UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2013] UKUT 5 (LC)

UTLC Case Number: LCA/58/2011

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

COMPENSATION – electricity – wayleave – overhead line across housing development site – contract for sale of corridor of land containing line entered into in advance of grant of wayleave – contract conditional on removal of line – whether contract price could be taken as basis for assessment of loss – held that it could – whether land with line retained had any market value for development – held it did not – compensation £5,829,476 – Electricity Act 1989 Sch 4 para 7  

 

IN THE MATTER OF A NOTICE OF REFERENCE

 

BETWEEN ARNOLD WHITE ESTATES LIMITED Claimant

and

NATIONAL GRID ELECTRICITY TRANSMISSION PLC  Compensating

  Authority

Re: Land to the North of the A505 and

East of Billington Road,

Leighton Buzzard,

Bedfordshire

 

 

Before: George Bartlett QC and N J Rose FRICS

 

Sitting at 43-45 Bedford Square, London WC1B 3AS

on 5-8 and 12-14 November 2012

 

David Elvin QC and Jonathan Milner, instructed by Gosschalks, solicitors of Hull for the claimant

Robin Purchas QC, instructed by Berwin Leighton Paisner, solicitors of London for the compensating authority

 

 

© CROWN COPYRIGHT 2013

 

The following cases are referred to in this decision:

Turris Investments Ltd v Central Electricity Generating Board [1981] 1 EGLR 186

Welford v EDF Energy Networks (LPN) Plc [2006] 3 EGLR 165 (LT); [2007] 2 P & CR 15 (CA)

Macleod v National Grid Co Plc [1998] 2 EGLR 217

 

The following cases were also cited:

Director of Buildings and Land v Shun Fung Ironworks [1995] 2 AC 111 (PC)

Horn v Sunderland Corporation [1941] 2 KB 26

Waters v Welsh Development Agency [2004] 1WLR 1304

Hughes v Doncaster MBC [1991] 1 AC 382

Eronpark Ltd v Secretary of State for Transport [1999] 1 EGLR 165

Ryde International Plc v London Regional Transport [2004] 2 EGLR 1 (CA)

British Waterways Board v London Power Networks Plc [2003] 1 All ER 187

Snook v London & West Riding Investments [1967] 2 QB 786

Seaton & Others v Seddon & Others  [2012] EWHC 735 (Ch)

R (oao Loader) v SSCLG 2012 3 CMLR 29

R (oao Mid Counties Cooperative Ltd v Wyre Forest DC 2009 EWHC 964 (Admin)

R (oao Halebank PC) v Halton BC 2012 EWHC 1889 (Admin)

R (oao Warley) v Wealden DC 2012 ENV LR4

Optical Express (Southern) Ltd v Birmingham CC [2005] 2 EGLR 141

Naylor v SEB [1996] 26 EG138

Aquilina v Havering LBC (1993) 66 P & CR 39

Geest Plc v Lansiquot [2002] 1 WLR 3111

Lindon Print Ltd v West Midlands CC [1987] 2 EGLR 200

British Westinghouse Electric Ltd v Underground Electric Railways Company of London Ltd [1912] AC 673

London & South of England Building Society v Stone [1983] 1 WLR 1242

 

 

 

DECISION

Introduction

1.           The claim in this case is for compensation under paragraph 7 of Schedule 4 to the Electricity Act 1989 in respect of a statutory wayleave granted to National Grid Electricity Transmission Plc by the Secretary of State for Energy and Climate Change on 21 June 2010 to retain a 400 kilovolt overhead electricity line across land owned by the claimant, Arnold White Estates Ltd (AWE).  The compensation claimed is £5,829,477. 

2.           The subject land forms part of an area known as 15C lying to the south of Leighton Buzzard. Area 15C is roughly the shape of the Indian subcontinent and is about 19.5 acres in extent.  The overhead line, consisting at this point only of conductors (the supporting pylons lie on adjacent land), crosses it from east to west just over half way down.  Along with other land in the vicinity, it had been the subject of sand extraction, and in the South Bedfordshire Local Plan Review 2004 it was shown for residential development.  In September 2006 the local planning authority, South Bedfordshire District Council, approved the Development Brief for South Leighton Buzzard, covering area 15C, adjoining areas to the north and north-east known as 15B and 15D and areas to the west, 17A and 17B.  The development brief was based on proposals put to the council by AWE.  These included provisions for a 54m strip, 27m either side of the centre line of the overhead line where it crossed area 15C.  The provisions were in the alternative, according to whether the line was removed or retained.  The local plan review had made clear the council’s preference that it should be removed.

3.           Planning permission for the residential development of areas 15B, 15C and 15D was granted on appeal on 5 December 2007, and conditions were imposed that related to the 54m strip to provide for its development with and, alternatively, without the line.  On 20 July 2007, shortly after the end of the public inquiry that led to the grant of planning permission, AWE entered into two contracts for the sale of area 15C to George Wimpey South Midlands Ltd and Persimmon Homes Ltd.  One contract related to the 54m strip and was called the “pylon land contract” (even though there were no pylons on the land).  It was conditional on the removal of the line.  The area of the land was 3.507 acres, and the purchase price was £5,361,246 plus VAT, plus RPI indexation between the date of the contract and payment of the purchase price.  The second contract related to the parts of area 15C north and south of the pylon land and was not conditional on the removal of the line.  The area of the land was 16.01 acres, and the purchase price for this land, referred to as the adjoining land or the non-pylon land, was £20,414,468 plus VAT plus indexation.

4.           The line had been constructed and retained under a terminable wayleave granted in 1964 by the then owners of the land.  On 11 March 2008 AWE served notice on NGET terminating this contractual wayleave, and on 15 September 2008 AWE served statutory notice requiring its removal.  NGET then applied to the Secretary of State for Energy and Climate Change for the grant of a necessary wayleave under paragraph 6 of Schedule 4 to the 1989 Act.  Following a hearing before an inspector in November 2009 the Secretary of State granted the wayleave on 21 June 2010.

5.           Between the date of the contract and the date of the grant of the wayleave (which is agreed to be the valuation date) residential land values had fallen substantially.  It is agreed that at the date of the grant the value of the pylon land with the line removed would have been £3,195,000.  AWE says that the land was worth nothing at the date of the grant with the line there, since no development was possible under the terms of the planning permission (and that was the best evidence of the ability of the land to be developed); and in any event the land was not capable of being developed other than in conjunction with the adjoining land, but at the date of the grant the adjoining land was owned by Taylor Wimpey and Persimmon and they had shown no interest in any such joint development.  In the absence of the line the value of the land to AWE, it is said, would have been the indexed price under the contract, £5,829,477, and it is this that is said to represent the loss in respect of which compensation is payable.

6.           The compensating authority say that compensation cannot be based on the contract price as the contract was a contract personal to AWE.  It did not create an interest in land and was not capable of being assigned by AWE.  Further or alternatively it is submitted that the contract price was too remote to be treated as material for the purposes of compensation.  NGET say, therefore, that the proper measure of compensation is such reduction in what would have been the market price of the land at the date of the grant with the line removed (agreed at £3,195,000) as is attributable to the presence of the line.  It is said that a development that optimised the use of the subject land and the adjoining land would have been possible under the terms of the planning permission and that it would have been in the commercial interests of the owners of the adjoining land to agree to such a development and that they would have done so.  The proper measure of the claimant’s loss, it is contended, is the 12½% reduction in the value of the land that was applied in the case of Turris Investments Ltd v Central Electricity Generating Board [1981] 1 EGLR 186.

7.           For the claimant Mr David Elvin QC and Mr Jonathan Milner called three witnesses: Robert Geoffrey Williams, chief executive of AWE, who gave evidence on the claimant’s involvement with the development area and the circumstances surrounding the contract, the planning application and the claim; Geoffrey Gardner MRTPI, a director of Hives Planning, who gave expert planning evidence; and Anthony Martin Chase FRICS, a partner in Gerald Eve, chartered surveyors, who gave valuation evidence.  For the compensating authority Mr Robin Purchas QC called Lyn Powell BSc, DipTP, MRTPI, FRSA, a senior director at RPS Planning and Development, on planning matters and Colin David Smith FRICS, IRRV, senior director and head of compulsory purchase and compensation at CBRE in relation to valuation matters.

8.           Following the hearing we carried out an inspection of the site and the surrounding area, and we raised in writing further points with the parties, who gave written responses.  The facts we set out below are those we derive from the agreed statement of facts, the witnesses’evidence, the substantial documentation that was provided and our site inspection, and we have drawn on all of these in reaching our conclusions.

Further facts

9.           At the valuation date the reference land (which was referred to throughout the hearing as the “pylon land” despite not having any pylons upon it) was part of a number of development sites situated on the southern edge of the settlement of Leighton Linslade abutting the existing built up area.  It is approximately 1.5 km from the town centre.  The development sites were mainly residential but included other uses; some were complete, others under construction, others not yet commenced.

