provide access north of the reference land. These options would be an improvement over the existing position and consistent with the standard for a residential road with buses but still a substantial relaxation in standards. Further, it would be significantly less than that which the Acquiring Authority and Symonds considered should be provided.

112. For all these reasons we consider that the owner of Zone A (a subsidiary of Taylor Woodrow) and the Acquiring Authority as owner of Zone B would have had a strong interest in acquiring the reference land by agreement, without which their ability to develop Zones A and B could be seriously compromised and the reference land would have significant ransom value. How much each would be prepared to bid would depend on a number of factors. These include in both cases, the likelihood (but not a certainty because it had not been tested and some widening could be carried out on the Acquiring Authority’s own land) that planning permission for the development of both Zones would require the widening of Mill Road to the extent that the reference land would be required. They also include, in the case of Zone B, the possibility (as yet wholly untested by any planning application or viability assessment) that it could be developed so as to reduce the quantum of development in order to avoid the need for a Mill Road access at all (very unlikely) or to reduce the amount of traffic using a Mill Road access.

Ransom value to Zone A – evidence

113. Mr Wall said that the owner of Zone A would have been under considerable pressure at the valuation date to secure an access to his development by purchasing the reference land. He prepared his assessment of the price which would be paid on the assumption that there would have been little prospect of an alternative means of access being approved by the local authority. The scheme would have had to be abandoned if the reference land could not be acquired.

114. At the valuation date the owner of Zone A was committed to paying the base land value of £3,000,000, incurring significant professional fees, building the piled foundations which were up to 30 to 40 metres deep and erecting steelwork. Mr Wall estimated the total potential loss at a figure of the order of £5,843,060, excluding the cost of removing the steel frame if the scheme were abandoned. In his opinion the parties would have reached agreement for the sale of the reference land based on one third of the potential loss, or £1,947,667, say £1,950,000.

115. In the light of Mr Szandrowski’s evidence Mr Bramley did not consider that the reference land had a ransom value to Zone A. In an addendum to his rebuttal report, however, he considered what the ransom value might be assuming that the owner of Zone A “only had to resolve a minor access problem relating to regular but infrequent refuse vehicle movements and access in the event of fire.”

116. Mr Bramley said that the background to the negotiations at the valuation date was this. Construction of the apartments, totalling 177, 843 square feet of net sales area, was progressing. The developer had not launched the apartments for sale (in fact, marketing commenced sixteen days later, on 1 August 2002). The anticipated “overage pot”, available to be shared between the vendor, Acquiring Authority and the developer was £1,778,430. This would ultimately have been distributed as to £978,136.50 to the vendor and £800,293.50 to the developer. The willing seller of the reference land, acting reasonably, would expect the developer to require a reasonable return from the development. The developer’s ability to make a ransom payment would depend on there being a residual surplus in excess of such a reasonable return. The anticipated surplus to the developer at the valuation date would be £800,293.50, although there was a risk that sales of the apartments might not complete. Since the Acquiring Authority was not involved in a partnership or joint venture with the developer, it was not reasonable to assume that it would contribute to the ransom payment from its share of the overage. In the course of negotiations the developer would put forward alternative solutions to the access problem, including Mr Szandrowski’s options and possible redesign of the scheme including an addition to the multi-storey car park. The developer would also take account of the re-use of the sub-structure and salvage of materials, and the fact that the vendor’s only option was to deal with the developer of Zone A.

117. Mr Wall’s suggested one-third share to the owner of the reference land would indicate a ransom figure of £265,000, but Mr Bramley did not consider that this was a correct apportionment. The owner of Zone A knew that a possible competitive bidder, the owner of Zone B, would not be prepared to offer £265,000, because planning consent for its latest proposals had not been secured and there could be no certainty as to when it would. The Zone B scheme was marginal and two previous schemes had failed. The owner of Zone A would also have formed a similar judgment to Mr Bramley, namely that the value of the reference land for residential development was £130,000.

118. Mr Bramley considered that, bearing in mind that the willing seller would have only had one opportunity to deal with Zone A and that the willing purchaser had other options, agreement would have been reached at £150,000.

Ransom value to Zone A – conclusions

119. As indicated in paragraph 88 above, we consider that it would be contrary to Pointe Gourde to attribute a ransom value to Zone A based on the assumption that development of that site had to proceed in accordance with the approved design. Accordingly Mr Wall’s approach, which was entirely based on the anxiety of the owner of Zone A to complete the scheme upon which it had embarked before the valuation date, is of no assistance.

