Compensation – fair and full and neither less nor more
The Boydell lecture 2013 by George Bartlett QC
I first met Peter Boydell in the earliest days of my pupillage 46 years ago when he was
leading my pupil-master, David Trustram Eve, for the Cadogan Estate in a planning appeal.
The proposal was to demolish 10 acres of Chelsea streets, erect a tower block into which all
the protected tenants would be, as it was put, decanted and build expensive new housing on
the surrounding land. Peter was an outstanding advocate but even he was unable to persuade
the inspector of the great benefits that the scheme would bring in terms of the urban fabric
and social cohesion.
As an advocate Peter was imperious. House of Lords committees always seemed particularly
gratified that anyone quite so grand should condescend to address them. He was always
meticulously prepared; and he was effective, sometimes in the most unpromising of
situations. But Peter was much more than a fine advocate. He was Leader of the
Parliamentary Bar for many years, Chairman of the informal Planning Bar committee that
existed before PEBA and Treasurer of the Middle Temple. He was the most effective
committee chairman I have ever encountered. And of course he was head of chambers for
many years. His contribution to the Bar in his specialist areas was immense, and it is a great
honour for me to be invited to deliver this year the lecture that was established by chambers
in his memory.
The topic I have chosen is from one of those specialist areas, compensation for the
compulsory purchase of land, and I will also touch on an associated area of compensation,
where land is not taken but is affected by public works. Certain parts of the law of
compensation are very difficult, and I will for the most part assume at least a basic
understanding of them because it would be impossible to proceed otherwise. Those of you
who have not had the need to gain an acquaintance with the law in this area will simply have
to content yourselves with your good fortune.
Fair compensation. The topic is, of course, potentially vast, but what I have to say is
relatively confined. There are two associated themes. The first is that, apart from
compensation for disturbance or equivalent reinstatement, what is fair compensation in any
particular situation is generally something on which a range of views can reasonably be held.
The second theme is that because of this and the need for consistency and uniformity, itself a
matter of fairness, the law needs to be both prescriptive and as clear as possible. So as not to
disappoint enthusiasts I shall have a fair amount to say about the no-scheme rule1.
1
Throughout this paper reference is made to “the no-scheme rule”. This should be understood to mean the
various statutory provisions and the effect of case law requiring effects of the scheme to be disregarded when
assessing compensation.
1
Background matters
First some background matters. Compulsory purchase of land, and with it the compensation
that is paid for such acquisition, has gone through a number of phases over the last 200 years.
Throughout the 19th century the predominant purpose of compulsory purchase was for the
construction of railways and other utilities for private profit through the medium of private
Acts of Parliament. In 1846 at the height of the railway mania no fewer than 454 private
Acts were passed, most of them for new railways. The entitlement to compensation was
contained in the respective Clauses Acts (railways, waterworks, harbours etc) that were
incorporated in the private Acts. Procedure was contained in the Lands Clauses
Consolidation Act 1845, although it was in due course treated also as conferring rights to
compensation. Claims were decided by magistrates if they were small and otherwise, at the
option of the claimant, by arbitration or by jury. It became the practice to add a 10%
allowance to the estimated land value to reflect the fact that the purchase was compulsory.
The jury option was popular. Juries had the reputation for being generous with acquiring
authorities’ money.
During the later 19th century land was increasingly acquired compulsorily for social purposes
by public authorities – for sanitation under the Public Health Acts, for instance, or for
housing under the Housing of the Working Classes Acts – and by the First World War the era
of the corporate state had begun. The prevailing ethos was self-sacrifice for the nation, and in
1919 the Acquisition of Land (Assessment of Compensation) Act was passed. It applied to
acquisitions by public authorities. It established the Official Arbitrators, as the body to
determine claims for compensation, and it required them to assess compensation in
accordance with the six rules that now survive (in very slightly amended form ) in section 5
of the Land Compensation Act 1961. The allowance for compulsion was abolished, and the
seller was to be assumed to be willing. A no-scheme rule was codified in rule (3).
The corporate state reached its zenith with the post-Second World War Labour government.
A universal system of town planning was accompanied by the nationalisation of development
value under the Town and Country Planning Act 1947, and compulsory purchase as the
perceived means of securing the use of land to the benefit of society assumed a greater
importance than ever. Compensation for land compulsorily acquired was to be at existing use
value. The Lands Tribunal was created in 19492 to deal with disputed claims for
compensation for the extinguishment of development value and to succeed to the jurisdictions
of the Official Arbitrators. Compulsory purchase by public authorities was extensive – over
the ensuing decades streets of unfit houses were acquired at site value and tower blocks were
erected in their place, new towns were built and motorways, and the nationalised industries
acquired land for their purposes.
Existing use value as the basis of compensation was abandoned in 1959.3 Under the Thatcher
government 20 years later privatisation of the nationalised industries gave compulsory
purchase powers to utilities that were to be operated for profit; major commercial
infrastructure developments like the Channel Tunnel were carried out under statutory powers;
2
3
Under the Lands Tribunal Act 1949
Under the Town and Country Planning Act 1959
2
and planning authorities used their compulsory powers to provide land to commercial
developers.
The compulsory purchase world in which we now live is thus very different from the one that
prevailed for most of the 20th century, but the compensation provisions are essentially those
that date from 1919 and 1959.