10.        The reference land, 1.42 hectares (3.507 acres) in area and 54m wide, had been part of Pratts Quarry, which extended eastwards from Billington Road and had been progressively worked for the purpose of extracting silica or industrial sand since the 1950s.  Site 15C was bounded to the north by the then recently constructed spine road off Billington Road which would serve development on sites 15B, 15C and 15D.  To the north of the spine road was site 15B, on which residential development was under construction at the valuation date.  To the north east was a further area of restored and levelled former quarry comprising site 15D.  To the south east was the remaining part of the working quarry which was in the process of being progressively worked, restored and levelled.  Some of the land to the south east had been restored and levelled and was bare or sparsely vegetated ground, but the reminder was a substantially excavated area of operational quarry.  A ramped access track led to the quarry entrance directly off the A505 to the south.  On site 15C the edges of the site were not clearly defined and it merged with the surrounding land uses.

11.        On 3 October 2005 the claimant entered into a promoter’s agreement with CC Trading Ltd, the trading arm of the Church Commissioners, who owned other parts of the land that was shown for residential development in the Local Plan Review.  Under the agreement it was agreed that AWE would lead the collaboration in consideration of a share of the sale proceeds of CC Trading Ltd’s land with the benefit of planning permission for residential development.  In particular AWE was to prepare and promote a development brief and seek its adoption by the local planning authority and use all reasonable endeavours to secure a satisfactory planning permission.  Clause 13.1 provided that the parties would jointly use all reasonable endeavours (at AWE’s cost) to negotiate with NGET for compensation in respect of or (in the alternative) for the diversion of the pylons currently on their land and other land.

12.        On 14 October 2005 a consultation draft of the South Leighton Buzzard Urban Extension Development Brief was issued by the local planning authority, South Bedfordshire District Council.  It stated that it was produced by the council with the assistance of the South Leighton Buzzard Partnership and their consultants.  In its final form the Development Brief was approved by the council on 22 September 2006.

 

13.        On 3 August 2006 AWE and CC Trading Ltd made five applications for the development covered by the Development Brief.  One of these was for the area consisting of site 15C (including the reference land) and sites 15B and 15D.  It sought permission for up to 720 dwellings together with a site for a single storey lower school, associated play space, landscaping, parking and access.  It included plans showing the separate treatment of the reference land.  All five planning applications were refused by the council on 1 November 2006 because they considered that they had inadequate information to conclude that the proposed development would be satisfactory with regard to environmental impact, design, open space and community infrastructure, detailed parameter plans and a design assessment of the implications of retaining the overhead line.

14.        Appeals were made against the refusals, and a public inquiry was held on a number of days between April and later months.   Planning permissions were granted by the Secretary of State for Communities and Local Government on 5 December 2007.  They included the permission sought in respect of sites 15B, 15C and 15D.  It was subject to a number of conditions (and we refer later to the material ones) and a section 106 planning obligation dated 11 July 2007, to which also we refer later.  The planning permission provided for both a “with pylons” scheme and a “without pylons” scheme, as illustrated on the parameter plans that had been submitted.

15.        On 20 July 2007 AWE entered into the two contracts referred to above with George Wimpey South Midlands Ltd and Persimmon Homes Ltd, one for the sale of the pylon land and one for the sale of the non-pylon land.  The pylon land contract was subject to an end date, so that if the line is not removed by 2 January 2014 the contract is of no further effect.  The contract relating to the non-pylon land gave the buyers the right to construct on the pylon land, firstly, those parts of the Buyer’s Roads (defined in the contract) that cross it and, secondly, carriageways along the edge of the pylon land, and wholly within it, as shown on a drawing forming part of the agreement, or on such other part of the pylon land as might be approved by the seller.

16.        The line had been constructed and maintained under a contractual wayleave dated 10 November 1964 made between the Executors of Albert Joseph John Arnold deceased, Joseph Ernest Arnold and Frederick Charles Arnold as grantors and the Central Electricity Generating Board, NGET’s predecessor.  The wayleave was terminable by either party on six months’ notice.  AWE is the successor to the grantors.

17.        The line, the 400kV 4YJ Sundon to East Claydon electricity transmission line, is of conventional construction, the pylons having three cross-arms, which support six sets of four (“quad”) conductors. The middle sets of conductors are 21m apart and the lowest sets of conductors are 17m apart.  At mid span the maximum swing width is 30m.  Where the line crosses the reference land it is supported by two pylons which are located on sites adjacent to the land, one of these (known as “4YJ 033”) being located just beyond the south eastern boundary of the land.  The pylons are in the region of 50m in height. 

18.        On 11 March 2008 AWE served notice on NGET terminating the wayleave on 14 September 2008.  On 15 September 2008 AWE served on NGET a statutory notice to remove the line in accordance with paragraph 8(2) of Schedule 4 to the 1989 Act.  It is agreed (but for the purpose of this claim only) that on 5 December 2008 NGET made an application for the grant of a necessary wayleave pursuant to paragraph 6 of Schedule 4.  There followed a period of statutory retention.

19.        NGET’s application for a necessary wayleave was subject to a hearing held between 10 and 18 November 2009.  The hearing was also into three similar applications relating to nearby sections of the line.  On 21 June 2010 the Secretary of State for Energy and Climate Change granted four necessary wayleaves to NGET pursuant to paragraph 6 of Schedule 4, including the one for the line across the reference land.  This statutory wayleave is terminable by either party subject to six months’ notice being given but such notice may not be given until the expiry of 15 years from the date of the grant.  Pursuant to the grant of the wayleave and as provided for in paragraph 6(2) of Schedule 4, NGET enjoys the right to have access to the land for the purpose of inspecting, maintaining, adjusting, repairing, altering, replacing or removing the line.

20.        In 2003 National Grid issued a document entitled “A Sense of Place” containing design guidelines for development near high voltage overhead lines.  It stated that there were good operational and amenity reasons for not siting built development directly beneath overhead lines.  While National Grid preferred that built development did not take place beneath lines (in order to minimise disturbance and to facilitate easy maintenance) land beneath and adjacent to overhead power lines could be efficiently used in many other practical and profitable ways – and it gave examples that included public open space, allotments, structural landscaping, parking, non-residential storage uses and roads, cycleways and paths.

21.        In 2008 National Grid published a further document entitled “Development near overhead lines”, containing information relating to planning and amenity issues for planning authorities and developers.  It prescribed minimum safety clearances and said that, while National Grid could not control development other than for safety reasons under and adjacent to overhead lines, it believed that there were operational and amenity benefits in controlling the siting of such development.  The document said that appropriate uses of land along an overhead line route were public open space, nature conservation or structural landscaping in residential areas, and parking and storage in employment areas, and it referred the reader to Sense of Place for further information

The 54m corridor

22.        The justification for the 54m corridor, which was reflected in the terms of the planning permission and the two contracts for the sale of area 15C, was explained by Mr Williams in his evidence.  He said that when AWE began to promote this part of the development area it was hopeful that, following termination of the contractual wayleaves, NGET would not be granted a statutory wayleave for the retention of the line.  The assumption in the Local Plan was that the line would be removed.  It was recognised, however, that it would take a considerable period of time before it would be known for certain whether or not the line would be removed, and at the time housebuilding on site 15A was moving ahead quickly.  It was thus necessary to develop the strategy for sites 15B-D so as to enable development to take place in two stages.  During the first stage the parts of the sites less affected by the line would be developed , and the second stage would involve the development of the pylon land when the line had been removed.  To facilitate this, and following many years’ discussions with SBDC, the proposed approach was for a 54m corridor that could be developed as part of the second stage as and when the line was removed.  The corridor had to be sufficiently wide not only to ensure that no dwellings were placed under the line, if it was retained, but also to ensure that the corridor was wide enough to sustain a viable development with the line removed.  Mr Williams said that the 54m had its origins many years before in connection with the minerals operations, and the designers for the residential development arrived at a corridor of the same dimension.

23.        It appears that the council were under the impression that the 54m corridor was a requirement of NGET.  NGET did, however, make clear in correspondence and at the wayleave hearing that this was a misunderstanding, and at a meeting on 24 October 2006 they expressed their concern about the possible sterilisation of land in the event that the corridor was adopted and the line was not removed.  In their submissions to the inspector on the planning appeal they referred to the 54m as an arbitrary corridor, but they did not express objections to the proposed conditions.  

The legal basis of the claim

24.        Paragraph 7 of Schedule 4 to the 1989 Act, the provision under which the claim is made, provides as follows:

“7(1) Where a wayleave is granted to a licence holder under paragraph 6 above–

a)     the occupier of the land; and

b)     where the occupier is not also the owner of the land, the owner,

may recover from the licence holder compensation in respect of the grant.

(2) Where in the exercise of any right conferred by such a wayleave any damage is caused to land or to moveables, any person interested in the land or moveables may recover from the licence holder compensation in respect of that damage; and where in consequence of the exercise of such a right a person is disturbed in his enjoyment of any land or moveables he may recover from the licence holder compensation in respect of that disturbance.

(3) Compensation under this paragraph may be recovered as a lump sum or by periodical payments or partly in one way and partly in the other.

