The following cases are referred to in this decision:
Thomas Newall Ltd v Lancaster City Council [2010] UKUT 2 (LC) [Thomas Newall 1]
Waters v Welsh Development Agency [2004] 1 WLR 1304
Pointe Gourde Quarrying & Transport Co Ltd v
Sub-Intendent of Crown Lands [1947] AC 565
Gajapathiraju v Vizagapatam [1939] AC 302
Lady Fox's Executors (1994) 2 EGLR 185
Transport for London v Spirerose [2009] UKHL 44
Fletcher Estates v the Secretary of State [2002] 2 AC 307
RMC (UK) Ltd v London Borough of Greenwich (2005)
Urban Edge Group Ltd v London Underground Ltd [2009] RVR 361
The following cases were also referred to in argument:
Thomas Newall Ltd v Lancaster City Council [2011] UKUT 437 (LC) [Thomas Newall 2]
City of Edinburgh v Secretary of State for Scotland
[1997] 1 WLR1447
DECISION
Introduction
1.
This is a reference, made by the acquiring authority, for the determination
of the compensation payable to JS Bloor (Wilmslow) Ltd (the claimant) in
respect of the compulsory acquisition of the freehold interest in two parcels
of grazing land extending to 26.85 acres (10.86 ha) at Milnrow, Rochdale by the
North West Development Agency (NWDA) under the North West Development Agency
(Kingsway Business Park, Rochdale) Compulsory Purchase Order 2002 (the CPO).
On 19 September 2011, pursuant to a Transfer Scheme, the NWDA’s “property
rights and liabilities” in the order lands were transferred to the Homes and
Communities Agency (HCA) who are now the respondent in this reference
and are thus responsible for payment of any applicable compensation.
2.
The claimant seeks compensation in the sum of £2,593,000 on the premise
that, absent the scheme, there was significant hope value that planning
permission would have been granted on the reference land for residential
development with access being obtained from Buckley Hill Lane through adjacent land
that was outside the order lands but was also in the claimant’s ownership (that
land being known as “the Nib”). The acquiring authority’s case is that
in accordance with the relevant provisions of sections 14-17 and section 6
Schedule 1 to the Land Compensation Act 1961 (the Act), no such
assumptions can be made and the land would have no value over and above its
existing use value (estimated at £2,000 per acre) and thus the compensation due
is considered to be £50,000 (rounded).
3.
Mr Martin Kingston QC and Mr Richard Kimblin of counsel appeared for the
claimant and called Mr Richard Brogden BSc MRICS of Bruton Knowles, Chartered
Surveyors of Gloucester who gave valuation evidence, Mr Peter James Frampton
BSc (Hons) TP MRICS MRTPI of Framptons Planning Consultants who gave planning
evidence and Mr Phil Wooliscroft MSc MCITL of Croft Transport Solutions who
gave highways evidence. Mr Mark Waite BA (Hons) Dip TP MSc MRTPI, Strategic
Planning Director of the claimant gave evidence of fact.
4.
Mr Michael Humphries QC of counsel appeared for the acquiring authority
and called Mr Andrew Gerald Massie BSc (Hons) MRICS IRRV MCI Arb of Keppie
Massie, Chartered Surveyors of Liverpool who gave valuation evidence, Mr Paul
Nicholas Singleton BSc MA MRTPI who gave planning evidence, and Mr Roger Wall B
Tech C Eng MICE of WYG Engineering who gave highways evidence.
5.
We carried out an accompanied inspection of the reference land and the Kingsway Business Park scheme on 15 January 2013 and, following completion of the hearing,
closing submissions in writing were received from the parties on 8 March 2013.
FACTS
6.
A brief statement of agreed facts was produced by the solicitors acting
for the parties together with statements of matters agreed and not agreed by
the parties’ planning and highways experts, and a statement of agreed matters
only by the valuation experts. From these, together with the statements of
case, the parties’ skeleton arguments and opening/closing submissions, the
written and oral evidence and our site inspection, we find the following facts.
7.
On 10 May 2002, the NWDA made the North West Development Agency
(Kingsway Business Park, Rochdale) Compulsory Purchase Order 2002 under
sections 20(1) and (2) of the Regional Development Agencies Act 1998 for the
purposes of securing the assembly of some 420 acres (170 ha) of land at
Milnrow, Rochdale (the order lands) in connection with the construction
of the Kingsway Business Park (KBP).
8.
The order lands are located about 1 mile east of Rochdale town centre
and lie predominantly to the north west of the M62 motorway in the vicinity of Junction
21, and within the boundary formed by Broad Lane (B6194) and the Turf Hill
estate to the west, Kingsway (A664) and the Rochdale Canal to the north, the
Rochdale – Oldham railway line (now GMPTE Metrolink) to the north east, grazing
land to the west of properties fronting Buckley Hill Lane, Egremont Road and
Ashfield Lane to the east. The claimant’s land (the reference land),
shown as Plots 13 & 14 on the CPO plan, comprises two elongated parcels of former
grazing which extend to some 26.85 acres (10.86 ha) and is situated towards the
north east part of the order lands close to (but not immediately adjoining) the
railway line and Buckley Hill Lane.
9.
Prior to the proposed business park development the order lands
comprised low-grade equestrian and grazing land with isolated buildings and
farmsteads – including three listed buildings that were to be retained. The
site was (and is) traversed by the Stanney Brook running from south to north
through a defined valley, that area being designated as a site of biological
importance.
10.
The potential for developing an area of land in the vicinity of Kingsway
and Buckley Hill Lane as a sub-regional industrial estate was first mooted in
the 1960s. A joint feasibility study between Rochdale MBC and Greater
Manchester Council (as they then were) was undertaken in 1979 and the Kingsway
Industrial Park Feasibility Study Interim Report was published in July 1980
with a final report and synopsis published in November 1983. That concluded
that the site was capable of, and suitable for, meeting the locational
requirements of major inward investors.
11.
In February 1998 Wilson Bowden Properties Ltd and English Partnerships
submitted a planning application for the proposed business park and consent was
granted in August 1998, but was subsequently overturned as a result of a
successful judicial review. The developers then produced and published The
KBP Development Framework (the Development Framework) in November 1999
in support of a revised hybrid (outline and full) planning application for the
KBP and to comply with conditions that had been imposed in the 1998 permission.
Its primary aim was to:
“…guide the
physical aspects of the development to ensure the ultimate creation of a
cohesive business park of high quality within a landscaped setting, which
relates sympathetically to its surrounding context. It provides the basis of
a development masterplan. The document is itself a part of the planning
application for the development and therefore will form an important part of
the ‘planning permission’”.
The framework also
stated:
“The Kingsway Business Park, although primarily a focus for business and employment uses, will
be a high quality mixed use development, for business, light industry and
distribution complemented by hotel and leisure facilities with small scale
retailing, local services and residential areas”.
and
Residential facilities are proposed in
their limited form compatible with the requirement of criterion (p) of the
[1999] UDP Policy EC/6, located on a site to the north of Buckley Hill, and
within the integrated canalside development on Plot S”.
12.
The Development Framework included a Master Plan layout for the KBP
development (the Master Plan) and provided for its phased development.
Parts of Plots 13 and 14 in the Schedule to the CPO are within Plot X in the
Master Plan which was designated for residential development, with the
remainder of the reference land located within Plots P, Q and R designated
variously for B1 Office and Floor Space. These areas were all planned to be
in Phase 5 of the development.
13.
Planning consent for the KBP, effectively tied to the Development
Framework and the Master Plan was granted on 19 December 1999. These three
principal planning consents, which remained extant at the valuation date and
had all been commenced, comprised:
Reference
No. 98/D35130: Hybrid (Outline and Full) permission for the proposed Business Park within Development Plots C – X inclusive, as shown on the approved Masterplan.
This permission, subject to reserved matters that had to be submitted
within 10 years, had to be commenced within 5 years (which it was) and was also
subject to extensive conditions. It included the whole of the reference land.
Reference
No. 98/D35132 It provided for a principal spine road (as required by
policy EC/6 of the 1999 UDP) linking the new connection with Junction 21 of the
M62 with the A664 Kingsway (to be the only vehicular accesses to the Business
Park).
Reference No. 99/D36760: Detailed
permission for the construction of the loop roads and surface water attenuation
areas to serve the business park. Known as the “loop road permission”,
this provided for two main loops off the spine road which, by the construction of
spur (attenuation) roads, would give access onto the individual
developments/units/areas within the KBP. This permission included parts of the
land in both of the reference plots.
14.
The development permitted was to comprise approximately 3.6 million sq
ft B1 commercial and business accommodation, 300 residential units, about
15,000 sq ft A1 retail and 9,000 sq ft A3 retail, a hotel, public realm,
infrastructure and public open space together with ancillary uses. Stanney
Brook was to be retained and landscaped on redevelopment and
attenuation/balancing ponds provided as part of the land drainage scheme.
15.
The project was subsequently taken over by the acquiring authority which
entered into a Joint Venture Agreement (JVA) and a Collaboration
Agreement (Collaboration Agreement) on 12 June 2002. These agreements
set out detailed provisions relating to the development and phasing, the nature
and timing of land transfer to WBD, the timing of the infrastructure works,
funding and other financial matters. In essence, the agreements provided for
the development to proceed in two distinct parts: the infrastructure works
(stage 1) and the design and build elements and disposal of serviced sites
(stage 2). By January 2006, the valuation date, the Collaboration Agreement
had become unconditional.
16.
Enabling works to provide for the diversion of a high pressure water
main away from the proposed Junction 21 improvements, and for the construction
of a cycleway along Stanney Brook were undertaken, and by July 2005 phase 1 of
the major infrastructure contract had been let to cover the Junction 21
remodelling, the new Kingsway junction, the main spine road and parts of the
southern loop road and attenuation ponds, earthworks and service connections
for the business park. These works were underway by the valuation date.
17.
At the time the CPO was made, the freehold of plot 13 (9.71 acres) was
in the ownership Mr A Nall, Mr S Nall, Mrs R Smith and Mr J F Nall, and plot 14
(17.14 acres) was owned by Mrs L Turner, Mr J F Nall, Mr A Nall, Mr SR Nall and
Mrs R Smith (referred to hereafter as “the Nall family”. The land was occupied
on the basis of a grazing licence by Mr R M Halliwell. A planning application
had been submitted on behalf of the Nall family for residential development on
part of the reference land and the nib but was refused on 18 January 2002 on
the grounds that it would be a piecemeal development.
18.
The Nalls submitted objections to the proposed CPO, but then sold their
interests in plots 13 and 14 together with a further area of 0.4 acres (the nib)
lying between the north eastern corner of plot 14 and Buckley Hill Lane (to which
it has a frontage of approximately 52m) to the claimant in May 2003 for a
consideration of £1,250,000 together with the vendor’s disposal costs making a
total of £1,300,000. The claimant took over the objections and appeared before
the Public Inquiry into the CPO seeking the removal from the order lands of the
part of the reference land that fell within an area of 4.38 ha (10.82 acres)
designated for residential development in the Master Plan for the KBP, and shown
thereon as Plot X (Plot X).
19.
Following that Public Inquiry, which was held between 24 June and 24
September 2003, the CPO Inspector reported to the Secretary of State who, on 5
October 2004, confirmed the CPO subject to modifications (none of which are
significant within the context of this reference). In referring to the
claimant’s objection (and that of another developer, Hartle Estates) he
concluded in his overall summary of findings at paragraph 562:
“562 Primarily, however, quite apart
from the question of their impact on the viability of the scheme, I have found
each of those two sites, like all others the subject of statutory objections,
to be intrinsic to the concept of the KBP, albeit for various differing
reasons. I have also found that, were either of those two sites, or any of the
others the subject of statutory objections, omitted, there can be no comfort
that private investment would take place such as to achieve the regeneration
purposes of the comprehensive KBP scheme as constituted in the NWDA’s
proposal. That being so, there can be no confident claim that private
investment would be prejudiced were the CPO to be confirmed. The KBP proposal
appears to me to be of very high quality and is as carefully timetabled as it
is reasonable to expect at this stage. In contrast, proposals for land the
subject of objections have either yet to reach a stage where their quality and
likely implementation date can be objectively assessed or they lack detail or
elaboration allowing any such assessment: accordingly they should not in my view
carry weight.”