120. Mr Bramley’s assessment of the developer’s anticipated surplus at approximately £800,000 was based on the assumption that the parties would estimate the selling prices of the apartments at £185 per square foot. That figure was derived from appraisals prepared by Taylor Woodrow on 3 July 2002 in connection with their negotiations with the Acquiring Authority regarding Zone B. Mr Bramley said that he had prepared his own appraisals but, rather surprisingly, he did not disclose them to the Tribunal. In any event, we have found that the anticipated sales price would have been not £185 but £210 per square foot. Sales at that level would have resulted in total proceeds of £37,347,030 (177,843 square feet at £210) and a surplus to the developer of £2,134,020 (more than 2.5 times Mr Bramley’s estimate), calculated as follows:

Proceeds in excess of £32,900,000 = £4,447,030 @ 30% = £1,334,109

Proceeds in excess of £32,011,740 = £ 888,260 @ 40% = £ 355,304

Proceeds in excess of £31,122,525 = £ 889,215 @ 50% £ 444,607

£2,134,020

121. Moreover, in the light of our conclusion that the owner of Zone A would have been keen to acquire the reference land in order to develop the site, there is in our view no logical reason why the vendor would not have insisted on a share of the profits of the development as a whole, rather than the profits of the developer who had agreed to hand over a proportion to the freeholder. Furthermore, on the assumption (which we have found to be conservative) that the anticipated surplus from the development of Zone A was £800,000, Mr Bramley’s conclusion that the owner of Zone A would have limited his offer to £20,000 more than the reference land’s value for residential development (that is £150,000 minus £130,000) is in our view unrealistic. In our opinion it seriously underestimates the strength of the bargaining position of the owner of the reference land.

122. In our judgment, the potential profit which should be considered when assessing ransom value is the difference between the full value of Zone A for residential development and its value for the alternative use, industrial development. The latter figure is agreed at £186,200 (2.66 acres at £70,000 per acre). As for the residential site value, we assess this at £1,700,000 per acre, or £4,522,000. This is lower than the figure of £1,850,000 per acre that we have attributed to the Lumsden site, and reflects the fact that residential development on Zone A would adjoin an industrial estate. The potential profit is therefore £4,335,800 (£4,522,000 - £186,200). In preparing for their negotiations for the sale of the reference land, both parties would have known it was likely (but not certain) that the reference land would be needed to enable Mill Road to be widened sufficiently to satisfy the requirements of the local planning authority. In the course of the negotiations the owners of Zone A would argue that, in the absence of agreement on price, they would be able to persuade the local authority to accept a revised carriageway width which could be provided without using any of the reference land. In reply the owners of the reference land would point out that failure to reach agreement on price would mean that the owners of Zone A would be gambling on a favourable outcome to such highway discussions, and that failure of such discussions would mean that the ransom value of the reference land would rise to, say, 50 per cent of the increased value of Zone A. Taking these considerations into account we conclude that the negotiations would have resulted in agreement on a ransom payment of £650,370, say £650,000, equivalent to 15 per cent of the likely profit.

Ransom value to Zone B – evidence

123. In his initial expert report Mr Wall assessed the price which the owner of Zone B would be prepared to pay for the reference land on the basis of the outline planning permission (1334/89) which had been granted on 7 May 1999 for leisure (including cinemas), food and drink and hotel uses and associated car parking. The assessment was based on a residual calculation which produced a site value of £6,000,000, and which Mr Wall said was equivalent to £1,395,000 per acre after the deduction of abnormal costs. He compared this to the residential land value of £1,500,000 per acre achieved at Curzon Place and the price paid for Zone A, which at the time he considered to be below market value. Mr Wall thought that his valuation of Zone B at £1,395,000 per acre was in line with general land values in the area. He added:

“I would expect residential values to have been higher than alternative uses at this time, however, given the scale and density of leisure development proposed, it is not unrealistic in my opinion for the residual site value to be at this level.”

124. From the site value of £6,000,000 Mr Wall deducted the value for the former industrial use at £70,000 per acre (£301,000). Given that the success of the leisure scheme would have been highly dependent on achieving a high density of development, Mr Wall considered that the ransom value of the reference land to Zone B would be a high proportion of the increase in value, possibly 50 per cent. He decided upon a payment of one-third, however, which he described as “robust” and arrived at a ransom value of £1,899,666.

125. As we have said, in his rebuttal report Mr Wall said that he had been advised that the Tribunal was likely to attach more weight to a valuation based on comparable evidence than to a residual valuation. He had also been informed about a planning application (997/02) relating to land including Zone B, which was approved on 8 November 2002, but which had first been submitted for approval in May 2002. (Details of the proposed development have been summarised in para. 10 above). The fact that application 997/02 had been made prior to the valuation date suggested that the existing planning permission for Zone B (1334/89) was probably not what Taylor Woodrow or the Acquiring Authority wanted to build at the time. The most valuable use of the site at the valuation date was likely to be the residential based scheme which was proposed in 997/02.