(4) Any question of disputed compensation under this paragraph shall be determined by the Tribunal; and sections 2 and 4 of the Land Compensation Act…shall apply to any such determination.”

25.        The scope of this provision was considered by the Lands Tribunal (the President and N J Rose FRICS) in Welford v EDF Energy Networks (LPN) Plc [2006] 3 EGLR 165.  Expressing agreement with the approach of the Member (P H Clarke FRICS) in Macleod v National Grid Co Plc [1998] 2 EGLR 217 we said:

“44. Under para 7(1) the owner is entitled to compensation in respect of the grant.  These words are apposite in our view to cover compensation both for value of the wayleaves and compensation for any consequential reduction in value of the claimants’ land.  The member in Macleod treated the provision as operating in this way, and we think that he was right to do so.  Disturbance is specifically provided for in subpara (2) and, although what it relates to is disturbance in the enjoyment of land that has not been acquired, there is no difficulty in applying this provision in accordance with the principles established under the law relating to compensation for the compulsory purchase of land.  We are thus concerned with the three standard elements of compensation…”   

26.        The Court of Appeal concurred with this analysis.  At [2007] 2 P & CR 15 Thomas LJ, with whom Chadwick and Scott Baker LJJ agreed, said at paragraph 14 that there was no dispute before the court as to the correctness of the general approach set out in the paragraph we have just quoted, and he went on:

“Although para 7 of Sch 4 expressly distinguishes between compensation under sub-para (1) for diminution in the value of land and under sub-para (2) for disturbance, the compensation payable under the whole of para 7 is to be assessed on the general principles applicable to the payment of compensation for compulsory acquisition which recognises these two separate heads as elements of the claim for compensation – injurious affection and disturbance.  The distinction drawn in para 7 of Sch 4 is a necessary distinction in relation to compensation for the grant of a wayleave for a fixed period to enable occupiers and owners of chattels to recover compensation for disturbance.”

27.        Mr Elvin said that, under the approach set out by the Court of Appeal, claims for disturbance and personal loss were subsumed within claims for land or damage to land, and the authorities pointed to a wide application of the principle of equivalence.  The claim here, based on loss under the contract, was recoverable in principle as part of “compensation in respect of the grant”, provided that the requirements of causation, remoteness and reasonableness were met.

The issues

28.        Each of the parties approached the assessment of compensation on the basis of the difference between the value that the land would have had at the valuation date if the line had been removed and the value that it in fact had at that date given the grant of the 15-year wayleave.  We have identified above the basic issues between the parties.  In relation to the without-line value the issue is whether, as the claimant contends, this value is represented by the contract price (£5,829,477 including indexation) or, as the compensating authority contend, by the agreed open market value of the land disregarding the contract (£3,195,000).  As regards the value that the land in fact had (which we refer to as the value in the real world), the issues are whether, as the compensating authority contend and the claimant denies, a development that optimised the use of the subject land and the adjoining land would have been possible under the terms of the planning permission; whether or not agreement would have been reached with the owners of the adjoining land to enable such development to be carried out; and whether or not the owners of the adjoin land would have bid for the land, and if so how much.  We will deal with each of these issues: the contract price, planning permission and agreement with the adjoining owners.

Contract price as basis of valuation

29.        The fundamental difference between the parties on the without-line value is whether, applying the approach referred to above to the application of paragraph 7, the pylon land contract price can be used as the basis of compensation.  In his skeleton argument Mr Elvin relied on the principle of equivalence and contended that the claim based on the loss under the contract was recoverable in principle as part of “compensation in respect of the grant”, provided that the requirements of causation, remoteness and reasonableness were met.  Mr Chase adopted the contract price as the without-line value of the subject land for the purpose of assessing injurious affection, on the basis that it was the contract price that established the value of the land to the owner.

30.        Mr Purchas submitted that the price payable under the contract could not be used as the basis for determining the compensation payable under paragraph 7.  Paragraph 7(1), he said, was concerned with the depreciation in the value of the land as a result of the grant of the wayleave and compensation under it was confined to the parties directly concerned in the land, that is the owner and the occupier.  Under paragraph 7(2) compensation in respect of disturbance in the enjoyment of land or moveables or damage to the land or moveables was to be paid from time to time as and when such disturbance or damage occurred.  He said that the contract provided what were personal rights only and could not give rise to a claim for compensation under paragraph 7.  It bound the parties and not the land.  It involved obligations on both sides in terms that made clear that it was of importance that it was the buyer and the seller who were required to discharge them.  Thus the definitions of “Buyer” (George Wimpey South Midlands Ltd and Persimmon Homes Ltd) and “Seller” (Arnold White Estates Ltd) were not expressed to include successors in title.  Clause 4 (which provided that, subject to the Condition being satisfied, the Seller would sell and the Buyer would purchase the property) only bound the seller and buyer as defined.  Clause 11 provided for a limited tolerance for inter-group assignment by the buyer.  Clause 15 (dealing with retention) and the Fourth Schedule (under which the seller undertook to use reasonable endeavours to obtain a satisfactory planning permission, to carry out certain works and to do other specified things) contained what were clearly personal covenants.  Clause 20 expressly excluded third party rights for the purposes of the Contracts (Rights of Third Parties) Act 1999.  Under clause 21 the agreement was to be confidential to the parties.  All these provisions, Mr Purchas said, were in contrast to the specific inclusion in other parts of the contract of provisions binding successors and assigns for particular limited purposes.  Thus under paragraph 14 of the Third Schedule successors in title were bound by the overage obligations, and there was an obligation for novation on transfer and registration.  Part 2 of the Third Schedule included covenants binding the property into whosoever’s hands it might come, and paragraph 14 in Part 2 of the Fourth Schedule extended the buyer’s covenant to enter into a planning obligation to successors in title.  Warranties to be provided in favour of the buyer under paragraphs 5 and 6 of the Fourth Schedule included permitted assignees but only to the extent permitted under clauses 4 and 5 of the deed.  Clause 1.2, the draft charge clause, included successors and assigns so far as the context admits, but that was in respect of the use by the seller of the deposit moneys to fund the seller’s works, which would arise after the agreement became unconditional.  On a proper construction of the contract, Mr Purchas said, the seller’s interest was not assignable.

31.        Mr Elvin said that paragraph 7(1) did not limit the claim to an interest in land.  It gave “compensation in respect of the grant” of the wayleave, and the authorities made it clear that compensation was to be determined according to the principles of equivalence.  The contract was assignable and the benefit to the landowner was in any event binding on a subsequent purchaser of the land by virtue of the notice on the Register of Title.

32.        We cannot accept Mr Purchas’s contention that the pylon land contract created personal rights only and did not create an interest in land.  Like so many agreements for the sale of land for development it was conditional upon the grant of a satisfactory planning permission, and it contained typical obligations on the part of the seller as to the obtaining of planning permission and other matters.  Indeed all of the provisions on which Mr Purchas relied were contained in virtually identical form in the contemporaneous agreement for the sale of the rest of 15C.  The contract was properly registered, and we can see no reason why the seller’s interest was not assignable.  The nature of the contract was as a contract for the sale of land that was subject to a condition subsequent: see Megarry and Wade’s Law of Real Property 8^th Edn at paragraph 15-007.  It was to come to an end on 2 January 2014 in the event that the line had not by then been removed.

33.        In any event, since all that was required to make the contract price payable was the removal of the line it is clear that it was the grant of the wayleave that caused the claimant to be deprived of the amount that was payable.  Under paragraph 7(1) what is payable is compensation; and that must mean compensation for loss occasioned by the grant.  Moreover, since the provision provides for compensation to the occupier as well as the owner, this would tend to suggest that the basis of compensation is not limited to depreciation in the value of the land.  If that is the case, even if the contract only conferred personal rights and even if those rights were not assignable that would be no reason to disregard it.

34.        To be compensatable in this way the loss, as Mr Elvin accepted, would need to satisfy the requirements of causation, remoteness and reasonableness.  Mr Purchas submitted that the loss was too remote.  The contract made in 2007 pursuant to the 2005 promotion agreement, he said, was remote from the actual effect of the wayleave when granted.  In principle a claimant was to receive fair compensation, but not more than fair compensation.  It was fair that the utility provider should have to pay compensation for the effect of the grant on the land, but it was not fair that the compensation should be dictated by contractual provisions made between other parties at a time and in circumstances remote from the making of the grant.

35.        We cannot accept that the loss arising from the inability to perform the contract for the sale of the reference land is too remote.  Since under the contract the claimant was entitled to receive the contract price when the line was removed, that price represented the value of the land to the claimant.  It was the direct result of the grant of the wayleave that the contract would come to an end on 2 January 2014 and the price would cease to be payable.  We do not see that the loss of this entitlement was too remote.