20.
A General Vesting Declaration was subsequently made, and the reference
land (but not the nib) vested in the NWDA on 4 January 2006, which
is the valuation date for the purposes of this reference.
Planning Policy Background
21.
The KBP site (namely the 170 ha (420 acres) or thereabouts that
eventually became subject to the CPO) has been allocated in the local
development plans continuously from 1989. In that year, it was included in
the South Rochdale local Plan, Policy E7 allocating it for large scale general
and light industrial use, offices, distribution and storage, research and
development and associated complementary uses.
22.
The Statutory Development Plan at the valuation date was RPG13: Regional
Planning guidance for the North West (RPG13) which had been approved in
March 2003 and the Rochdale Unitary Development Plan (the 1999 UDP)
adopted in March 1999. The KBP was listed in RPG 13 as one of 11 sites
identified in the North West Regional Economic Strategy (RES) as Strategic
Regional Sites and that they are critical to the strategy’s effective
implementation. In respect of Regional Housing Provision, Policy UR7
provided:
“Local
planning authorities should monitor and manage the availability of land
identified in development plans to achieve the annual average rates of housing
provision set out in Table 5.1 [240 units pa within Rochdale] and in doing so
must seek to minimise the amount of land needed for new housing:
…
Maximising
the re-use of vacant and underused land and buildings within Policy UR4
…”
23.
The KBP was allocated in Policy EC/6 of the 1999 UDP. There were
sixteen criteria within that policy which the council stated they would
“strictly apply”. Those relevant to this reference were:
“(j) Vehicular
access to the site to be from the A664 Kingsway and from Junction 21 of the M62
Motorway only; significant improvements to the geometric layout of the layout
of the M62 Junction 21 will be necessary;
(l) Any
individual development within the site must be compatible with the overall
objective of a strategic business park development and must not constrain
either a comprehensive overall development or the provision of a satisfactory
highway link between the A664 and junction 21 of the M62;
(p) Limited residential development may be
acceptable provided it is part of a comprehensive development scheme for
predominantly business uses and would not undermine the site’s primary role as
a business park.”
24.
At January 2006 a draft replacement UDP (draft replacement UDP)
was well under way, having been published in 2003 and the subject of a Public
Inquiry in 2005 Within this draft, the KBP land was allocated under Policy EC/7
and a number of policies that had been within Policy EC/6 in the 1999 UDP were
preserved. For example, criterion (j) from EC/6 remained intact and became
criterion (j) in policy EC/7.
25.
At the Public Inquiry into the draft replacement UDP, the Inspector
identified seven key issues for examination and under the heading ‘Background
and General Principles’ he said (at paragraph 8.50 of his report):
“Proposals for development of the KBP have
had along and complex history and there have been several ‘false starts’ in
bringing this development forward. It is likely however that the development
will commence shortly. There is an extant and unchallenged outline planning
permission for the comprehensive redevelopment of the site, together with a
more detailed permission for infrastructure and other works. The recent
inspector’s report into the Compulsory Purchase Order (CPO) application,
together with accompanying letter from the Secretary of State for Trade and
Industry (who is minded to approve the CPO) together with the recent
acquisitions by the NWRDA, indicates that land ownership constraints are likely
to be overcome. Objectors’ concerns have previously been discussed in several
forums and, given the above the broad brush principle of the development of the
KBP has been clearly established. Policy EC/7 is a reasonable starting
point.”
26.
Within the draft, criterion (l) from EC/6 was broken up, extended and
incorporated into the proposed new criterion (p) which read:
“(p) Any development within the site will
be required to accord substantially with an approved Master Plan for the
comprehensive development of the whole site; and in any event to:
i. be compatible with the
overall objectives of a strategic business park development;
ii. comply with, or allow and
enable an overall scheme to comply with, all the criteria in
this policy;
iii. not constrain a
comprehensive and satisfactory overall development of the entire site;
iv. not hinder the provision of a
satisfactory highway link between the A664 and Junction 21 of
the M62; and
v. contribute to the total cost
of all on and off site infrastructure works, including highways
and services , necessary for the development of the entire site. Such contributions
will be secured through planning conditions or other legal agreements.”
27.
Having considered an objection at the Inquiry on the grounds that the
need to comply with a Master Plan was inflexible, the Inspector concluded,
under a sub-heading ‘Flexibility of the Policy’ at paragraph 8.54 of his
report:
“Deanbank
Investments Ltd is concerned that the policy is inflexible. Essentially,
criterion (p) requires developers to strictly follow an agreed masterplan. I acknowledge
that this requirement may restrict the degree to which some individual
developers could bring forward sections of the site but, given the importance
of the comprehensive development of it (and in its specific circumstances), I
consider it to be reasonable. The need for the site to be developed
comprehensively has been clearly demonstrated by the Council and its
development partners, in a number of forums. The provisions of the adopted
plan are less stringent and would not provide for the degree of certainty that
is required for comprehensive development of Kingsway Business Park. I do not consider that the main paragraph of criterion (p) would place an embargo on
individual developments.
8.55 I do,
however, have some sympathy with the objector’s criticisms of the sub-criteria
of criterion (p). All the matters addressed in these sub-criteria are largely
administrative considerations and can be addressed either, in the reasoned
justification (i and v) or, by the use of a masterplan (ii, iii and iv). To
include these criteria in the policy is, therefore, unnecessary and
repetitious.”
As a result, the
council accepted the Inspector’s recommendation for the deletion of criterion
(p) as drafted and it was incorporated into the reasoned justification thus:
“8.40
Development of the site is likely to be phased and it is essential that any
development is compatible with the overall objective of a strategic business
park and does not constrain a comprehensive overall development that meets all
the criteria set out in the policy. Any development within the site will
therefore be expected to accord substantially with an approved Master Plan for
the comprehensive development of the whole site; and in any event to:
i. Be
compatible with the overall strategic objectives of strategic business park
development, which are primarily to attract major inward investment to the
Region and sub region to support economic regeneration;
ii. Comply
with, or allow and enable an overall scheme to comply with, all the criteria in
this policy;
iii. Not
constrain a comprehensive and satisfactory overall development of the entire
site;
iv. Not hinder
the provision of a satisfactory highway link between the A664 and Junction 21
of the m62; and
v. Contribute to the total cost of all on
and off site infrastructure works, including highways and services, necessary
for the development of the entire site. Such contributions will be secured
through planning conditions or other legal agreements.”
28.
In regard to this paragraph, the planning experts agreed that the local
planning authority would have continued to ensure that any development on the
KBP accorded substantially with an approved Master Plan. They also agreed
that the Inspector had specifically considered the possibility of individual
development coming forward within the planning process and that the provision
of the proposed criterion (p) to Policy EC/7 did not place an embargo on such
development although it was accepted that planning permission would not have
been ranted for any employment development on the reference land with vehicular
access from Buckley Hill Lane. Any individual development that might have
been permitted would, it was agreed, have had to contribute to the onsite and
offsite infrastructure costs of the KBP by means of a s.106 obligation or other
appropriate mechanism.
29.
As to what had been criterion (p) in EC/6 relating to residential
development and was reworded as criterion (o) in the draft to: “limited
residential development may be acceptable provided it is appropriate in scale,
location, access and design”, the Inspector continued at paragraph 8.56 of
his report in response to an objection on the grounds that any such development
would be contrary to the sequential test set out in PPG 3 and would restrict
the flexible use of the site:
“…KBP is a greenfield site although the areas identified in the masterplan for housing are reasonably
well located in terms of their connections to local services and public
transport links. I can see that the limited housing may well be necessary as
enabling development, particularly in terms of the significant infrastructure
costs that the development of the site may accrue. It may also assist the
vitality of mixed-use areas on the Park. However, beyond this fairly limited
contribution, the development of extensive housing would be inappropriate under
PPG 3 and would restrict the flexible use of the site. The wording of
criterion (o) is clear in that extensive redevelopment would not be acceptable
and that the design and siting of limited residential development must be such
that it would not compromise the overall objective of the Business Park.”
The proposed wording of criterion (o) was thus
confirmed.
30.
The revised UDP was not formally adopted until June 2006 and the operative
development plan therefore remained the original 1999 UDP. However, as the
revised UDP had reached an advanced stage of preparation it was agreed that it would
have been material to any planning application made at the valuation date.
Highways
31.
Mr Wall and Mr Wooliscroft agreed, in respect of a limited residential
development on the reference land with access off Buckley Hill Lane, that
whilst the independent development of the reference land for these purposes had
not been formally accepted by Rochdale Borough Council, the advice given by the
council’s highway officers was that it could not be recommended for refusal on
highways grounds. If such a development were to achieve planning consent
(whether for residential only on the 4.88 acres comprising part Plot X (Mr
Wooliscroft’s Option 2) or for a mixed use scheme incorporating business use on
the remainder of the reference land with access for that off Kingsway (Option
3)), section 106 contributions in the region of £115,000 would have been
required. These were improvements to the traffic light control system beyond
the junction of Buckley Hill Lane with Elizabethan Way where the latter meets Bridge Street and Rochdale Road (the Bridge Street Junction), bus stop upgrades and
footway improvements to the Buckley Hill Lane Bridge over the Metrolink railway
line.
32.
It was agreed that Mr Wooliscroft’s three proposed development scenarios
(option 1 being employment only on the whole of the reference land, and
therefore not relevant to this decision) included all or part of the adjacent
CPO plot 12 – the narrow strip lying between plot 13 and the railway line.
Issues
33.
The sole matter for us to decide in this reference is the value of the
subject land as at 6 January 2006 in accordance with section 5, Rule (2) of the
Land Compensation Act 1961. The principal dispute between the parties is
whether or not the reference land enjoyed any value in addition to its existing
use value (which itself is not agreed) at the valuation date. In that regard,
the evidence and argument as to whether the land enjoyed any hope value to
reflect development potential centred principally on the statutory and case law
context within which the issue is to be determined.
34.
We proceed therefore by considering firstly the legal and planning issues
and, having drawn our conclusions from this, then turn to the question of
value.
The Law
35.
The basic principle in accordance with the Land Compensation Act 1961,
section 5, Rule (2), and the words of Lord Romer in Gajapathiraju v
Vizagapatam [1939] AC 302, at 312, is that the value of land shall be taken
to be the amount which the land, if sold on the open market by a willing seller
to a willing buyer, might be expected to raise. The seller should not be
regarded as disinclined to sell, nor should the buyer be regarded as under any
urgent necessity to buy. The parties are to be taken as behaving reasonably and
being properly informed about the attributes of the property and the market for
it. (See Lady Fox's Executors (1994) 2 EGLR 185). It is common ground
that the valuation is to be at the valuation date, which is 4th January 2006,
assessed on the facts and circumstances at that date, so far as the law
permits.
36.
The issue between the parties is, as we have said, whether the reference
land has any development value or is only to be valued on the basis of its
existing agricultural use. The value results from the demand for the land,
which is a consequence of a purchaser's view of the uses to which he may be
able to put it and when. As the President of the Lands Tribunal observed in the
case of RMC (UK) Ltd v London Borough of Greenwich (2005), at paragraph
35:
"The assumptions that fall to
be applied in valuing the reference lands are, on the one hand, those relating
to the planning permissions to be assumed in respect of each of the sites and,
on the other, those relating to any increase or diminution in value arising from
the proposal to acquire each compulsorily."
37.
The first step is to identify the appropriate planning status and
assumptions at the valuation date.