Rule (2)
Of the six rules in section 5 the basic one is that contained in rule (2). The value of the land
compulsorily acquired is the amount that it would realise if sold on the open market by a
willing seller. Someone coming for the first time to these provisions might find this puzzling.
The landowner may in reality be a most unwilling seller. His land is taken from him by
compulsion and then he is paid for the land no more than he would have received if he had
sold it willingly. Of course this basic rule is tempered in two ways. Firstly the landowner is
entitled to payment for such consequential loss as he may suffer (an entitlement recognised
by rule (6)). So the house owner receives his removal expenses and the businessman is
compensated for his loss of profits. Secondly there may be an entitlement, if the qualifying
conditions are satisfied, to a home loss, basic loss or occupier’s loss payment under Part III of
the Land Compensation Act 1973 as amended. In the case of the owner who has lived in his
house for at least a year he will receive a home loss payment of 10% of the value of the house
up to a maximum of £47,000.4
Does this achieve fair compensation? Take two neighbours whose houses are acquired for
the construction of a motorway. Mr Brown lives with his wife in the house that they bought
40 years ago. There they have been for most of their lives, cherishing it, improving it in
minor ways. There they brought up their children, and when the grandchildren come to stay
they sleep in rooms each still referred to by the name of the child whose room it was. The
garden, with its borders and lawn and vegetables, has always been their delight. There is an
old apple tree of an unknown sort that produces every year without fail in September a crop
of the sweetest red apples. (Lord Denning could have written this.) The Browns had been
looking forward to celebrating their golden wedding in two years’ time in their home, but
now will not be able to do so. Years of living with the threat of the road has taken its toll on
them, sleepless nights, occasional hopes that the scheme might be altered or abandoned
successively dashed. Mr Brown, like many others, doubted the need for the road, and
considered that, if it was thought to be needed, it should be built on a different route. But the
line order and the CPO were confirmed.
The Browns obviously would not have been willing sellers of their house. They would have
rejected offers to buy it, even if they were substantially above the market price. They could
no doubt have been induced to sell it at some price, reasoning that it would not be fair to their
children, who would in due course inherit what they have, to refuse to do so. Thinking
honestly about it, they would admit to themselves that they might feel constrained to
4
Land Compensation Act 1973 section 29; Home Loss Payments (Prescribed Amounts) (England) Regulations
2008 reg 2
3
relinquish their home if offered 50% more than the market price, although they would not so
so for less.
Next door lives Mr Green, who moved there three years ago with his new partner, Roxanne,
and his new 4x4 with its fuel-efficient 5 litre engine. He was able to acquire the house at a
favourable price, in view of the road proposal, from owners who were desperate to sell. He
generally moves at intervals of about three years, taking advantage of the unearned tax-free
gains that the upwards movement of the housing market gives him, getting each time a larger
mortgage for a more expensive house and financing the purchase of a larger car and other
things. The garden, which he rarely enters, is all grass, except for some impenetrable old
shrubs, and a contractor cuts it once a month. The tiles on the south face of the roof of the
house, which he refers to as his property, are now totally obscured by solar panels, for which
he received a generous subsidy. They have enhanced its value, although, owing to their
rather overpowering presence, they have diminished the value of the Browns’ house next
door. Each time he comes up the road in his fuel-efficient 4x4, laden with goods made in
China, Mr Green looks up at the roof and congratulates himself on the major contribution he
is making to the solution of the problem of global warming.
When the CPO was confirmed Mr Green had been planning to move. Bargains were to be
had in the housing market, especially if you were prepared to be tough with sellers who were
in difficulties, and it was time for a new car. Also, Roxanne was beginning to look rather
worn, so time for a change there too. So Mr Green welcomes the CPO. He will have a ready
buyer for the house, collect a 10% bonus in the form of a home loss payment and have all his
removal expenses paid.
Fair compensation. What would be fair compensation for Mr Brown on the one side and Mr
Green on the other? In giving these examples I would not of course wish to pander to any
prejudices you may have. But what would you and I, we the jury, decide to award if
unconstrained by statute or untrammelled by judicial authority? Would we not give Mr
Brown and his wife 150% of the market value of their house, probably their removal
expenses too, and a message of sympathy? And would we not award Mr Green simply the
market value of his house, neither more nor less, with no home loss or disturbance payment?
But of course compensation cannot be awarded in this way. There have to be rules, if only to
avoid the greater unfairness that would result if there were none. Compensation must be
assessed on a consistent basis. Nevertheless – and this is the principal burden of what I have
to say – rules cannot be invented that would ensure that in all cases compensation is what
everyone would regard as fair. And the reason for this is twofold: firstly because rules have
to be general in their nature and application, and secondly because, in any event, there will
always be areas where different views can reasonably be held as to what is fair. I will
explore this further in due course.
For the moment let me note one thing. In perhaps the most quoted judicial soundbite on the
principle of compensation, Scott LJ referred in rather austere terms to “the principle of
equivalence which is at the root of statutory compensation, the principle that the owner shall
4
be paid neither less nor more than his loss.”5 The loss that Scott LJ had in mind was, of
course, pecuniary or economic loss. The notion that compensation is fair provided that it is
assessed in accordance with such loss is, however, no longer acceptable. The house owner
who loses his home, the small business man who loses a business which makes no profit once
the cost of his time has been allowed for but which is the very heart of his existence, each of
these suffers a loss that goes beyond an economic loss. It is a personal loss, unique to him.