36.        We can see that it is unlikely that the contract price would have represented the market value of the land at the valuation date.  No purchaser would buy the land for the same price as that for which he was obliged by the contract to convey it to the buyer.  An arbitrageur might conceivably buy the land, but at a price below the contract price, enabling him to make a profit through completion of the sale to the purchaser.  Conventional analysis would say that the difference between the arbitrageur’s price and the market value of the land with the line retained represented the injurious affection suffered by the land by reason of the grant of the wayleave, while the difference between the contract price and the arbitrageur’s price would be a loss suffered by AWE that did not arise from the value of the land (at the valuation date), the sort of loss to which the second part of rule (6) in section 5 of the Land Compensation Act 1961 relates (and is commonly included within the term disturbance).  According to the approach to the application of paragraph 7 that the Court of Appeal and this Tribunal held to be appropriate in Welford both these types of loss would be recoverable.

37.        If, instead of falling in value, the land had by the valuation date increased in value above the rate of inflation, we do not think that AWE would have been entitled to compensation on the basis of the land’s higher value on the valuation date.  Mr Purchas asked Mr Chase about this in cross-examination and Mr Chase said that the claimant would be limited to what it would have received under the contract (D4/68/7-20).  We agree with that.  On the assumption on which compensation was to be assessed, that the line had been removed, the purchaser would have required conveyance of the land to it at the contract price.  Compensation at more than this price would give AWE more than it had lost.

38.        We therefore accept the claimant’s case that compensation is properly to be assessed on the difference between the contract price as at the valuation date and the value that the land in fact had at that date.

Value in the real world: the parties’ positions

39.        The claimant’s contention, as we have said, was that the 2007 planning permission did not permit a conjoined layout of the pylon land and the adjoining land and that, in any event, there was no one at the valuation date who was interested in buying the land.  The compensating authority on the other hand said that there would have been particular advantages to the adjoin developers in acquiring the reference land to enable it to be developed with the adjoining land.  It would have increased the land available for residential development, ensuring its comprehensive and effective treatment.  Under the sale contract of the adjoining land reserved matters on the adjoining land were subject to the approval of plans by the owner of the reference land.  Acquisition of this land would have enabled the owners of the adjoining land to avoid the delays and other disbenefits of the requirement for approval.  The reference land would moreover have been attractive to other developers with a view to developing the land in conjunction with the adjoining land, with the option for development on its own, or to a speculator with a view to either of those opportunities.

40.        So far as planning permission was concerned, with the retention of the line on the valuation date, the compensating authority said, the planning officers would have recognised that the 54m corridor was inappropriate, given the decision to retain the land in advance of development taking place on the adjoining land, and would have looked for an integrated development that made efficient use of the land for residential purposes, in accordance with the policies in the development plan and the principles in Sense of Place.  This was the approach that had been adopted at the nearby Brickyard Quarry development.  There the claimant had applied for outline planning permission for up to 209 dwellings with the exclusion of a 54m strip for the overhead line.  This was rejected by the planning officers shortly after the wayleave decision on the reference land on the basis that a 54m strip would accentuate the existence of the line and the land should be used more efficiently by designing in solutions for underneath the line, including parking areas, gardens, roads and open space.  Permission was later granted for up to 165 dwellings, with no area excluded from development.  The parameter plans indicated an “offset for built development” of 30m for the line.  In the delegated report granting permission with all matters reserved it was noted that the only restrictions for development under overhead lines related to height and swing distances from the line.

41.        In the light of this, it was said, a bidder for the reference land at the valuation date would have been advised that the planning authority would support an arrangement that made efficient use of the land along these lines.  In approaching conditions 13, 14 and 17 it would have been recognised that these had been imposed at a stage when no decision had been taken on the retention or removal of the line.  The parameter plans were for guidance, and it was open to the authority in approving reserved matters to approve development that was not in accordance with the parameter plans or the stated housing limit.  A similar flexible approach would have been taken under the Tenth Schedule to the section 106 agreement.

42.        The claimant said that on its approach on planning the only value that the land had in the real world at the valuation date lay in the hope that some development might be possible after the termination of the wayleave in 15 years’ time, but that this amount was outweighed by the cost of laying out and maintaining the pylon land in accordance with condition 14(b).  The compensating authority said that, since planning permission should be assumed for a conjoined development, the value of the land was the value that it was agreed it would have had disregarding the pylon land contract, less 12½% to reflect the effect of the line.  We need to consider the planning and valuation evidence relating to these issues.

 

 

The planning permission

43.        The permission granted by the Secretary of State on sites 15B, 15C and 15D was for “the erection of up to 720 dwellings, together with a single storey Lower School, associated play space, landscaping, parking and access in accordance with [the submitted] application”.  The approval of reserved matters under conditions 1 and 2 was related to phases of the development, and it was provided that the developer must nominate not less than 3 and not more than 6 phases and that each phase must contain not less than 50 dwellings.  The standard time limits were applied to each phase.  Condition 13 provided:

“13. Except as may be otherwise approved in writing by the local planning authority, the development shall be carried out in accordance with the provisions of the relevant parameter plans, as defined in the unilateral undertaking dated 11 July 2007...”

The parameter plans provided for development both with and without the overhead line.  Drawing 1028-030 showed the land uses with the line removed.  The housing on site 15C was shown as containing “Approx 276 units, 41 dph” on 6.72 ha.  A lower school covering 1.40 ha was also shown, as well as peripheral areas of strategic landscaping.  The equivalent plan for the “with pylons” situation showed hatched an “Overhead line exclusion zone” of 1.00 ha and housing areas to the north and south of this zone: that to the north was shown to contain “Approx 164 units, 43 dph” on 3.83 ha, and that to the south was shown to contain “Approx 70 units, 37 dph” on 1.89 ha, a total, therefore of 234 units, 42 fewer than with the line removed.  On sites 15B, 15C and 15D together (the areas covered by the permission) the totals were 720 and 678 units respectively, with and without the line.

44.        Condition 14 provided as follows:

“14 (a) In this condition, ‘the pylon land’ means the strip of land running east-west across the site 27 metres to either side of the centre line between each pair of adjacent 400 kv electricity line pylons and indicated on the ‘with pylons’ parameter plans.

(b) No development shall take place on a phase of the development including or adjacent to any part of the pylon land until there has been submitted to and approved in writing by the local planning authority a scheme for the laying out, landscaping, maintenance and management, pending the relocation of the 400 kv electricity transmission line, of that part of the pylon land in or adjacent to that phase, such scheme to include

(iii) the provision of links for pedestrians and cyclists to and across the land; and

(iv) the timing of its implementation; and

(c) the works and other measures forming part of that scheme shall be carried out in accordance with it.”

 

45.        Condition 17 provided as follows:

“17. (a) Except as may be otherwise approved in writing by the local planning authority, no more than 678 houses shall be constructed until a scheme under the Electricity Act 1989 for the removal of the pylons and the 400 kv electricity transmission line has been approved and a contract has been entered into for its implementation and for the removal of all associated infrastructure; and

(b) no more than 678 houses shall be occupied until the pylons, the transmission line and the associated infrastructure have been removed to the satisfaction of the local planning authority.”

The section 106 undertaking

46.        On 11 July 2007 the claimant gave a unilateral undertaking under section 106 of the Town and Country Planning Act 1990 in respect of sites 15B, 15C and 15D to South Bedfordshire District Council and Bedfordshire County Council.  The undertaking contained planning obligations in relation to a range of matters including affordable housing, public open space, play areas and the provision of a site for a new lower school.  The Tenth Schedule contained planning obligations in respect of the parameter plans and the pylon land.  The claimant covenanted that all applications for approval of reserved matters would be in accordance with the relevant parameter plans unless the council approved a variation, and, in relation to the pylon land, it covenanted as follows:

“3. Prior to the implementation of the Planning Permission the Developer will submit to the Council for its approval in writing a scheme of management for the implementation Landscaping, laying out, access (including the provision of links for pedestrians and cyclists to and across the Pylon Land) and maintenance of the Pylon Land which said scheme shall for the avoidance of doubt have regard to the possible relocation of the Pylons from the Pylon Land and be in accordance with Parameter Plan Number 1028/037.

4. Subject to the proviso contained in paragraph 5 below until such time that the Pylons are relocated from the Pylon Land or such other time as may be agreed in writing by the Council the Pylon Land shall be managed and maintained in accordance with the scheme approved by the Council pursuant to paragraph 3 above.

5. The proviso referred to in Paragraph 4 above is that the Council will act reasonably and without unreasonable delay in the approval of the scheme.” 

Planning: the claimant’s case

47.        Mr Gardner said that the basis of the planning of sites 15B-D was the Development Brief, which had been prepared to provide the framework for the detailed planning of the area to the south of Leighton Linslade.  It specifically required and was predicated upon the removal of the overhead line.  Despite representations made by NGET it was adopted by South Bedfordshire District Council, and planning permission was granted by the Secretary of State in accordance with it.  No other planning permission existed for the pylon land or any other part of sites 15B-D, and all that land was disposed of between 2008 and 2010 following the grant of planning permission, only the pylon land remaining in the claimant’s ownership.  Mr Gardner said that in his view there was no basis for assuming that the planning authority would have granted a different planning permission at the valuation date or might do so afterwards.  The 2007 permission was fully in accordance with the planning authority’s policy.  The parameter plans, which formed part of the 2007 permission, were precise, as required by the planning authority, in showing the form of development in the with and without line scenarios.  There was in his view no realistic prospect that the new housebuilder landowners would band together to prepare a new planning application with a scheme that retained the line but increased the number of dwellings.  The reasons for this included value, uncertainty, cost and delay.  There was moreover no realistic prospect that such a planning application would receive permission. 