126. In Mr Wall’s original report he had assumed that the area of Zone B was 4.3 acres, but he now understood that the correct figure was 4.612 acres. Despite the advice he had received as to the merits of a comparables based approach, it had proved impossible to find a land sale which was truly comparable to 997/02. He therefore prepared a revised residual valuation based on that scheme, which he then tested against available evidence of land sales. The revised residual valuation produced a site value of £9,464,000. This was higher than his original valuation based on the initial cinema/leisure based scheme and reflected the fact that a large proportion of the later proposal was for residential development.

127. As a check, Mr Wall analysed the revised valuation as showing half of the site for residential development at £1,500,000 per acre and the remainder for hotel/A3 use at £2,500,000 per acre. The figure for residential was in line with the sales of Curzon Place and Zone A and the hotel/A3 figure was supported by two sales of the Sterling House site in South Shore Road, one in late 2005/early 2006 and the other in 2007. Mr Wall said that, based on the corrected site area, his initial valuation of £6,000,000 was equivalent to £1,300,000 per acre. Such a valuation was consistent with the general range of values for which land had been sold in the Gateshead Quays area. At the valuation date there was a good prospect that planning permission would be granted for 997/02. Accordingly, Mr Wall remained of the opinion that the market value of Zone B was £6,000,000. He also still considered that the value of Zone B without the reference land was £70,000 per acre (£322,840 on the correct area). The uplift in value of Zone B resulting from the acquisition of the reference land would therefore be £5,667,160. He took into account that the reference land provided the best possible access into the heart of Zone B; that a second access was envisaged from Maidens Walk over land which was also outside the control of the owner of Zone B, and that limited access could be gained from South Shore Road to the section of the proposed development between South Shore Road and the retaining wall. He concluded that the ransom value of the reference land to Zone B was 25 per cent of the uplift in value, that is £1,420,000.

128. Mr Bramley’s view was that no ransom value attached to the reference site so far as the development of Zone B was concerned. He disagreed with Mr Wall’s residual valuation based on 997/02. He thought that the rental levels assumed for the leisure space were excessive; that insufficient allowance had been made for letting agents’ fees; that there was no justification for assuming a revenue stream from car parking spaces allocated to the residential units; that the anticipation of early receipts from flat sales was optimistic given the number of competing schemes in the area; that the assumed level of developer’s profits was inadequate; that little weight should be given to the sale of Sterling House over five years after the valuation date; and that no allowance had been made for quantum or the limited market for such a large and complex development.

129. Mr Bramley considered that a valuation based on an overall rate per acre, reflecting all these matters, was more appropriate. In his opinion the site value of Zone B was £2,500,000, or £500,000 per acre. The value would be the same with or without the reference land. Assuming, however, that he could be persuaded that there was an element of ransom, its value would only be nominal. This was because there were other opportunities for access from South Shore Road and Abbotts Road which would have enabled Zone B to be developed in other ways. At the valuation date a planning application had only recently been submitted. The developer would have been unable to predict the outcome of the application, nor when it would be determined. If the eventual planning consent imposed conditions giving rise to a ransom situation, then “given how marginal the scheme was, it is difficult to see how there would have been a surplus to make an extra payment by way of ransom.” Accordingly, the owner of Zone B would only have made an offer equivalent to an option to purchase. Mr Wall assessed the value of such option at £50,000. He added “In any bidding situation in willing seller circumstances it is difficult to see that the owner of Zone B would bid more than £1 higher than necessary to beat any other bidder.”

Ransom value to Zone B – conclusions

130. We agree with Mr Bramley that Mr Wall’s revised residual valuation is unreliable. Mr Wall accepted in cross examination that he had underestimated the letting agents fees. He also conceded that it was probably necessary to adjust the sale prices of the Curzon Place apartments, which he had used as comparable evidence in assessing the likely sale prices, and which each included a parking space, if he intended to value the parking spaces separately. Mr Wall did not suggest that he had made any such adjustment. His residual valuation included £6,600,000 capital value in respect of residential parking income. Mr Wall said that he would need to work through the calculation before he could assess the impact of removing this element of sale proceeds. It is clear, however, that the effect would be very substantially to reduce the residual site value.

