Land Compensation Manual Section 2: Compensation for land taken

Practice note 2/5: Determining the extent of ‘the scheme’

The Valuation Office Agency`s technical manual covering all aspects of compulsory purchase and compensation.

General

In post-war years the conception of comprehensive redevelopment, new town, and town development entailed complicated and far reaching schemes requiring statutory definition of what comprised ’the scheme’ for the purpose of the compulsory purchase compensation code. Provisions giving statutory effect to the ‘no scheme’ principle insofar as it relates to the effect of actual or prospective scheme development and the prospect of acquisition and defining the relevant schemes are now embodied in the LCA 1961 with amendments in the New Towns Act 1981, the T & CP Act 1990, section 51 LCA 1973 and section 149 Local Government Planning and Land Act 1980.

However, the Pointe Gourde principle was not superseded by the statutory provisions in section 6 and the First Schedule LCA 1961. Both exist side by side and both must be applied where on the facts of the case they are capable of applying independently of each other.

The extent of the scheme is a question of fact. It is not necessary for the scheme to provide for the acquisition, it is enough that it underlies the acquisition.

The scheme under Pointe Gourde is wider in application than under section 6 LCA 1961 as it embraces the relevant land and all other land in the scheme. Section 6 applies only to the development of land defined in the column headed ‘development’ in the First Schedule (which excludes the relevant land ie the land of the particular claimant). The Pointe Gourde scheme can therefore extend to a larger area than the area to which cases 1 and 2 of the First Schedule LCA 1961 can apply. In Cases 3, 3A and 4 of the First Schedule however it is thought that the scheme could not extend beyond the designated or defined area.

The Pointe Gourde principle relates not to the ascertainment of what is the interest to be valued, but to the value of the interest when ascertained.

An assumption of planning permission for the development to be undertaken by the acquiring authority is mandatory in all cases whether or not this section 15(1) LCA assumed planning permission would have been forthcoming in the ‘no scheme’ world. The assumed planning permission is not necessarily of value as it is not to be assumed that the roads, services and infrastructure required to support a large scale development would necessarily be forthcoming as a consequence of an assumed permission.

In the case of other land within the scheme, the planning circumstances are deemed to be those that would have appertained in the ‘no scheme world’. While this means that competition from allocations or planning permissions arising from the scheme cannot be taken into account unless these would have also been available in the ‘no scheme’ world, there would normally be other land that could have been expected to attract planning permission in the ‘no scheme’ world and it is important to identify such land and to reflect the effect of its competition in the valuation of the relevant land.

The general valuation approach is to disregard scheme development that has in fact taken place or will in all probability take place owing to the scheme (except insofar as such development would have taken place or be likely to have taken place in the absence of the scheme) and to substitute the development that would have taken place or would have been likely to have taken place in the future in the ‘no scheme’ world.

The Pointe Gourde principle and section 6 and First Schedule LCA 1961 also apply to the assessment of compensation for disturbance.

In considering the ‘set off’ provisions under section 7 and section 8 LCA 1961 in regard to other contiguous or adjacent land, regard may be had only to such land as is included in Part I First Schedule to the Act. The provisions will not apply to land outside the First Schedule which for other purposes might be included under the Pointe Gourde rule. There may also be specific betterment provisions in the Act under which the acquisition is taking place eg section 261 Highways Act 1980.

Case law reports

Pointe Gourde Quarrying and Transport Co. Ltd v Sub-Intendent of Crown Lands (1947) AC 565

A limestone quarry was acquired in order to make it available as part of naval base to be developed in Trinidad. Compensation was assessed at $86,000 for the quarry as a going concern and an additional $15,000 was awarded to reflect the special value that the stone product would have had for the construction of the naval base.

The issue was whether the additional $15,000 for the additional value of the stone product should be allowed. The Supreme Court of Trinidad and Tobago decided that it was not due to the effect of Rule (3) which excluded the ‘special suitability of adaptability of the land’. On appeal the Privy Council of the House of Lords determined that Rule (3) did not apply in this case since it dealt with the suitability or adaptability of the land not the products of the land.

However, on the basis of previous case law they decided that the additional value could not be awarded. Lord McDermott said “It is well settled that compensation for the compulsory acquisition of land cannot include an increase in value which is entirely due to the scheme underlying the acquisition”.

This became known as the Pointe Gourde Rule.

Viscount Camrose v Basingstoke Corporation [1966] 3 All ER 161

Section 6 of the LCA 1961 provides that no account shall be taken of any increase or diminution in the value of the ‘relevant land’ which is attributable to the carrying out or the prospect of being carried out of any development of any of the ‘land authorised to be acquired’, other than the relevant land, as is referred to in the second column of the First Schedule to the LCA 1961 that would not have taken place had the acquiring authority not acquired or proposed to acquire that land.