In recognition of this, as I have said, Part III of the 1973 Act makes provision for payments in
defined circumstances to supplement the statutory compensation that is payable. Such
payment, however, is not related to the particular personal circumstances of the individual
claimant, and that is perhaps inevitable. In practice there have to be qualifications and cutoffs of a general nature, so that Mr Brown and Mr Green, fairly or unfairly, have their
compensation assessed on the same basis.
Value to the owner and the no-scheme rule
From the 19th century up to the present day judicial pronouncements have emphasised that
what has to be assessed is the value of the land to the owner and not its value to the
purchaser. There are essentially two aspects to this concept of value to the owner. The first
is the recognition that he may suffer a loss by reason of the compulsory acquisition that is
greater than that represented by the market value of his interest. Provision is made for this,
reflecting the law as it was established in the 19th century, by rules (5) and (6) of section 5 of
the 1961 Act. Rule (5) enables compensation to be awarded on the basis of the reasonable
cost of equivalent reinstatement where the purpose for which the land is used is one for which
there is no general demand or market and where reinstatement elsewhere is intended. Rule
(6), as I have said, preserves the right of the claimant to compensation for consequential loss.
I need say little about this first aspect of the concept of value to the owner since the essence
of both rule (5) and rule (6) is to enable the direct application of the objective of fair
compensation through an assessment of the actual loss suffered by the particular claimant.
The second aspect of the concept of value to the owner as the courts have referred to it lies in
the no-scheme rule; but to say that compensation is to be based on the value to the owner and
not the value to the purchaser is of no assistance in establishing what the scope of such a rule
should be. The value to the owner is (or includes) what a buyer would pay him to sell the
land. An owner may sell the land to a developer. He would never have developed it himself.
But he will receive development value for it. That is the value to him because it is what the
buyer, a developer, would pay.
The value to the owner was at an early stage held to consist of all the advantages that the land
possessed as they existed at the date of valuation.6 In modern terms such value could
comprise the value of the land for its existing use, for the scheme development and for any
alternative use. It has never been the law that the use to which the acquiring authority
propose to put the land must be disregarded. The value of land for development, even before
the era of planning, has always been an essentially community-created value. The owner of
agricultural land on the periphery of a town became rich when he sold the land for
5
6
Horn v Sunderland Corpn [1941] 2 KB 26 , at 49
See eg R v Brown (1867) LR 2 QB 630
5
development or developed the land himself and sold or let the property upon it. Mayfair and
Belgravia were once agricultural land, and London’s demand for housing land created there
the wealth for the richest of dukedoms. Even the value of land for agriculture was
community-created because it arose from the demand for food. Land on the periphery of a
town might become, as it was put, “dead-ripe” for development when the roads and sewers
extended to it, while other land beyond, with the prospect of future development, would have
a value elevated above the agricultural value and determined by its development value
deferred by an appropriate number of years.
What planning did was to shift the values that would have prevailed in its absence. Town
planning schemes prepared under the Housing, Town Planning, etc Act 1909 and later Acts7
deprived some land of its development value and increased the value of other land.
Compensation was payable under those Acts for the loss of value. But the landowner whose
land was increased in value was allowed to keep the increase. The question of betterment
came to the fore during the Second World War, and the result was the nationalisation of
development value under the 1947 Act, which introduced universal planning.
The removal or taxation of development value, though having a clear basis in principle, such
value being community-created, was found to be impracticable. It was an undue inhibition to
development, and compulsory purchase was insufficient to make land available for this
purpose. So for the last 60 years, except for some unsuccessful attempts at taxation (and of
course capital gains tax, which is not confined to land) the landowner has been able to keep
the development value of his land which planning has created. It does not matter that the
value may have been created by a developer achieving the grant of planning permission. The
value is his. And if his land is compulsorily acquired for development he is accorded an
assumption of planning permission for such development upon it.8
The no-scheme rule (or a no-scheme rule) was the product of cases decided under the Lands
Clauses Act and similar legislation in Commonwealth countries. Its origins appear to have
been a view that the undertaker who had gone to Parliament to get statutory powers for his
scheme should not have to pay for any value of the claimant’s land that had been created by
the statutory powers that he, the undertaker, had achieved for himself.9 What the – or a – noscheme rule may do is to exclude such increased value as arises by reason of the factor or
factors to which the rule makes reference. And the factors, and thus the rule can be variously
expressed. The increase in value to be excluded could be that arising from:
(a) the existence of the acquiring authority’s statutory powers, or some of them ; or
(b) the exercise, past or prospective, of those powers; or
(c) the implementation, past or prospective, of the scheme underlying the acquisition; or
(d) the particular requirement of the acquiring authority for the land; or
(e) the special suitability of the land for a purpose to which it could only be applied under
statutory powers.
7
The Town Planning Act 1925 and the Town and Country Planning Act 1932
Land Compensation Act 1961 section 15
9
See In re Lucas and Chesterfield Gas and Water Board [1909] 1 KB 16
8
6
All of these alternatives had been identified, though not necessarily precisely in these terms,
by decisions of the courts at the time of the Scott Committee’s recommendations 10 on the
rules that came to be enacted in section 2 of the 1919 Act. It was the last two of these five
factors (the particular requirement of the authority for the land and its special suitability) that
were embodied in rule (3), and it is difficult to see, as a matter of statutory construction, how
any of the other factors, deliberately omitted from the rule as they obviously were, could be
treated as extra-statutory qualifications to rule (2), the value of the land.
