United Kingdom Upper Tribunal (Lands Chamber)

UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2015] UKUT 452 (LC)

UTLC Case Number: ACQ/49&50/2013

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

 Compensation - compulsory purchase of rights - sterilisation of development value - valuation - rights as “exercised” - s.7 Compulsory Purchase Act 1965 as modified by Gas Act 1986, Schedule 3 para 7 - compensation £Nil

 

 

 

IN THE MATTER OF A NOTICE OF REFERENCE

 

 

 

BETWEEN ELITESTONE LIMITED Claimant

 

 

and

 

 

NATIONAL GRID GAS PLC Acquiring Authority

 

 

 

Re: Land at Sidings Fach, Pentre Road, and Bolgoed Road,

Pontarddulais, Swansea

 

Before: P R Francis FRICS

 

Sitting at: Port Talbot Justice Centre, Harbourside Road,

Port Talbot SA13 1SB

on

21-24 and 28-30 April 2015

(Submissions 15 June 2015)

Miss Philippa Ashworth, instructed by T G Jones & Associates, solicitors of Swansea, for the claimant

Mr Richard Honey, instructed by Eversheds LLP, solicitors of Cambridge, for the acquiring authority   

 

 




 

The following cases are referred to in this decision:

Director of Buildings and Lands v Shun Fung [1995] 2 AC 111

Brickkiln Waste Ltd v Northern Ireland Electricity (2014) R/41/2009 (NI)

Wexham Maelor BC v MacDougall [1993] 2 EGLR 23

Harris v Welsh Development Agency [2000] RVR 49

Thomas Newall v Lancaster City Council [2013] EWCA Civ 802

Bridgestart Properties v London Underground [2004] EWCA Civ 793

Cowper Essex v Acton Local Board (1889) 14 App Cas 153

Inland Revenue Commissioners v Clay [1914] 3 KB 466

Ryde International v London Underground [2004] RVR 60


DECISION

Introduction

1.             This is a decision to determine the amount of compensation (if any) payable to Elitestone Limited (“the claimant”) for the compulsory acquisition of rights to lay, use, maintain, repair and replace a high pressure natural gas pipeline under land at Sidings Fach, Pentre Road, Pontarddulais, Swansea (“the Rugby Club Land”) and at Bolgoed Road, Pontarddulais, Swansea (“the Elitestone Land”) (together referred to as “the reference land”) by National Grid Gas PLC (“NGG”) under the National Grid Gas PLC (Milford Haven to Aberdulais Pipeline) (Pontarddulais) Compulsory Purchase Orders 2006 (Nos 1 and 2) (“the CPOs”).

2.             Miss Philippa Ashworth of counsel appeared for the claimant and called Mr Timothy Gilbert Jones of T G Jones & Associates, solicitors, who was also, at the valuation date, the sole director of the claimant and who gave evidence of fact.  Expert evidence was called from Mr John Eirian Davies MRICS (minerals valuation), Ms Maxine Lewis Pg Dip TP (planning) and Mr Robert William Harlow BSc MRICS (valuation).  

3.             Mr Richard Honey of counsel appeared for NGG and called Mr Paul Swinbourne, a former Senior Land Officer at NGG, Mr Ronald Sidney Anker, a Land Agent and Project Manager with NGG and Mr David John McCollum, a Safety Engineering Manager with NGG who all gave evidence of fact and opinion.  Expert evidence was called from Mr David Neil Hughes BSc MRICS MIQ (minerals), Mr Peter James Frampton BSc (Hons) TP MRICS MRTPI (planning) and Mr Richard Brogden (valuation).

4.             The claimant seeks compensation on the basis that it has suffered:

(a) Loss due to disturbance and damage during the occupation and use by NGG of the land prior to, during and after the pipeline construction process (£143,454.93).

(b) Loss due to being prevented from extracting/working the surface and below ground mineral deposits on the Elitestone and Rugby Club land (£1,813,912.50).

(c) Diminution, due to sterilisation, in the value of the Elitestone Land (£2,470,000).

(d) Diminution in value of the restrictive covenant Elitestone has over the Rugby Club land (£96,000)

Total: £4,523,367.40

5.             NGG’s case is that the claimant has suffered no loss and that compensation should be determined at nil, or alternatively in the sum of £17,000, 90% (£15,300) of which was the subject of an advance payment, purportedly paid under section 52 of the Land Compensation Act 1961 on 22 October 2007.

Factual Background

6.             The parties’ expert witnesses helpfully produced agreed joint statements of fact and issues to be determined in relation to their respective disciplines of minerals, planning and valuation. From these, the claimant’s statement of case and NGG’s statement of case in reply, together with the evidence and my inspection of the reference land on 20 April 2015, I find the facts as set out below.  I am grateful to the claimant for arranging for the provision of a full transcript of the proceedings, as this has provided an extremely helpful addition to my own notes taken at the hearing. 

7.             The reference land comprises a total of 13.43 ha (33.2 acres) of currently undeveloped and disused land lying to the south of Bolgoed Road on the southern outskirts of Pontarddulais, a small South Wales town approximately 7 miles north-west of Swansea.  The land was acquired (as part of a larger area) by the claimant on 30 November 1989 as a long term investment with a view to extracting both surface and below-ground coal deposits and thence, in time, redeveloping the reference land principally for residential purposes (other parts of the originally acquired land having subsequently been sold on for residential development).  The land, it was agreed, was ‘brownfield’ land (as defined by Planning Policy Wales) (“PPW”) having been previously developed and occupied as railway sidings and coal storage areas.  When acquired, all remnants of the railway sidings including railway lines, sleepers and pigs were sold as scrap, leaving a layer (agreed at 351,000 tonnes) of colliery spoil comprising ‘low volatile dry steam’ coal duff/lump coal which had previously been graded to form the base for the railway lines. Some of these deposits (the percentages being in dispute) could be extracted (subject to planning permission being obtained) and marketed as semi-anthracite coal.  The land is underlain by solid strata belonging to the ‘Gelli Group of Coals’ comprising seven or eight individual seams and extraction of any coal in these seams (again subject to planning) would be by means of opencast mining and, as with the surface deposits, the thickness and quantity of the seams was not agreed.

8.             On 2 October 1992, in accordance with an agreement that had been reached with British Coal as part of the reference land purchase, the claimant transferred 2.29 ha (5.67 acres) (title No. WA655138) of the land (referred to hereafter as “the Rugby Club Land”) to the Trustees of Pontarddulais Rugby Football Club, where the intention was to redevelop that area for rugby pitches and a clubhouse, access to which would be off Pentre Road.  A restrictive covenant was included in the conveyance made between the claimant and Noel Gwyn Davies & others, and appears in the Land Charges Register at entry 5(ii):

“Not to use the property hereby transferred for any purpose other than for the provision of a rugby ground and rugby football clubhouse and all other uses ancillary thereto or for any other sporting recreation purposes.”

Although planning permission was obtained in 1996 for a clubhouse and rugby pitches the land has not, to date, been developed. 

9.             The remaining 11.14 ha (27.53 acres) (title No. WA548061) and referred to as “the Elitestone Land” has its principal (and only currently used or usable) access to the north from Birchrock Road, off Bolgoed Road.  This land also currently remains undeveloped and is designated as open countryside (apart from a small linear section of the land towards the north which is contiguous with the settlement boundary as defined in the now adopted UDP), although some of the surface deposits have been removed and sold.  It was agreed that rights to two further accesses onto the Elitestone Land off Park Terrace and Alt-y-Graban Road have not been established. 

10.         The reference land in total was agreed to be shaped roughly in the form of a golf club, with the ‘shaft’ and ‘neck’ being a narrow section lying between the principal point of access to the north and the northernmost part of the Rugby Club Land, with the ‘club head’ being the southernmost section comprising most of the Rugby Club Land and the rest of the Elitestone Land.  The base of the club head to the southernmost extremity of the Elitestone Land is formed by an operational railway line. At the valuation date, the narrow section to the north had, to the west, a residential development being undertaken by Persimmon Homes, and to the east, a site for which planning permission had been obtained on appeal in 2005 for residential development by Redrow Homes - that site having been sold to Redrow by the claimant, who retained a 300mm “necklace” or ransom strip around all three sides of the land sold other than that which directly abutted the Elitestone land in connection with any potential future development of the reference land. To the south, the narrow section is traversed by a pre-existing Wales and West Utilities 300mm gas pipeline which was laid in 1965.

11.         At the valuation date, the adopted Development Plan comprised the West Glamorgan Structure Plan (adopted February 1996) and the Southern Lliw Valley Local Plan (adopted June 1986).  It was agreed that weight would have been given to the emerging Unitary Development Plan for the period 2008 to 2016, which was not adopted until November 2008, together with the provisions of Planning Policy Wales, in formulating planning advice as to prospects of the future development potential of the reference land.

12.         In August 2004, the claimant became aware that Transco (NGG’s predecessor) was planning to construct in or around 2006/07 a 317 km (196 mile) long high pressure gas pipeline from Milford Haven to Aberdulais and that would potentially transect both the Rugby Club Land and the Elitestone Land in a roughly west-east direction through the widest part of the land towards the south.  Due to concerns that the laying of the pipe would effectively sever what would be a significant part of the land and potentially sterilise the whole of the reference land from development, the claimant objected to the planned route.  Subsequently, the two relevant Compulsory Purchase Orders were made on 8 March 2006 to secure the rights over a 24.4 metre wide strip extending to about 356 metres across the Elitestone Land and 96 metres across the Rugby Club Land for the purposes of constructing and thereafter maintaining and, if required, replacing the pipeline.  A Public Inquiry, at which the claimant was an objector, commenced on 14 November 2006 and was held over four days. The Inspector’s report, recommending that the CPOs should be confirmed, was issued on 24 January 2007.  These were subsequently confirmed by the Secretary of State on 13 February 2007 and notices were served on the claimant on 22 February 2007.  Notice to Treat and Notice of Entry were served on the claimant on 24 April 2007, and the rights vested in NGG on 8 May 2007, which is agreed to be the valuation date for the purpose of these references.