The ‘land authorised to be acquired’ comprises the aggregate of the land comprised in the CPO, area of comprehensive development etc and the ‘relevant land’ comprises the land to which the notice to treat refers.

In this case the claimant argued that any increase in the value of the ‘relevant land’ due to the acquiring authority’s proposal should thus be taken into account in assessing compensation. However, Lord Denning explained that the Pointe Gourde rule supplemented and enlarged the statutory ‘no scheme’ rule. The Pointe Gourde rule is wider than the statutory rule as set out above and would thus preclude the claimant from receiving any increase in value of the ‘relevant land’ (the land to be acquired from him) that was due to the proposals of the acquiring authority.

Thus the Court held that section 6 LCA 1961 covered development of other land within the CPO, or area of comprehensive development etc, and the common law Pointe Gourde principle covered development of the ‘relevant land’. It was also established that regard should be had to the prospect of as much of the actual or proposed scheme development as would have taken place in the absence of the scheme.

Wilson v Liverpool Council (1971) EGD 144

In 1960 the Council resolved to develop 391 acres of land for housing and acquired 305 acres by agreement. In 1963 the Minister granted the Council permission to develop the whole of the land. A CPO to acquire the remaining 86 acres was confirmed in 1965. The claimant owned 74 acres of the land to be acquired by CPO.

The question arose as to whether the development of the land already acquired, which enhanced the value of the claimant’s 74 acres, should be disregarded in assessing the compensation. The LT held that the Pointe Gourde Rule applied to supplement the provisions of section 6 and Schedule 1 LCA 1961 and disregarded the additional value given to the claimant’s land by the development of the 305 acres already acquired by agreement.

The Court of Appeal dismissed the claimant’s appeal against the LT decision. It held that a scheme was a progressive thing that had a progressive effect on the values as it became more precise and better known. It determined that the enhanced value should be disregarded under the Pointe Gourde Rule since the whole of the area of residential development being undertaken by the Council comprised the scheme. It was for the LT to determine as a matter of fact the extent of the scheme.

The value was thus determined at £6,700 per acre less a deduction of approximately £1,350 per acre to reflect the acceleration of development in the area and the investment in infrastructure resulting from the Council’s scheme.

Myers v Milton Keynes Development Corporation (1974) 27 P&CR 518

The applicant owned 324 acres of land within the site designated for Milton Keynes New Town that was to be acquired for residential development within the new town. Under sections 15 of the LCA 1961 the claimant was entitled to assume the grant of planning permission for the Development Corporation’s proposals for the land that was to be acquired. Under the development plan for Milton Keynes the claimant’s land was to be developed in the second ten-year phase of the scheme.

At first instance the LT held that the assumed planning permission was a direct result of the scheme of the acquiring authority and must therefore be ignored in assessing the compensation under the Pointe Gourde Rule.

On appeal, the Court of Appeal determined that there was no conflict between the planning assumption to be made under section 15 LCA 1061 and the Pointe Gourde Rule. The assumed planning permission helped to identify the interest to be valued and the Pointe Gourde Rule assisted in the ascertainment of the value of that interest. Thus the land must be valued as if there had been no proposal for a new town but as if in the ‘no scheme world’ the claimant had been granted planning permission for residential development deferred ten years.

Lord Denning said regarding a valuer’s task of valuing in the ‘no scheme world’ … he must let his imagination take flight to the clouds. He must conjure up a land of make believe where there has not been, nor will be, a brave new town but where there is to be supposed the old order of things continuing’….

Lord Denning also illustrated the difference between demand and planning permission by the example of land with planning permission for a petrol station adjacent to a proposed motorway across Dartmoor. The planning permission for the petrol filling station without demand for that would be valueless. With the demand created by the scheme it would have great value.

Jelson v Blaby District Council (1977) 2 EGLR 14

A plan made in 1951 for a ring road around Leicester city. A strip of land just over one third of a mile long and 140ft wide was reserved for the ring road. The strip comprising about six acres went through the middle of a site that the claimant was developing for housing. The land on either side of the strip was developed on the basis that the road would be built. The houses were constructed so as to face the ring road.

The road scheme was abandoned in 1961 because it would not fit in with the new M1 motorway. Jelson Ltd then made a planning application for the development of the strip of land. Following a planning inquiry planning permission was refused.