That, however, was what happened in Pointe Gourde,11 and the two-page ex tempore
judgment given by Lord MacDermott in the Privy Council had, eventually, huge
repercussions for the law of compensation. In Spirerose Lord Walker said:12
“Quite apart from its subsequent history, I find Pointe Gourde itself a rather surprising
decision.”
It certainly seems to me surprising. The case concerned the compulsory purchase of land in
Trinidad during the second world war to enable the US Government to establish a naval base.
Part of the land acquired consisted of a limestone quarry which, at the time of acquisition,
was being conducted as a profitable going concern. The quarry stone had a particular value to
the US authorities because they needed stone for the purpose of building the naval base. The
tribunal which assessed the compensation awarded for the quarry land a sum that included the
special value of the quarry having regard to the special needs of the US for the stone. The
relevant local legislation included rule (3), in the same terms as in the 1919 Act, and it
appears that the only point argued was whether the extra amount of this special value should
be disregarded under that provision. Lord MacDermott held that the provision did not apply
since the references in rule (3) to "…. a purpose …." to which the land could be applied
connoted "a use, actual or potential, of the land itself" and could not be regarded as meaning
a purpose "which is only concerned with the use of the products of the land elsewhere". But
he concluded, although the point had not been addressed in argument, that the extra amount
was excluded by a different, non-statutory, version of the no-scheme rule, which he
encapsulated a short sentence. As Lord Scott observed in Waters,13 it is difficult to see why
the special need would not have been excluded by rule (3) since the unquarried stone at the
valuation date was a part of the land and its commercial potential was an element in the value
of the land.
The subsequent history of Pointe Gourde is remarkable. In cases decided before the 1959 Act
the case was only mentioned for what it decided about rule (3). Then came the 1959 Act,
which provided that in assessing compensation regard could be had both to scheme
development value and alternative development value and prescribed planning assumptions
about each of these as well as disregards (no-scheme disregards) that were consequential
upon this. Its provisions were shortly to be contained in the consolidating Act of 1961.
10
In the Second report to the Ministry of Reconstruction of the Committee Dealing with the Law and Practice
Relating to the Acquisition and Valuation of Land for Public Purposes Cd 9229 (1918). The chairman, Leslie
Scott QC, later became Scott LJ.
11
Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565
12
Transport for London v Spirerose Ltd [2009] 1 WLR 1797 at 1085H
13
Waters v Welsh Development Agency [2004] 1 WLR 1304 at 1327G
7
I should say that I am not sure that I agree with those who have attacked the 1961 Act for its
alleged inadequacies and obscurities. What the policy makers and the draftsman had in 1959
was an extraordinarily difficult task: how to give claimants the benefit of planning permission
where previously compensation had been limited, in pure simplicity, to existing use value.
Decisions of policy – for example, should it be assumed that planning permission for scheme
development and alternative uses had actually been granted? in what way should no-scheme
disregards be built in? – had to be made, and severe challenges to drafting – how do you deal
with Housing Act cleared site value in the Schedule 1 disregards? for instance – had to be
faced. What it sought to do was to be specific, both in relation to planning assumptions and
the disregards for scheme development. It was Schedule 1 that spelt out what those
disregards were.
It was in a case concerning the valuation of land in a clearance area that Pointe Gourde was
first significantly identified in relation to the rule as encapsulated by Lord MacDermott. That
case was Davy v Leeds,14 which reached the Court of Appeal in 1964. There Lord Denning
MR said15 about the provisions: “I am inclined to think that this statute specifies the method
of valuation in such detail that there is not much room for the application of general
principles, but I am glad to find that the conclusion I have reached is in accordance with the
general law which would have applied in the absence of express provision…” and he then
quoted Lord MacDermott. Later, in the House of Lords, Lord Dilhorne said16 that what are
now section 6 and Schedule 1 gave statutory expression to the principle stated by Lord
MacDermott.
Thus in Davy the references to Pointe Gourde were made for no wider a purpose than of
observing that section 6 and Schedule 1 were consistent with the words of Lord MacDermott.
In the next case, however, Pointe Gourde was relied on to produce a result that would not
have flowed from the specific provisions of the Act. That case, Camrose v Basingstoke,17
was decided by the Court of Appeal three months after the House of Lords decision in Davy.
