[2023] UKUT 217 (LC)

At the commencement of the hearing it appeared that the parties might disagree significantly on the interpretation of section 7, Compulsory Purchase Act 1965 and therefore on the proper approach to the assessment of the claim for injurious affection. From their opening statements, Mr Pereira KC and Mr Booth KC were at odds on the relevance of events which had occurred after the valuation date, and specifically the consequences of the delay in giving effect to the claimant’s entitlement to rights over the new access to replace those it had lost when the original access was closed. By the conclusion of the hearing, however, these issues of principle had all but disappeared.

Section 7 of the Compulsory Purchase Act 1965 confers a right to compensation where land which has not been taken by an acquiring authority has nevertheless been adversely (or “injuriously”) affected by being severed from other land which has been taken. Section 7 provides:

“In assessing the compensation to be paid by the acquiring authority under this Act regard shall be had not only to the value of the land to be purchased by the acquiring authority, but also to the damage, if any, to be sustained by the owner of the land by reason of the severing of the land purchased from the other land of the owner, or otherwise injuriously affecting that other land by the exercise of the powers conferred by this or the special Act.”

The assessment of this form of compensation is generally achieved by determining the value of the retained land before severance, i.e. on the valuation date but disregarding the effect of the acquiring authority’s scheme, and deducting from it the value of the retained land after severance, i.e. on the same date but taking into account the effect of the scheme and of the severance of the retained land from the land taken. The necessary assessment must be carried out as at the date of entry, in this case, 10 November 2014.

It had originally been suggested by Mr Pereira KC that the direction to provide compensation for “damage, if any, to be sustained” by the owner of the land required that the “after” valuation of the severed land at the valuation date must take account of all matters arising out of the exercise of the relevant compulsory powers which affect the value of the land and which are known to have occurred by the date of the hearing, notwithstanding the fact that they could not have been known at the valuation date. That required that the notional purchaser of the land at the valuation date must be assumed to know, not only that the original access would be closed and replaced by the new access, but that the owner would still be waiting for the grant of rights over the replacement access more than eight years later and that, for a period of time, it would effectively be abandoned by National Highways and left to negotiate unsuccessfully with the Tatton Estate to secure the rights which it was entitled to under the Order.

By the end of the hearing the claimant’s position was that a purchaser of the Cheshire Lounge site in November 2014, having made appropriate enquiries and having become aware that the formalisation of a grant of legal easements over the route of the new access would depend on agreement on compensation first being reached between National Highways and the Tatton Estate to allow the route to be vested in National Highways, would assume that certainty over its new rights would not be achieved for a period of at least seven years and possibly as long as nine years. The logic of that proposition was that it would be assumed that agreement would only be reached after the commencement of a reference to the Tribunal, at the end of the six-year statutory limitation period. That was not the impression the claimant itself had been given by Mr El-Rayes on behalf of National Highways, but it allowed the claimant to suggest that a purchaser would discount the value of the site much more heavily than the claimant itself had done. The claimant had agreed the price of the site on the basis that the contract was conditional on it being satisfied with the access arrangements; it proceeded with the acquisition on the basis of representations by Mr El-Rayes that the policy of National Highways, where it was responsible for acquiring a replacement access over land belonging to a third party, was to allow a period of up to two years for private negotiations between the displaced landowner and the third party before it would be prepared to “force the issue” by exercising its compulsory powers. The claimant therefore assumed that the necessary rights would be achieved with National Highways’ assistance in a period of not much more than two years.

In his closing submissions Mr Pereira KC accepted that the correct way to undertake the valuation was to have regard to all matters that were known or anticipated at the valuation date, or which would have been known or anticipated by a reasonably prudent and properly advised purchaser. Mr Booth KC accepted that proposition, as do we. As a general rule, without an express contractual or statutory instruction to do so (and there is none in section 7) it would always be wrong to value land as if with knowledge of matters which were not known, and could not have been known, at the valuation date. The suggestion made by the Lands Tribunal in Waterworth v Bolton MBC (1979) 37 P&CR 104 that a different approach is permissible in cases of injurious affection has been the subject of criticism by learned commentators and seems to us to be wrong in principle (see Barnes, The Law of Compulsory Purchase and Compensation, at para 9.57, and Tottel’s Compulsory Purchase and Compensation Service, at para 2521). Mr Pereira KC did not rely on Waterworth.

The guiding principle in the assessment of compensation is the principle of equivalence. The landowner whose land is taken in the public interest should receive compensation which fully and fairly reflects the loss which the owner has actually suffered, no more and no less. National Highways acknowledged that principle and invited the Tribunal to give effect to it. It accepted that a valuable development of the Cheshire Lounge site could not sensibly have been undertaken by the claimant until it had certainty over the rights of access to which it was entitled (including access for the installation of new services). The new access was in place and available to be used, but the Estate had continued to maintain that such use was with its permission, which could be revoked; nor was there clarity about what rights to lay or connect to services the claimant would enjoy. National Highways’ position was that the required certainty was achieved by July 2022, when it reached agreement with the Tatton Estate on the terms of a deed which would confer rights on the claimant over the new access while it remained in the Estate’s ownership. It proposed that equivalence should be achieved by compensating the claimant for its holding costs while the site remained undeveloped, ceasing on 30 June 2022 when the terms of access it had negotiated were available to the claimant, rather than by valuing the claim for injurious affection with the benefit of hindsight.

Mr Pereira KC warned against eliding the claim for injurious affection and the claim for holding costs. The first was to compensate the claimant because the Cheshire Lounge site was less valuable as a development site than it would have been with the original access, while the second was to reflect the cost to the claimant of being unable to secure a return on its investment while uncertainty persisted over the final resolution of its rights of access. We agree that the two heads of claim are conceptually and legally distinct, but that does not mean that in an appropriate case they could not be alternatives or that the assessment of one could not have regard to compensation provided under the other. What matters is that the claimant is put in an equivalent position, so far as money can achieve it, to the position it would have been in if the reference land had not been taken.