Planning Assumptions
38.
Section 14 (1) of the Land Compensation Act 1961 provides that:
“For the purpose of
assessing compensation in respect of any compulsory acquisition, such one or
more of the assumptions mentioned in sections 15 and 16 of this Act as are
applicable to the relevant land or any part thereof shall be made in
ascertaining the value of the relevant interest.”
39.
Section 15 is not relevant as planning permission for the scheme
underlying the order existed at the valuation date.
40.
The parties now agree that KBP was not land subject to ‘comprehensive
development proposals’, given the special meaning of those words, within
section 16 (4). Therefore, the relevant parts of Section 16 are:
“(3)
If the relevant land or any part thereof (not being land subject to
comprehensive development) consists or forms part of an area shown in the
current development plan as an area allocated primarily for a range of two or
more uses specified in the plan in relation to the whole of that area, it shall
be assumed that planning permission would be granted, in respect of the
relevant land or that part thereof, as the case may be, for any development
which—
(a) is
development for the purposes of a use of the relevant land or that part
thereof, being a use falling within that range of uses, and
(b) is
development for which planning permission might reasonably have been expected
to be granted in respect of the relevant land or that part thereof, as the case
may be.”
And
(6) Where in accordance with any of the
preceding subsections it is to be assumed that planning permission would be
granted as therein mentioned—
(a) the
assumption shall be that planning permission would be so granted subject to
such conditions (if any) as, in the circumstances mentioned in the subsection
in question, might reasonably be expected to be imposed by the authority
granting the permission, and
(b) if, in accordance with any map or statement comprised
in the current development plan, it is indicated that any such planning
permission would be granted only at a future time, then (without prejudice to
the preceding paragraph) the assumption shall be that the planning permission
in question would be granted at the time when, in accordance with the
indications in the plan, that permission might reasonably be expected to be
granted.
But then, significantly:
(7) Any reference in this section to development for which
planning permission might reasonably have been expected to be granted is a
reference to development for which planning permission might reasonably have
been expected to be granted if no part of the relevant land were proposed to be
acquired by any authority possessing compulsory purchase powers.
41.
Section 16(7) enshrines what has been called the ‘cancellation
assumption’ since the House of Lords considered the same words in section 17(4)
in the case of Fletcher Estates v the Secretary of State [2002] 2 AC 307.
It was held that the scheme must be assumed to have been cancelled on the
relevant date. Apart from that, as Lord Hope said, "no assumption has to
be made as to what may or may not have happened in the past." (Para.105).
This left open the question how much of the scheme should be assumed to be
cancelled.
42.
An answer was provided by the Tribunal in the case of Thomas Newall
Ltd v Lancaster City Council [2010] UKUT 2 (LC) [Thomas Newall 1]. In that
case the Lands Chamber had to consider certain preliminary issues, the first of
which was whether, for the purposes of section 16 of the 1961 Act, it should be
assumed that a certain planning permission would be granted. In order to
determine that issue the Lands Chamber had to decide what assumptions should be
made as to the factual background. In particular whether it should be assumed
that the acquiring authority's proposals underlying the compulsory purchase
order had been cancelled and, if so, how much of the authority's proposals
should be ignored - the whole scheme for the area or only as much of it as
affected the reference land? (See paragraphs 4 - 10.) The claimant submitted
that the correct approach was that the whole scheme had been cancelled and (see
paragraph 25) more generally argued that the effect of the Pointe Gourde
principle was that the assumption to be made was that no land was proposed to
be acquired pursuant to the acquiring authority's scheme. It was submitted that
Spirerose supported that argument.
43.
The Lands Chamber rejected that argument, distinguishing Fletcher
Estates and Urban Edge Group Ltd v London Underground Ltd [2009] RVR 361 as being linear transport proposals. (The Lands Chamber plainly
considered Waters v Welsh Development Agency [2004] UKHL 19 but
did not make any express reference to it in their decision). In dealing with
the statutory assumptions to be derived from section 16(7) they said (paragraph
28):
"…. in the case of section 16 the cancellation
assumption is to be made at the valuation date. That is well after the
compulsory purchase order is made and in many cases other land may already have
been acquired and some works undertaken pursuant to the order. For example, in
this case the acquiring authority had already taken steps to secure removal of
the gas holder and it is common ground that the physical condition of the
reference land and its surroundings is to be taken as at the valuation date. In
those circumstances one must ask on what basis it is to be assumed that the
whole extant scheme has been cancelled when section 16 (7) states only "if
no part of the relevant land were proposed to be acquired (Emphasis
added)"
44.
The Lands Chamber did not consider that reliance on the Pointe Gourde
principle entitled an assumption to be made that the whole scheme was to be disregarded
(see paragraph 29). Spirerose gave no
support for such a submission. They said (paragraph 30):
"In our judgment the Pointe
Gourde principle does not permit a further statutory assumption to be made,
namely that in addition to the assumption that "no part of the relevant
land were proposed to be acquired" there are no proposals to acquire any
land pursuant to the relevant scheme. To do so would introduce a new assumption
which is not warranted by the language of section 16(7) or by any recognised purposive
principle of statutory construction as envisaged by Lord Walker in paragraph 36
of Spirerose. It would also result in applying the Pointe Gourde
principle to the ascertainment of the
interest to be valued rather than the value of the interest contrary to (the) Rugby
Joint Water Board case and see also Myers v Milton Keynes Development
Corporation [1974] 1WLR 696 at p702. It will be at the subsequent
valuation stage that Pointe Gourde is potentially applicable, not at
this preliminary stage of determining whether the reference land is assumed to
have planning permission.
31. Further, to ignore any proposals to acquire
land for the purposes of the scheme as a whole would be inconsistent with the
House of Lords decision in Margate Corporation v Devotwill Investments
[1970] 3 All ER 864."
45.
It may be helpful to say something about the case of Transport for London v Spirerose [2009] UKHL 44, referred to as Spirerose above. That case
seems to us to be little direct assistance on the issue of the cancellation
assumption but it is of some relevance in considering the proper interpretation
of the Pointe Gourde principle in the light of the Waters case. The
issue was whether, where the success of an application for planning permission
was probable but not a certainty, compensation should be assessed on the basis
that planning permission would be granted or whether compensation should be
discounted to reflect a degree of uncertainty (see Lord Scott at paragraph 1;
Lord Walker at paragraph 27; Lord Collins at paragraph 66). The conclusion of
the House of Lords was that the Pointe Gourde principle gave the lower
courts no support for the proposition that the probability of permission should
be treated as a certainty. In the course of their examination there was analysis
of the juridical basis of the Pointe Gourde principle and some
discussion of the Waters case (see particularly Lord Collins at
paragraphs 127 to 129). After pointing out that the Pointe Gourde case
provided no basis of authority or principle for the conclusion reached by the
lower courts, Lord Collins continued (in paragraph 129):
"…Waters v Welsh Development Agency is an example of an extended
interpretation of the concept of value in the context of determining the extent
of a scheme in order to give effect to a Parliamentary intention to provide
dispossessed owners with a fair financial equivalent: see at [61]. The
underlying basis of the decision in Waters is that the extent of the scheme to
be ignored for the purposes of valuation is not limited by the express
provisions of section 6 and schedule 1. It does not go further, and does not
support the conclusion of the Court of Appeal."
46.
The claimants can fairly claim the support of paragraphs 24 to 31 of Newall
in support of the submission that in the present case regard is to be had to
the Acquiring Authority’s underlying KBP proposal at the stage of considering
the planning assumptions to be made. Indeed we do not think that this is
contested by the acquiring authority. We agree. The assumption required by
section 16(7) must be taken as far but no further than its language warrants.
It is also important not to elide the stages of first identifying the planning
status and then, when seeking to value on that basis, applying the ‘disregards’
to the result.
Disregards
47.
A picture of the planning prospects that will be in the minds of the
willing purchaser and seller will emerge from the analysis of the planning
status. From this picture a judgement may be made about what would be offered
and accepted for the land. But this judgement must then be adjusted by
disregarding particular elements of actual or prospective development so far as
they affect the value of the land. The disregards are to be found in section 6
and Schedule 1 of the LCA 1961 and in the Pointe Gourde principle. Section
6 reads:
“6 (1) ….. no account shall be taken of
any increase or diminution in the value of the relevant interest which, in the
circumstances described in any of the paragraphs in the first column of Part I
of the First Schedule to this Act, is attributable to the carrying out or the
prospect of so much of the development mentioned in relation thereto in the
second column of that Part as would not have been likely to be carried out if—
(a) (where the
acquisition is for purposes involving development of any of the land authorised
to be acquired) the acquiring authority had not acquired and did not propose to
acquire any of that land;
FIRST
SCHEDULE
Part I
Description
of Development
|
Case
|
Development
|
|
1. Where
the acquisition is for purposes involving development of any of the land
authorised to be acquired.
|
Development
of any of the land authorised to be acquired, other than the relevant land,
being development for any of the purposes for which any part of the
first-mentioned land (including any part of the relevant land) is to be
acquired.
|
48.
In the case of Waters v Welsh Development Agency [2004] UKHL 19
the House of Lords decided that the Pointe Gourde principle applied as a
principle of law and was not limited by the statutory provisions. The Pointe
Gourde principle applies to any increase or decrease in the value of the
subject land that is wholly attributable to the underlying scheme. The
underlying scheme might well include a great deal more than the land involved
in compulsory acquisition. That is well illustrated in the RMC case
where the parties had identified ‘the scheme’ as encompassing either 181 acres
or 294 acres, whereas the land included in the compulsory purchase order, and
thus the subject of the statutory disregard, only amounted to 19 acres. (RMC
case, paragraph 39).
49.
The House of Lords in Waters considered that the Pointe Gourde
principle had come to be applied too widely and should be restricted in its
application (see Lord Nicholls at paragraph 56 and Lord Brown at paragraph 148).
Lord Nicholls said:-
“59. The
extent of a scheme is often said to be a question of fact. Certainly,
identifying the background events leading up to a compulsory purchase order may
give rise to purely factual issues of a conventional character. But selecting
from these background facts those of key importance
for determining the ambit of the scheme is not a process of fact-finding as
ordinarily understood.
60. Take
the present case. The purpose for which the claimants' land was acquired can
be identified at two different levels of generality: for use as a nature
reserve, or for use as a nature reserve to compensate for loss of the Taff /
Ely site of special scientific interest through construction of the Cardiff Bay barrage. Factually each of these stated purposes is correct. Which of these
purposes is to be regarded as the more appropriate when identifying the scheme
within the meaning of the Pointe Gourde principle is a matter for the
tribunal’s judgment.
61. A
similar judgmental exercise is required with regard to the works said to
comprise one scheme for the purposes of the Pointe Gourde principle. When
deciding, for instance, whether a phased development constitutes a single
scheme or more than one scheme the tribunal will consider all the circumstances
and decide how much weight, or importance, to attach to the various relevant
features. The tribunal will attach to these features the degree of importance
it considers appropriate having regard to the purpose of the Pointe Gourde
principle. What, then, is the purpose of this principle? Its purpose, in
separating 'value to the owner' from 'value to the purchaser', is to forward
Parliament's objective of providing dispossessed owners with a fair financial
equivalent for their land. They are to receive fair compensation but not more
than fair compensation. This is the over-riding guiding principle when
deciding the extent of a scheme.
62. This
statement of general principle does no more than articulate the approach
already adopted intuitively by tribunals when faced with making a choice
between competing views of the extent of a scheme in a particular case. It is
to be hoped that bringing this principle into the open will assist
decision-making in difficult cases.
63. In applying this general
principle there is of course no magical detailed formula which will provide a
ready answer in every case. That is in the nature of things, circumstances
varying so widely. But some pointers may be useful. (1) The Pointe Gourde
principle should not be pressed too far. The principle is soundly based but it
should be applied in a manner which achieves a fair and reasonable result. Otherwise
the principle would thwart, rather than advance, the intention of Parliament.