13.         The following paragraphs within the CPOs (identical in both) are relevant for the purposes of this reference:

“2(1)(a)  rights to construct lay place cathodically protect and use below ground at a depth (measured from the original surface of the ground to the top of the gas pipe hereinafter mentioned) of not less than 1.2 metres below the level of the surface of the ground and at a depth (measured from the level of the original surface of the ground) of not more than 50 metres a gas pipe (forming part of the said gas pipeline) of an external diameter not exceeding 1,330mm together with where appropriate all necessary ancillary equipment including markers land drains manholes valves and governors (in this order all together referred to as “the said works”) in through under over and upon the strip of land (in this order referred to as “the pink land”) described in...;and

(b) rights to connect inspect maintain support land drain repair alter renew sleeve disconnect remove and replace the said works; and

(c) rights of access over and upon the pink land and to carry out works in through under over and upon the pink land in each case for the purpose of access to the said works and the order land or any part or parts thereof and for the purposes of constructing laying placing cathodically protecting using connecting inspecting maintaining supporting repairing land draining altering renewing sleeving disconnecting removing and replacing the said works and any works contiguous therewith and any other part of the said gas pipeline and any other works similar in nature to the said works and ancillary land drainage not constructed lain or placed in the pink land with or without all necessary workmen vehicles machinery and equipment at all times and (for the avoidance of doubt)in an emergency at any time; and

2.2 rights to occupy use and carry out works in through under over and upon the same for a term not exceeding three years from the date of entry upon the order land and for the purposes of and incidental to the construction laying placing and cathodic protection of the said works and any works contiguous therewith and any other part of the said gas pipeline or any works similar in nature to the said works not constructed lain or placed in the pink land the land also respectively described in Table 1 and (if any) Table 2 of the said Schedule hereto and respectively... (... and referred to as “the green land”)” 

14.         The “pink land” referred to in 2(1)(a) and (b) above has an aggregate area of 2,381 sq m and the “green land” an aggregate area of 2,312 sq m over the Rugby Club Land (CPO No.1).  The figures for the pink land and green land over the Elitestone Land (CPO No.2) are 8,856 sq m and 7,340 sq m respectively. 

15.         A thick walled, 1,220mm diameter high pressure gas pipe was subsequently installed by means of Horizontal Directional Drilling (“HDD”) beneath the land at a depth of between 20m and 35m, those works being undertaken between June and October 2007.  The pipe became operational in February 2008.

16.         It was agreed that a prospective purchaser of the land at the valuation date would have been a speculator or a consortium of speculators, and that the appropriate method of valuation was the “before and after” approach. The valuers agreed that there was no need to make separate estimates of depreciation in respect of the land over which the rights were acquired, and the remainder of the land. 

Statutory Provisions

17.         Section 7 of the Compulsory Purchase Act 1965 as modified by paragraph 7 of Schedule 3 to the Gas Act 1986 provides:

“In assessing the compensation to be paid by the acquiring authority under this Act regard shall be had not only to the extent (if any) to which the value of the land over which the right is to be acquired is depreciated by the acquisition of the right but also to the damage (if any) to be sustained by the owner of the land by reason of its severance from other land of his, or injuriously affecting that other land by the exercise of the powers conferred by this or the special Act.”

Issues

18.         The issues for determination by the Tribunal can effectively be summarised, based upon the heads of claim, as:

(a)  Is the claimant entitled to claim, before this Tribunal, “disturbance and damages” for the occupation and use of the land by NGG during prospecting and installation of the pipeline (Gas Act 1986, Schedule 3, para 7) and/or the Land Compensation Act 1961 section 2, rule (6)).  If so, what is the compensation payable?  

(b & c)  Has the claimant suffered any damage by way of injurious affection caused by the exercise of the powers under the CPOs.  If so, to what compensation (if any) is it entitled in respect of the alleged sterilisation of the land (i) having prevented the extraction of coal from the surface and any below ground deposits and (ii) having removed any long-term residential development potential?

(d) Has there been any diminution in value to the Restrictive Covenant that the claimant benefits from over the Rugby Club Land? 

19.         I proceed firstly by summarising the evidence of fact from Mr Jones. In the light of the way the claim was put, and how matters developed during the course of the hearing, I then turn to the specific issues set out above on an item by item basis. After dealing shortly with issue (a), I consider (b) & (c) together because the claims under both of these heads are each equally reliant upon evidence of fact and consideration of the arguments of counsel for each side on the question of legal principle under section 7.  Then, in the light of my findings on that evidence, I deal very briefly with issue (d).

The claimant’s evidence

20.         Mr Jones is a practising (qualified 1976/77) solicitor based in Swansea, and has experience in planning matters including dealing with planning appeals and public inquiries, having been involved locally with the Second Tawe Bridge Crossing in Swansea, and with the Llanelli Town Centre public inquiry amongst others.  He also acts for property developers.  At the valuation date he was the sole director of Elitestone, but since then his daughter has also been appointed.  He explained that he and a friend originally established Elitestone Ltd to acquire random pieces of land for the purposes of exploiting any potential that the sites may have.  He produced a comprehensive witness statement and appendices (which included his statement to the CPO Inquiry in respect of the reference land) and a rebuttal statement.

21.         It was explained that a tranche of land (which included part of the reference land) became available in the late 1980s when offered for sale by the then British Coal.  Although another prospective purchaser had made a bid, Elitestone offered a higher price for the major part of the reference land that was then in the ownership of British Coal and some adjacent land owned by them, and secured it in 1989.  As part of a separate transaction, the Company acquired the colliery spoil and coal duff that had been deposited on the land “so that all material which was not in the ‘bedrock’ was acquired on all of the land.”  Any coal within the bedrock was retained by British Coal. The remaining area of the reference land (an area at the south-east corner) was acquired from the Hawkesworth Estate, but that also did not include the below ground coal deposits which were retained by the Estate. 

22.         Elitestone had also planned to exploit the residential development potential on what was known as the ‘Brickworks Site,’ but that area (adjoining the north-eastern narrow section of the reference land within the Elitestone Land part of it) could not be acquired from the Jeffries family who owned it, and it was eventually sold to Persimmon Homes who have developed it out with 144 houses - leaving tail ends of estate roads that could facilitate additional access onto the Elitestone land.  

23.         Redrow Homes also acquired land to the east of the reference land (opposite the Persimmon development) and Elitestone provided a small strip to facilitate their access. In return, Redrow had to provide an access for the Elitestone land, and that was constructed.  Redrow subsequently carried out residential development of 94 units, and are have planning consent to develop further land to the east, although, at the valuation date, the owners of that land were unwilling to dispose of it.

24.         The intention for the land that Elitestone did succeed in acquiring was, Mr Jones explained, to firstly exploit the minerals and then to look to the longer term opportunities for residential development on the whole of the reference land, but the gas pipeline has, it was alleged, thwarted any such opportunities.  This was because of the possibility, as set out in the CPO, that the pipeline could be laid at a depth of only 1.2 metres and, as the expert evidence demonstrated, this would sterilise the potential over all but the top of the narrow north-eastern section of the land.  It was not until after the CPO Inquiry that NGG ‘obliquely’ indicated that they had decided not to cut and fill; it was only by letter of 18 June 2007, some 5 months after the publication of the CPO Inquiry report and over a month after the valuation date that NGG confirmed this, saying:

“I am writing to let you know that following further consideration, National Grid intends to construct the pipeline using a non open-cut technique.  Some of the consequences of this are that crossing points will not be required to have access across the pipeline and also that there will not be mass excavation of surface material.” 

25.         Mr Jones’ said in his witness statement that that confirmation that an open cut technique was not to be used “unfortunately missed my gaze when I was considering the letter dealing with other matters.”  In cross examination, he accepted that the paragraph made it clear to anyone reading it that with no requirement for reinforced crossing points and no mass excavation of material meant that “they were going to use a tunnel of some sort or a drilling exercise or something” but it still did not make any reference to depth.   He went on to say that if NGG had said initially that (a) they were not going to lay the pipe by cutting and filling the surface of the land, (b) were planning to horizontally drill at depth, and (c) had removed the reference to the 1.2 metre minimum, it was his view that the CPO Inquiry could have been avoided.  However, despite extensive enquiries, correspondence and phone calls, he had not been told prior to receipt of the above confirmatory letter.  The wording of the CPO was such that if there was a problem with the pipe in the future, it could be re-laid at the minimum depth of 1.2 metres.  Even if that were not the case, the sterilisation still applies to the 24.4 metre wide easement strip as there are restrictions over what can be done with it, and even if despite the development exclusion zones either side of the strip (to which the experts referred), there could be development on the rest of the land, there would be massive market resistance on health and safety grounds due to the existence of a volatile pipe. 

26.         It was a condition of the purchase of the reference land from British Coal that 5.67 acres was to be sold to the Rugby Club for £300, but Elitestone retained a restrictive covenant which meant that if the Club ever wanted to develop the land for, say, residential purposes perhaps in conjunction with wider development of the Elitestone land, then it would have to pay compensation for a modification or discharge of the restriction. 

27.         As to the extraction of coal deposits, the price paid for the land had been recouped by sporadic, intermittent but nonetheless continuous extraction and sale of coal deposits over the years.  Although he had some but by no means all remaining records, Mr Jones thought about £100,000 worth of coal had been sold.  The initial extraction was from both the Elitestone and the Rugby Club areas (Elitestone having reserved the right to extract the colliery spoil and duff for a limited period).

28.         In a lengthy and detailed rebuttal statement, Mr Jones expressed particular concerns as to the accuracy and veracity of Mr McCollum’s evidence of fact (much of which he thought bordered upon opinion).  In essence, the references to the involvement of the Health and Safety Executive (“HSE”) in respect of the safety requirements and additional controls required around certain pipelines (this being one such), exclusion zones and bars on development within specified distances were unclear, and were not supported by relevant documentation which NGG should hold.  The difficulty that the claimant had had obtaining information from the HSE, the time taken to elicit responses and the fact that information sought from the local planning authority (who should obviously hold it) was withheld because NGG will not allow it to be disclosed “in the interests of national security”, demonstrated that if a speculative purchaser had attempted to undertake the same exercise at the valuation date, he would have “given up and gone away to buy something else.”   The number of hoops that the interested party would have to jump through (contacting HSE through NGG, and the local planning authority) and the fact that much of the required information was clearly not in the public domain was a serious impediment to any evaluation of future development potential and subsequently any speculative sale.  Despite Elitestone’s own enquiries over a period of 4 years between 2010 and 2014, it appeared that the local planning authority still did not have the information that a purchaser would require.  An example of the difficulties that were encountered was a response Elitestone received on 10 December 2014 from the City and County of Swansea to a formal request made on 16 July 2014 about the pipeline which stated:

“...however, we are withholding this information since we consider that the exception under Regulation 12(5)(a) of the EIR applies to it.  This exception applies where disclosures could adversely affect Defence/National Security/Public safety.  Giving out the additional information could increase the risk of or assist those who would seek to damage the pipeline or carry out a terrorist attack...”