48.        If there was no prospect of a re-planning of site 15C, Mr Gardner said, no form of  development of the pylon land alone would have been acceptable.  It was 54m wide, and on NGET’s approach the central 30m would have to be kept free of development.  Since roads of 8m each were planned for the edge of the land, this would leave a mere 4m on either side, which was insufficient to accommodate any acceptable form of development.

49.        The consequence of this, Mr Gardner said, was that the 42 dwellings lost by reason of condition 17 could not have been accommodated elsewhere in sites 15B-D.  He also considered that there was no reasonable possibility of consent being granted for development of the pylon land at any time during the Core Strategy period to 2031 or indeed beyond.

Planning: the compensating authority’s case

50.        The compensating authority’s planning witness Mr Powell noted that the land benefited from an extant outline planning permission for sites 15B-D granted by the Secretary of State for the residential development of the land for up to 720 houses, a lower school, play space, landscaping parking and access and that at the valuation date no reserved matters applications on site 15C had been submitted.  Development around overhead lines was commonplace and should be designed according to well-considered industry-accepted guidelines, such as that produced explicitly for this purpose by NGET, including Development Near Overhead Lines (July 2008) and A Sense of Place (2003).  The guidance in those documents was that there were no specified minimum distances between houses and overhead lines.  Instead each instance was to be dealt with on its merits, with the only explicit limitation being the statutory safety clearances.  In the light of this Mr Powell considered that there would have been a range of potential development approaches at the valuation date about which a potential purchaser of the subject land would have been advised.  These would have included a comprehensive development in conjunction with the adjoining land and independent development of the reference land in reliance on the rights retained under the sale of the non-pylon land.

51.        Mr Powell said that the planning policy and development control context was favourable for the residential development of the land in general in accordance with Policy H1 of the Local Plan and the parameter plans referred to in the 2007 planning permission.  It was his opinion that this amount of development could be achieved with the line in situ in accordance with local planning authority and NGET guidance.  He produced three plans to illustrate how this could be done.  One of these (plan 6) showed the pylon land developed as part of a common layout with the adjoining land.  The other two plans (7 and 8) showed the land developed separately from the adjoining land, although Mr Powell did not advance these with much enthusiasm and appeared to agree in cross-examination that it was unlikely that the local planning authority would approve either of them.  In the event Mr Smith in his valuation evidence did not rely on either of them.

52.        Plan 6 was prepared on the assumption that a corridor of 17m would be kept free of development but that development would be permitted up to the boundary of this corridor.  The distance of 17m was that between the lowest of the three sets of conductors.  The middle conductors were 21m apart.  Mr Powell agreed that the 17m had first been mentioned in his evidence and had not been referred to in the evidence given by NGET’s experts to the wayleave hearing.  They had based their evidence on an exclusion area 30m wide, based on the maximum swing of the middle conductors in mid-span.

Valuation evidence: claimant

53.        Mr Chase considered that, for the purpose of assessing the diminution in the value of AWE’s interest in the pylon land at the valuation date, the following matters were to be taken as they were in reality at that date; the grant of the planning permission and the conditions to which it was subject; the existence and terms of the pylon land contract; the sale of the adjoining land in 2009; the rights reserved by the adjoining land contract for the benefit of the pylon land; and the planning policy which applied at the valuation date.

54.        In the light of Mr Williams’s evidence Mr Chase felt there was no reason to assume that the sale of the pylon land would not have been completed at the price provided for in the contract had the statutory wayleave not been granted.  In his opinion, therefore, having regard to the principle of equivalence, the compensation payable should be the price which AWE would have expected to realise on the valuation date by completing the sale of the pylon land in accordance with the contract, minus the value of the land at that date subject to the statutory wayleave.

55.        Mr Chase did not believe that the value of the pylon land subject to the statutory wayleave was more than nominal at the valuation date, having regard to the likelihood of planning permission being granted for development on termination of the wayleave and the positive obligations under the planning permission.  The planning permission imposed constraints and positive obligations in relation to the development of the pylon land whilst the line remained in place.  The impact of the planning conditions was that, with the line remaining in place, the owner of the pylon land would remain under a duty to layout, landscape, maintain and manage the land in accordance with condition 14(b).

56.        Based upon Mr Gardner’s opinion as to the position regarding planning permission, Mr Chase valued the land subject to the statutory wayleave on the assumption that the conditions set out in the planning permission had to be complied with and that there would be no realistic prospect of the obligation relating to the pylon land being substantially varied or removed, or of a new planning permission being applied for or granted to permit residential development to take place on that land, whether directly under or adjacent to the line.  On that basis Mr Chase considered that there were two principal elements to the valuation of the pylon land as at the valuation date.  Firstly, the potential value of the land to a purchaser having regard to the cost of complying with the obligation in condition 14(b) of the planning permission and the value and benefit of any use which might reasonably be made of the land within the requirements of the condition; and, secondly, the value of the land, or the potential further compensation entitlement, on the earliest assumed date of termination of the wayleave (15.5 years from the valuation date).

57.        AWE’s estimate of the cost of laying out the pylon land in accordance with planning condition 14(b) was of the order of £250,000 at the valuation date, and its preliminary estimate of the cost of maintaining the land in accordance with the condition was £25,000 per annum.  There was no agreement between AWE and Wimpey/Persimmon as to who was liable under the terms of the adjoining land contract for laying out the land and maintaining it until the termination of the pylon land contract, so that the position in this respect was uncertain.  In any event the owner of the pylon land would have to assume responsibility for maintenance from the end date of the pylon land contract – 2 January 2014 – for at least the duration of the statutory wayleave.

58.        It was possible that some limited value might attach to the land, after landscaping and laying out, for use such as sports or recreation, or paddocks for keeping horses or ponies over the term of the statutory wayleave.  There would however have to be deducted from the value of any such use the cost of constructing and maintaining fencing and other security, and the landscaping and public access requirements of the local planning authority might conceivably constrain any such use to only part of the land or even prevent it altogether.  Taking these factors and uncertainties into account Mr Chase was unable to express a firm view as to any potential annual or capital value at the valuation date for such use.  He did not believe, however, that the capital value would be likely to be any more than say £25,000 after allowing for costs of fencing and other work, based on an assumed area of 1 hectare for some form of recreational use.  Whilst there were too many unknown factors to enable a reliable comparison to be made he considered it very likely that the costs of maintaining (and possibly laying out) the landscaped areas would far outweigh the potential value of any beneficial use of part of the land.

59.        Mr Chase thought it was reasonable to assume that the owner of the pylon land would seek to mitigate its loss by serving notice to terminate the statutory wayleave at the earliest date provided for – that is six months notice at the end of the minimum 15 year term – if there were a reasonable prospect that this might then enable the land to be developed or a further compensation claim to be made.  In reality one of two situations would arise upon termination of the wayleave.  Either a further statutory wayleave would be applied for and granted, potentially giving rise to a further claim for compensation; or a further wayleave would not be required by NGET or would be applied for and refused, in which case the line would be removed.

60.        In terms of value both scenarios could be expected to produce a similar result because, if the line were retained by grant of a new statutory wayleave, compensation would be payable in respect of any additional value which would have been released and realisable had the line been removed. Whether any such value would arise depended primarily upon whether or not it could be expected that planning permission would be granted for development of the pylon land upon removal of the line and, if so, on the extent of demand for residential development at that time.

61.        Mr Chase concluded that, having regard to the considerable uncertainties as to whether any form of development would be permitted on termination of the statutory wayleave and whether there would be demand for such development, a purchaser of the land at the valuation date subject to the wayleave would pay only a relatively modest element of ‘hope value’ to reflect the prospect of development value being released over 15 years later.  The line had a planned life extending some way beyond the earliest termination date of the wayleave and Mr Chase thought the likelihood was that at that time a further statutory wayleave would be applied for and granted.  Prospective purchasers would probably be residential developers who would place the land into a ‘land bank’ as a speculative long term development prospect; they would be less likely to be prepared to purchase the land if the potential after some 15 years was for a further compensation payment rather than the removal of the line and the release of the land for development.  Any value the pylon land might have on this basis had to be based on valuer’s judgement in the absence of any evidence of other land sales in comparable circumstances.  In Mr Chase’s opinion such value was unlikely to be more than, say, £100,000 to £150,000 – with possibly an addition to reflect the possibility of some value during the term of the statutory wayleave for recreational or similar uses.  Since this value was below the likely cost of complying with the landscaping obligations in the planning permission, the value of the pylon land would be nominal, say £1.