131. Moreover, Mr Wall’s cross check of his site value by reference to values per acre revealed an inconsistency of approach. In his initial report he stated in terms that he considered residential values to have been higher than alternative uses, and yet his cross check attributed a value to hotel/A3 use which was two-thirds higher than residential value. That approach was in turn inconsistent with his residual appraisal which, as became clear during cross-examination, showed a negative value for the hotel element.

132. For these reasons we do not feel able to draw any conclusions from Mr Wall’s assessment of the development value of Zone B. In the absence of any other evidence we accept Mr Bramley’s figure of £2,500,000.

133. We are unable, however, to accept Mr Bramley’s suggestion that the reference land possessed no ransom value to the owner of Zone B. We consider that the parties’ negotiating positions would have been broadly similar to those relating to the ransom value of Zone A, which we have described in para 122 above. In the case of Zone B, however, there was in addition a possibility that a different form of development would be permitted, and that such development would not require a Mill Road access, or would incorporate a narrower Mill Road access which did not need any of the reference land. In our view the existence of such a possibility (at least in theory) and also of the possibility that access rights from both Mill Road and Maidens Lane would need to be acquired, would have made the vendor of the reference land rather less confident of his negotiating position than in the case of Zone A and prepared to accept a level of ransom payment which, whilst significant, was less than that to be anticipated from the owner of Zone A. We assess the ransom value to Zone B at £215,000, calculated as follows:

Full development value of Zone B = £2,500,000

Deduct residual industrial site value

5 acres @ £70,000 = £ 350,000

Potential profit £2,150,000

Ransom value @ 10% £ 215,000

Overall conclusion

134. We have concluded that the values of the reference land to the most likely purchasers were as follows:

Value to owner of remainder of Lumsden site £315,000

Value to owner of Zone A £650,000

Value to owner of Zone B £215,000

135. In our judgment the owner of the reference land would have sought to negotiate with all three potential purchasers and would sell to the highest bidder, the owner of Zone A. Mr Wall suggested that, in deciding how much he could afford to pay, the owner of Zone A would bear in mind that he in turn could ransom the owner of Zone B and would include the likely payment from the latter in his bid for the reference land. However, it is agreed that the owner of Zone B reserved a right of access over Zone A to Mill Road when agreeing to grant the long lease of Zone A. That right reflects the access in fact constructed pursuant to the CPO. We have already found that the location and design of this access were a product of the scheme underlying the CPO. Therefore to attribute a ransom value to the reference land to enable that access to be constructed would be contrary to Pointe Gourde. For the reasons already given, we consider that in the absence of the scheme underlying the CPO, no developer of Zone B would voluntarily place himself in a position where the adjoining owner could demand a ransom. In the absence of the CPO and scheme underlying it, we consider that when disposing of Zone A, the owner of Zone B would have reserved a right of access over whatever alternative access had been designed to avoid the reference land. In those circumstances the owner of Zone A would not be able to ransom the owner of Zone B after acquiring the reference land because he could not prevent traffic from Zone B accessing Mill Road.

136. We therefore determine the compensation payable by the Acquiring Authority for the freehold interest in the reference land at £650,000, plus claim preparation costs of £1,800.99. A letter concerning costs accompanies this decision, which will become final when the question of costs is determined.

Dated: 16 January 2012

Her Honour Judge Alice Robinson

N J Rose FRICS

Addendum on Costs

137. We have received written submissions on costs. The Claimants ask for their costs, pointing out that the amount of compensation awarded is more than twice the higher of the two sealed offers submitted by the Acquiring Authority. They ask for the following orders in relation to costs:

1. The Acquiring Authority to pay the Claimants the Tribunal Fee of £13,000 within 14 days of the date of the decision on costs.

2. The Claimants’ fees of counsel to be summarily assessed in the sum of £175,006.05 and be paid to the Claimants within 14 days of the decision on costs.

3. The Acquiring Authority to pay the balance of the Claimants’ costs of and incidental to these proceedings beyond and in addition to the items referred to at paragraphs 1 and 2 above, such costs to be subject to detailed assessment on application to the Newcastle Upon Tyne County Court.

138. In support of these requests the Claimants advance the following reasons. The Claimants are individuals who have been engaged in costly high value litigation and have been obliged to fund/incur the disbursements referred to. Unless voluntary interim payments are made by the Acquiring Authority the detailed assessment process will normally take between six and twelve months, meaning the Claimants will be deprived of the value of the said disbursements for that period without any real justification. The Tribunal fee should be entirely uncontroversial. Copies of counsels’ fee notes have been provided to the Tribunal and have been paid. Unless the Acquiring Authority seriously contends that these are materially greater than its own expenditure on counsel such expenditure on counsel should also be uncontroversial. If objection is raised, the Acquiring Authority should disclose its own fee notes from counsel.