Mr Jones said that if the pipeline was dangerous or constituted a risk, that information should be available and it most certainly would affect the views of a potential purchaser as to the prospective development value. There were also concerns about some of Mr McCollum’s exhibits, and their provenance, and there was a distinct lack of records which NGG should have held.  

29.         It was accepted by Mr Jones that, as regards the Wales and West Utilities (“WWU”) pipeline that traverses the northern section of the Elitestone land, the easement contained no reference to the depth at which the 12” gas main could be installed or re-laid, but there were restrictions as to what could and could not be done over or on the land which were not dissimilar to those which applied in respect of the NGG pipeline.

30.         Regarding the grading works that Mr Jones intended to carry out on the land, including over the WWU pipe, he had submitted a notice to WWU on 8 October 2014.  In reply, they enclosed a print out of their “General conditions to be observed for the protection of apparatus and the prevention of disruption to gas supplies” which set out what could be done without consultation and what required specific authority before any works commenced. There were restrictions over building on the land and as to the proximity distances for buildings, paragraph 13 stating:

“There are minimum proximity distances for buildings from WWU mains depending on both the operating pressure and the material of the main.  Advice should be sought from WWU prior to building works taking place to confirm these distances.  For High Pressure pipelines you must seek further guidance from the HSE and Local Authority Planning team regarding their PAHDI distances regarding building proximities as these may be in addition to WWU proximity distances for a pipeline.” 

There were also restrictions in connection with excavating below 300mm, reducing the cover over the pipe, laying of apparatus over and along the pipe irrespective of clearance and moving heavy equipment over the pipe until certain conditions had been complied with.

31.   There was, it was acknowledged, the right for the landowner to call upon WWU to divert the pipe if that became necessary to, for instance, facilitate development over the land, but it was accepted by Mr Jones that the pipe would still need to cross the Elitestone land at some point within the ‘neck’ of the land.  WWU also included with their letter of 16 October 2014 a specification for “safe working in the vicinity of pipelines and associated installations operating above 2 barg.”  This was a June 2013 version of the document that had originally been produced in 2001 and subsequently regularly revised.  Mr Jones said that WWU were happy for him to go ahead and scrape the soil over the pipe and he did not disagree with the suggestion that the gas authority would be flexible in what they allow to go over or through the land and that they would be prepared to negotiate upon matters such as, for instance, the construction of a roadway over the pipe.

32.         As to the second document WWU provided at the same time, Mr Jones accepted that apart from the names of the companies, this was a standard industry wide document and was to all intents and purposes the same as that used by NGG, as shown in Mr McCollum’s exhibits. 

33.         Having confirmed to Mr Honey in cross-examination that it was solely the wording of the CPO that was the basis of the claimant’s case (together with the HSE requirements that would apply) for the purposes of assessing compensation, Mr Jones accepted that the CPO did not actually say that there could be no building on the land or that the level of the surface could not be altered.  However, he insisted that because the CPO gave NGG the right to replace the pipe at a minimum of 1.2 metres below the surface even if it had originally been laid as a thick walled pipe at 20 to 35 metres in depth, there would always be a risk that NGG or their successors could replace it at 1.2 metres if it ever needed to.  Whilst he accepted that there was no evidence to suggest that that is what NGG would be likely to actually do, the fact remained that they could do.  In a lengthy exchange in respect of the precise meaning of the word “replace” and whether or not the CPO permitted the replacement of the pipe in another location (because the existing heavy walled, concrete encased pipe could not be removed and the CPO did not permit the laying of a second pipe), Mr Jones insisted that because of the wide remit permitted by the CPO wording, NGG would be able to lay a replacement pipe anywhere within the defined area.  He did not accept Mr McCollum’s suggestion that NGG would, in reality, install a replacement pipe below the existing one if it became necessary to replace it anywhere other than precisely where the existing  pipe is now located.  It was, Mr Jones said, simply common sense to assume that a replacement pipe could go between 1.2 metres and 50 metres below the surface anywhere within the permitted or defined area.

34.         As to Mr Jones’ concern that the pipe that had been installed was volatile and posed a health and safety risk, it was accepted that there was nothing in the evidence to suggest that that was the case.  He acknowledged that NGG had an excellent safety record, but his concerns had stemmed from articles that he had read.  He also acknowledged that, in terms of what the prospective purchaser would have been able to elicit on enquiry at the valuation date, it had been confirmed at the CPO Inquiry that NGG’s intention was to lay a thick-walled pipe, that the HSE guidance applicable at the valuation date advised prospective purchasers to contact the operator and that the PADHI process does not apply to pipes with these additional protection measures.  Mr Jones went on to accept that, as Dr Harper of the HSE had confirmed in response to his retrospective inquiry in 2013 as to what would the advice would have been with the fact it was to be a thick walled pipe being known at the valuation date,  the applicable HSE requirements at the time would not have been the 360 metres to each side of the pipe as argued by Miss Lewis (under the PADHI requirements based upon a thin walled pipe), but 5 metres if installed at 1.2 metres, or 4 metres each side of the pipe if installed at 2.5 metres depth.  There would, he therefore acknowledged, be no HSE restrictions on what could be built beyond that 5 metre exclusion zone each side of the middle zone. The PADHI requirements, he also accepted, applied only to the pipeline as a whole, and did not take account of local variations to the specification. The only restrictions on building, say houses, would therefore be within the 24.4 metre easement strip.

35.         Mr Jones said that he did not suggest that Mr McCollum’s evidence was factually wrong rather than that he had not dealt with the situation as it could have been under the CPO, i.e. potential replacement with a thin walled pipe laid at a depth of 1.2 metres.

36.         Regarding the coal deposits beneath the reference land (as opposed to the surface spoil that had been deposited to construct the railway and sidings), Mr Jones accepted that they were reserved to British Coal (now the Coal Authority) and, therefore, if he intended to mine those deposits, Elitestone would have to obtain the Authority’s agreement and pay for it. Similarly, if the Company wished to exploit the deposits below the currently undeveloped Rugby Club land, not only would a similar arrangement need to be made with the Coal Authority, but as the restrictive covenant only referred to the use of the land, a separate agreement would have to be entered into with the Rugby Club.  As to the land acquired from the Hawkesworth Estate, it was also accepted that payment would have to be made to extract coal at depth from that area.  Regarding the surface spoil and coal duff, Mr Jones confirmed that when contractors came to take soil samples to establish the amounts, there appeared to be no concerns about Elitestone or its appointed contractor taking spoil off the easement strip - which NGG had just confirmed it was possible to do.

37.         On the subject of the alleged additional accesses to the land, Mr Jones accepted that neither the path off Pentre Road to the west of the “neck” of the land, nor the southern access off Alt-Y-Graban Road were in Elitestone’s ownership, although he thought there may be prescriptive rights over the latter, and that neither of them would be, even if the rights could be established, suitable or permissible to service a residential development.  He also acknowledged that the only disturbance to the land during the construction of the pipeline was the erection of the fence to each side of the 24.4 metre easement strip, and the existence of a mud line that took the liquid and semi-liquid spoil from the deep drilling works.  Although he had complained that he had not had use of the land forming the easement strip during the course of the pipeline installation works or for a long time afterwards because Elitestone had not formally been told until much later that they could re-enter the land (the fence having been left in situ), it was accepted that no potential income had been lost because none of the land was being worked during that time.  Also, it was accepted that no material damage was done to the land.

Issue (a) disturbance/damages for occupational use before, during and after construction

38.         Mr Davies is a Chartered Surveyor specialising in agricultural, minerals and easement valuation matters and is a director of Bob Jones Prytherch & Co Ltd, Llandeilo.  He said that he had acted for, and successfully settled claims for easements and damage against NGG in respect of this pipeline on behalf of 84 clients, one of whom also being subject to the threat of a Compulsory Purchase Order and through whose land the pipeline was laid at depth by the HDD method.  Payments were made by NGG in that case for early entry, boreholes and associated damage, easement, agricultural damage/disturbance and loss of quiet enjoyment. 

39.         Mr Davies provided expert evidence in respect of two aspects of the claims in this reference.  Firstly, allegedly pursuant to the Gas Act 1986, s.7 and Schedule 3, he had calculated losses occasioned by Elitestone Ltd in accordance with NGG’s occupation and use of the reference land prior to, during and after the pipeline construction process and I consider this issue here.  The second aspect relating to alleged losses occasioned by sterilisation of the land preventing the extraction of surface and below ground deposits is considered under (b) and (c) below.

40.         The detailed calculation (included as Appendix 1 to Mr Davies’ first report) was set out in three parts thus:

“Appendix 1 - Claim for damages

THE CLAIM

Part 1 - Prior to pipe installation

1.1 Early Entry

Entry allowed to site for prospecting and site investigation

Works following Notice to Treat

358m x £6.46/m £ 2,312.68

 

1.1 Prospecting payments

1.1.1 Hedge removal £  50.00

 

1.1.2 20 Boreholes @ £250 £5,000

1.1.3 12 Trial Pits x £250 £3,000

£ 8,000.00

 

1.2 Borehole Damage Claim

1.2.1  Use of site for storage of machinery and implements

Site used for storage of machinery for prospecting subject and adjoining holdings

Storage of machinery from 12/5/2005 to 15/5/2005, 17/11/2005 - 25/11/2005 and August 2006 -

23 days at £100/day £ 2,300.00

 

1.2.2 Borehole Claim - Restoration

Temporary fence off damaged areas £ 800.00

Re-grading of coal material including material owned over RFC land -

Hi-Mac machine for regrading of coal material to tracking areas

to fill ruts and damaged areas £2,000.00

Importation of scalping to damaged access track £2,000.00

Surface treatment of damaged areas to avoid surface

Erosion of coal material £1,200.00

Restoration £6,000.00

 

Disturbance

Disturbance to property during works

Consultation with engineers during works

Advice to contractors, engineers and drivers on access

Various inspections of works

Disturbance as a result of borehole works £1,500.00

Total Borehole Claim £  7,500.00

 

Part 2 - Installation of Pipeline Claim

 

2.1 Additional Working Areas

Extra working areas as detailed in Notice to Treat amounting to

5,661 sq m and 1,679 sq m x £1/sq m or part thereof

7,340 sq m x £1/ sq m x 2 years £14,680.00

 

2.2  Pipeline installed by Directional Drilling

Damage occurred as a result of installation of mud line during works and extensive access to land by surveillance personnel, fencing contractors, tree cutting personnel and general workmen during operations.  Damage claim includes elements of restoration over coal material owned over RFC land

 

Restoration - Hedgebank

Maintain for 7 years to first ley:-

Bry Plot - South - 50m £  400.00

 

Cultivation

Restore areas affected by mud line and general access works. 