62.        Mr Chase noted that the approach adopted by the Lands Tribunal in Welford to reflect the 15-year term of the statutory wayleave was to decapitalise the diminution in value and then recapitalise over the term of the wayleave.  He did not disagree with that approach in that case where there appeared to have been no disagreement that, on termination of the wayleave, there would have been an entitlement to a further compensation payment assessed presumably on a similar basis to the claim to which the reference related.  However, he did not consider it to be an appropriate valuation approach in this case, where the entitlement to any further compensation, or the prospect of being able to realise development value, was far from certain and might not arise at all.

63.        Alternatively, if it was held that compensation was to be based first and foremost on the market value of the freehold interest at the valuation date, then the special value of the land to AWE as owners must be compensated for in addition, to the extent that it exceeded that market value.  In Mr Chase’s view the special value of the land to AWE was represented by the pylon land contract price which, but for the grant of the statutory wayleave, it would have been entitled to receive on completion of the sale.  On this alternative basis, therefore, the measure of compensation would be the same – that is the contract price plus indexation (a total of £5,829,477), together with any VAT that AWE would be liable to pay on the compensation awarded.

64.        Mr Chase said that, although he did not consider it to be a correct or appropriate basis of valuation, he recognised that it might be argued that the value of AWE’s interest should be based solely on the price which might have been expected to be realised on an open market sale at the valuation date.  He considered that such a valuation must still take into account the pylon land contract which, as a question of fact, existed and remained enforceable at that date.  Whilst the price would have been lower that the price which AWE would have been expected to receive under the terms of the contract, and would therefore in Mr Chase’s view result in AWE receiving less than its true loss, this would nevertheless still reflect the actual circumstances which pertained at that date.

65.        Mr Chase thought there would have been a number of potential purchasers, possibly including AWE, Wimpey and Persimmon, who would have paid a price which reflected the assumed removal of the line and the ability then to call for completion of the purchase in accordance with the pylon land contract.

66.        It was reasonable to assume also that the purchaser would require a profit on its investment in purchasing the freehold interest; in the absence of a profit there would be no incentive to acquire the freehold interest on this basis.  The level of profit which might reasonably be required by a purchaser would reflect a range of factors and was a matter of valuer’s judgement.  Mr Chase did not undertake that valuation exercise.

Valuation evidence: compensating authority

67.        In preparing his assessment of compensation Mr Smith had regard to Mr Powell’s opinion that the grant of the statutory wayleave need not have reduced the capacity of site 15C to accommodate the broad quantum of housing set for it in the outline planning permission.  It followed, in Mr Smith’s opinion, that the market for the reference land in June 2010 included both Taylor Wimpey and Persimmon (whether jointly or separately), other developers and indeed speculators.

68.        There would have been the clear opportunity for the market to consider a range of bases for development of the land, as had been considered by Mr Powell  No steps had been taken to discuss specific details of any reserved matters for the adjoining land with the local planning officers.  Moreover, the subsequently submitted details were constrained by the land ownership situation.  If the land had been available for sale on the valuation date it would have been seen as a valuable opportunity to produce a comprehensive and efficient layout for the land as a whole.

69.        There were three companies involved in the development of the adjoining land (Persimmon, Charles Church (part of the same group) and Taylor Wimpey.  Mr Smith considered that other developers would also have been interested in this opportunity, either as part of a comprehensive approach or for development of the pylon land on its own in reliance on the rights reserved.  It would have been seen as land which had services secured and available in an established market area.

70.        Despite the general market downturn in 2008/9 residential development continued to be undertaken in Leighton Buzzard.  From early 2010 onwards sales volumes achieved on the adjoining development areas north of 15C had been good, with purchasers available for all the dwellings being built.

71.        The obvious attractions to Taylor Wimpey and/or Persimmon in securing the land were: to amalgamate the separate areas of 15C, ensuring the layout and quantum of development was maximised; to remove the complications and restraints arising from the contractual rights and obligations affecting both the pylon land and the adjoining land; to ensure no competing or conflicting development or use took place on the reference land; and to ensure that the overall development of 15C was programmed to maximise market opportunities.

72.        Mr Smith quoted from page 11 of Development Near Overhead Lines, as follows:

“Since it [NGET] does not own the land, it cannot prevent development close to or under overhead lines (although of course safe electrical clearances must be maintained)”; and

“Since the only limitation on new development has been the statutory safety clearances (Appendix III) a large amount of residential and other development has been carried out subsequently beneath and adjacent to overhead lines.”

73.        An example of such residential development was at Worsley, Greater Manchester.  The development comprised a mixture of detached, semi-detached and terraced houses, detached bungalows and flats.  The site of the partly completed residential development was affected by both pylons and a 400kv overhead line.  It was the subject of the Lands Tribunal’s decision in Turris.  The valuation date was 14 January 1980.  While the compensation payable was for compulsory purchase of the right as opposed to a wayleave, the principles of compensation following Welford were the same in both cases.

74.        Mr Smith said that the Turris decision had become a leading source of guidance on establishing the quantum of the diminution in value of residential building land beneath overhead lines and in proximity to pylons.  He had been involved in numerous cases where settlements had been reached based on Turris.  The decision in that case was that the land most seriously affected, an area of 3 acres directly beneath the overhead line and next to that strip, was depreciated in value by 12.5%.  Land further away with an area of 6.6 acres was held to have been depreciated by 3% due to “visual effect”.

75.        Mr Smith produced a schedule of sales data for the period from 1995 to date.  This showed that sales volumes were consistent in respect of properties directly beneath and away from the overhead lines.  Over the years he had dealt with a number of cases involving electricity easements and wayleaves.  In his experience the adverse effect on the value of residential property and hence residential building land in close proximity to overhead lines and pylons was smaller at the higher density lower end of the market, where affordability and the desire of first time buyers to enter the market were the primary concerns.

76.        The creation of the pylon land strip, its conditional sale and the sale of the adjoining land which, together with the reference land comprised area 15C, prior to the decision on retention of the overhead line in accordance with the necessary wayleave produced an unusual situation.  The sale of the adjoining land to Taylor Wimpey and Persimmon was completed in 2009 leaving the reference land separated.  One or both of the owners of the adjoining land would seek to acquire the reference land in order to carry out a comprehensive development, maximising the return on essential infrastructure and providing the best outcome from the planning permission.  Acquisition of the reference land would avoid the need to deal with the complexity and potential disputes arising from the cross rights and access obligations over the reference land.  This would be attractive to the owner of both the reference land and the adjoining land.  One or both of the adjoining owners was therefore an obvious purchaser of the reference land.  When held together the value of the adjoining land and the reference land was likely to be greater that the sum of the values of each area in separate ownerships.  The result was to produce a “marriage value” where the value of the merged areas exceeded the combined value of each of the areas if held separately.

77.        Mr Smith said that he had agreed with Mr Chase that the value of 15C land at the valuation date, without the overhead line, was £910,500 per acre (£2.25m per ha).  This value was derived from the price agreed for the 15C land in 2007, adjusted in line with the Valuation Office Agency Eastern Region Land Index for June 2007 and June 2010.  The reference land would have been of interest to local and regional developers who would not normally have an opportunity to participate in such a large scale development.  It followed that there would be a competitive market.

78.        Mr Smith said that he was in no doubt that there would have been significant interest if the pylon land had been offered for sale in June 2010. Whilst the potential for development of the pylon land on its own would have attracted bids, it was likely that Taylor Wimpey and Persimmon/Charles Church would have outbid other developers in order to secure the benefits of a comprehensive layout over the whole of 15C.

79.        In Mr Smith’s opinion, if the pylon land had been acquired by one of the developers involved in the development of the adjoining land so as to be developed with it the diminution in value would have been due to visual and other issues arising from the presence and proximity of the overhead line.  He considered that it was appropriate to apply an approach based on Turris.  It was not clear from the reported decision how far from the overhead lines the 12.5% injurious affection extended, but Mr Smith was confident it would not have gone beyond 54m (27m either side of the centre line of the overhead line).

80.        In order to arrive at a “robust” valuation and provide the claimant with the benefit of any doubt, he applied a figure of 12.5% injurious affection to the whole of the reference land, as follows:

3.51 acres @ £910,500 per acre = £3,195,855 @ 12.5% = £399,482

81.        Allowance must be made for the 15.5 year term of the necessary wayleave.  Assuming that the wayleave would be terminated in January 2026, he calculated the present value of the diminution in value on the basis that this sum would be payable following grant of a fresh necessary wayleave and reduced proportionally.  This calculation reflected the need for another necessary wayleave hearing and assumed the actual grant of the new necessary wayleave.  Hence the valuation date was one year after the application.  It followed that a 16.5 year period was assumed.  The Present Value of £1 in 16.5 years @ 6% was 0.38.  The compensation for 15.5 years was therefore the full compensation subject to an allowance for the future compensation entitlement, i.e. 1.00 minus 0.38, or 0.62, producing a compensation figure of £250,000, as follows:-

£399,482 x 0.62 = £247,678, say £250,000

Value in the real world: conclusions

82.        The claimant’s contention was that the effect of the conditions in the planning permission was that there could be no development in the 54 m strip, 27 m either side of the centre line, and that the number of houses could not exceed 678 unless the line were to be removed.  NGET’s contention was that the underlying intention of the permission was to enable consideration of a varied parameter basis, so that there could be an adjustment in relation to house numbers and in other respects if the circumstances should warrant it.  At the valuation date the council’s planning officers would have realised that the 54 metre corridor was inappropriate, given the decision to retain the line in advance of development taking place on the adjoining land, and would have looked for an integrated development that made efficient use of the land for residential purposes, adopting the same approach as they had for the Brickyard Quarry development site.