(2) A result is not fair and reasonable where it requires a valuation exercise
which is unreal or virtually impossible. (3) A valuation result should be
viewed with caution when it would lead to a gross disparity between the amount
of compensation payable and the market values of comparable adjoining
properties which are not being acquired. (4) When applied as a supplement to
the section 6 code, which will usually be the position, the Pointe Gourde
principle should be applied by analogy with the
provisions of the statutory code. Thus in the class 1 type of case the area of
the scheme should be interpreted narrowly, for instance, so as to embrace the
property acquired under the compulsory purchase order and property which would
probably have been so acquired had it not been bought by agreement. In other
cases, such as case 2, Parliament has spread the 'disregard' net more widely.
Then it may be appropriate to give the scheme a wider scope. (5) Normally the
scope of the intended works and their purpose will appear from the formal
resolutions or documents of the acquiring authority. But this formulation
should not be regarded as conclusive. (6) When in doubt a scheme should be
identified in narrower rather than broader terms.”
50.
Mr Humphries' submissions on the extent of the disregards were
uncompromising and essentially simple. He submitted that one should ask
"would that development have come forward if the authority had not
acquired any of the land?" The answer to that he said must be no. Then,
he asked, "does the rest of the compulsory purchase land increase the
value on the relevant land?" The answer to that is clearly yes. And
"would the rest of the development on the KBP land have come about
anyway?" To this, he submits, the answer is no clearly not. That is the
scheme that the law requires to be disregarded. It is the whole of the KBP
proposal. All of the permissions are required to bring about the comprehensive
development that comprises the KBP scheme. Once that is disregarded, all value
is removed from the reference land other than its existing value. Any
additional value would mean that the reference land was taking advantage of the
underlying and partly publicly funded scheme.
51.
Mr Kingston by contrast had less to say about the disregards or the Pointe
Gourde principle. He stressed that what had to be disregarded was the
value attributable to so much of the development ‘as would not have been likely
to be carried out’ in the absence of the acquisition. On the facts he
submitted that a significant amount of development would have been likely to be
carried out in any event and it was that that the claimant said gave extra
value to the land. So far as Pointe Gourde was concerned, he relied on
Lord Nicholls in Waters, particularly his principle 4, that applied as a
supplement to the section 6 code, which was the case here, the scheme should be
interpreted narrowly and not extend the disregard further than the statutory
provisions took it. He emphasised that it was for the tribunal to find as a
matter of fact what the scheme was.
The Nature of the Exercise
52.
The impulse not to move any further away from reality than the law
compels is evident in the cases. It is a powerful impulse which we share; but
it seems impossible to avoid considering life in at least two parallel universes:
the ‘cancellation assumption’ universe and the ‘disregard the scheme’ universe
(called "no KBP" for short).
53.
Both parties focused in their evidence and submissions upon the
prospects of a purchaser obtaining a residential permission on the reference
land in those two different situations. The "cancellation universe"
assumed that the compulsory purchase orders on the reference land had been
cancelled but that access could be obtained through the KBP. In that situation
it was broadly agreed that the reference land might indeed have some potential
hope value for residential development.
54.
The claimant said it would be substantial. The acquiring authority
maintained that any such hope value would be much reduced, probably to nil,
because the planning authority would not be prepared to grant a permission that
did not conform with the master plan requirements for phasing, which would
delay residential development, or make a very substantial financial
contribution to the infrastructure of the KBP. Finally, the acquiring
authority submitted, any such value that remained should be disregarded as a
matter of law.
55.
The second situation was postulated in order to consider what value the
reference land might have if the law required that the whole of the KBP proposals
had to be left out of consideration. That situation was chiefly one where
permission was being sought for a development with access from Buckley Hill Lane,
although we do not think the claimant completely abandoned the possibility
that in the "no KBP" universe a purchaser would still contemplate the
development of a business park by another scheme.
The Evidence and Submissions on the Planning Assumptions
56.
Mr Frampton, for the claimant, drew attention in his evidence to the
identification as at April 2002 of plot X as part of the housing land supply
which was being relied upon to resist development on a new greenfield sites. The
site was a commitment for new housing at the valuation date. The UDP Inspector
had said that his view was that the assessment of the commitment element of the
supply, including plot X, was "fairly robust". One of the purposes
of the Urban Potential Study 2005, with a base date of 14 April 2004, was to
estimate the likely level of land that could realistically come forward for housing
within the next 5 to 15 years. The study adopted a "Priority Area
approach" to identify potential sites for future housing. One criterion
was to draw an 800 m radius from "key public transport interchanges".
The reference land was within such a radius from Milnrow Station and was
considered to be within the defined urban area as designated in the UDP. In
the full list of sites, plot X of the KBP was recorded as being
"likely" to come forward within 10 -- 15 years. Mr Frampton said
that the time horizon in that document was not determinative. He considered
that it would be seen as perfectly possible that residential development would
come forward earlier than that timescale. He felt that it had been put in the
10 to 15 year category because the planning officers had looked at the
development framework and seen that plot X fell in phase 5 of the framework. He
noted that plot S had actually come forward early, although it was also within
the 10 to 15 year period. He pointed out that there was nothing in EC/6 or
EC/7 that precluded individual development nor was there anything to justify it
being regarded as simply "enabling development" and a necessary evil.
It was evident from the framework, which had been incorporated into the
planning permission, that the ancillary uses, including residential, were there
to ensure the "vitality" of the business park. Mr Frampton's opinion
was that residential development would add to the vitality of the business
park. It would to its attraction. It would not be inconsistent with
development policy. There would be no harm to the underlying purposes of the
interim housing policy. That was intended to reflect the advice of PPG 3 and
declared that it would not be prudent to release further greenfield land beyond
that already committed. However, Mr Frampton noted, the land on plot X was
already committed.
57.
At the valuation date, with KBP but on the cancellation assumption, the
planning policies and permission would have meant that the reference land would
have had significant hope value attached to it. He drew attention to the
illustrative layout plan showing a 60 dwelling layout, 56 of which would be on
the reference land, 4 on the nib, with access from Buckley Hill Lane. Such a
development would not prejudice the development of the remainder of plot X or
the reference land. Mr Frampton did not accept that any value would have been
sucked away by a requirement to make a substantial contribution to the
infrastructure of the KBP. By the valuation date the funding was in place for
that infrastructure, much of it was either built or building and the
collaboration agreement had become unconditional. A contribution might be
expected from a development with access onto Kingsway but it would be
negotiated on the basis that it should be reasonably related in scale and kind
to the development. The planning authority would have had no warrant for
demanding an excessive sum. Nor would there be any justification for an
over-strict insistence upon compliance with conditions in circumstances where
the cancellation assumption meant that achieving development in the northern
part of KBP would have to become a matter of cooperation and negotiation. In
summary Mr Frampton said –
(i)
Residential development on the reference land would provide appropriate
separation between existing residential development and proposed business uses;
(ii)
Early residential development would provide confidence for the market
for this important, strategic site;
(iii) There was scope to provide
aspirational housing to attract future senior employees
(iv) There
would have been no prejudice to the future development of KBP
(v) There would be no financial
impediment by reason of contributions to existing infrastructure because there
could be no lawful basis upon which to require those contributions
(vi) There would be no objection to
the use of land fronting Buckley Hill Lane for residential development, as he
believed the acquiring authority agreed
(vii)With
substantial infrastructure on the KBP land, but no CPO on the reference land,
there would have been planning advantage in bringing forward development on
that land
58.
Indeed, even absent the KBP scheme, Mr Frampton believed that, at the
valuation date, on the basis of the policy development to that point there was a
prospect that residential development of part of the reference land would come
about anyway, with access to Buckley Hill Lane. The same planning arguments
would largely apply. If the development was independent of the KBP land there
would be no justification for any contribution to the KBP infrastructure. He
did not accept that it could properly be regarded as back-land development. The
nib had a frontage of 52 m to Buckley Hill Lane. The land was not in the green
belt, it was out of any protected corridor, it was sustainable, it was in a
priority area and there was no technical constraint for up to 74 houses. He
considered it would be perverse to suggest that it would not be developed.
59.
Mr Frampton was cross-examined about the refusal of permission on 18
December 2002 on an application (02/D40001) by A and J. Nall and Mrs Turner for
50 dwellings with an access off Buckley Hill Lane. It was put to him that this
was a "real world" refusal for what he was contemplating. Mr
Frampton examined the reasons for the decision. They were largely based upon
the failure to comply with policy EC/6 but there was no adequate explanation of
the harm that would be done to that policy by such a development and he did not
feel that the reasons could be justified. It was wrong, in reason number 5, to
apply a sequential test under PPG 3, given the policy status that Mr Frampton
had already set out. Mr Frampton agreed with Mr Massie that the nib would have
had significant development potential at the valuation date.
60.
The claimant drew attention in submissions to the points Mr Frampton had
made in his evidence about the extensive planning history, particularly Policy
EC/6 of the 1999 UDP and the way that became modified in policy EC/7 of the
2006 UDP. It was agreed that, although the 2006 UDP had not been adopted at
the valuation date, it had reached a very advanced stage and would have been
accorded very considerable weight. It was pointed out that there was no
requirement in either EC/6 or EC/7 that the housing element would be restricted
to enabling development. Mr Singleton had agreed in cross examination to most
of the salient points on the policy background. The reference in both policies
to strict application of the criteria should not have prevented the planning
authority from taking a sensible view of the purpose of the policies in the
light of all the circumstances at the time of the application. The acquiring
authority's real difficulty was identifying the harm that would flow from a
grant of planning permission. There would be no harm to the underlying purpose
of the policy. The CPO had been confirmed because at least, in part, the
acquiring authority had told the inspector that it was vital to have the
reference land. In a "cancellation assumption" universe the planning
authority would not have the reference land, but it would still be important to
the KBP to incorporate it by agreement if it could. That would be a material
consideration that the planning authority would correctly take into account in
deciding what permission to grant. It would also be a very material change from
the circumstances in which the Nalls’ 2002 application and the section 17
certificate application were refused.
61.
The planning permissions that were granted in December 1999, which included
in permission D 35130 references to housing plot X, were to be taken into
consideration under section 16 under the cancellation assumption.
62.
Mr Frampton's evidence about the prospect of planning permission for a
residential development remained sound in a "no KBP" universe he
said. If the tribunal were driven to contemplate a "no KBP" universe
in which it was to disregard the physical reality of the KBP site's installed
and committed infrastructure, it remained a fact that an independent access
could be achieved from Buckley Hill Lane. The evidence suggested that this
could be done either through the nib or by the acquisition of two of the
existing houses.
63.
The acquiring authority, through Mr Singleton, argued that the reference
land is "back land" with no direct access to the highway. The
hypothetical purchaser considering development independently of the wider
comprehensive scheme would face the problem that he would need to buy other
land to obtain access. To the price he would have to pay for the reference land
he would have to add the cost of purchasing the land for an access, the
prospect of obtaining planning permission for that access and the holding costs
involved in keeping the land until permission was obtained. For there to be
any "hope" value in the reference land on the basis that some form of
independent development might be permitted, that is development not deriving
its value from the scheme, there would need to be a very high prospect of
planning permission granted and that high prospect would have to be at or very
shortly after the valuation date. Any other outcome would result in the costs
of purchasing and holding the access land, and indeed the reference land,
wiping out any hope value in the reference land.
64.
We were urged in submissions to put no weight on the offer Mr Massie
made for the reference land. He was under pressure to dispose of an objection
to the CPO enquiry if he could do so. It should be borne in mind that
compensation is to be determined by reference to the price which a willing
vendor might reasonably expect to obtain from a willing purchaser. The price a
purchaser with an urgent necessity to buy might offer is not the test. The claimant's
purchase of the reference land and the nib for £1.25 million might support the
proposition that a hypothetical purchaser would pay more than existing use
value to implement part of the actual planning permission in accordance with
the overall comprehensive scheme, but that extra value would have to be
disregarded.