Land had been compulsorily acquired for development pursuant to an agreement under the
Town Development Act 1952. Planning permission was to be assumed for the development
under section 15(1). Under section 6 and Case 4 of Schedule 1 any increase or diminution in
value due to the development of land, other than that acquired, in the course of town
development was to be disregarded. The problem on the merits (as they were seen by the
Lands Tribunal and the Court of Appeal) was that there was no provision for disregarding the
TDA agreement itself, and the landholding of the claimant was so large that disregarding the
prospect of developing the other town development land had no effect on value. Lord
Denning had no difficulty in surmounting this problem and producing the result that he
considered to be right. He said:18
“The explanation of section 6(1) is, I think, this: The legislature was aware of the
general principle that, in assessing compensation for compulsory acquisition of a
defined parcel of land, you do not take into account an increase in value of that parcel
of land if the increase is entirely due to the scheme involving the acquisition. That was
14
Davy v Leeds Corpn [1964] 1 WLR 1218 (CA); [1965] 1 WLR 445 (HL)
[1964] 1 WLR 1218 at 1224
16
[1965] 1 WLR 445 at 453
17
Camrose v Basingstoke Corpn [1966] 1 WLR 1100
18
[1966] 1 WLR 1100 at 1107
15
8
settled by Pointe Gourde… That decision has since been approved by the House of
Lords in Davy v Leeds Corporation…
(Of course it had not been approved by the House of Lords so as to justify its application as
an extra-statutory rule. Lord Dilhorne had merely noted, as Lord Denning himself had done,
that section 6 accorded with the principle that Pointe Gourde had stated.) Lord Denning went
on:
…It [the general principle] is left untouched by section 6(1). But there might be some
doubt as to its scope. So the legislature passed section 6(1) and the First Schedule in
order to make it clear that you were not to take into account any increase due to the
development of the other land, namely, land other than the claimed parcel. I think that
the decision in the Pointe Gourde case covers one aspect: and section 6(1) covers the
other: with the result that the tribunal is to ignore any increase in value due to the Town
Development Act, both on the relevant land and on the other land.”
In other words, he was saying, despite enacting a statute that codified the no-scheme rule in a
specific and detailed way, Parliament intended that another version of the no-scheme rule
should also apply but should not appear in the codification. If it was the need for clarity that
underlay the provision, as Lord Denning suggested, this was an odd way to seek to achieve it,
given that the new provisions expressly gave the claimant the benefit of an assumption of
planning permission for scheme development on his parcel of land. John McEnroe, had he
been present in court at the time, would no doubt have been moved to make the observation
he habitually reserved for decisions of a doubtful nature. But Lord Denning was serious, and
within a few years the single sentence from Lord MacDermott’s judgment, scarcely noticed
before Davy v Leeds, had burgeoned into something akin to a piece of legislation paralleling
the statutory code; and numerous references to it were to be found in the new textbook of the
1970s, Corfield and Carnwath on compensation,19 the joint work of a well-known silk in the
field and a promising young junior.
I must not lose sight of the first of my themes, and the Point Gourde case seems to me to
provide a very good illustration of my argument that the no-scheme rule, however it may be
expressed, cannot be guaranteed to produce a result that everyone would agree to be fair.
Although there seems to have been no question on anyone’s part since the case was decided
that it was fair that the quarry owners should not receive any part of the extra value created
by the proposal to construct a new US naval base, a contrary view would not, I think, be
manifestly untenable. Alter the facts somewhat and a quite different picture would almost
certainly emerge.
Imagine a present-day proposal, not to build a war-time allied naval base on a West Indian
island, but to extend an existing port there so that it can accommodate cruise liners. The
quarry and the land needed for the port extension, the subject of the compulsory acquisition,
are all in the ownership of the quarry company. The port is owned by the municipality, the
acquiring authority, which is thus the only potential purchaser of the land for the harbour
extension. In the absence of the scheme there would have been very little demand for the
19
Compulsory Acquisition and Compensation: Sir Frederick Corfield QC and Robert Carnwath (1978)
9
quarry’s stone, owing to the weak local economy. The effect of the harbour extension and
the visits of the cruise liners will be to transform things in the locality. Traders will strike it
rich, and there will be a knock-on effect on the local economy to the benefit of most of the
inhabitants. The municipality will luxuriate in the income from the harbour dues. The quarry
owner may be able to look forward to being entertained on the yachts of his newly-enriched
friends in the town; but he will no longer have his business, and, under the no-scheme rule he
will receive as compensation only the low value that the quarry had before the scheme.
Would that be fair compensation?
One of the features of the no-scheme rule, which is shared by many provisions in the
compensation legislation that impose qualifications or restrictions or requirements, is that it is
binary in nature. Either you fulfil the qualification or you don’t. Either the restriction applies
or it doesn’t. Such a cut-off may have enormous consequences for the compensation payable.
A landowner whose small area of agricultural land holds the key to a major development
might expect to receive up to 50% of a development value running into many millions of
pounds. If the no-scheme rule is held to apply, he will lose out entirely on this value. So on
the question “What is the scheme to be disregarded?” may depend whether compensation of
many millions of pounds is payable or only a small amount. The question is one of fact for
the Tribunal to determine; and the decision of the Tribunal may in the event be the most
marginal of decisions; and it will be unappealable except for an error of law. This feature of
the no-scheme rule is, it seems to me, an unattractive one, but it is inevitable if there is to be
such a rule at all.