Surface treatment of damaged areas to avoid surface erosion of coal material

£2,000.00

 

Removal of Debris

Removal of fencing following works

385 linear metres x £1.85/m £ 712.25

Various wires, debris and spoil left on site £ 500.00

Total restoration £3,612.25

 

Disturbance

Disturbance to general use of holding.

Effects of mud line and associated works on land

Disturbance to normal use

Extensive representations to BG representatives, agents

etc. after works especially following entry without

consultation to install mud line for drilling

works and operations. 

Various inspections following works

Disturbance £5,000.00

Damages during installation of pipeline £ 8,612.25

 

Part 3

3.1- Claim for Damages as a result of Professional Disturbance to Client

 

Time taken in dealing with all legal matters appertaining to the said entry.

Costs to be assessed if not agreed and a suitable order made or to be quantified

before determination

Estimate for claim for Professional Disturbance £100,000.00

 

Summary

Part 1 £  20,162.68

Part 2 £  23,292.25

Part 3 £100,000.00

 

TOTAL CLAIM FOR DAMAGES £143,454.93

 

 

 

41.         Mr Davies accepted that other than taking photographs of the reference land during the time that the easement strip was fenced off and there was a mud line lying over it, he had no knowledge of the land other than what the claimant and Mr Jones’ former surveyor had told him.  He had no personal knowledge of what, if any, damage had been caused and was not able to confirm that, as he had suggested in the claim, an area had been cordoned off for storage of equipment.  He provided no background to demonstrate how the individual figures making up the claim had been assessed, but said that he took them from the documentation that had been provided to him in respect of the Ryan Mining operations and other relevant matters.  Mr Davies also acknowledged that the payments that had been made to the owner of Cwm Farm, Ammanford, which was a property subject to the threat of a CPO and where the circumstances were similar to those applicable in this case, were made by agreement, the owner having withdrawn its objection. 

42.         For the claimant, Miss Ashworth said that it was accepted by NGG that the build up of the figures within part 1 of Mr Davies’ Schedule was based upon NGG standard tariff, and that there had been entry onto the land, an area was fenced off (and remained so for some three years after the installation of the pipeline was completed), that boreholes had been dug and that machinery had been taken onto and possibly stored on parts of the land.  The standard figures were, she said, demonstrative of the value of the disturbance suffered by the claimant.  It had not been disputed that the claimant had effectively been barred from using the fenced off area throughout the period, and with no crossing points having been installed (or offered), the claimant could not have accessed the area to the south from the main entrance off Bolgoed Road.  It was also submitted that, as Mr Anker confirmed in cross-examination, the claimant would have had to seek permission to go onto the reserved area whilst the fencing was in place. 

Discussion

43.         In cross-examination, Mr Davies was asked repeatedly to confirm under which statutory provisions the individual elements of the claims were being pursued, the answers to which persuaded me that he was unclear as to the workings of the compensation code and what precisely the jurisdiction of this Tribunal is in such matters. 

44.         In any event, the claim appeared to have been made on the basis of “damages” and for “standard NGG payments” which are made purely by agreement with landowners. There was no such agreement with the claimant in this case, and there was no evidence to support a claim for damages which, even if there were, would not be within the remit of this Tribunal.  As to the claim of £100,000 for what Mr Davies described as “Professional Disturbance”, this appeared to relate to pre-reference costs for Mr Jones’s time spent on the matter.  No evidence was provided to support this element of the claim and, as determined in Thomas Newall v Lancaster City Council [2013] EWCA Civ 802 pre-reference losses must be both real and proven.

45.         I accept Mr Honey’s submissions on the law on this issue.  As Mr Davies admitted, the figures set out in Part (1) of his Schedule were based upon the tariff that NGG adopts when agreeing payments with landowners, and there was no such agreement here. Mr Swinbourne confirmed that payments to landowners were made on that basis, the tariff having been agreed with the National Farmers Union and the Country Landowners Association.  A first payment is made upon receipt by the Company of signed consent (to the easement and proposed installation) with subsequent standard payments following, for instance, drilling of boreholes.  An offer was made to the claimant on the standard basis, but rejected and, Mr Swinbourne said, no claim was subsequently made seeking a higher sum.  The first NGG knew of what was being claimed under this head was in the claimant’s statement of case relating to this reference. 

46.         The claim under parts (1) and (2) of the Schedule were, as Mr Davies confirmed, made as a damages claim (over which I have no jurisdiction) and not on the basis of disturbance that falls within section 5, rule (6) of the LCA 1961 (over which I do).  Mr Davies was, I conclude, confused as to the applicable statutory provisions.  It was clear from the evidence that these were not statutory payments and were only made in circumstances where agreement was reached with landowners, thus preventing the need for potential CPO procedures from continuing.

47.         Even if I were to treat this as a disturbance claim under rule (6), there was not a scintilla of evidence that the claimant has suffered any loss as a result of the occupation of part of the land before, during or after the construction of the pipeline.  The land throughout the period in question was disused and Mr Jones admitted that he had no cause to go onto any part of the land, let alone the area that was fenced off.  Whilst NGG accepted that cross-over points had not been offered to the claimant, thus facilitating access to the southern part of the reference land, no permission had been sought by the claimant so to do.  As Mr Honey pointed out, a claimant is required to prove that he has suffered an actual loss as a direct result of the works or the occupation of the land but no such loss has been proved.  Mr Davies’s figures set out in part (2) of his Schedule relating to restoration of the removed hedge bank, of the land that had been occupied or the removal of the fencing are not costs that have been actually incurred.  There is, for example, a claim for scalpings, but they have never been acquired or laid. In my view these claims were misconceived and totally unmeritorious.  

48.         As to the claim under part (3) of Mr Davies’s Schedule for the claimant’s time, absolutely no justification whatsoever was provided to support it.  The claimant has not kept an ongoing record of the time spent on the matter prior to the notice of reference and has not produced any evidence that could possibly convince me that as a result of the distractions to Mr Jones’s time, his business has suffered any loss as a result.  The recent judgment in Thomas Newall makes it abundantly clear that, as with other matters that come under the heading “disturbance”, actual losses have to be proved.

49.         Therefore, this part of the claimant’s claim amounting to some £143,000 entirely fails, and I determine compensation at nil.

Issues (b) & (c) Compensation for injurious affection caused by the acquisition of the rights

50.         The claimant’s right to compensation under these heads arises under s.7 of the CPA 1965 as modified by Schedule 3, para 7 of the Gas Act 1986 (set out above at paragraph 17).  That any injury must be caused by the exercise of the powers is not modified by the 1986 Gas Act, so case law relating to s.7 applies generally to this case.  However, in assessing the injury for the purposes of injurious affection, it is necessary to have regard not only to the rights “as exercised” initially but also to how those rights might realistically, in practice, be exercised in the future in terms of ongoing maintenance, repair and possible replacement.

51.         The crux of the matter regarding the issues under these heads is what a prospective purchaser would have known, or could realistically have found out, at the valuation date of 8 May 2007, about what was going to be installed under the land (together with any potential implications relating to subsequent works of repair or replacement), and what restrictions on the potential for development, this might mean.  Mr Jones confirmed unequivocally in cross-examination that the key point of the claimant’s case was that even if the Tribunal were to accept NGG’s arguments that a prospective purchaser would have been able to establish, at the valuation date, that a heavy wall pipe was to be installed beneath the reference land, and that there would thus be no bar on development including coal extraction over the whole site (including extraction of the spoil together with open-cast mining over the 24.4 metre easement strip) and residential development on all but that strip (subject to planning), the CPO would enable NGG to replace it, if that became necessary, as a thin wall pipe, at as little as 1.2 metres below the surface.  If that were to be the case, it was argued, the exclusion (“middle”) zone would be 360 metres each side of the pipe, and thus all development potential would be removed.

52.         If I am persuaded by NGG’s evidence of fact and its submissions on the law that despite the claimant’s unarguably correct assertion that the CPO would allow a replacement pipe in either thin or thick wall to be installed at 1.2 metres depth at any time (and in that regard I do not accept Mr Honey’s submissions relating to the interpretation of “replacement” meaning that a new CPO would be required because it is physically impossible to replace the existing pipe in precisely the same location), that would in reality simply not happen, then the evidence on minerals, planning and valuation issues in connection with lost development potential becomes, to all intents and purposes, superfluous.  For example, if I find that the prospective purchaser would have been able to satisfy himself by the valuation date, having behaved reasonably and made proper enquiries about the property (see Inland Revenue Commissioners v Clay [1914] 3 KB 466 and Ryde v London Regional Transport [2004] RVR 60) that the pipeline was going to be installed as a heavy wall pipe at depth, and that if ever a replacement were to be needed, it would be similarly installed, then there would have been no bar to him extracting the spoil/coal duff over the whole site.  He could also open cast mine the below ground deposits.  Similarly, whatever the longer term planning prospects were, the CPO would not have prevented residential or any other development of the site, and there would be no loss.  

53.         I consider it appropriate therefore to deal firstly with this issue and thus turn to the factual evidence of Messrs Swinbourne, Anker and McCollum for NGG, together with Mr Jones’ evidence on that issue, and the relevant submissions on the law. 