65.
Mr Singleton had stressed the conditions attached to the KBP planning
permission. He particularly emphasised the requirements in conditions 1.7 and
1.12 that the development should be carried out in substantial accordance with
the principles, proposals and layout in the development framework and Master Plan.
Phasing was to be in accordance with the framework (condition 1.13) and various
enhancement and landscaping works were to be done before the implementation of
particular phases. Policy EC/6 would have been strictly applied. Mr Humphries
referred us to section 38 (6) of the Planning and Compulsory Purchase Act 2004
and the requirement that "the determination must be made in accordance
with the plan unless material considerations indicate otherwise." He
referred us to the judgement of Lord Clyde in City of Edinburgh v Secretary
of State for Scotland [1997] 1 WLR1447 to support the proposition that
there was a presumption that the development plan would govern the decision
unless the applicant could show that there were material considerations in the
particular case that indicated the contrary.
66.
In both evidence and submissions particular criteria of policy EC/6 were
emphasised. Criterion (j) required vehicular access to be from Kingsway and
junction 21 only. ‘Independent’ development of the reference land would clearly
conflict with this criterion. It was submitted that the claimant had not
justified any departure from this criterion. There was a well recognised
junction capacity problem at the Bridge Street and Elizabethan Way signalised
junction. Residential development on the reference land with vehicular access
on to Buckley Hill Lane would put more traffic through that junction. Mr
Wooliscroft's analysis had assumed a completion date in 2008 and that the KBP
development did not exist. He had simply looked at changes in percentage
flows. This was inadequate for this difficult junction which was crucial to the
delivery of the KBP scheme. In those circumstances the planning authority
should strictly apply criterion (j). That would be consistent with the Nall
application refusal, reasons 1 and 2. While it is correct that there was no
highway impact reason for refusal in the Nall decision, the CPO had not
actually been promoted at that stage. In the officer's report on the
application for a section 17 certificate (paragraphs 10.5.5 and 10.5.6) there
had been no highway objection but no allowance had been made for KBP.
67.
We pause to note that what the officers
said in that report was that on the basis of 60 houses with access off Buckley Hill Lane –
"The conclusion
that was reached in our capacity as Highway Authority was that as a stand-alone
development it could not be recommended for refusal. This was subject to a
section 106 agreement for minor improvements to the junction of Bridge Street and Elizabethan Way to leave it in a no worse state. These were for the
installation of an intelligent traffic signal control system such as MOVA and
modifications to the signal timings as suggested in the TIA. In my opinion
that squeezed the last improvements out of the junction that are possible
without substantial work to the junction. It should be noted that the TA made
no allowance for Kingsway Business Park as in our opinion should the
application (D40001) have been successful the Business Park would not be
constructed and hence have no impact on
the Bridge Street/Elizabethan Way junction."
68.
Mr Wall pointed out that on the basis of the conditions at the valuation
date the developer of KBP had no intention of opening the spine road early to
through traffic. Thus, on the cancellation assumption, the council would have
known that there would be up to 90,000 m² of development from junction 21 which
would have taken up any spare capacity remaining at the Bridge
Street/Elizabethan Way junction.
69.
EC/6 criterion (l) required that any individual development must be
compatible with the overall objective of a Strategic Business Park and must not constrain a comprehensive overall development or the provision of a
satisfactory highway link. Mr Singleton explained that he considered that this
meant not only physical constraints but also other constraints including
financial contributions to the provision of infrastructure. At the valuation
date the failure of an independent development on the reference land to
contribute to the wider infrastructure would constrain the comprehensive
overall development and damage the viability of the scheme. It was pointed out
that it was such an argument that was part of the reason why the CPO inspector
rejected the claimant's objection and this was explored in some detail in
evidence with the structure of the JVA being explained. An independent
development on the reference land would make no contribution whatsoever towards
the overall infrastructure costs of the KBP.
70.
Criterion (p) required that limited residential development should be
part of a comprehensive development scheme for predominantly business uses. That
would be a further fundamental objection to ‘independent’ residential use.
71.
In summary, submitted Mr Humphries, there would have been a strong
development plan objection to any independent development on the reference land
and similar points would be made on the basis of the emerging draft policy
EC/7. In addition there would have been an objection based upon PPG 3 and the
interim housing policy to any development of the reference land that was not in
accordance with policy EC/6 and the comprehensive outline planning permission. The
council, it was submitted, was not relying upon any part of projects coming
forward within a three or five-year period from the valuation date.
72.
The criteria in EC/6 and EC/7 had plainly been important in the
considerations of the replacement UDP inspector and the CPO Inspector. It
would be wrong to apply the cancellation assumption in such a way as to suggest
that there would be any weakening of the emerging development plan policy.
73.
Mr Singleton said that it was clear that the large infrastructure works
necessary to open up the KBP site could not have come forward without public
funding. Any planning permission on the retained land as part of the KBP would
derive its value from the existence or prospect of development of that
infrastructure.
74.
Mr Singleton’s opinion was that the prospects of planning permission for
an early residential development outside the development plan would be small.
He answered Mr Frampton’s summary points in favour of a grant of permission in
the following way.
75.
Safeguarding the amenity of the houses on Buckley Hill Lane by the
separation of that residential area and the business uses offered no advantage
compared with the planned provision of landscaped bunds between the different
elements of KBP.
76.
He did not agree that an early start would be any benefit to market
confidence. It was a start on a high quality business park that the market
wanted to see. In any event at the valuation date significant progress could
be seen on the ground. A start on a small part of residential development
would have provided no contribution; indeed it might even been seen as a
disadvantage. There would be no protective effect for other greenfield sites;
on the contrary the planning authority's position might be disadvantaged.
77.
Nor would aspirational housing be much of an advantage. A handful of
senior executives might choose to live there, but it would not be of
significance. Against that should be set the fact that phasing would pass out
of control of the developer and residential development might not be brought
forward at the best time.
78.
He did not think that there would be advantage in early provision of
mixed development. Housing was supposed to be complementary to the business
park and support it. Insofar as earlier provision of the Entwhistle Bridge was claimed as an advantage, it could be achieved any way and the advantage would be
extremely limited.
79.
Mr Humphries acknowledged that, on the cancellation assumption, the
value of the reference land "could be considerable, depending on its
contribution to overall infrastructure costs." He added that "it is
accepted of course that the hypothetical purchaser might pay more than existing
use value for the reference land to develop it as part of the KBP scheme.” But
his simple point was that such value had to be disregarded. That was not a
matter of valuation judgement - it was a matter of law.
Consideration: the Cancellation Assumption
80.
The cancellation assumption requires the Tribunal to imagine all the
facts on the ground and all the planning permissions, plans and potentialities
as they were at the valuation date but to assume that the compulsory purchase
order on the reference land, and only on the reference land, had been
cancelled. That, of course, can have a significant effect upon some of the
planning assumptions. In the present case it is to be assumed that the KBP had
been begun in accordance with the Master Plan. The junction with the motorway,
the central spine road and part of the southern loop road were built or in the
course of construction, and some development had already begun. Part of the
northern loop road at the western end had also been started. It was too late
for the developer to pull out of its commitments to build out the KBP according
to the master plan.
81.
If that had actually happened it would at least present the authorities
responsible for developing the KBP with major challenges. At worst it might be
regarded as a disaster. planning judgments could not be unaffected by the
change. The planning authority would be as anxious as the developer to see as
coherent a development as possible as much in accordance with the master plan
as could be achieved. However neither the planning authority nor the developer
could simply impose its will. The owner of the reference land could always
refuse to do a deal. For that reason it seems to us quite unrealistic to
suppose that, much as it might wish to do so, the planning authority could
extract a contribution to the infrastructure of the business park that was so
substantial that it would remove most of the potential profit from the
reference land. Mr Humphries submitted that it would be wrong to suppose the
development plan would be weakened. In our view this is to miss the point: it
is not suggested that the development plan policy would be "weakened"
but in a cancellation assumption universe those policies could not be applied
to the reference land as if nothing had happened and the compulsory purchase
order had been confirmed. It might not be wise to insist strictly on elements
of the plan, such as the timing of the housing development, that may have made
sense when the developer was confident of building the northern loop road at an
appropriate stage, but which would make less sense if the strict insistence of
the planning authority on the letter of the policies left the owner of the
reference land with no incentive to do a deal that would enable the northern loop
road to be built. There would have to be a sensible negotiation on the basis
that both the planning authority and the owners of the reference land had an
interest in achieving a planning permission that would contribute towards an
appropriate development of the reference land. For the same reason there would
be more scope for debate about the conditions to be imposed upon any
development on the reference land and the timing of it.
82.
In brief summary, our view of the planning assumptions to be made on the
basis of the cancellation assumption is that the owner of the reference land
would perceive himself to be in a stronger rather than a weaker position and
would have a well nourished expectation of some housing development on the
reference land within a reasonable time.
83.
Indeed, in the ‘cancellation assumption universe’ it would have been
very much as if the claimant’s objection to the compulsory order had succeeded.
The £1.25 million price the claimant paid the Nall family for the reference
land, subject to the proposed CPO at the time, and the nib, is a transaction
that gives some indication of the level of value of the reference land, as long
as it is borne in mind that the value of the Nib would have to be deducted and
that there must have been a significant discount to reflect the chance that the
CPO would might not be confirmed. The ‘without prejudice’ offer of £1million
for the reference land and the Nib made by the NWDA seems to us to be
consistent with a substantial market value against a background of uncertainty
about the success of the CPO. Mr Massie gave evidence that he was, at that
stage under pressure to settle the Nall’s objection to the CPO and, of course,
that price included the Nib, to which he attributed the value of £770,000,
leaving £230,000 for the reference land. It was argued that this pressured
transaction was of no evidential value to us. In our view it may not be a
transaction capable of bearing much weight, but it is not wholly without
significance. Whatever Mr Massie wanted to offer, and whatever his motives for
offering it, he knew that to have a chance of success he would have to offer a
sum that would be competitive in a real market. What he did actually offer is
comparable to the sum actually paid. That offer is consistent with a view of
the value of the reference land and Nib under the shadow of the CPO. In a
world where the shadow of the CPO over the reference land had finally and
permanently lifted, it is difficult to see how the value of the land could
possibly be lower than those levels. We consider that in a cancellation
assumption world the reference land would have had a substantial value.
84.
However we do not seek to quantify that value because we agree that so
far as it is attributable to the KBP scheme, it must be disregarded.
The Nib
85.
It appears to be common ground between the parties that there would be a
good prospect of development on the Nib. This would make it valuable in its own
right. The ownership of the Nib needs some explanation. By an agreement dated
11 November 2004 J S Bloor (Wilmslow) Ltd, the claimant, transferred the Nib
for no consideration to JS Bloor (Tamworth) Ltd, an associated company. The
agreement imposed restrictive covenants. The restrictions defined a boundary
strip and the transferor undertook not to construct any access over it and,
importantly, not to use the retained land or any part thereof for any purpose
other than agricultural land or grazing land. As Mr Humphries pointed out, in
circumstances where it is assumed that the purchaser of the reference land (the
retained land) would need to purchase an access to Buckley Hill Lane, the owner
of the Nib would be in an extremely strong position. He could insist upon being
bought out at a ransom price and would be invulnerable to the threat that the
prospective purchaser of the reference land might achieve an access to Buckley
Hill Lane by some other means, for example by purchasing two of the existing
houses, because he could use his restrictive covenant to prevent any
development at all on the back land. However the parties initially appeared not
to have accorded it any significance, having assumed that the restrictive
covenants would be released or modified for no consideration in the event of
the claimant wishing to develop the retained land. Given that, unless the
restrictive covenants were first released, no reasonable hypothetical purchaser
would pay anything other than existing use value for the land and the whole
argument about hope value would be pointless, we think it is a reasonable
assumption to make that the restrictive covenants would be released between the
two companies in any event and we need say no more about it.