Since for the application of the Pointe Gourde version of the no-scheme rule identification of
the scheme is all-important, it is obviously desirable that the criteria by reference to which, as
a matter of law, the scheme is to be identified should be as clear as possible. Lord
Carnwath’s superb Law Commission Report of 200320 included in the code that it
recommended for adoption a provision that stated how the scheme – or, as the report referred
to it, the project – was to be defined. It is a matter for regret that the code as a whole,
including this project-definition provision, should not have been the subject of legislation,
although of course the recommendations on planning assumptions have essentially been
enacted by the Localism Act – thanks to House of Lords decision in Spirerose and the
admirable efforts of the Compulsory Purchase Association. We are left with the guidance
contained in the House of Lords decision in Waters v Welsh Development Agency, and in
particular Lord Nicholls’s pointers.21
I should say two things about Waters. That was the case, you will recall, in which the
claimants’ 225 acres of low-lying farmland adjacent to the Severn Estuary at Nash, near
Newport, were acquired as part of a proposed nature reserve. The reserve was needed in
connection with the Cardiff Bay development in order to comply with European directives by
compensating for the loss of an SSSI – mudflats that attracted wading birds – that would be
lost when the Bay was flooded. Of the very limited number of sites that might have been
suitable the one that included the claimants’ land was considered the most suitable. The
claimants sought compensation at a value that reflected, as they put it, the land’s
“indispensable status vis-à-vis the Cardiff Development Scheme”. The acquiring authority
20
21
Towards a Compulsory Purchase Code: (1) Compensation – Final Report (Law Com No 286)
[2004] 1 WLR 1304 at para 63
10
said that such value was excluded both under rule (3) in view of its special suitability and
under Point Gourde. In the Tribunal the argument on rule (3) failed, as it had to, because of
the restrictive interpretation given to “special suitability” in Batchelor v Kent County
Council22 in the Court of Appeal (put shortly, “special” equals “unique”) but it succeeded on
Pointe Gourde, and the decision was upheld on appeal.
The first thing I have to say about Waters is this. Before the Court of Appeal and the House
of Lords rule (3) was not advanced. Lord Scott considered that the claim ought to fail on the
basis of rule (3) because Batchelor was wrongly decided: special did not mean unique, but
special.23 The other Law Lords thought that it was too late to overrule Batchelor, even
though it had been decided only 15 years earlier and there would not have been any apparent
adverse repercussions in making the correction. As in Pointe Gourde itself the statutory
codification of the no-scheme principle in rule (3) was given, unnecessarily it seems to me, a
restrictive interpretation, only for the result that a less restrictive interpretation would have
given to be produced by applying an extra-statutory version of the rule. I do find that
surprising.
The second thing I have to say about Waters is to relate it to my theme: that what is fair
compensation when there is a cut-off to be applied is often a matter on which different views
can reasonably be held. The Cardiff Bay development went ahead. Where once there were
sloe-black mudflats there is now a deep blue yacht-bobbing sea, and commercial
development of high quality and considerable value covers the lost land of Tiger Bay. This
transformation would not have been possible without the 225 acres of low-lying farmland
owned by the Waters family further up the Severn estuary. Ought they in fairness to have
received for the land that was taken from them compulsorily at least something that reflected
the great wealth that the Cardiff Bay scheme has created? Ought those in Cardiff itself whose
land was compulsorily acquired have received more than its no-scheme value?
I ask these questions not because I think that there is a clear and indisputable answer to them
but because I know that there is not. Different views can reasonably be held, both generally
and in relation to particular cases, on what is fair compensation for the value of land acquired
for scheme development. I respectfully differ from Lord Woolf’s view in Waters24 that all
that is necessary to produce fair compensation is to have broad general parameters and then
to leave it to the valuers. What is important, in my view, since fairness is a matter that can
be so variously judged, is that the law should be as precise as possible.
Since different views can reasonably be held about the extent to which the claimant should
enjoy or be denied the benefit of scheme value it must be the role of policy to determine this.
I can see that in the present age, where powers of compulsory purchase are conferred to
enable profitable development to be carried out, there are good arguments for enabling
claimants to enjoy a greater share of such value than is possible under the present rules. How
this might be done, however, would require careful thought. The need is for clarity, and
legislation in this area needs to be prescriptive. I think that the judicial superimposition of
22
(1989) 59 P & CR 357
[2004] 1 WLR 1304 at para 112
24
[2004] 1 WLR 1304 at para 71
23
11
the wide general proposition stated in Pointe Gourde on the precise code enacted by
Parliament has been unfortunate. If the disregards in section 6 and Schedule 1 appeared to be
incomplete (and there were obvious arguments that in relation to the Camrose type situation
or that in Wilson v Liverpool25 they were), then the proper course was for those responsible
for the code to amend it by legislation that addressed in precise terms the additional
disregards that were seen to be needed. What fairness demands is that limitations on and
qualifications to the compensation that is payable should be prescribed and that this should be
done in terms that are as clear as possible.
The same goes for all those provisions that give additional rights to compensation. In all
cases where provisions for additional compensation have been introduced by legislation, this
feature of the cut-off that I have noted applies. The house owner who has been in occupation
for 365 days prior to displacement will receive a home loss payment; the house owner who
has been in occupation for 364 days will receive no such payment. Whether particular works
– to extend facilities for aircraft at an existing airport, for instance – are such as to give rise to
compensation under Part I of the 1973 Act may well be a marginal question. To ask whether
it is fair that someone who falls on the wrong side of a cut-off should lose out, however, is
nothing to the point. There have to be qualifications, precisely stated, and while there can be
debate about what they should be it is ultimately for policy, expressed in legislation, to
determine them.
Injurious affection and the use of public works
I want to move on to say something about injurious affection and the use of public works.
Here we are concerned with compensation that is payable where no land of the claimant is
compulsorily acquired; and here the law is all about qualifications and cut-offs. It is
contained in the decisions under the Lands Clauses Act, with some minor statutory
modifications, and in the 1973 Act, which introduced a new entitlement in respect of the use
of public works. Let me note some of the qualifications and cut-offs.