54.         Mr Swinbourne, now retired, explained that as one of a team of experts and specialist engineers, surveyors and the like, his remit was to manage NGG’s land requirements for the commissioning and installation of pipelines.  In this case, it had originally been the intention to install a standard pipe at shallow depth using the open-cut (trench) technique, but when carrying out due diligence for the installation, NGG’s contractors found that together with the existence of the coal duff and potential coal seams, there was also a significant amount of potentially combustible material within the first metre of depth including timber and other debris resulting from the previous land use.  So, the Company had to re-think the type of pipe and the installation strategy and reconsider the depth to minimise any risk of combustion and to conform with NGG’s health and safety obligations. In terms of that being the, or a, reason for the pipe to be laid at depth, Mr Swinbourne accepted that a thin wall pipe had been laid at only 1.2 metres depth over the site at Shands Road, Ammanford, which was also believed to contain combustible material.  However, he said he did not personally know what the land strata was at that location, and that he was relying upon the advice he had received from the relevant engineers.  

55.         Although the full files relating to the installation were no longer available (they belonged to the contractor rather than NGG and both electronic and paper records had been disposed of), Mr Swinbourne was able to produce partial minutes of construction meetings that had been held on 16 and 23 May 2007 from records that he had been able to see..  His interpretation of these notes where they relate to the Elitestone land was that whilst they did not specifically confirm, in terms, that the HDD method was to be used, there were a number of references to HDD on both dates and the likelihood was that this methodology was clearly the intention at that time.  As lead-in times for adopting that method were normally at least two to three months, it would not be realistic to conclude that a decision to use HDD was made at the last minute.  The note of the 16 May meeting (at para 3.09) said “HDD probably selected and that a preliminary programme will be issued today”, and “Methodology to be agreed regarding HDD” [following further soil investigation works].  On 23 May at para 3.07 it was recorded that “KB [Kase Brower - a construction manager for NGG’s installation contractor] waiting for results from soil investigation, pipe routing to be finalised and special crew to arrive after the Bank Holiday for HDD and extra coating.”  In Mr Swinbourne’s view, it was inconceivable that the intention was not to drill using HDD when everything was in place for work to start in early June, immediately after the Bank Holiday, but he did accept in cross-examination that clearly no final decision on methodology had been made by 8 May 2007, the valuation date.  

56.         Mr Swinbourne said that in his opinion, there was absolutely no prospect of NGG going back on the chosen heavy wall pipe by May 2007 (that being of X80 high grade steel with a wall thickness of 22.9mm and encased in Bentonite grout) because the prospect of development of the Elitestone land at some time in the future had been identified.  In his view, the claimant was particularly fortunate in that it was unusual for a heavy wall pipe to also be encased in concrete type grout where drilled at depth.

57.         Mr Anker has, since 2013, been the Principal of Anker Utility Services Ltd which contracts with utility companies in respect of land matters, and between 2006 and 2013 was a director of Eurobeck Ltd which provided similar services.  It was with them that he provided services to NGG in respect of the pipeline. He was principally involved, in connection with the reference land, in facilitating and overseeing access arrangements between NGG and the claimant.  He had first visited the land in March 2006 and had probably been back there a dozen or so times since then, during the course of the works and afterwards.  He disagreed with a number of the assertions that had been made by Mr Jones as to the condition of the land, such as the extent of coal deposits and the fact that it was ‘industrial”, in nature and was brown land, although this latter point was eventually accepted.  As the report from Wardell Armstrong regarding the historic use of the land confirmed, it was clear that there had been some extraction of the surface deposits over the years, but apart from two piles of uncollected coal duff there was no evidence of recent works, and the site was seriously overgrown and during the winter months lay very wet. There was certainly no evidence during any of his visits of any continuing use of the land, other than motorcycle tracks (from illegal use for moto-cross) and some fly-tipping. 

58.         Mr Anker confirmed that he attended various progress meetings on site and although he was not a part of the decision making team, these meetings enabled him to liaise with colleagues and keep abreast of progress.  As to the use of HDD, he agreed with Mr Swinbourne that its use would not have been referred to in those meetings if it had not been intended to install the pipeline by that method, as HDD was not being used anywhere else in the pipeline, or to his knowledge anywhere within the UK, and the specialist equipment had to be brought in specifically for this project from Holland.  He said the wording of the minutes where it referred to HDD could be interpreted in different ways.  He did accept that the wording did not specifically confirm when the final decision to drill by HDD was made, and that until any final decisions were made, there was always the opportunity for changes to be made, although he considered any major change, such as to the type of pipe or proposed method of installation would be highly unlikely.  Finally, he said that if NGG had been asked by a prospective purchaser at the valuation date what was going to be installed and where, the Company, probably through its senior Project Manager and Head of Communications, Dave Mercer, would have had to make a statement.

59.         In response to a question from me, Mr Anker helpfully described how the HDD process works and how the steel pipe is installed.  It is not necessary to set out that process here, suffice it to say that it is clear there was no access required to the reference land for the actual drilling process, the drilling equipment entering the ground at a depth of 21.7 metres from the land to the west, and proceeding eastwards, exiting beyond the eastern boundary at a depth of 18 metres.  The only activity on the reference land related to the laying and maintenance of a mud line (a tube that takes liquid slurry removed by the drilling) and two micro turbines that suck the material out.

60.         Mr Anker confirmed that the Mr Kase Brower referred to in the minutes of the project meetings was not an employee of NGG, and would not have been a decision maker in respect of the adoption of the HDD method.

61.         Mr McCollum is a Chartered Engineer and is employed by NGG as a Safety Engineering Manager within the UK Gas Transmission Asset Management Directorate.  He is responsible for a team of professionals who produce safety cases and relevant documentation required for the UK transmission gas terminals, LNG sites and high pressure pipelines and provides safety engineering advice on design, operational and planning and development issues together with risk assessments.  He has been with NGG and its predecessor companies for some 30 years, and was involved with the Milford Haven to Aberdulais pipeline, but whilst having prepared risk assessments for other parts of the pipeline, was not involved with the CPO process on the reference land. He provided evidence of Land Use Planning Controls (“LUPs”) that would be applicable in respect of the pipe as laid through the reference land, and any restrictions on the use of the land and any development thereon together with a description of how NGG provides guidance to developers on how they might obtain maximum value from a site that contains such a pipeline.

62.         The safety framework for high pressure gas pipelines is set out in the Pipeline Safety Regulations 1996 and includes requirements for the engineering design and installation processes to ensure that they are appropriate to withstand the range of operating conditions to which they may be subjected.  The Regulations refer to Major Accident Pipelines, of which this is one.  Such pipelines require additional controls such as the control of development around the pipeline once it is operational.  This is facilitated by requiring that such installations are notified to the HSE prior to construction thus enabling the appropriate LUP controls to be identified and implemented by the Local Planning Authority (“LPA”).  The HSE’s advice on planning controls is provided through the Planning Advice for Developments near Hazardous Installations (the “PADHI” process) which allows it to fulfil its role as a statutory consultee in the control of development in such circumstances, and is the process by which the LPA can be advised as to how much land in the vicinity of the pipeline has to be considered when planning applications are submitted.  The area over which restrictions on the use of land apply is known as the Consultation Distance which is itself divided into three zones - the inner, middle and outer zones. The LUP zones are based upon the risk to individuals in the vicinity and are calculated by determining the pipeline failure rate and the consequences of such failure.  The most important factor in the calculations is the likelihood of the pipeline being interfered with by third parties.  The nature of the ground in the vicinity of the pipeline is factored in but does not have a significant bearing upon the calculation of risk for LUP purposes. 

63.         Mr McCollum said that the design of the pipeline will take account of the likely development requirements in the vicinity as a pipe passing through rural or agricultural areas would be different to one passing through suburban areas.  The pipeline installed beneath the Elitestone land is designed for compliance with IGEM/TD/1 which is suitable for suburban areas with residential development such as housing estates.  A prospective purchaser of the land contemplating development would consult the HSE to establish the LUP zones and to consider the type of development that the LPA would not advise against in the vicinity.  It would also be usual and reasonable to consult the pipeline operator (in this instance NGG) as there may be features associated with the pipeline which could have a material effect upon the HSE’s  advice. The main feature that would have a bearing on the HSE’s initial advice would be if it is a thicker wall pipe of the type installed through the reference land.  Whilst burial depth can also have an effect, it is nothing like as significant as the type of pipe construction.  Having made the requisite enquiries, a prospective purchaser of the Elitestone land would have been told that that the thick wall pipe was being used, and that it was to be installed by HDD at depth.  As the consultation distances available through PADHI are for standard (thin) walled pipes used in rural areas the purchaser would have been advised to consult the HSE and ask them to calculate the distances applicable here because of the bespoke factors related to this section of the pipeline. For thicker wall pipes the result would be a considerable reduction in the LUP zones to the extent that there would only be a small distance each side of the pipe that could not be built upon so that maintenance could be facilitated.  Neither the HSE nor NGG charge for the advice they give under the various Regulations, and the HSE normally reply to enquires within a week.

64.         In order to be in a position to advise the Tribunal as to precisely what the purchaser would have been told by the HSE in respect of this proposed installation at the valuation date, Mr McCollum said he asked Dr Peter Harper of the HSE to calculate, retrospectively, what the advice would have been based upon the pipe as laid. In fact, the advice that was given in response was for a pipeline at 2.5 metres below the surface as that was the deepest HSE’s calculation model went to because, in reality, most pipelines of this type were laid at 1.2 metres. The outer consultation zone, he was told, would have been 305m overall with a middle zone of 5 m and an inner zone of 3m. This compares with the figures for the pipe some 150 metres to the east of the reference land, which is a standard pipe, where the consultation zones were: outer 440m, Middle 370m and inner 135m.  As it is the middle zone that is the key to what could be built on the land, that zone from the point where the pipe changes type would extend into the reference land on its eastern boundary by 35 metres which was considered to be immaterial as in any event it only affects the 24.4 m easement section.  The advice that would be given to the purchaser would be that there was no bar to residential development on the land other than over the easement strip itself.  Examples were included in Appendix 3 to Mr McCollum’s report showing where residential development had occurred within close proximity to high pressure gas pipelines in a number of locations, and he said that NGG has a permanent department dealing specifically with development activity in the proximity of pipelines all across the country.  

65.         Mr McCollum referred to the WWU pipeline that also crossed the reference land at a narrow point over which it would be likely that a developer would wish to construct an access road to serve the residential development that he was proposing to the south.  Similar enquiries would need to be made as to those he had described for the NGG pipe.  It would be unlikely, due to the WWU pipe having a middle zone of some 55m, that residential development would be permitted, but subject to negotiation, it would be likely that a road could be constructed subject to relevant design and construction parameters for crossing points being adhered to.

