[2023] UKUT 217 (LC)

Rather than relying on the evidence of their experts in property valuation both parties looked to specialists in the assessment of compensation to assist the Tribunal in quantifying the claim. We question why this is thought to be a helpful approach. It almost invariably means that those who have been involved in negotiating on behalf of one side or the other (often for many years) are asked at the eleventh hour to clear their minds of the interests of their client and acquire qualities of objectivity and impartiality which, in practice, are beyond them. Rather than providing expert evidence on issues of fact or judgment they are expected to be the mouthpieces through whom factual evidence of which they have no first-hand knowledge is presented and arguments on one side or the other are developed. We do not single out the witnesses in this case for criticism. They have done their best to be objective, but to a greater or lesser extent that state of mind has proved to be unachievable, as it almost always proves to be unachievable by experts in their situation.

Mr Cook reviewed much of the factual detail in the case and the principles of compulsory purchase compensation; Mr Kershaw did the same. In neither case was it necessary.

Mr Cook presented the claimant’s case on the ‘before’ and ‘after’ valuations of the Cheshire Lounge. He immediately shed his veil of impartiality by adopting Mr Hunter’s valuation of the site with the original access at £1,340,000. He implied that this was partly an exercise of his own judgment having regard to the sale price, and partly because Mr Hunter had assessed the development value of the land and had supported his opinions with comparable evidence. But Mr Cook is not an expert in the valuation of leisure property and it was not a legitimate part of his function to express his own opinion on matters on which he lacks expertise, or to seek to persuade the Tribunal that Mr Hunter was right and Mr Owens wrong. He could have assisted us by providing alternative assessments of compensation first assuming Mr Hunter’s evidence was accepted, and then Mr Owens, but he did not do so.

Mr Cook’s appraisal of the ‘after’ value was based on the premise that it was the price to be paid by a hypothetical purchaser with no lawful access at the valuation date but with the expectation of an easement being granted at an unknown future date. The grant was out of the hands of the buyer and was the prerogative of the Tatton Estate who would be expected to maximise the benefit of the opportunity. Mr Cook thought that the purchaser would assume a worst case scenario in which no agreement would be reached until after the route of the new access was eventually acquired by National Highways, a period which he put at seven years, allowing six years before the expiry of the statutory limitation period forced a reference to the Tribunal and a further year for that reference to be determined.

Mr Cook thought that a pub company or an independent operator, whom Mr Hunter thought the most likely purchaser but for the Order, would not be interested in a speculative property transaction. They were driven by a return on capital as their business model is to trade as operational businesses. The only sort of purchaser who would be interested in the property without a confirmed access would be a speculator who would be prepared to invest money for a long term potential upside.

Mr. Cook said he regularly acts for such speculators who are usually individuals or smaller property companies operating in the regional market. They would rarely entertain an opportunity unless they could double their money within a relatively short time. In his experience most speculators acquiring land unconditionally would expect to resolve issues such as planning, title, access, rights of light and so on over a period of two to three years. For longer term opportunities the level of return sought would be significantly higher. In the case of the Cheshire Lounge he thought that a speculator would appreciate that they would be entirely ransomed by the Tatton Estate and would effectively have no control over the resolution process.

He gave three current examples of what were said to be speculators paying a low proportion of market value for sites with issues over planning or title, and six historic instances. None was concerned with the negotiation of rights of access in the shadow of powers of compulsory acquisition, and we found them of little assistance. Some were simply examples of a price being paid for an option to acquire land at a valuation at a later date, another was a negotiated hope value on compulsory purchase, and some were examples of land being acquired at a discount but with some confidence that a planning permission would eventually be obtained.

Mr Cook concluded from the transactions he referred to that if a proposed development faces delay and uncertainty, but is offered for sale nonetheless, those in the market for the opportunity will insist on a substantial discount. We accept that proposition. If the delay was for as long as 5 to 10 years Mr Cooke considered the discount would be in the range of 90 to 95% from the market value of the unimpeded site. We accept that the greater the uncertainty and the longer the anticipated delay, the greater the discount a purchaser is likely to insist on. But nothing in the examples Mr Cooke produced assisted in quantifying an appropriate allowance in a case such as this.

Mr Cook had been unable to find any direct parallels to sale of the Cheshire Lounge. He assumed that the buyer in 2014 would consider that the easement could be secured within 7 years and would be a speculator rather than an operator like the claimant. He took the access to be dependent on the commercial decisions of a third party which he assumed was not accountable and could not be obliged to grant an easement. He thought the situation was less certain for a purchaser than where the issue was over the availability of a planning permission which was subject to a third party determination within a predictable period. Despite these differences he said he based his assessment on the transactions he had referred to and considered that the property would change hands at a discount of 90% of its value without any difficulty or uncertainty over access. His assessment of compensation was therefore based on the following simple calculation:

“Before” Market Value as at Nov 2014 £1,340,000
% of Market Value payable in Nov 2014 with no access rights 10%

“After” Market Value as at Nov 2014 £134,000

Injurious Affection £1,206,000

Mr Cook also addressed the issue of the effect on value of the condition of the new access. The parties approached this issue differently. Mr Hunter had made the assumption that the new road had been built to a standard where no improvements were required and consequently thought that there was no requirement for an adjustment in value, whereas Mr Owens thought that no improvements were required but that a purchaser would nevertheless regard the access as less attractive than the original, which he reflected by a reduction in the “after” value. Mr Cook agreed with Mr Owens that it would be appropriate to make an allowance for the replacement of the original access with the new road, but while Mr Owens had made an allowance of 10% of his valuation (£105,000) Mr Cook preferred to rely on costs of works supplied by Cinns Quantity Surveyors based on a specification prepared by Mr Jones, the claimant’s highways expert. These amounted to £263,466.