First those that arise leaving aside the 1973 Act provisions. If some of your land is taken, let
us say part of your garden for a motorway on an embankment, you are entitled to
compensation for the diminution in value of what you retain. You are entitled to
compensation for the reduction in value of your house due to the visual effect of the
motorway on its embankment and the movement of the vehicles along it and to the physical
effects of noise and vibration and fumes. And you are entitled to compensation for the effect
of the whole length of the motorway, not just the bit of it on the land that was taken from
you.26 Your neighbour, none of whose land was acquired, is affected to a similar extent by
the motorway, but under the Lands Clauses Act (as it was interpreted) and its successor the
Compulsory Purchase Act he would be entitled to compensation only in respect of the
construction of the works and not their use and only if, in the absence of the statutory powers,
they would have constituted an actionable nuisance.
25
26
Wilson v Liverpool Corpn [1971] 1 WLR 302
Land Compensation Act 1973 section 44
12
The limitations on claims in respect of injurious affection where no land of the claimant has
been acquired are those that were laid down in 19th century cases in what are known as the
McCarthy rules, after the House of Lords case in which they were first collectively
adumbrated. I have always enjoyed Metropolitan Board of Works v McCarthy,27 not only
because the rules to which it gave rise seem to me have a welcome clarity about them, but for
another reason also. The essence of the rules were set out in the submissions of the Hon A H
Thesiger QC, the junior of the two silks appearing for the claimant, and were accepted by
their lordships, who went out of their way to pay tribute to Mr Thesiger’s advocacy. Lord
Cairns LC referred to Mr Thesiger’s “very able argument at your Lordships’ Bar”; Lord
Hatherley to “his able argument”; and Lord O’Hagan to his “very lucid and powerful
argument”. Lord Chelmsford, however, though agreeing on the outcome of the case, did not
join in these encomiums. He probably thought it would be indecorous to do so in view of the
fact that Mr Thesiger was his son. At the time Thesiger was 35. Lord Cairns had clearly
been very impressed indeed. Three years later in 1877, when Thesiger was still only 38, he
had him appointed a Lord Justice of Appeal, by far the youngest ever. He died when he was
only 41.
The severe limitations on claims for compensation for injurious affection where no land of
the claimant was taken led to the passing of Part I of the Land Compensation Act 1973.
Under its provisions compensation is payable to an owner whose property is diminished in
value by public works. But the provisions are a mass of qualifications and cut-offs. To be a
claimant you must be the resident owner-occupier of a dwelling or the owner-occupier of
agricultural land or land with an annual value of less than the prescribed amount. The
diminution in value must be due to the use of the works; and it must be caused by physical
factors – noise, vibration, smell, fumes, smoke and artificial lighting. The works must be
public works as defined; and they must consist of new construction or specified types of
alterations to existing works. And any claim must be made within the limited period spelt out
in the provisions.
The effect of all these qualifications and cut-offs is that there is huge scope for apparent
unfairness, where falling on one side of a specified requirement entitles you to compensation
but falling on the other leaves you with an uncompensatable loss. That, however, is
inevitable. In such compensation provisions there have to be qualifications and cut-offs. A
wide range of different views as to what each one should be may no doubt reasonably be
held, and it is the role of policy, expressed through legislation, to determine them. But the
scope for apparent unfairness inevitably remains.
Such problems as these come very much to the fore when a particular major infrastructure
project is proposed – a new airport or a new railway, for instance. Such projects also raise in
acute form the problem of blight, a matter strictly outside the range of the subject of this
lecture but one which deserves to be mentioned in this context. HS2, the proposed highspeed rail line to the midlands and then to the north, is the current, and paradigm, example.
27
(1874) LR 7 HL 243
13
The prospect of compulsory acquisition may well cause difficulties to the owner of land that
is potentially to be acquired and a fall in property prices. Provision is made under the blight
notice provisions in the Town and Country Planning Act 1990 enabling an owner to require
the acquiring authority to purchase his interest where certain qualifying conditions are met.
If the blight notice is accepted by the authority or confirmed by the Lands Chamber the
authority is required to purchase the land, paying for it the amount that would be payable as
compensation if had been acquired under compulsory powers. There is a widely held view
that in relation to some major linear projects these provisions do not go far enough. In the
case of HS2, because of what it referred to as the exceptional nature of the proposals, the
Government has proposed that it should go beyond the statutory requirements and accept
blight notices from all eligible property owners whose property is wholly within the
Safeguarded Area (approximately 60m from the line of the route), even if it is not clear that
the property will actually be required for the construction or operation of the railway, and to
consider for purchase on a case by case basis properties within what it calls the Voluntary
Purchase Zone (approximately 60m from the edge of the Safeguarded Area). Other
measures, a sale and rent back scheme and a hardship scheme, are also proposed.
And the question of fair compensation is, of course, much to the fore. At an early stage in the
scheme’s conception the then Secretary of State for Transport said this:
“Where a project which is in the national interest imposes significant financial loss on
individuals, I believe that it is right and proper that they should be compensated fairly
for that loss.”
It is unlikely that anyone would take issue with that. Of course, it was only financial loss for
which fair compensation was said to be right and proper; but, under the present proposals,
within the Safeguarded Area the standard home loss payment of 10% up to the £47,000
maximum would be payable, although no home loss payment would be made with the
Voluntary Purchase Zone.