66.         Turning to the prospects for mining, Mr McCollum said that there would be no objection to the extraction of the coal duff and surface deposits anywhere on the reference land, including directly over the pipeline within the easement zone.  It is normal for activities to be permitted that disturb the surface of the ground, including for instance, ploughing agricultural land, or grading and adjustment to surfaces generally in connection with residential development.  Open-cast mining would also potentially be acceptable over the whole of the land apart from within the easement strip so long as there were sufficient stand-off distances provided and any restrictions on blasting were respected, but in the light of the considerable depth at which the pipe was actually laid, even open-cast mining might be permissible over the easement strip.

67.         As to the chances of the pipe requiring maintenance or replacement, Mr McCollum said that the available statistics on pipe failure indicated there was a one in 520 year chance of that happening.  The design life of the pipe itself was 40 -50 years but in his view this was an exceptionally conservative estimate and he anticipated there would be no need for replacement for a very long time indeed. By such time it was conceivable that fossil fuels would have been entirely used up thus making the whole “what if” question entirely hypothetical.  The suggestion made by the claimant (and indeed the crux of its case) that NGG could or might install a replacement pipe in thin wall pipe at 1.2 metres depth was just not sustainable. There was absolutely “zero prospect” of that happening.  In his experience, Mr McCollum said that if anything it would be the other way round.  He knew of thin walled pipes that had been replaced with thicker wall pipes, and if this one had to be replaced it would be installed deeper, under the existing one. As to Mr Harlow’s concerns about developers being put off by potential safety risks, it was pointed out that this was a standard natural gas pipeline and not, as Mr Harlow had contended a Liquefied Natural Gas (LNG) pipeline that were entirely different and subject to even stricter controls. 

68.         Regarding Ms Lewis’s reference to 11 cases she had investigated that she said supported her conclusions that the reference land would be sterilised, Mr McCollum gave a detailed explanation in respect of the facts pertaining to each.  He pointed out that the majority had LUP distances that were greater than those applicable to the reference land at the valuation date as they were related to much earlier applications and were thus “pre PADHI distances” which were based upon the consequences of failure.  However, those under PADHI (introduced around 2002) also take into account the likelihood of the event, and the consultation distances were thus usually now much less.  One of the cases Ms Lewis had referred to (in Newport) was very pertinent in that a refusal of an application for development close to a pipeline had been overturned on appeal once it was discovered that it was a thicker wall pipe that had been installed - as was the case here.  In Mr McCollum’s view, the cases upon which Ms Lewis sought to rely did, in fact, give support to the respondent’s argument that there would be no bar on development in respect of the reference land. In summary he said that the claimant’s case is based upon fundamental factual misunderstandings of the rules and practices that apply in relation to the operation of high pressure gas pipelines and land use planning in their vicinity.

69.         Mr Jones said he accepted Mr McCollum’s evidence in the terms it was given, but reiterated that his issue was what the CPO permitted, not what was actually laid.

Submissions

70.         It was submitted for NGG that the claimant’s case falls at the first hurdle because, under s.7, the injurious affection must be caused by “the exercise of the powers” under the CPO.  It had been accepted by both Mr Jones and Miss Ashworth that there had been no injury caused by the pipe that had actually been laid in exercise of the powers.  The importance of this, Mr Honey said, cannot be over-stated.  It is the exercise of the powers, not their existence, which gives rise to the right to compensation for injurious affection.  That the injury must be caused by the exercise of the powers is not modified by the 1986 Gas Act, so case law relating to s.7 of the CPA 1965 generally will apply to this case and it is well established that injurious affection compensation under s.7 is based upon the construction of the works, and the use of the works once constructed (see, for example, Bridgestart Properties v London Underground [2004] EWCA Civ 793 at para 4). 

71.         Mr Honey said that it is not necessary to wait for the injury to have actually occurred before compensation is assessed.  But where, as here, the works have actually been executed by the time compensation comes to be assessed, the injury is calculated by reference to what has been done.  Where injury runs into the future, as with the use of the works, it is assessed by judging what is likely to occur in the future.  In Cowper Essex v Acton Local Board (1889) 14 App Cas 153, the phrases that were used were “the injury actually likely to result from the establishment...of the works” and “the consequences likely to result from the execution of the works.” An example of s.7 in practice is set out in Cooke v SSE.  This shows that where, at the time of the assessment of compensation, the powers have actually been exercised to any extent, it is necessary to base the assessment on the injury (if any) that arises from the actual exercise of the powers which has taken place.  Not only, it was submitted, does this make sense, but it also reflects the principle of equivalence and the presumption of reality, both of which guide statutory construction in the field of compensation.  In this case, this would mean judging the injury based on what has in fact been done to date under the CPO, and what is likely to be done under the CPO rights in the future. 

72.         Measuring diminution in value (if any) to the land resulting from the exercise of the powers or the use of the works [in the future - e.g., replacement of the pipe] requires an open market valuation of the retained land immediately before and immediately after the exercise of the powers. As to what the land might be expected to realise in the open market, this refers to the expectations of properly qualified persons who have taken pains to inform themselves of all the particulars ascertainable about the property and its capabilities (see Inland Revenue Commissioners v Clay [1914] 3 KB 466 at 475).  Both before and after valuations are the values applicable at the valuation date - 8 May 2007.  Any injury is to be assessed upon the reality of the exercise of the powers under the CPO and, for instance, how rights of entry for maintenance or replacement are likely to be exercised in practice, and not what might theoretically have been possible within the ambit of the CPO.  Further, for compensation to be recovered in accordance with the statutory provision, it is necessary for the injury (if any) not to be too remote (see Shun Fung and Cooke).  The likelihood of the pipe being replaced with a thin wall pipe is unrealistic and simply too remote.

73.         Miss Ashworth said in closing that “it is the claimant’s position that the Tribunal must look at the terms of the CPOs and their impact both as at the relevant date and looking into the future, since the rights subsist in perpetuity and relate to the subsequent exercise of the powers in addition to those exercised to date.”  That there has been no diminution in value caused by the initial exercise of the rights does not mean there has been no impediment to the land.  A finding on that basis would ignore the subsisting rights to repair, maintain, renew or relay the pipe, that the CPO rights subsist from the visible surface of the land to a depth of 50 metres and that the claimant is thus no longer able to deal with the land as it so wishes. As there is no opportunity under the law for future claims for compensation to be made, it is essential that any future exercise of the CPO rights must be considered at this stage. 

74.         On the basis of the evidence, it was submitted, a prospective purchaser at the valuation date would not have been able to ascertain details of how the pipe was to be laid in the first instance, nor how it might be re-laid in the future if that became necessary.  Whatever the HSE planning zones were at the valuation date, it was clear, as Mr McCollum agreed, they were subject to regular review and a prospective purchaser would have been likely to rely upon the general zones for the pipeline as a whole as set out in PADHI.

Discussion

75.         The whole crux of the claimant’s case, as Mr Jones admitted in cross-examination, was that it relies strictly, and only, upon the wording (set out at paragraph 13 above) contained within the CPO (together with the HSE restrictions that would apply if the pipeline was not installed as a heavy wall pipe at depth) in its argument that virtually the whole of the reference land has been sterilised from any development potential. 

76.         In a lengthy cross-examination, Mr Jones accepted that the restrictions on what could be done on, and in close proximity to, the WWU pipeline that was already installed when the claimant purchased the land were set out in industry standard documents which were virtually identical to those which applied to the NGG pipeline. Nowhere in his evidence, either written or oral, did he suggest that the existence of the WWU pipe (which had been in situ since 1965) had any bearing upon what he had been prepared to pay for the reference land, or that it would affect the potential development value. He did say that he was comforted by the fact that there was an ‘uplift and divert clause’ but he acknowledged that even if it were to be moved to permit development, it would still have to cross the neck of the Elitestone land at some point.  Whilst the question of whether or not a CPO was required for the installation of the WWU pipe was not raised at this hearing or in the evidence, the claimant here is relying strictly (and only) upon the wording of the CPO as the basis of his contentions that the effect of the NGG pipeline is either complete, or at least significant, sterilisation of the site.  The fact that it does not appear the claimant had any such concerns in 1989 about the WWU pipe goes only to strengthen my view that neither would a prospective purchaser of the reference land at the valuation date have had any such concerns about it.  That purchaser would know that if he wanted to carry out development or other works in, on or near the WWU pipe, he would have to deal with the relevant authority and, possibly, with the HSE and the Local Planning Authority, but would also know, as Mr Jones confirmed, that they tended to take a flexible and accommodating approach and that, in respect of that particular pipe, there was provision for it to be moved if necessary (although it would have to be re-routed somewhere else on the reference land). 

77.         So, how is the NGG pipe so different?  Whilst it is a larger, high-pressure thicker wall gas pipeline (not, as was originally thought, a LNG (liquefied natural gas) pipe), it is buried at a depth of between 20 and 35 metres and the only applicable restrictions relate to the easement strip itself.  The evidence from NGG, which I accept, is that the purchaser would be told on enquiry at the valuation date that the decision had been made to install the pipeline as a heavy wall pipe, suitable for use in urban and residential areas where there is a high population.  That information had been in the public domain for some time.  Paragraph 3.5.6 of the Inspector’s report from the CPO Inquiry dated 24 January 2007 stated, in the section setting out NGG’s case:

“Heavy wall pipe is to be installed throughout the land owned by Elitestone and Draeth Developments [another site not related to the reference land] to minimise the effect on any future development potential of the land by reducing the building proximity distance. However, no building would be permitted 12m either side of the pipe to allow future access to the pipe for maintenance and repairs.”

At paragraph 7.6.5, in the comments and conclusions section, the Inspector said:

“There was some suggestion at the Inquiry of installing the pipeline at a greater depth than originally proposed by National Grid... The benefit would be to give Elitestone opportunity to adjust the finished level when the land is developed in the future.  However, with the development potential of the land being doubtful, it is difficult to see how the extra cost involved in a deeper installation could be justified.”

78.          As to Mr Swinbourne’s evidence, I accept that the meeting notes (which appeared in any event to be incomplete) did not specifically say that HDD was definitely to be used, but my interpretation of the relevant references to the Elitestone land was that final confirmation of ground conditions was awaited before the exact line and depth of the pipe across the site could be finalised.  The evidence was clear that at the site meetings one and two weeks after the valuation date, the final preparations for an installation by HDD were being made, and the fact remains that that work commenced very shortly afterwards. I am of the opinion that despite the lack of available documentation to support all these points, the decision to install by HDD had been made by 8 May 2007. 