Mr Cook said that the cost of £263,466 represented 19.66% of Mr Hunter’s valuation of £1,340,000. He therefore used 20% of the market value as being his assessment of the impact on value caused by what he took to be deficiencies in the new access arrangements. This equated to £268,000. He also suggested that the ‘after’ value was adversely impacted both by the access rights position and by the deficiencies in the route itself. Taking both these factors into account he concluded that the Cheshire Lounge had a negative value in November 2014 as a result of the acquisition of the reference land.

Mr Kershaw presented National Highways’ case on the ‘before’ and ‘after’ valuations, comparing the ‘before’ market value with the market value with the new access in place. In his initial appraisal he adopted Mr Owens’ ‘before’ value of £1,050,000 and compared it to the value of £1,232,500 realised by sale of the property by DT to the claimant. Having deducted £25,000 as the value of the land taken, he concluded that the Cheshire Lounge had increased in value by £207,500. He attributed this to the sale having taken place ‘off market deal’ and suggested that there had been no injurious affection. This proposition (which was contradicted by Mr Owens’ own evidence) was not relied on by Mr Booth KC and we say no more about it.

Mr Kershaw put forward two alternative bases of assessing injurious affection. The first had no regard to events after the valuation date, whilst the second took them into account up to the date of his report.

In the first scenario Mr Kershaw examined the value of the Cheshire Lounge with the original access (as it remained available), then with the new access taking into account the commitment in the Order that it be made available. He took no account of any matters after the valuation date. He noted, but did not rely on, the fact that at the valuation date negotiations had begun between DT and the claimant which subsequently bought the site without any reduction in price to reflect the absence of a formal easement.

Mr Kershaw adopted Mr Owens’ deduction of 10% for the effect of the new access on the value of the site notwithstanding Mr Cooper’s view that the route was not a material disbenefit. He thought the purchaser would have anticipated that the easement would be granted within twelve months, but as a back stop would have had in mind that there was a statutory limitation period for compensation claims of six years, with the vast majority of claims settled within this timeframe.

Mr Kershaw provided two examples of road improvements schemes where a sole means of access has been stopped up, and where new access was to be provided over third-party land. In both cases, National Highways secured the access by compulsory acquisition powers. Mr Kershaw acknowledged that these situations were not directly comparable to the Cheshire Lounge but said they had informed his assessment that a 10% adjustment was appropriate to reflect the fact that at the valuation date, an easement had not yet been granted.

The first of Mr Kershaw’s comparables was Woodland View Farm, which, prior to an A5 improvement scheme had benefitted from direct access off the A38.  A new access was to be provided off the A38 slip road, with egress on to the A5 adjacent to a roundabout.  Compensation for the diminution in value of the property was agreed at £50,000 or 10% of its market value.  The new access was longer and less convenient, but the claimants had been satisfied that it would ultimately be conveyed to them as a freehold.

The second comparison was Hillside Cottage which was affected by the A453 Birmingham to Nottingham Trunk Road Improvement Scheme.  The cottage had enjoyed direct access from the A453 but this was stopped up in July 2012 and replaced with a separate shared access over third party land. The property was a large, detached house with 13 acres of gardens and amenity land and Mr Kershaw thought it was used as a bed and breakfast. Compensation for injurious affection was agreed at £67,500, being 10% of the unaffected value, on the basis that National Highways would use reasonable endeavours to obtain rights from the third party and would itself grant a deed of easement once all the necessary acquisitions under the CPO were completed. Mr Kershaw said that formal easements were yet to be granted.

Occupation of both of the properties Mr Kershaw referred to had continued uninterrupted and the new access routes were used by the owners despite the absence of formal easements.

Relying on these examples and on his general experience from other road schemes Mr Kershaw adjudged that a 10% adjustment on the ‘before’ valuation was appropriate to reflect the fact that easements over the new access for the benefit of the Cheshire Lounge were not available at the valuation date. In summary the result of his first approach was as follows:

Mr Kershaw’s second scenario took into account all relevant matters that occurred after the valuation date. In particular he had regard to the fact that the premises were sold to a purchaser which intended to develop them yet was content to do so based on the access arrangements in the Order. As at June 2022 the claimant had been provided with a draft deed of easement which, had it been signed, would have conferred the rights agreed between National Highways and the Estate. As the deed of easement was available Mr Kershaw proposed that there was no need to make any allowance for the absence of formal rights. The only allowance he made was therefore the 10% proposed by Mr Owens which left an “after” value of £920,000 and a compensation figure of £105,000.