The Disregards
86.
In section 6(1) and the first Schedule Parliament has attempted to
specify the element of value that must be disregarded. Our task must be to
interpret those provisions and to apply them in accordance with what we
understand to be their meaning. The effect of section 6 and Schedule 1, case 1,
is that there must be left out of account any increase or decrease in value of
the reference land that is attributable to the development or prospect of
development of the other land subject to the compulsory purchase order for the
purposes of the acquisition and which would not have been likely to be carried
out without compulsory acquisition. In this case, because the compulsory
purchase order area included the whole of the KBP scheme up to the highway
boundary of the motorway (but not including the motorway junction; see drawing
CPO/001, revision H, attached to the CPO), that means the development of the
whole scheme. But that disregard only has effect if and so far as the increase
in value would not otherwise have been likely to come about if the authority
had not acquired and did not propose to acquire any of ‘that land’,
meaning "any of the land authorised to be acquired". “Authorised to
be acquired” must mean actually authorised by the existing compulsory order.
This is a point of some significance in this case because of the long history
of policies and proposals to develop this land for a business park, which might
have given rise to some hope that there would ultimately be a major development
on the site, even disregarding the KBP scheme itself.
87.
What if the authority had acquired part of "of that land" on
an earlier occasion, for example, to build the motorway junction? Lord
Nicholls in his pointer (4) in Waters refers to applying the Pointe
Gourde principle by analogy with the provisions of the statutory code; for
example, with the area of the scheme being "interpreted narrowly, for
instance, so as to embrace the property acquired under the compulsory purchase
order and property which would probably have been so acquired had it not
been bought by agreement." (Our emphasis.) It seems to us that Lord
Nicholls thought that property bought by agreement but which would have been
bought by CPO if necessary, would not be caught by section 6 but might be by Pointe
Gourde. While this statement is obiter dicta, it is interesting and
persuasive.
88.
We are therefore led to consider whether the development of the
reference land would otherwise be likely to be carried out.
89.
We think that simply on the cancellation assumption there would have been
a reasonable prospect of some residential development on the reference land
with access from a northern loop. However, it would seem that such an
increase in the value of the relevant interest would have to be disregarded.
It would be unequivocally attributable to the development of part of the land
authorised to be acquired other than the relevant land, and it would not have
been likely to be carried out in the absence of the acquiring authority's
proposals to acquire the land for such a road.
90.
The next challenge for us is to decide whether that question is answered
on the basis of what was on the ground at the valuation date, or whether
ignoring the increase in value brought about by the development of the
"other land" means in effect ignoring the development of the
"other land" altogether. To take the example of the KBP: if there
had been no development at all on any of the KBP area, so that the reference
land was not physically surrounded by development or the prospect of
development (subject to arguments about the effect of the planning policies),
development of the reference land might be thought less likely to be carried
out. Is the conclusion to be drawn from that that, to a degree, the carrying
out of development on the "other land" has increased the value of the
relevant interest, and that increase must be disregarded? We think the answer
to that must be yes.
91.
We remark at this juncture that it does not seem to us to be a case
where the Pointe Gourde principle has anything to much add. This is not
a case where the statutory disregards would produce a much narrower answer than
the Pointe Gourde principle (as, for example, in the RMC case). That
is because the "other land" included in the compulsory purchase order
does encompass all the land that could be described as "the scheme".
There is little point, therefore, in considering whether it would make a
difference to the extent of the disregards whether the Pointe Gourde
principle is given a wide or a confined meaning. In this case so far as the Pointe
Gourde principle has any application it would only be as a supplement to
the section 6 code and as such it is not needed. The statutory code, it seems
to us, in the circumstances of this case, gives the whole answer. The
Pointe Gourde principle cannot operate to narrow the statutory code.
92.
A powerful head of planning steam had built up behind the prospect of a
business park development on the reference and other land in any event. Other
plans had been put forward, had looked promising but had come to nothing. We
have no doubt that if the KBP scheme had failed the planning policies of the
area would have continued to support such a development and the authorities
would have done their best to bring another scheme forward. So we accept Mr
Frampton’s evidence that such a development might have been anticipated by a
purchaser, even in the absence of the KBP scheme. In that planning context
there might well have been some prospect of residential development on the
reference land eventually. But in our view the prospective purchaser would
perceive the chances as slim and the possible delays as substantial. It would
have been regarded as a long shot and on its own would not have added much, if
anything, to the existing use value of the reference land. In our view that
must be disregarded.
93.
The only development that would produce an increased value on the
reference land which would not have to be disregarded under the statute would
be a ‘likely’ development that took no part of the "other land". In
other words that would have to be a development which took its access from the
existing Buckley Hill Lane.
94.
In arguing that there would have been little prospect of permission for
residential development on the reference land taking access from Buckley Hill Lane,
the acquiring authority put a lot of weight on the refusals of the Nall
planning application and section 17 certificate application. They argued that
the same policy objections based upon EC/6 and emerging EC/7 would carry
weight. There are, of course, specific arguments to the contrary which were
raised by Mr Frampton, based upon the planning authority's failure to explain
with any particularity or persuasiveness as why such a permission would damage
the underlying objectives of the policies. But there is, it seems to us,
another point that requires consideration in the context of the disregards. The
statute requires that what should be left out of account in assessing the value
of the reference land is any increase or diminution attributable to the
acquisition of the other land for the purposes of the order. Point Gourde
is to similar effect so far as the "scheme" is concerned. It is to
try and understand what valuation effects do flow from the scheme that it is
necessary to visualise a 'no KBP' universe.
95.
When it comes to considering a residential development with access from Buckley Hill Lane no increase in value due to KBP should be taken into consideration. For
example improved access to the area due to the KBP infrastructure should be
left out of account, as should, perhaps, any claimed advantage that the
proposed residential development would have in screening the KBP development
from the existing houses. But, by the same token, any disadvantages arising
from the KBP development should also be left out of account. Thus, it seems to
us, that it cannot be said against an independent residential development in
the "no KBP world" that it would face a traffic objection because the
KBP traffic would need and use up existing highway capacity. To take that into
account would be to permit a diminution of the value of the reference land
which would be attributable to the scheme. In the same way, a policy objection
based upon a failure to make a substantial contribution to the infrastructure
of the KBP scheme or a failure to comply with the KBP development plan is also
something that, it seems to us, must be left out of account. That is not to
say that there might not be a broader and more general policy objection along
the lines that development of the reference land could potentially prejudice
the conception of some future scheme, but such an objection would be very
different in weight to the situation where the planning authority is seeking to
relate the policy and the objection based upon it to a specific scheme which is
just starting to get off the ground.
96.
For those reasons it does not seem to us that we should attach much
weight to the refusals of either the Nall application in 2002 or the section 17
application. The reasons for those refusals rely almost exclusively upon policy
EC/6 and the need to bring about a comprehensive and properly funded KBP
scheme. In a universe where there is no such scheme, while accepting that the
planning authority would not wish to do anything to impede a substitute plan,
those reasons for refusal would have to be very carefully reconsidered and
might carry much less weight. The possible exception is the reason for refusal
based upon the sequential development of a greenfield site, which might gain
more force in the absence of any active scheme for a business park. However
such a reason would have to consider very carefully the extensive policy
support for residential development on part of the reference land. There would
be a reasonable argument, in our view, in favour of permission in those
circumstances.
97.
It was evident from our site visit that there has been development off Buckley Hill Lane in the comparatively recent past on its eastern side. The long history of
the identification of the land of which the reference land forms part for
substantial development would weaken a PPG 3 greenfield objection to a
residential development on the west side of the lane, incorporating the nib. It
was agreed between the highway witnesses that a substantial number of houses
could take an access on to Buckley Hill Lane although the witnesses differed as
to whether the maximum would be 60 or 74. For the reasons we have just given
we think we should give less weight, in considering the prospects of this
hypothetical permission, to an objection based upon policy EC/6 or emerging
policy EC/7 and no weight to a highway objection based upon traffic flows from
the KBP development. On the other hand the motorway junction itself was a fact
on the ground at the valuation date. It was not part of the compulsory
purchase order and it does not seem to us that it would be right to extend the
definition of the scheme to include it.
98.
Taking all those matters into consideration and doing the best we can to
make sense of a number of assumptions of varying solidity, in our judgement the
hypothetical purchaser would have considered that the reference land would have
had some extra hope value of a permission for residential development. However
we would not put a percentage better than 50/50 on the chances of success.
99.
That hypothetical purchaser would have to acquire an access, probably
but not necessarily through the Nib, which has its own substantial value for
residential development. An alternative means of access, by buying two
existing houses fronting the Lane, if possible, would also be expensive and
uncertain and, as the Nib is currently undeveloped infill land with the
potential we have described, it is much more likely that the owner of the
reference land would be able to do a deal with the owner of the Nib. However,
the fact that it might be possible to gain access to the reference land
elsewhere would be likely to have the effect of moderating whatever ransom the
owner of the Nib was able to demand. We also think that the hypothetical
purchaser would have to contemplate a delay of some years before he could achieve
any return and this will of course have an impact on holding costs.
100. To that extent
we prefer Mr Massie's general approach to valuation to that of Mr Brogden and,
reflecting upon what we have said above, now turn to their evidence.
Valuation
101. Mr Brogden
produced expert witness and rebuttal reports together with his valuation and,
during the course of the hearing, provided some amendments and revised
calculations to reflect Messrs Wooliscroft and Wall’s agreement on land areas
(4.88 acres) which were less than he had originally calculated (5.2 acres), and
to correct a number of errors. This was his Addendum 1 in which the claim figure
became £2,433,000. We note, as pointed out by Mr Humphries in his closing
submissions, that Mr Brogden’s initial valuations did not reflect section 16
assumptions and the revised valuation in his rebuttal report following Mr
Frampton’s rebuttal statement relied upon section 16(4) which is no longer
pursued. Indeed, Mr Brogden admitted in cross-examination that compulsory
purchase was not his speciality, he had not previously undertaken valuations in
accordance with the compensation code and was not familiar with the relevant
law as he was principally a development valuer.
102.
In the light of our conclusions on planning and the law above, we do not,
in any event, think it would be helpful to say much more here about the
claimant’s initial valuation arguments other than in the context of Mr
Brogden’s second Addendum valuation which he produced immediately prior to
giving his evidence in chief on the fifth day of the hearing. In it he said:
“Following
comments from the Tribunal with regard to the valuation approach and following
more closely Rule (2) (thereby distinguishing solely market value for the
reference land and severance) and then identifying a separate stand-alone value
for the retained land (Nib), I have prepared this addendum.”
He said that this was contrary to the approach
he had used in his initial valuation (which had assumed no ransom value in
respect of the Nib) but placed an ‘equalised’ value over it, reflecting the
fact that, as in his Addendum number 1 produced on the fourth day of the
hearing, pre-CPO it had been in the same ownership as the reference land. On
the basis of the £1.25 million that the claimants paid for the 27.75 acres of
the reference land and the Nib in 2003, this indexed to £2,638,000 at the
valuation date. From this, he deducted the cost of providing access to the
reference land and the value of the Nib based upon the four plots shown by Mr
Frampton in his supplemental report.
103. As the
possibility existed for separate access by potentially buying a pair of
semi-detached road frontage houses that backed onto the reference land and
demolishing them, with one additional plot provided on the frontage land when
the access had been made, he considered this would serve to moderate the
expectations of the owner of the Nib and assessed the net cost of purchase of
that land at £300,000. He then assumed the owner would accept a lesser sum
(£250,000) as he would also be receiving payment for the four plots as part of
the overall development. Those four plots he estimated to have a total value
of £140,000 (on an equalised basis assuming say 66 plots on the reference land)
which, when added to the cost of access payment gave £400,000. This figure, he
said, exceeds the value of the Nib as a development site just for four plots
with no discount for uncertainty about getting planning permission, so it was
reasonable to assume therefore that the landowner would be willing to sell.