139. The Acquiring Authority accepts that the amount of compensation determined by the Tribunal exceeds the sealed offers and therefore the position as to costs is governed by the principle set out by the Court of Appeal in Purfleet Farms Ltd v Secretary of State [2003] 1 P& CR 324. Potter LJ stated the principle at para 29 in the following terms:

“It means, in my view, that following the hearing of a compensation reference in the Lands Tribunal in which the claimant has been successful, a special reason for departing from the usual order for costs should only be found to exist in circumstances where the Tribunal can readily identify a situation in which the claimant’s conduct of, or in relation to, the proceedings has led to an obvious and substantial escalation in the costs over and above those costs which it was reasonable for the claimant to incur in vindication of his right to compensation.”

140. The Acquiring Authority submits that, in four respects, the conduct of the Claimants’ case has created a readily identifiable situation where there has been an obvious and substantial escalation in the costs incurred by both parties above that which it was necessary to incur. They are: the evidence put forward unnecessarily in connection with the alleged ransom value in favour of the Sterling House/Kelvin Works site; the evidence of Mr Checkley, unreasonably suggesting that the availability of the reference land would have increased the number of residential units on the Lumsden site by 50; Mr Wall’s residual valuations of Zone B, which contained a fundamental flaw; the calculation in Mr Wall’s rebuttal statement of the ransom value attributable to Zone A which was predicated on a cancellation approach to the valuation, contrary to Pointe Gourde, and assuming, unreasonably, that the land value would be completely lost.

141. In the result the Acquiring Authority submits that the Tribunal should make an order that the Claimants receive two thirds of their costs, to be assessed if not agreed. Subject to these general submissions the Acquiring Authority accepts that summary assessment is appropriate in the case of the Tribunal fee. It argues, however, that summary assessment of counsel’s fees is inappropriate. That is because para 12.10 of the Tribunal’s Practice Directions dated 29 November 2010 indicates that the Tribunal may make a summary assessment in a “simple case” or at an interlocutory hearing. This was not a simple case and a detailed assessment should take place if costs cannot be agreed.

142. In our judgment there is no special reason in this case to depart from the normal costs rule. We accept the Claimants’ submission that the four matters which are alleged to justify a reduction in the amount of costs awarded to the Claimants fall short of the threshold described by Potter LJ in Purfleet Farms for the imposition of a sanction in terms of costs. We comment on each as follows.

143. The claim in respect of Sterling House/Kelvin Works was not pursued, not because it was not sound in principle but because it appeared from the valuation evidence that the owners of Zone A and Zone B would have paid significantly more. No time was spent at the hearing on this aspect of the claim.

144. Although Mr Checkley’s layouts were not accepted as the basis for an assumed planning permission under section 16(3), his opinions were not such that no competent expert could have reached them. Moreover, his evidence was accepted in preference to that of the Acquiring Authority in relation to the significant issues of the Cirque and the Crucible.

145. As for Mr Wall’s approach to the value of Zone B, we bear in mind Potter LJ’s observation in para 37 of Purfleet Farms that

“if the amount of the ‘exaggerated claim’ is based on the valuation, opinion and evidence of the claimant’s expert witness, it will rarely be appropriate in my view to make an adverse costs order against the successful claimant. Valuation is an inexact science.”

There was no helpful open market evidence to assist in the valuation of Zone B. In our view the fact that Mr Wall’s approach was not accepted does not mean that it was put forward unreasonably.

146. Although there is in our view some force in the Acquiring Authority’s criticism of Mr Wall’s approach to the ransom value of Zone A contained in his rebuttal statement, any resultant increase in costs is more than counter-balanced by the costs effect of Mr Bramley’s failure to disclose the overage provisions in the sale of Zone A. We agree with the Claimants that much time would have been saved if the valuers had agreed at an early stage that the Curzon Place sale was the best evidence of value.

147. We order that the Acquiring Authority must pay the Claimants’ costs of the reference, such costs to be assessed in default of agreement by the Newcastle Upon Tyne County Court on the standard basis. In a letter dated 28 February 2012 in response to a letter from the Tribunal dated 22 February 2012 the Acquiring Authority stated that it was prepared to pay an immediate contribution of 66% of the Claimants’ Counsel’s fees (that is £115,504). The Acquiring Authority must make an interim payment on account of the Claimants’ costs totalling £128,504 within fourteen days of the date of the letter accompanying this addendum, which figure includes reimbursement of the Tribunal fee.

Dated 8 March 2012

Her Honour Judge Alice Robinson

N J Rose FRICS