79.         I am satisfied that the purchaser would have been able to find out that it was to be a heavy wall pipe. A question may have remained over the method of installation or the depth at which it would be laid, but the fact it was to be a heavy wall pipe would, as explained by NGG’s witnesses of fact, provide sufficient comfort because even at 1.2 metres, the non-development zone would only be, under the HSE rules, 5m each side of the line of the pipe (well within the width of the easement strip).  This was confirmed by Mr McCollum following his request to the HSE to calculate the figures retrospectively. Mr Jones accepted in cross-examination that that would indeed be the case. The purchaser would also have been advised that the PADHI requirements would not be applicable in circumstances where a heavy wall pipe is to be installed, as they related to thin wall pipes and he would thus have been advised to contact the HSE to obtain the relevant consultation distances specific to this part of the installation.

80.         The fact that a heavy walled pipe was to be utilised had, as I have said, been in the public domain since the CPO inquiry, which was long before the valuation date, and I agree with the submission that it would be inconceivable for NGG to attempt to install a thin wall pipe after advising the CPO inquiry that they would be installing something else.  The prospective purchaser would know that he could not construct houses on the strip (whatever the depth of the pipe), but that roads and services could go over it, and it could be used for gardens, public open spaces or other uses related to the potential residential development.  He would also, in my judgment, have been told by NGG that he would be able to take the coal duff and spoil off the easement strip.  Further, if the installation was to be by HDD, and thus at depth, he would possibly also be permitted to open-cast mine. It seems to me to be implicit that if HDD was to be used that the pipe would without question be laid at significant depth.  As the evidence showed, the costs of using this methodology are substantially higher than using an open trench technique, and it is obvious that if the pipe were to be laid at 1.2 metres or thereabouts below the surface, HDD would not have even been contemplated. 

81.         In my judgment, the prospective purchaser would not, based upon his enquiries, have been unduly concerned about the existence of the pipeline and would not have anticipated that, in the event of problems, any replacement pipe would be installed at shallower depth than actually installed, or in thin walled pipe.  I accept NGG’s arguments that it would be simply ludicrous to anticipate that that might occur.  For arguments sake, let’s assume that 30, 40 or 50 years hence, there is a major fault discovered that necessitates the replacement of part or all of the pipe where it passes below the reference land.  By then I suspect that there is a fair possibility that part or maybe even all of the reference land might have been developed for residential (or predominantly residential) purposes (or at least would by then have been so allocated within the UDP) with the 24.4 metre “exclusion zone” for the easement strip having been incorporated into the development for public open space, gardens, or other non-building purposes.  NGG or their successors could not then be permitted (by the HSE) to install anything other than a heavy wall pipe suitable for urban use and residential areas, and there is no reason to suspect that they would contemplate putting it any shallower than the existing pipe, this being confirmed by Mr McCollum at paragraph 10 of his rebuttal report. 

82.         Further, the new pipe would have to connect up with the rest of the pipeline at the boundaries of the reference land and, even if NGG or their successors did decide to lay it closer to the surface, that would not be of consequence because of the nature of the pipe and the fact that the ‘middle zone’ (the area within which building would not be permitted) is only 10m wide - well within the width of the easement strip.  The claimant argued that because there is evidence that the HSE consultation distances tend to be reviewed on a regular basis, they might have been extended by the time work was required to the pipe.  However, a prudent purchaser would consider it most unlikely that they would be increased to such an extent that it would have any material effect upon the development potential of the land. In any event, Mr McCollum stressed that the reason the pipe was laid at depth was to avoid the combustible materials, and they would, of course, still be there. As Mr Honey said in his skeleton argument:

“It is necessary to assess the injury for the purposes of the injurious affection having regard to the reality of the exercise of the powers under the CPO, and how rights of entry for maintenance and the like are likely to be exercised in practice, and not what might theoretically have been possible within the ambit of the CPO.” [My emphasis]

83.         The scenario promulgated by the claimant is, in my view, simply unsustainable and does not reflect the approach that would be taken by a purchaser of the land. It is theoretical, unrealistic and excessively pessimistic, and it appears that Mr Jones has fundamentally misunderstood the situation in respect of the pipe and the CPO rights.  He accepted that there had been no injurious affection resulting from the pipe as laid and, in terms of what might happen in the future he was entirely reliant upon the possibility that a replacement pipe could, under the provisions of the CPO, be laid by open cut as a thin-wall pipe at 1.2 metres or thereabouts below the surface.  That proposition is, as I have said, unlikely in the extreme and, in terms of Shun Fung, is in my judgment a possibility that is far too remote to justify compensation being recoverable in law.  As Mr Harlow, the claimant’s expert valuer accepted in cross-examination, reliance solely upon the wording of the CPO was wrong and he conceded that the injurious affection claim must follow the exercise of the CPO powers, and the “after valuation” must be based upon the pipe that was actually laid.

84.         I fully acknowledge Mr Jones’ point that it was not until June 2007, three weeks or so after the valuation date, that he received NGG’s letter actually providing written confirmation of the type of installation that was to be effected, and pointing out that the disturbance to the land would be significantly less, but it would be absurd, in my view, for that to be the sole catalyst for a c. £4 million claim when the evidence of what was known, or could reasonably have been found out by 8 May 2007, is so persuasive.  A prospective purchaser must be assumed to make reasonable enquiries at the relevant time, and Mr Jones’s own subsequent investigations are not determinative. Miss Ashworth acknowledged in closing that “the claimant acknowledges that the principles relating to compensation are such that only fair compensation should be awarded to the claimant.”  I agree.

85.         I am also mindful of the fact that Mr Jones is, as he admitted, a speculator as would be the hypothetical purchaser of the land at the valuation date.  Speculators are risk takers who pay prices over and above existing use value that reflect what they consider to be the potential for some sort of exploitation that may, at some time in the future, produce a financial reward.  As submitted by NGG in closing, why would a speculator be relaxed, for instance, about the long-term planning prospects for development and yet demand the level of certainty that the claimant is insisting upon in connection with the potential effects of the pipeline installation.  I agree that the hypothetical purchaser could be expected to be consistent in his attitude to risk, and would only seek the level of reassurance consonant with that appetite. They are very different to developers who acquire options or sites on the basis that development potential is clearly foreseeable and in all the circumstances pertaining to the site, likely to happen, and will pay a price significantly higher. There was also no evidence that the claimant has made any attempt to sell the land, either before or subsequent to the CPO rights having been exercised, and there is nothing therefore produced from the market to support the claimant’s contention that the CPO and/or the exercise of the rights under it has served to completely extinguish any potential development value, either for mining or residential development, or both.  In my view Elitestone’s claim is opportunistic and without merit. 

86.         Miss Ashworth said that the Tribunal should, when considering what a purchaser would have been able to find out at the valuation date, bear in mind the difficulties that the claimant and Ms Lewis had had trying to extract information about the pipeline from the HSE over the past four years or so.  Whilst the point is well made, this was of course a retrospective exercise and I am satisfied that, with both the HSE and NGG being obliged to react promptly to queries in respect of potential development prospects, there would be no significant delays in a prospective purchaser receiving a response to enquiries. As I have said above, Mr Jones’ investigations are not determinative of the matter. 

87.         It will be seen from these conclusions that I have concentrated on what a prospective purchaser would have been able to find out about what, by the valuation date, was to be constructed on (or below) the land because it is at that point that he has to decide whether what may occur on the land, at some future date, has any effect upon its development potential.  It was however NGG’s principal case that it would be wrong in law to consider only facts and matters that existed at the valuation date when judging injury to the land, and that, under s.7, one has to look at what has actually been done in the “exercise” of the rights in order to assess compensation (and to consider what might occur in the future in respect of the implications of ongoing maintenance and the like).  However, I note Mr Honey’s reference to Cowper Essex (see paragraph 71 above) from which it is clear that, if the works have not yet been exercised (which will surely nearly always be the case) at the valuation date, it is the extent of the injury that would be anticipated to be the consequences of the execution of the works that has to be considered. As is clear from what I have said above, on the evidence I come to the same conclusion under each scenario.  On the basis of the works as they were actually undertaken (or “exercised”), there has been (as I have found) no loss.  I have also found that the purchaser, at the valuation date and prior to the execution of the works, would not have had any undue concerns, from what he had reasonably been able to find out, that the installation to be effected or what might happen with the pipe in the future would cause any injury by the sterilisation of potential development prospects.  Thus, the exercise of the powers conferred by the CPO did not, as a matter of fact, and would not be anticipated to, cause damage to the claimant compensatable under section 7 of the 1965 Act, as modified under Schedule 3, para 7 of the 1986 Gas Act. 

88.         In the light of these findings therefore, and in accordance with the principle of equivalence and the presumptions as to reality and fairness that are enshrined within compensation law, I conclude that the claimant has suffered no loss as a result of the CPO, and compensation under heads (b) and (c) is assessed at nil. 

89.         I should add that part of Mr Davies’s calculations (which amounted in total to £1,813,912.50 under issue (b)) included a claim for the displacement of material caused by the laying of the pipe in the sum of £24,412.50.  In a submission made by Miss Ashworth following receipt of a draft of this decision, it was suggested that as Mr Davies’s claim was purportedly also made as a disturbance claim under rule (6) of the 1961 Act, his oral acceptance that if compensation were to be payable for the injurious affection claimed under s.7 this element could not be pursued as it would amount to double counting, was not applicable.  With no compensation having been determined for injurious affection, this element of the claim should stand.  However the claim was clearly made under s.7 but even if it were to have been advanced under rule (6), there was no evidence of any loss having been occasioned and it cannot therefore be allowed.

Issue (d).  Diminution in value to the restrictive covenant over the Rugby Club Land

90.          It was the claimant’s case that with the whole of the Rugby Club land also being sterilised, the opportunity for the claimant to extract, at some future date, a percentage of any enhanced development potential (valued by Mr Harlow at £96,000) in return for a modification or discharge of said restriction, had been lost. As I have concluded that there has been no such sterilisation, and thus no loss of potential development value (if indeed there is any), this claim must also fail. 