The result was a net value for the reference land of £2,238 million.
104.
Mr Brogden then went on to say:
“I then need
to identify the marriage value lost as a result of the reference land being
severed from the nib by the scheme CPO. I have assumed four frontage plots
with a theoretical [unequalised] value of £90,000 per plot assuming a readily
implementable planning permission. As planning permission has not been granted
I have deducted 40% risk (for consistency with my approach in… my initial
report). This results in the Nib having a value of £192,000 to reflect its
hope value as a stand alone proposal.”
The severance under this approach became
£208,000 which, when added to the £2,238,000 produced a revised claim value of
£2,446,000 which, he said, was sufficiently close to the £2,433,000 which his
Addendum 1 had produced to mean the claim did not need to be re-assessed. He
confirmed that, within that claim figure, there was no specific allowance for
the rest of the reference land that was without part Plot X as it was
acknowledged this was purely agricultural value – but he did not accept that
that was only £2,000 per acre as promulgated by Mr Massie and thought £3,500 to
£5,000 per acre as shown in some of the acquiring authority’s other
settlements, or up to £15,000 per acre for the part Plot X land that was
immediately behind the Buckley Hill Lane houses as pony paddocks or lairage.
105. In cross-examination,
Mr Brogden firstly accepted that the figure he had arrived at for the value of
the Nib at £192,000 was mathematically incorrect and should have been £216,000.
He confirmed that the 40% discount he had applied to the development value was
an assumed figure that encompassed both planning risk and deferral. He was of
the view that the site could be developed “very quickly” and certainly within
much less than the “medium term” of 5 - 20 years referred to in the planning
evidence (as set out at paragraph 5.5 of his first report). Thus, in his view,
the issue of deferral was more to do with how long it would take to negotiate
the purchase of the access than how long it would take to get planning consent.
He accepted that he had made no specific allowance for holding costs, and
acknowledged that if we found that prospects of obtaining consent were not as
high as he thought, or that there would be an extended timescale, the 40%
discount he had allowed would have to be considerably greater. Nevertheless,
he said he did not agree with Mr Massie’s assessment of the price the owner of
the reference land would have to pay for the Nib as it needed to be remembered
that the Nib would also not have had planning consent in the no-scheme world,
and there would be planning risks to consider in that scenario as well as in
respect of the reference land. If the price being demanded was too high then
efforts to gain access elsewhere would be re-doubled – the owner of the Nib
could only realistically expect to receive one bid above what he would get in
the market if selling it elsewhere.
106. In submissions,
Mr Humphries said it was completely inappropriate to use the price paid by the
claimant for the land as the basis for his assessment as they were also purchasing
the Nib (which had access to Buckley Hill lane); they were purchasing land that
had the benefit of planning consent for residential and employment development
as part of the KBP scheme and there was, of course, a premium element to
reflect the potential to remove the Nalls’ CPO objection. This had been
accepted by Mr Brogden in cross-examination. The idea that access might be
gained from elsewhere was inherently risky, Mr Humphries submitted, and fraught
with further planning difficulties. On analysis, Mr Brogden’s value for each
of the four potential frontage plots at £35,000 was clearly insufficient,
especially as it was the claimant itself which had described Buckley Hill lane
as one of the prime residential areas of Rochdale. His estimate of the cost of
acquiring the access was patently inadequate. The 40% discount (meaning a
value at 60% of the full unfettered development value) was wildly optimistic. No
holding costs had been allowed for. None of his figures were supported by
reliable comparable evidence, and his revised valuation still did not address
the fundamental flaws included within his original assessment.
107. Mr Massie said
that he had been involved with the KBP since 1996, acting for NWDA and thence
HCA, had been involved in the CPO Inquiry and had initially undertaken
negotiations with the previous owners of the reference land and the Nib. Those
negotiations continued with the claimant when the land was acquired by it in
full knowledge, he said, of the impending CPO. He said he has negotiated the
acquisition of the majority of the land required for the scheme.
108. He has
consistently argued that, taking into account all the relevant planning
assumptions and the law, together with, for example, the massive contribution
to the infrastructure costs that would have to be made, the hypothetical
purchaser of the reference land at the valuation date if it were to be hived
off would not consider it had a value of anything more than for its existing
use as grazing land which he assessed at £2,000 per acre. Neither in his
expert or rebuttal reports did he produce a valuation in the alternative.
109. However, in
response to Mr Brogden’s Addendum number 2, he provided a series of ‘re-workings’
of it which, he said, were solely to demonstrate what the outcome would be if
more appropriate figures and assumptions had been used, based upon the
reference land coming forward for development within 5, 10, 15 and 20 years
respectively.
110.
Those assumptions, which he said were for the most part based upon Mr Brogden’s
own figures, and did not therefore necessarily reflect his own views were:
(a) that in
the absence of the KBP scheme, there would be no prospect of development on any
of the reference land beyond the 4.88 acres in part plot X, and the remainder
was therefore included at agricultural value only per his estimate of £2,000
per acre.
(b) realistically,
the whole of Nib would have to be purchased, its value being assessed on the
value of the main land, together with a ransom element which he calculated at
40% of the uplift in the development value released.
(c) the
number of houses that would be permitted on the reference land would be 74
(using Mr Brogden’s figure rather than the 60 units reckoned in the acquiring
authority’s evidence).
(d) section
106 and servicing costs at £40,000 per plot, per Mr Brogden’s valuation.
(e) the
“hope window” assessed at 5, 10, 15 and 20 years.
(f) prospect
of planning consent being obtained assessed at 30%.
(g) deferment
assessed at PV @ 7%.
111.
On the 5 year deferment assumption, the valuation became:
Part Plot X Land (plus developable part of Nib)
|
|
Acres
|
£ p ac
|
£
|
£
|
£
|
£
|
£
|
|
Part Plot X
Plus
|
4.88
|
1,300,000
|
6,344,000
|
|
|
|
|
|
Part of Nib for development
Less
|
0.20
|
1,300,000
|
260,000
|
|
|
|
|
|
S.106
|
74
|
40,000
|
-2,960,000
|
|
|
|
|
|
Present Day Value of Part Plot X
|
|
|
3,644,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defer until anticipated development
|
|
|
|
|
|
|
PV
|
5 years
|
|
7%
|
0.7130
|
|
|
|
|
|
|
|
|
|
2,598,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allow for “prospect” of hope being realised
|
|
|
|
|
|
|
Prospect;
|
Say
|
30% chance
|
|
|
|
779,436
|
|
|
Less ransom sum payable to Nib for access
|
40%
|
|
|
-311,775
|
|
|
Hence, Reference Land
|
|
|
|
|
|
467,662
|
|
|
|
|
|
|
|
|
|
|
|
Allow for purchase of Nib:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acres
|
£ p ac
|
|
|
|
|
|
|
Nib
|
0.40
|
1,300,000
|
520,000
|
|
|
|
|
|
Plus ransom for Nib 40% (see above)
|
311,775
|
|
|
|
|
|
|
|
|
831,775
|
|
|
|
|
|
Finance of Nib purchase until developed
|
|
7%
|
334,832
|
|
|
|
|
|
Total “holding cost” of Nib
|
|
|
|
|
-1,166,607
|
|
|
|
|
|
|
|
|
|
|
|
Hope Value of Part Plot X
|
|
|
|
|
|
|
-698,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining Reference Land
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assume grazing land to remainder of Reference Land
|
|
|
|
|
|
|
Acres
|
£ p ac
|
|
|
|
|
|
|
Remaining Land
|
21.97
|
2,000
|
|
|
|
|
43,940
|
|
|
|
|
|
|
|
|
|
|
Overall Value of Reference Land with Hope Value
assumption
|
|
|
|
-655,005
|
|
|
|
|
|
|
Say
|
|
-655,000
|
|
|
|
|
|
|
|
|
|
|
112. Mr Massie
explained in examination in chief that in his view the hypothetical purchaser
would want to acquire the whole of the Nib, to give him complete control, and
would develop out the part of it that was not required for access (with 4
houses). He said he had assumed £1.3 million per acre as residential
development value for the developable part of the Nib and for the whole of the
Part Plot X element of the reference land (this being marginally more than the
£1.2m per acre used by Mr Brogden in his addendum report of 15 January 2013). The
multiplier for the 5 year deferral in this example, at 0.713 reflected a 28.7%
discount from the full development value. Applying that (proper) multiplier
to Mr Brogden’s basis of adopting a composite discount of 40% for both deferral
and risk meant that the reduction for the expectation of gaining planning
permission in the 5 years became only 10%. In other words, he was assuming a
90% chance of consent being obtained within that period which, in Mr Massie’s
view, was overly optimistic.
113. As to Mr
Brogden’s revised assessment of the value of the Nib at £400,000, Mr Massie
said this was wholly inadequate. It was firstly inconceivable for him to have
to assumed 4 building plots at £35,000 each when the fact was that there was a
semi-detached house currently on the market in Buckley Hill Lane at £465,000.
Building plots in this part of Rochdale would command very substantially more.
Secondly the remainder of the value to the Nib owner, assessed by Mr Brogden as
the ransom element at £250,000, was far too low when one considers that he effectively
holds the key to the development of some 74 houses on the reference land. Mr
Massie went on to say that Mr Brogden’s approach to the marriage valuation was
not only mathematically incorrect, but was also an inappropriate way to
calculate it being based as it was upon a severe underestimate of the value of
the Nib, against an over-assessment of the value of the land to the rear. Regarding
his own assessment that there was a 30% chance of planning consent being
obtained within the 5 year deferment period, Mr Massie accepted in
cross-examination that that figure was not scientifically obtained, and there was
no evidential source for it.
114. In each of the
subsequent assessments reflecting extended planning delays, the negative figure,
Mr Massie said, became significantly higher. In his view the exercise proved
beyond doubt how flawed Mr Brogden’s valuations were and strengthened his own
argument that with proper account being taken of the planning risks, costs of
acquiring access and holding costs, paying anything more than EUV would not
have made economic sense. Certainly an investor or speculator looking to add
to a land bank or to hold for long term returns would not see this as a viable
proposition.
115.
In connection with the argument that, if the claimant was prepared to
offer £1 million (and eventually pay £1.25 million) for the reference land with
the Nib, that must be a good indicator that development value did exist, Mr
Massie explained the background to the context around talks that had been held
initially with Mr Peter Higham, the Nalls’ agent, and then with the claimant. Asked
how he could initially offer £230,000 for the reference land (without the Nib)
based upon 10 acres at £17,000 and 17 acres at £3,500 and then come before this
Tribunal with a valuation of £2,000 per acre (£50,000) for the whole, Mr Massie
said that they were trying to acquire the few remaining sites by agreement
pre-CPO. The situation regarding the cancellation assumption was not clear, he
said, as this was before the significant cases that clarified those issues and
pre Thomas Newall. He said, in precise terms:
“ The offer was made to acquire the land
by agreement before the CPO. At that time I was uncertain as to the
definitive position on the cancellation assumption. This was subsequently
clarified in the case of Thomas Newall. At that time, I was concerned
that the cancellation principle might result in the whole of the scheme being
assumed to be cancelled including policy EC/6. In that event, it was likely
that the land would have been designated as greenbelt but there was a small
risk that it would not be designated as greenbelt. The risk was small but the
effect of that was great, and there was a possibility that the site might have
been designated as residential land. I therefore built some hope value into
the calculation.”