In 1965 Jelson Ltd served purchase notices on the local council requiring the council to purchase the land since it had become incapable of reasonably beneficial use. After an inquiry the purchase notices were confirmed. The claimants then applied for section 17 certificates for the land. The Minister ultimately issued nil certificates on the basis that the planning issues had to be determined as at the date of the Compulsory purchase which was when the Purchase Notices were served. Matters that took place before that date were immaterial to the consideration of the planning circumstances.

The Court of Appeal on an appeal from the LT determined that the Section 17 Certificate Application had to be considered at the date of the Compulsory Proposal ie when the purchase notices were accepted (Jelson Ltd v Minister of Housing and Local Government (1969) 20 P&CR 663). This was similar to the decision of the House of Lords in the Fletcher case in 2000.

Jelson Ltd then applied to the LT for the determination of compensation under the Purchase Notice for the land. Blaby District Council appealed the LT Decision to the CA. The CA decided that the claimant should have the full development value of the land on the basis that under the Pointe Gourde Rule the road scheme should be disregarded. They therefore valued the land as if it had been available as part of the original development site and awarded £60,000 instead of £6,000 as part of the already developed site. The Court also said that the depreciation in the land caused by the abandoned road scheme could also have been disregarded under section 9 LCA 1961 due to the indication in the Development Plan of 1951 that the land would be acquired by Compulsory Purchase.

Director of Buildings and Lands v Shun Fung Ironworks Ltd (1995) 19EG 147 (PC)

In November 1981 the Hong Kong Government informed the claimant that it intended to develop its factory site as a new town. In 1985 a CPO was made and possession of the property was given up by the claimant in January 1987.

Various issues were determined in this case but one relevant to the scheme was decided.

The claimant sought compensation for loss of profits from the outset of the scheme. By 1982 the claimant’s customers had become aware of the proposed acquisition and started to place their long term orders for steel bars elsewhere. The claimant thus suffered a decline in trade and a loss in profits. The acquiring authority denied that any loss of profits incurred prior to acquisition should be compensated.

The PC determined that all losses caused by the scheme whether before or after actual acquisition were compensatable under the Pointe Gourde principal so long as they were a direct result of the scheme and the claimant had acted reasonably in attempting to minimise his losses. The PC compared the scheme to a shadow that gradually grew darker as the scheme became more certain. The period from the announcement of the scheme up to the date of acquisition was referred to as the ‘shadow period’. The scheme was held to have started in 1981 when the acquiring authority announced their intention to acquire the claimant’s land.

The PC accepted that if the scheme had been cancelled prior to Notice to Treat the claimant would not have been able to claim compensation for its loss of profits.

Waters v Welsh Development Agency (2004) RVR 153 (HL)

Under the Cardiff Bay Barrage Act 1993 the Cardiff Bay Development Corporation constructed a barrage that flooded inter-tidal mudflats that had been designated a SSSI. The construction of the barrage started in 1994. To overcome objections from the Countryside Council for Wales, the RSPB and the EC the government undertook to create replacement wetland habitats. In January 1996 the SoS for Wales announced that the Gwent Levels Wetland Reserve comprising 1,000 acres would be established 10 miles up the coast from Cardiff Bay and would include the claimant’s land comprising 225 acres. In 1998 the Land Authority for Wales used its own statutory powers to acquire the claimants land although the CBDC provided the funds for the acquisition. The LAW subsequently vested the site in the CBDC which in turn transferred the site to the CCW.

The claimants had put forward three valuations: £4,500 per acre as agricultural land, £13,000 per acre as a nature reserve and £28,000 per acre as ‘key’ or ‘ransom’ value in relation to the Cardiff Barrage Scheme.

The question was whether the construction of the barrage and the acquisition of the land for the wetlands reserve could be considered to be one or two schemes. The barrage scheme and the acquisition of the land for the wetlands reserve has been effected by different public bodies under separate compulsory powers. The claimants’ land had not been identified for acquisition until after the barrage project had been started. If there were two schemes the addition value of the claimants’ land as a ‘key’ to the development of the Cardiff Bay Barrage could be reflected in the compensation. If there were only one scheme, the ‘key’ value must be disregarded. The LT and the CA both determined that there was only one scheme. The claimants appealed to the House of Lords.

The House of Lords determined that the Cardiff Bay Barrage Scheme had proceeded on the basis that some compensatory wetlands would be provided. It could not have proceeded without assurances from the government on that point. There was no evidence that the value of the claimants’ land had been enhanced prior to its selection as part of a wetlands reserve in 1995. Therefore it was reasonable to consider the acquisition of the claimants’ land as an integral part of the Cardiff Bay Barrage project. The additional value of the land as a ‘key’ to the barrage scheme should be ignored in assessing the compensation for the claimant’s land.