The HS2 Action Alliance in its response to the Government’s Phase 1 consultation argued
that the £47,000 cap should be removed, that the 10% should be increased and that home loss
payments should be made within the Voluntary Purchase Zone. As you will know, the
Alliance successful challenged by judicial review the lawfulness of the consultation on the
proposed compensation arrangements, and in the light of Ouseley J’s judgment28 the
Government is re-running the consultation exercise. Whatever the outcome of the review
may be you can be sure that the Government will say that it is satisfied that its final proposals
provide for the payment of fair compensation and the Alliance will say that they do not.
Different views as to what is fair can reasonably be held, and, as I have said, the great
difficulty with setting limits for this purpose is that the impact of the loss of a home varies
greatly between individuals.
Conclusions
28
R (on the application of Buckinghamshire County Council and others) v Secretary of State for Transport
[2013] EWHC 481 (Admin), 15 March 2013
14
Where does all this lead? I have suggested, my second theme, that the law needs to be both
prescriptive and as clear as possible. Uncertainty about what the law is has the potential for
imposing increased costs on the parties as they seek to resolve their differences. And in those
areas where divergent views may reasonably be held about what would be fair, it is
particularly important that the law should be clear. I have made specific mention of the noscheme rule in this respect and to the cut-offs and requirements that statute has imposed.
Beyond that, however, to be aware that there is scope for unfairness, or the perception of
unfairness, in compensation for the compulsory purchase of land and for the effect of public
works suggests, in my view, the following.
Firstly, it is only where there is a compelling case in the public interest that compulsory
purchase of a person’s land should be authorised. This is the recognised fundamental
criterion, but it needs to be borne in mind throughout the process. Secondly, acquiring
authorities should seek to meet the reasonable expectations of landowners from the earliest
stages of a project; and for major proposals at least they should consider going beyond their
basic statutory duties in relation to blight. There is moreover no reason why an authority
should not go beyond what the law requires in relation to compensation or community
benefits; and indeed the perception of fair dealing on its part is likely to assist in gaining local
acceptance for the project if it does so. Thirdly, when powers of compulsory acquisition are
exercised the landowner must always have the benefit of expert valuation (and, where
necessary, legal) advice and representation and should be recompensed in full for the
reasonable costs of this. Compulsory purchase compensation, as we know, raises difficult
questions both because of the hypothetical nature of the valuation exercise and the
complexities of the legal basis on which it has to be carried out. Specialist expertise is
needed, and claimants need to know where they can find it. Fourthly, where negotiation
between claimant and authority has failed to reach agreement, the processes for resolving the
disagreement need to be appropriate, proportionate and fair; and I want, finally, to say a little
more about this.
It is obviously necessary that some provision is made by statute for resolving disputes as to
compensation, and indeed this has been done in changing ways through the successive eras of
compulsory purchase that I referred to at the outset. Up to the 1919 Act it was arbitrators and
juries that determined claims (apart from the small claims that went to the magistrates). After
the 1919 Act it was the Official Arbitrators. They were surveyors, not lawyers, and they did
not give reasoned decisions. Appeal from them lay by case stated to the High Court. When
the Lands Tribunal was established in 1949 it was composed of both lawyers and surveyors
with appeal lying to the Court of Appeal. Its decisions, all of which are published, establish
points of law and valuation principle – an important function in the field of compensation. I
was privileged to be President of the Tribunal and its successor the Lands Chamber for 14
years up to the end of last year. Following my recommendation the Lands Chamber now has
a High Court judge as President and also a Deputy President, both experts in their fields, and
under Keith Lindblom and Martin Rodger it is now, I believe, as strong as it has ever been,
with the expert circuit judges and outstanding surveyors who make up the membership.
In recent years both the courts and the Government have given encouragement to alternative
dispute resolution – the determination of disputes in private, by less formal and less costly
procedures than formal litigation. In the Lands Chamber itself provision is made in the
Practice Directions for proceedings to be stayed to enable alternative dispute resolution to be
15
pursued. There are different types of ADR – arbitration, neutral evaluation, expert
determination and mediation – and they all have these things in common, that they are
private, it is the parties that agree on what issues are referred, and the procedures for their
resolution are tailor-made for the individual case. Arbitration and expert determination
produce decisions that are binding on the parties; neutral evaluation and mediation do not –
they assist the parties in reaching agreement. The issues referred may be the entirety of the
claim or an aspect or aspects of it only, perhaps a matter that, if determined, may unlock the
door to a negotiated settlement.
My own view is that ADR is of great potential importance in the field of compensation, but if
it is to fulfil this potential two things are necessary. Firstly the parties must know where and
to whom they can go for the particular types of dispute resolution. This is essentially a matter
for the professionals, lawyers and surveyors, offering these services, who need to organise
themselves for this purpose, so that they and the services they offer can be readily identified.
At the moment I do not believe that such organisations exist. It is important that they should
do so. Secondly those advising claimants and acquiring authorities need to be aware of the
different sorts of ADR and how they can be effectively used, so that they can guide their
clients and encourage the other side to follow the route that is likely to resolve the claim in
the most cost-effective and expeditious way.
This is not the occasion, even if there were time, to say anything in detail about the different
types of ADR. But the subject-matter of this lecture has been fair compensation, and for my
part I have no doubt that compensation that is seen by both parties as the fair result of the
compulsory acquisition or the adverse effects of the project will often be achieved best in one
of these alternative ways.
16