116. The Nalls had
inherited the land and were not farming in the area. They would only
contemplate selling the whole (to include the Nib) which of course held a high
prospect of gaining permission for development. Although it had not been
scientifically worked out, Mr Massie said there was potentially some element of
hope value in the reference land – hence the higher values per acre, and the
remaining £770,000 of the offer related to the Nib, which he had always
considered to be very valuable. He had originally considered the frontage land
would create 5 plots at approximately £120,000 each making a minimum of
£600,000 with possibly more if a flatted development could have been created.
He had been instructed to offer £1 million, and the additional £250,000 related
to stamp duty and the vendors’ professional fees. There could, he said be no
comparison with the circumstances of that acquisition and the current dispute.
Also, post Newall and upon advice from Mr Singleton, Mr Massie no longer
considered there to be development value in the reference land without the Nib
and in cross-examination he confirmed that his evidence before this Tribunal is
critically reliant upon the statutory assumptions. He was of the view that
the claimant had taken a calculated gamble on getting the land taken out of the
CPO and that that gamble had not worked. He accepted that there was an element
in the price eventually agreed of “buying-off” objections to the CPO.
Conclusions on value
117. As we have said
in our conclusions on planning and the law, we do think that there would have
been a 50/50 chance of planning permission being obtained on the reference land
in a no KBP world, and we think it realistic to assess the period of deferral
at 5 years. There would thus, as Mr Massie admitted, be some hope value.
118. We focus upon the
evidence and argument pertaining to Mr Brogden’s second Addendum and Mr
Massie’s re-workings of it. Accepting Mr Massie’s opinions relating to the
inadequacies of Mr Brogden’s allowances for the value of the Nib, and the
inappropriateness of his other figures, and whilst as we have said above, we
prefer Mr Massie’s general approach, there do however appear to be a number of serious
errors in his re-working which, when taken with our findings on various figures
and percentages, shows that the significant negative sum he arrived at is just
not sustainable.
119. Firstly, we note
that in the top-half of Mr Massie’s version of Mr Brogden’s 5 year cycle (as
set out at paragraph 112 above), he has included in his assessment of the value
of the reference land the sum of £260,000 that relates to the development value
of part of the Nib, meaning that the 40% of the development value he uses
includes a ransom payment for part of the land that is not part of the
reference land. Secondly, he has not taken account of the fact that, if the
Nib is purchased, there will need to be added to the value of the whole an
allowance for the fact that the purchaser will be obtaining the value of an
additional four plots (which the parties agreed could be built once the access
had been provided) less the cost of servicing them.
120. Thirdly, no
account is taken of the fact that it would most likely be possible to develop
those 4 units much sooner than the 74 he has allowed for on the reference land
– say within 2 years. Fourthly, Mr Massie goes on to assess the “chances” of
obtaining planning consent at 30%. As mentioned above, we consider prospects
to be 50/50. Fifthly, he has assumed that the vendor of the Nib would demand
40% of the increased development value of the reference land as a Stokes v Cambridge ransom. In the light of the fact that, although arguably an extremely risky
strategy, the purchaser might be able to gain access from elsewhere, we
think that, on balance, the maximum that the vendor could extract would be
30%. As will be seen from our own “re-working” of the valuation which we come
to below, the existing use value of the developable part of the reference land
(the part Plot X land) will need to be deducted in calculating the ransom
element as it is a percentage of the increase in value over the EUV that needs
to be taken. Sixthly, we also note that Mr Massie’s calculation double-counts
the ransom value (£311,775) and seventhly, he has double-counted at least part
of the holding costs/deferral.
121. Turning to the
question of EUV, both in respect of the developable 4.88 acres of the reference
land and the remainder, we do not accept Mr Massie’s view that the value was
only £2,000 per acre. We are persuaded by Mr Brogden’s arguments that,
although it makes very little difference in terms of the overall compensation
payable against the sum claimed, the evidence shows an agricultural value
nearer £3,500 per acre and rather more for the land that forms part of Plot X
being as it lies directly behind Buckley Hill Lane. We conclude that the 4.88
acres should be valued on the basis of pony paddocks or other ‘lairage’ uses at
£15,000 per acre. It will also be noted that we have assumed a two year
deferment for the four road frontage plots as it was not in issue that
development prospects on the Nib were considerably higher.
122.
The overall valuation therefore becomes:
DEVELOPABLE
PART OF REFERENCE LAND
4.88
acres at £1,300,000 £6,344,000
Less Servicing costs – 74
units at £40,000 £2,960,000
£3,384,000
Less 50% Planning risk £1,692,000
£1,692,000
Deferred
5 years @ 7% 0.713
Development
value of part plot X £1,206,396
THE NIB
Development value of whole of Nib
0.40 acres
@ £1,300,000 £ 520,000
Less Servicing 4 plots @ £40,000 £
160,000
£ 360,000
Defer 2
years @ 7% 0.873
£
314,280
Add Ransom for reference land
Development
value £1,206,396
Less EUV
4.88 acres
@ £15,000 =
£ 73,200
Net
development value £1,133,196 @ 30% £ 339,958
Gross
cost of acquiring Nib £ 654,238
Less Value
of retained developable part of Nib
(50% of
£314,280) £
157,140
£
497,098
Add Finance
(holding cost) of the retained part
of the Nib (access) for additional 3 years at 7%:
£180,000 x (1 – 1.073) = £
40,508
Net cost of
acquiring Nib £
537,606
Value of
developable part of reference land £
668,790
Add EUV of remaining un-developable 21.97 acres @ £3,500
pa £ 76,895
£ 745,685
Say £
746,000
123. In the light of all
the evidence and our findings relating to the issues of planning and law, we
are satisfied that this is a figure which, in all the circumstances, the
hypothetical purchaser would be prepared to pay for the reference land, and we
determine compensation therefore in the sum of £746,000.
124.
A letter concerning costs accompanies this decision, which will become
final when the question of costs has been determined.
DATED
28 May 2013
His
Honour David Mole QC
P
R Francis FRICS
ADDENDUM
125.
Submissions on costs have been received from the parties. The
claimant says it should have its costs, assessed on an indemnity basis. The
acquiring authority argues that in all the circumstances of the case, the
Tribunal should exercise its discretion (per paragraph 12.2 of the Practice
Directions) and should conclude that each party bear its own costs.
126.
The claimant said that it had always been willing to settle, but the HCA
(which had made the reference in the first place) had shown a “dogged
attachment” to its argument that the reference land benefited from nothing more
than its existing agricultural use value, despite the obvious planning
assumptions that unarguably suggested there was an element of development value
in the land. Furthermore, not only did the HCA stick rigidly to Mr Massie’s
expressed opinion that the land was worth no more than £50,000 despite clear
and indisputable evidence that even at agricultural values the land was worth
significantly more, but it had made a sealed offer in February 2012 of £275,000
plus reasonable professional fees. This offer was over 5 times the amount that
Mr Massie had attributed to the land in his expert report. That alone
suggested that the valuation was not an amount that could be realistically
justified, but despite this, and the Tribunal’s indications as to its initial
thoughts during the early part of the hearing, no alternative valuations had
been produced. Instead, Mr Massie chose simply to dissect Mr Brogden’s revised
valuation in an attempt to demonstrate that even if there was potential
development value, the costs of achieving it outweighed any benefit.
127.
It was acknowledged that a sealed offer had been made to HCA by the
claimant in November 2012 at £1,250,000 plus costs, and a that a further
without prejudice offer was made at a meeting between the parties on the first
day of the hearing (9 January 2013) whereby the claimant offered to settle for
£750,000 plus costs. This offer was confirmed in writing on 29 January 2013
which was after the close of the claimant’s case, and before the resumption of
the hearing on 12 February 2013. It was submitted that the acquiring authority
should have accepted that offer as it was within £4,000 of the amount
eventually determined by the Tribunal. Thus it is clear that the case could,
and should, have settled on the first day of the hearing. The acquiring authority’s
offer (of £275,000) was 2.7 times less than the compensation actually
determined, and there was no question therefore that the sealed offer had been
well beaten and that in accordance with overriding principles, the claimant was
entitled to all its costs. The HCA’s intransigent and inflexible approach
justified, it was submitted, costs being awarded on an indemnity
basis.
128.
The acquiring authority set out the legal framework relating to costs in
the Tribunal at some considerable length and, in referring to AEI Ltd v
Phonographic Performance Ltd [1999] 1 WLR 1507 (which related to the [then]
new CPR Rules, the principles of which the Tribunal follows in respect the
exercise of discretion), where Lord Woolf said (at pp 1522–1523):
“I draw attention
to the new [CPR] rules because, while they make clear that the general rule
remains, that the successful party will normally be entitled to costs, they at
the same time indicate the wide range of considerations which will result in
the Court making different orders as to costs. From 26 April 1999, the
‘follow the event principle’ will still play a significant role, but it will be
a starting point from which a Court can readily depart… The most significant
change of emphasis of the new Rules is to require the Courts to be more ready
to make separate orders which reflect the outcome of different issues… It is
now clear that too robust an application of the ‘follow the event’ principle
encourages litigants to increase the cost of litigation, since it discourages
litigants from being selective as to the points they take. If you recover all
your costs as long as you win, you are encouraged to leave no stone unturned in
your effort to do so.”
Thus, it was submitted, ‘follow the event’
must be seen as a starting point from which the conduct of the parties may
cause the Tribunal to readily depart, and there were a number of factors in
this case that are relevant to the exercise of the Chamber’s discretion.
129.
Firstly, it was argued that the claimant had failed to properly plead
its case on the law or the facts – for example there had been no reference to
the section 16 planning assumptions in the statement of case or in its expert
valuation report. Further, those issues were only dealt with in rebuttal and it
was then, only on the first day of the hearing, that the claimant stated it was
dropping its case in relation to section 16(4). There was also no reference to
the statutory disregards in the statement of case, despite the acquiring
authority having set out its own case relating to those in detail in its
statement of case which preceded that of the claimant. The HCA was thus put at
a disadvantage from the outset as to knowing precisely how the claimant’s case
was to be pleaded.
130.
Secondly, whilst it was acknowledged that the Tribunal’s determination
was significantly above the acquiring authority’s valuation, it was some £3.6
million below the claimant’s alternative pleaded valuation. That the claim was
exaggerated was, therefore, unarguable.
131.
Thirdly the claimant’s suggestion as part of its case that the remainder
of the reference land (outside part plot X) supported employment land value was
not accepted by the Tribunal as it had concluded that that land should only
reflect agricultural value. Mr Brogden’s various valuations and addenda were
each produced upon the basis of different methodology and approach, and the
acquiring authority had to respond to each one as it came along.
132.
There were also sections of the decision relating to an analysis of section
6 and Schedule 1 to the 1961 Act in connection with hope value that formed no
part of the claimant’s case and were not canvassed at the hearing. It would be
unfair, it was argued, that the acquiring authority should have to pay any of
the costs where the scale of the determination reflected un-argued legal
issues.
133.
In all the circumstances, it was submitted that the acquiring authority
was perfectly justified in declining to accept the claimant’s revised offer of
£750,000 and the fairest conclusion would be for there to be no award of costs.
134.
We are not persuaded by the acquiring authority’s arguments. Whilst
some of the criticisms relating to the pleadings, and to Mr Brogden’s initial
valuation approach undoubtedly have some merit, there were equally (as
submitted by the claimant) aspects of the acquiring authority’s approach to
valuation that created difficulties – particularly Mr Massie’s continued
failure to provide any alternative valuation to reflect the claimant’s
arguments, other than his ‘re-working’ of Mr Brogden’s addendum No 2, that
contained a large number of inaccuracies.
135.
We are entirely satisfied that the claimant should have all of its
costs, and there is in our judgment no justification whatsoever in the
suggestion that there should be no award. However, we do not consider that
there are any grounds for costs to be assessed on an indemnity basis. The
costs awarded to the claimant shall therefore be on the standard basis, such to
be the subject of assessment by the Registrar if not agreed.
Dated
1 July 2013
HH
David Mole QC
P
R Francis FRICS