83.        What has to be borne in mind, in our view, is that the planning permission of December 2007 was granted at a time when it was hoped by both the claimant and the local planning authority that the line would be removed but it was uncertain whether it would be.  Thus the permission was designed to cover both the with-line and the without-line situations and, importantly, to enable development on the non-pylon land to proceed without the need to wait to see whether the line was to be removed or retained.  At the date of valuation it had been determined that the line was to remain.  Had an application for permission for the development of site 15C been determined at that date we have no doubt that the local planning authority would have granted permission, as they were later to do for Brickyard Quarry, in a way that would have enabled them to insist on an integrated development.  But that is not the situation with which we are concerned.

84.        At the valuation date outline permission for site 15C had been granted, and it is material to consider, therefore, whether the authority would have been able to refuse to approve details for the non-pylon land if they did not show an integrated development of the Brickyard Quarry sort.  We do not think that they could have done so.  The owners of the non-pylon land would have been entitled to nominate as a phase or phases of the development the areas of 15C adjoining the pylon land on the north and the south and to have details approved for these.  There would have been a need to comply with condition 14.  Although it was worded so as to require the submission and approval of a scheme for the laying out, landscaping, maintenance and management, “pending the relocation of the 400 kv electricity transmission line”, the requirement did not, in our view, cease to have effect once the statutory wayleave, permitting the line to be retained for 15 years, had been granted, and Mr Purchas did not suggest otherwise.  Nor was it suggested that the need to comply with condition 14 constituted any impediment to the development of the non-pylon land by its owners.  The scheme envisaged did not include built development on the pylon land, and we do not think that the planning authority could have refused to approve details on the basis that the scheme submitted under condition 14 failed to provide for some built development within the 54 m corridor.

85.        Although under paragraph 6 of Part 2 of the Third Schedule to the contract for the sale of the adjoining land the buyer was not permitted to submit any application for approval of reserved matters without first obtaining the approval of the seller, such approval was not to be unreasonably withheld, and we do not think that it would have been open to AWE under this provision to refuse its approval on the ground that the details did not provide for an integrated development.  In particular AWE could not have objected to a layout that included the provision of roads on the pylon land along its southern and northern edges since that was expressly provided for by paragraph 3 of the First Schedule. 

86.        The question then arises: could the value of the non-pylon land have been enhanced by adding to it the pylon land, so as to enable an integrated development, including some built development within the 54 m strip, to be carried out?  In terms of the loss caused to the claimant by the grant of the wayleave, unless it could have been so enhanced, any scope that there might have been under the permission and in accordance with Sense of Place for carrying out built development on the pylon land would be immaterial.  Two possibilities, in our view, have to be considered for this purpose.  The first is that a more attractive layout of the pylon land than simply treating it as an open corridor would have increased the sale value of the adjoining houses.  There is insufficient evidence to suggest that this would have been the case, and indeed we note and accept the evidence of Mr Williams that the areas facing the corridor could be used for low cost housing with no adverse effect on the overall value of the development.  The second possibility is that parts of the pylon land could have been used for open space, car parking and garaging to serve the non-pylon land, thus enabling a greater number of houses to be built or a more spacious and more valuable development to be carried out.  This possibility requires more detailed consideration.

87.        Mr Powell’s plan 6 was produced to show that an increased number of houses on site 15C could be produced with the pylon land developed together with the adjoining land.  It was confined to a band 75m wide centred on the line, and Mr Powell’s evidence was that, although the density within this area, if applied across the whole of 15C, was less than that necessary to achieve the 276 units shown on the parameter plan in the without-line situation, nevertheless that number could be achieved if the open areas beneath the line were brought into the reckoning for assessing an overall level of density.  The plan, however, assumed an exclusion zone of 17m – much less than the 30m that had been the subject of NGET’s expert evidence at the wayleave hearing and one for which we can see no basis in any of the guidance produced by NGET.  It therefore is of no assistance in showing the sort of development that might have resulted with a layout for the pylon land and the adjoining land together.  We are quite unable to conclude on this evidence that a joint development would have enabled the adjoining land to be developed more profitably than if it were developed separately, so that it would been worth the adjoining landowners paying to acquire the pylon land and to seek consent, either under the 2007 permission or through a further application for planning permission.  The fact that they made no approach to the claimant at any time following the grant of the wayleave suggests strongly that they did not think that a conjoined development would be sufficiently more profitable to them to make acquisition of the land worthwhile.  We accept the claimant’s evidence on this.

88.        We received submissions on the question whether details that departed from the parameter plans to the extent necessary to permit a conjoined development could lawfully have been approved under the 2007 permission.  In view of the conclusions we have reached, however, it becomes unnecessary to consider this question.  On the evidence we conclude that there was not at the valuation date anyone who would have wished to achieve such an approval and that there is nothing to show that such an approval would have given value to the reference land.

89.        We can quite see that, if at the outset it had been known that the line was to remain, it would have been likely that planning permission for a layout along the lines of the Brickyard Quarry permission would have been sought and granted, ensuring an integrated development designed to optimise the use of the land and to minimise the impact of the line on the housing.  But the fact is that it was not known that the line would remain, and indeed the expectation on the part of the planning authority and the developers was that it would be removed.  It was this expectation that underlay the development brief, the parameter plans and the planning permission itself.

90.        The result of this is that we accept the basis on which Mr Chase has valued the land at the valuation date in the real world.  Its value would consist of its value for some form of recreational or paddock use in the immediate future, plus any hope value it might have that some profitable development might be allowed when the wayleave terminated in 15 years time.

91.        Mr Chase put the cost of laying out the pylon land to comply with condition 14(b) at £250,000 for laying it out and £25,000 per annum for maintenance.  There was no challenge to these figures.  Although Mr Chase said that there was as yet no agreement between AWE and Wimpey/Persimmon as to who was liable under the terms of the adjoining land contract for the cost of complying with condition 14(b), as we have noted above the section 106 undertaking imposed the duty for compliance on the claimant, and we do not see anything in the adjoining land contract that would make the buyers liable to AWE for the cost of this.  Paragraph 10 of the Third Schedule, which contains the buyer’s obligations, provides that the buyer is to maintain the pylon land in accordance with the terms of the section 106 agreement until the pylon land contract terminates.  That provision and the absence of any provision dealing with maintenance after termination of the pylon land contract suggests that the liability for maintenance after that date would remain with AWE, and the same would go for the cost of that and of laying out the land.  A purchaser of the pylon land would, we think, assume that the cost would fall on him.  It is surprising that the cost should not have been put on the buyer, but there was no suggestion by the compensating authority that the failure to do so was unreasonable, so that the cost was not compensatable.  We therefore accept Mr Chase’s evidence that the cost is to be set off against the amount that a buyer would attach to the hope of development in 15 years time. Although Mr Chase did not seek to attribute a specific capital figure to the ongoing liability to maintain the pylon land, it is plain that the combination of such cost and the cost of complying with condition 14(b) would be significantly in excess of £250,000.  

92.        Mr Chase expressed the view that the value of the pylon land for recreational or paddock use would not exceed £25,000, whereas Mr Smith thought that the correct figure was “close” to £100,000.  In the absence of any evidence of comparable transactions we find that the land was worth £60,000 for this purpose.  As far as hope value is concerned, in Mr Chase’s opinion this was in the region of £100,000 to £150,000.  Mr Smith did not express an opinion as to the appropriate level of hope value, but he did not challenge Mr Chase’s view that it would be relatively modest.  We conclude that the value of the pylon land in the real world, before allowing for the cost of complying with condition 14(b), was £210,000 (£60,000 paddock value plus £150,000 hope value).  Since this is below what we have found to be the cost of complying with condition 14(b), we accept Mr Chase’s opinion that the market value of the pylon land at the valuation date was £1.

Additional matter  

93.        After receipt of the parties’ written submissions following the hearing we raised two further matters with them.  One related to possible evidence of the measure of depreciation in the value of the land if Mr Smith’s basic approach was correct.  Since we have now concluded that his approach was not correct we do not need to deal with this in our decision.  The other matter was this.  We noted the agreement between the parties that at the valuation date the reference land could only be developed in conjunction with the adjoining land (and, of course, it could only be so developed if there was planning permission for this) and the claimant’s case that, since the adjoining landowners were not interested in coming to an arrangement for a conjoined development, the reference land was valueless.  The need to achieve such an arrangement arose from the fact that the adjoining land had been separated from the subject land under a contract entered into on the same day as the pylon land contract without any provision to ensure that the purchasers of the adjoining land co-operated in a conjoined development in the event of the line being retained.  It might be said, we suggested, that the difference between, on the one hand, the value of the land at the valuation date on the basis that no agreement could be expected with the adjoining landowners for a conjoined development and, on the other hand, the value that the land would have had if such an agreement could be assumed represented a self-induced loss, so that the requirements of reasonableness and perhaps causation were not met.