91.         It was in any event clear from Mr Jones’s evidence that not only had there been no attempt by the Rugby Club either to develop the land for the purposes it was acquired or to promote it for any other type of development, the Trustees were also notoriously difficult to deal with.  Even if the land had been sterilised in terms for coal extraction (which the claimant would have to pay the Rugby Club for), and/or there was considered to be a prospect of obtaining planning permission for residential development on that land at some time in the foreseeable future, I am of the view that a prospective purchaser would deem any prospect of obtaining some form of ransom payment as being remote in the extreme.  He would not, therefore, increase his bid for the reference land.

92.         Compensation under this head is, therefore, also determined at nil.

The expert evidence

93.         These conclusions are determinative of the matters before me.  However, for the sake of completeness I now set out briefly my views upon whether, if I had decided in favour of the claimant, the expert evidence established a loss of prospective development value in the reference land.

94.         On the minerals aspect of the claim (issue (b)), Mr Davies assessed the value of the potential to extract marketable material (which in his view amounted to around 22% of the agreed 351,000 tonnes of coal duff/surface deposits) and to then open cast mine what might lay in the Gelli seams under the land in the sum of some £1.8 million. It was assumed that the extraction of the coal duff would not require planning consent as it was an existing use and no enforcement action had ever been taken in respect of the limited operations that Elitestone had carried out in the past.  However, planning consent would, it was agreed, be required for open-cast operations.  Mr Davies accepted in cross-examination that it would only take a 10% increase in the costs, or reduction in profit, or “5% either way” to completely eradicate any potential profitability, and he said he was not in a position to comment on Mr Hughes’ calculations of the costs of compaction as he was not qualified to do so. 

95.         Mr Hughes concluded that any extraction of minerals would not only be totally uneconomic in terms of financial viability, but the prospects for obtaining planning consent (which in his view would be required for both extraction of the coal duff and for open-cast mining) were so remote that a speculator would not consider there was any value to be lost.  Further, Mr Davies’s estimate of the percentage of marketable coal within the duff was not based upon any reliable evidence whereas Mr Hughes’ own researches indicated a maximum of 11.8%.  The coal seams beneath the land were also extremely thin, and it was likely the costs of extraction of what was marketable far outweigh any market value.  Mr Davies had also, as he accepted in cross-examination, failed to allow for remediation costs (filling and compacting) and had not made any deferral to reflect the time it would take to earn the stated profits, but also the additional time that would be required for the backfill to be sufficiently compacted before residential development could commence.  The claim was effectively, therefore, for the full value of the potential profit at the valuation date.

96.         The claim was advanced as part of the s.7 claim for injurious affection under which compensation is assessed by considering whether there has been any diminution in the value of the land. However, as he admitted in cross-examination, Mr Davies’ valuation, and the amount claimed, was a calculation of the total potential profit that could be made from the mining activities.  It was not an assessment of the diminution of open market value of the land and it was therefore submitted by NGG that the basis of the claim was simply impermissible under s.7.  As was made clear by the Court of Appeal in Ryde, it is not possible to claim open market value and loss of profits which could be made by exploiting the land after the assumed sale.  It was suggested that with the minerals contributing to the overall open market value of the land, Mr Harlow having made an allowance (in the “before” valuation) for the savings in the infrastructure costs for a subsequent residential development, then acceptance of the claim would at least in part amount to double-counting.

97.         That, in my view, is sufficient to dismiss entirely this element of the claim.  But, even if it were to be admissible, on the basis of the evidence, I conclude that had the land been sterilised by the installation of the pipeline, there was simply no material additional value, over and above the reference land’s existing use value, because the potential for coal extraction was not economically justified.  The prospect of the sort of profits that Mr Davies espoused was clearly over-optimistic and he missed out so many of the potential costs (including costs of obtaining planning consent at least for the open-cast mining if not all of the extraction works, remediation, deferment and the like) that the mining activities would simply not be worthy of economic consideration and thus added no value.   

98.         Mr Jones said that the reason he had not proceeded with extraction of the coal duff, other than what limited extraction was carried out in the early years of Elitestone’s ownership, was because he had been distracted by other matters.  In my view, if the potential for exploitation had been as valuable as it was assessed by Mr Davies to be, then a speculator whose stated remit was to exploit that potential would have certainly found a way to do so by now.

99.         As to the planning evidence, Ms Lewis accepted that her evidence did not include minerals planning issues and that she was reliant upon what she had been told by the claimant, but acknowledged that the processing or washing of the coal that would be required as part of the removal of surface deposits would not be considered to be part of the lawful use (if one was established) following the sporadic removal of spoil that had been carried out by Elitestone some time ago. 

100.     In respect of the prospects for obtaining planning consent for residential development (issue (c)) the planning experts agreed that that, at the valuation date, there was no real prospect of planning permission being granted for the bulk of the reference land as it was currently in an area designated as open countryside.  It was accepted that other than a small area comprising the northern, narrow section of the land, the remaining areas to the south were not included in the relevant local plan or UDP and that a purchaser, therefore, would be looking to whether it might be designated within the plan that would cover the period 2017 to 2026.  If the land was not allocated then, it was accepted by Ms Lewis in cross-examination that consideration would have to be given to whether it might be included in the plan that would cover the period after 2026, which was some 19 years after the valuation date but it was her view that the land would be allocated within the 2017 plan.

101.     It was also agreed that the bulk of the reference land would not be developed for residential purposes in isolation from adjoining land.  Mr Frampton thought that the best prospects for other land obtaining consent would be to the west (north of what would become the access road for the Rugby Club land off Pentre Road), or to the north of the main part of the land, and south of the land currently developed by Redrow, and the field adjacent to that development that was currently allocated.  Ms Lewis considered that there was a strong likelihood that the land to the north would be developed, and there was a possibility that that to the west might be.  It was thus the case of both experts that the land, if ever it were to be developed, would be developed incrementally following the development of the adjoining land which meant that the owner of the reference land would be a participant in what might be a joint venture, and in anticipating what he might be able to do and when he could do it, would realise he was not in sole control of those development prospects and had to deal with third parties. It was also a fact that there was a large amount of land both to the west and north which would have to be designated before the “golf club head” main part of the reference land could be included.  Those areas, if they were to be designated in a future development plan would in themselves comprise very significant acreages, and therefore, in my judgment, the chance of the bulk of the reference land being included at the same time would be extremely unlikely.

102.     There was considerable discussion at the hearing about whether or not other allocated sites (mainly to the north of Pontarddulais) would ever be developed, principally due to concerns about flooding, and whether if some of them were taken out of the plan, it would result in the reference land coming forward sooner.  However, this all involved a considerable amount of speculation, particularly as to whether Pontarddulais itself might become an area within the Swansea region upon which sufficient land for residential expansion would become allocated for the reference land to be included, especially as, within the emerging UDP at the valuation date, prioritisation for residential development within Swansea and Pontarddulais would be upon previously developed land within the existing developed area. 

103.     It seems to me that the key issue over residential planning prospects was whether the land might be included as an allocation in the 2017 development plan, or whether it would be at least 2026 before any such inclusion might be anticipated. On the basis of the evidence before me, and in the light of the parties’ submissions I conclude that Ms Lewis’s evidence and Mr Harlow’s position that “a purchaser of the site would anticipate residential development coming forward within a period of 10-12 years” from the valuation date was wildly optimistic. 

104.     In my view, as Mr Frampton said, there was absolutely no sound basis upon which it could be contemplated that the expansion of Pontarddulais would be large enough for the reference land to be considered even as a remote possibility for residential development, and even if such expansion were proposed, there was still a considerable risk that due to its distance from the currently developed area it might not even then come forward.

105.     I am also mindful of the fact that, as pointed out in NGG’s closing statement, it was Mr Davies’ contention that it would be necessary to seek planning permission for the whole scheme of development - that is the mineral extraction and residential development - at the same time in order to avoid there being an expensive and uneconomic restoration scheme imposed in any minerals permission.  Thus, on the basis of NGG’s case that the earliest possible date by which allocation of the reference land might occur (2026), that would be the trigger point for such a joint application.  Following that, there would have to be time allowed for obtaining consent, carrying out the mining operations (a minimum of 5 years) and on top of that a period allowed for compaction and settlement of the land before residential development could even commence.  In my view, that would take the date to well beyond 2030 - effectively 25 years after the valuation date.  Even that takes no account of the fact that any residential development is likely incremental due to it being reliant upon the other land between the reference land and the existing developed areas being developed first.  If that were to be factored in, there would then be a further significant delay.

106.     I accept NGG’s submissions as to the inappropriateness of Mr Harlow’s valuation approach, which was basically a development valuation deferred for the 10-12 years he thought it would be before planning consent might be obtainable, and further discounted for risk.  That would not be the approach that a speculator would take.  I prefer Mr Brogden’s approach which was based upon what a speculator would conclude and that, as he said at paragraph 9.6 of his report:   

“In reality the pipeline would simply be another factor to add to the already long list of factors which would need to be considered when designing the development of the land.  It would not weigh in the mind of a potential purchaser, even one which based its bid on the development of all the land, to any material degree.” 

He concluded that the prospects of development were low, even in the long term.  There was no diminution in value to the land, and a prospective purchaser would value the land at the same figure under both the before and after scenarios, and he did not therefore produce a valuation which assumed that the land had been sterilised.

107.     In the light of the above, and with development prospects being as remote as they are, I conclude that a speculator would not add anything to what he might be prepared to pay for the land to reflect the possibility that, perhaps, in 25 to 30 years time he might be able to negotiate with third parties and achieve some form of potential residential development on the land.

Disposal

108.     It will be seen from the above that I have concluded the claimant’s case fails on all grounds, and all scenarios.  There is, in my judgment, no enhancement in value, over and above existing use value, and thus sterilisation of the land by the construction of the pipeline, if that had actually occurred, would not have produced any loss to the claimant.

109.     Compensation under all the heads claimed is, as I have concluded, determined at nil.  As to the question of the advance payment that was made by NGG on the basis of a valuation that was said to have been undertaken by Bruton Knowles in the sum of £17,000, that valuation was not produced apparently because it cannot be found.  It was also said that, in any event, the sum paid was an attempt to get the matter settled by agreement.  With no evidence having been produced, I find it impossible to come to any conclusion on that matter.

110.     This decision is final in all respects other than the costs of the reference.  The parties may now make submissions as to costs and a letter giving directions for the exchange of submissions accompanies this decision.

DATED 2 September 2015

P R Francis FRICS