94.        In their further submissions on this matter the compensating authority said that the approach suggested was on all fours with the case that they had advanced.  They said that the compensation should fairly reflect the effect of the grant over the land to which the statutory wayleave relates, notwithstanding the ownership position, and their statement of case had said: “…depreciation is the depreciation in the market value of the relevant land.  Compensation is not for the implications of any contractual arrangements into which the Claimant had chosen to engage.”

95.        In his response on behalf of the claimant Mr Elvin said that the point raised was substantially a new issue on which further evidence could have been given had it been raised at the hearing and that, contrary to the acquiring authority’s submissions, it was not one that they had raised or relied on.  The issue of reasonableness therefore did not arise.  In any event the contractual arrangements for the sale of the pylon land and the adjoining land were a reasonable response to the wish to dispose of the land as soon as reasonably practicable and to accommodate the possibility that the line might remain in place.  The agreements resulted from a number of offers for the various parcels of land and it was clear that the purchasers were not interested in the pylon land as development land with the line in place.  The agreements also reflected the planning circumstances at the time, namely that the planning authority considered the line to be a constraint on development and wanted it to be relocated.  It was plainly reasonable in the circumstances for AWE to enter into contracts which disposed of the great majority of the land and to enable completion within a short period of time whilst providing for the disposal of the pylon land should the line be removed.  Whilst other contractual solutions might have been possible, this did not make unreasonable the solution which was in fact settled on in the light of the above considerations.  The compensating authority had not adduced evidence that reasonable businesses would not have acted as AWE did.  Nor had any suggestions been made as to what it would have been reasonable for AWE to do.

96.        We accept the claimant’s submissions on this.  It is of course the claimant’s case, as Mr Elvin pointed out in his further submissions, that the effect of the provision in the adjoining land contract for accommodating the roads within the pylon land was to leave within the pylon land with the line retained strips of 3.2m on either side of the 30m corridor which are too narrow to contain any housing. If there had been no such provision in the contract, or if it had been decided to make the pylon land wider than 54m, with rather less land being sold under the adjoining land contract, it may well be that the pylon land would not have been rendered valueless with the line retained.  We have nevertheless concluded that the claimant’s submissions are correct.  It formed no part of the compensating authority’s case as pleaded or argued that the claimant acted unreasonably in entering into the contracts for the sale of the pylon land and the adjoining land in the terms that it did, nor was there any evidence or argument as to what terms were unreasonable or what the terms should reasonably have been.  On the evidence of Mr Williams we are satisfied that the contracts were justifiable for commercial reasons as the means of achieving an early sale of the adjoining land and the sale of the pylon land in the hoped-for event of the line being removed.  On the evidence before us we conclude that the claim has been made out.

 

Determination

97.        We determine that the compensation payable is £5,829,476, being the difference between the contract price at the date of valuation and the value at the valuation date in the real world.  The parties are now invited to make submissions on costs, and a letter dealing with this accompanies this decision, which will become final when the question of costs has been determined. 

 

 

Dated 19 March 2013

George Bartlett QC

 

 

N J Rose FRICS

 

Addendum

98.            Before addressing the question of costs, on which we have now received submissions from the parties, there is one matter, raised by the acquiring authority in a letter dated 27 March 2013, that we must deal with.  In paragraph 91 we said that Mr Chase put the cost of laying out the pylon land to comply with condition 14(b) at £250,000 for laying it out and £25,000 per annum for maintenance (with no specific capital figure attributed to this annual amount) and that there was no challenge to these figures.  In fact, as the acquiring authority correctly point out, the parties had agreed figures in substitution for those advanced by Mr Chase, £225,000 for implementation and £10,000 for maintenance, providing, after capitalisation of the annual maintenance cost, an overall figure of £301,000.  In paragraph 92 we concluded that the value of the pylon land before allowing for the cost of complying with condition 14(b) was £210,000 and that, since this amount was less than the cost of compliance, the market value was a nominal £1.  This conclusion clearly holds good when the agreed figures are applied.

99.            On costs, it is agreed that costs should be ordered in favour of AWE.  The issue is whether such costs should be assessed on the indemnity basis or the standard basis.

100.         In support of its request for indemnity costs AWE relied on the following alleged features of NGET’s conduct: failure to make itself available to negotiate the claim, resulting in delay and forcing AWE to refer the matter to the Tribunal; refusing to attend a mediation once the reference had been made; intimating in its skeleton argument and other documents that the pylon land contract was some kind of sham or artificial device, despite the fact that such allegation had not been pleaded or supported by any evidence; failing to cooperate in agreeing an early date for the final hearing; failing to implement the settlement agreed in relation to the Pulford Corner minerals claim.  AWE submitted that, through such conduct, NGET had acted so as to exploit the inequality of arms between itself (a very large PLC) and AWE (a small, family owned business) and the absence of any power for the Tribunal to award interest on the compensation awarded.

101.         In response NGET submitted that there were no compelling and exceptional reasons why costs should be awarded on the indemnity basis.  It denied that there was any inequality of arms and submitted that the absence of a power to award interest was no reason to depart from the normal costs basis.  NGET rejected each of AWE’s criticisms of its conduct.  It submitted that it had co-operated fully and engaged with the claim and that discussions between experts were ongoing when the reference was made; the discussions at a without prejudice meeting held on 7 October 2011 had made it clear that pursuing mediation at the time and based on the claim as it then stood did not carry a realistic prospect of securing a settlement but, following AWE’s abandonment of a significant part of its claim in January 2012, NGET had itself suggested further consideration of mediation on a without prejudice basis;  NGET had never questioned that the pylon land contract was a binding contract and no suggestion of a sham had been made in its skeleton argument or in its closing submissions; at the case management hearing on 27 January 2012 the Tribunal had agreed with NGET’s view that it was not appropriate to fix a hearing date at the CMH and, further to the Tribunal’s order dated 2 February 2012, NGET had responded promptly to the Tribunal’s request for availability, resulting in a hearing date being set 22 days after the date of the Order; the Pulford Corner minerals claim was not relevant to the issue of costs in the present reference and, in any event, the suggestion that NGET had caused delay in relation to that claim was unfounded.

102.         Before considering the various allegations of misconduct made against NGET, we deal with the suggestion that NGET took advantage of its position as a very large PLC against a small family owned business.  We do not accept that characterisation of the claimant company.  As NGET pointed out, AWE is a private limited company with a turnover in 2011 of just under £10m and is the wholly owned subsidiary of Arnold White Group Ltd, which reported in its final accounts to 30 April 2012 to have expended some £6.6m that year and the previous year paid out equity dividends of some £1.8m.  Against that background we consider that neither the description of AWE as a small family owned business, nor the suggestion that there was a significant inequality of arms was justified.

103.         Given the size and complexity of the claim, there is in our judgment no evidence to support the suggestion that NGET delayed negotiations unreasonably.  As far as mediation is concerned, the material before us does not suggest that NGET rejected mediation.  On the other hand it does not contradict AWE’s assertion that NGET consistently refused to be represented at a mediation by a person with authority to enter into a binding settlement.  What we have to address, however, is the question whether an award of indemnity costs is justified.  Since there was no rejection of mediation on the part of NGET – indeed it appears that it was positively disposed to it, subject to the point about binding authority – we do not think that an award of indemnity costs would be justified on the basis of NGET’s conduct.  Moreover it does not appear to us, given the fundamental difference between the parties on the question whether the contract could form the basis of the claim, that there was a likelihood that mediation would have been successful, and in the absence of such likelihood we do not consider that the exceptional circumstances required to justify an award of costs on the indemnity, rather than the standard, basis exist.

104.         We accept NGET’s submission that, although it suggested with justification that AWE had sought to retain ownership of the pylon land to entitle it to claim compensation in the event of the line remaining, and although there was no evidence of any similar contractual arrangement elsewhere, it never suggested that the contract itself was a sham.  We are also satisfied that NGET did not unreasonably withhold its cooperation in fixing a hearing date and that the circumstances surrounding the settlement of the Pulford Corner minerals claim are irrelevant to the costs of the present reference.  Moreover, given our conclusion that NGET did not unreasonably delay the initial negotiations or the fixing of a hearing date, the question of its seeking to take advantage of the absence of interest on the compensation moneys does not arise.

105.         There being no good reason for the award of indemnity costs, we order that NGET must pay AWE’s costs, to be assessed in default of agreement by the registrar of the Lands Chamber on the standard basis.

Dated 16 April 2013

George Bartlett QC

 

N J Rose FRICS