Hertfordshire County Council v Ozanne and others

Compensation for compulsory acquisition of land — Value of ‘ransom strip’ — Third stage in this litigation, Lands Tribunal, Court of Appeal, House of Lords — Whether rule (3) in section 5 of Land Compensation Act 1961 applied to the valuation of the strip so as to confine compensation to agricultural value — Agricultural value £5,500, award of Lands Tribunal £1.24m — Present appeal, by acquiring authority, related to the application of rule (3), which the Lands Tribunal and the Court of Appeal held not to apply — Appeal to House of Lords not concerned with that part of decision of Court of Appeal which remitted case to Lands Tribunal to identify the relevant scheme — House of Lords35 agreed that the provisions in rule (3) excluding purposes to which the land could be applied only in pursuance of statutory powers did not apply to the land acquired — The reason was that the statutory powers relied on by the council for the application of rule (3), namely to stop-up an existing highway, did not relate to the use of the land acquired This litigation arose from the compulsory acquisition of a strip of land of 1.605 ha used for agricultural purposes adjoining the south side of Thorley Lane, Bishop’s Stortford — North of Thorley Lane there existed a substantial area allocated for residential development — The claimants (respondents to the appeal), the owners of the strip, contended that it was a ‘ransom strip’, required for the purpose of realigning and improving Thorley Lane as a prerequisite to the full development of the large development area to the north of the lane — The value of the strip on this basis was claimed to be £1.24m and this was in fact the amount awarded by the Lands Tribunal — The tribunal found that in the imaginary no-acquisition world with which one must grapple there existed a market for the land as a ‘ransom strip’ — The tribunal had considered that it was unnecessary to go into the submissions on law or fact as to the existence and extent of any scheme — The Court of Appeal disagreed with this conclusion — They considered that it was impossible to say that in the imaginary no-acquisition world the land had a value as a ransom strip unless the relevant scheme were identified — The court accordingly remitted the case to the tribunal to examine the issue as to what was the scheme and to consider any matters consequential on its identification — As the Lord Chancellor mentioned in his speech, the House of Lords was not called upon to adjudicate on the merits of this part of the case The only matter with which the House was concerned was the appellant council’s submission that part of rule (3) in section 5 of the Land Compensation Act 1961 applied to the valuation of the respondents’ strip of land — The part of rule (3) which was claimed to apply provided that ‘the special suitability or adaptability of the land for any purpose shall not be taken into account if that purpose is a purpose to which it could be applied only in pursuance of statutory powers’ — It was the appellants’ contention that the enhanced value referred to in the rule should accordingly be disregarded in the present case — The steps in the appellants’ argument were (1) that the land in question had an enhanced value over its agricultural value because of its special suitability or adaptability for the purpose of providing a realignment of Thorley Lane; (2) that, in order that it should be used as such a realignment, it was necessary that part of Thorley Lane should be stopped-up; (3) that, as Thorley Lane was a public highway, such stopping-up required the exercise of statutory powers; and (4) that, as a result, the special suitability or adaptability of the land for the alignment of Thorley Lane should be disregarded — It followed that the compensation should be assessed at agricultural value, namely £5,500 In the opinion of the House of Lords, however, there was a fatal flaw in this argument — The correct construction of the part of rule (3) on which the acquiring council relied was that the statutory powers referred to must be powers enabling the person who is entitled to use the land to apply it to the purpose in question; and the statutory powers must be necessary to enable such person to use the land for that purpose — Statutory powers not related to the use of the land acquired could not form a basis for the application of this part of the rule — It was accepted that no part of the existing Thorley Lane which could be affected by any such stopping-up order lay within the land acquired from the claimants — It followed that statutory powers conferred on the Secretary of State to order the stopping-up of a highway on land which was not part of the land acquired could not justify the application of the rule to the land acquired — The council’s submission therefore failed and their appeal must be dismissed The following cases are referred to in this report. Cedars Rapids Manufacturing & Power Co v Lacoste [1914] AC 569, PC Hampson v Department of Education and Science [1990] 3 WLR 42; [1990] ICR 511; [1990] 2 All ER 513, HL Horn v Sunderland Corporation [1941] 2 KB 26; [1941] 1 All ER 480, CA This was an appeal by Hertfordshire County Council from a decision of the Court of Appeal allowing the council’s appeal from a decision of the Lands Tribunal (Mr C R Mallett FRICS) awarding compensation in the sum of £1.24m to the claimants, P J Ozanne, M J Wilson and Rothschild Trust Co (CI) Ltd, trustees of the Boyd Gibbins Family Trust, in respect of the compulsory acquisition of a strip of land, of 1.605 ha adjoining the south side of Thorley Lane, Bishop’s Stortford. The decision of the tribunal was reported at [1988] 2 EGLR 213; [1988] 36 EG 195 and 37 EG 123 and the decision of the Court of Appeal at [1989] 2 EGLR 18; [1989] 43 EG 182. Michael Rich QC and John Howell (instructed by Mr W J Church, County Secretary, Hertfordshire County Council) appeared on behalf of the appellant council; Matthew Horton QC and Sebastian Head (instructed by Berwin Leighton) represented the respondent trustees. In his speech, LORD MACKAY OF CLASHFERN LC said: This is an appeal by the Hertfordshire County Council (‘the council’) from an order of the Court of Appeal dated August 2 1989 allowing the council’s appeal from a decision of the Lands Tribunal given on March 2 1988 whereby the council was ordered to pay £1,240,000 in compensation to the respondents (‘the claimants’) but remitting to the said Tribunal the issue as to what was the scheme and any matters consequent upon the Tribunal’s identification of it. This appeal proceeds by virtue of leave granted by this House on December 14 1989. The council is the highway authority for the County of Hertford on whose behalf the East Hertfordshire District Council (Thorley Lane, Bishop’s Stortford) Compulsory Purchase Order 1976 was made. That order authorised the compulsory purchase of 1.605 ha of land adjoining the south side of Thorley Lane, Bishop’s Stortford, the property of the claimants. The compulsory purchase order was made under section 214 of the Highways Act 1959 and section 22 of the Land Compensation Act 1973 and the purpose for which the purchase was authorised was described as (a) the construction of a new highway from the existing junction of Thorley Lane and the London-Norwich Trunk Road A11 to a point 123m west of the junction of Thorley Lane and Pynchbek at Bishop’s Stortford in the district of East Hertfordshire in the County of Hertford; (b) the construction of new highways to connect the above-mentioned highway with the existing road system at Bishops Avenue and Pynchbek at Bishop’s Stortford; (c) the improvement of Thorley Lane and Oxcroft, Bishop’s Stortford; and (d) the mitigation of the adverse effect which the existence or use of the new highways proposed to be constructed and improved at (a), (b) and (c) will have on the surroundings of the highways. The claimants referred the question of the determination of the amount of compensation payable to them on the acquisition of the said land to the Lands Tribunal. The agricultural value of the said land was agreed to be £5,500. The claimants contended that the said land was a ‘ransom strip’. They argued that the said land was required in order to enable residential development of a substantial area lying to the north of Thorley Lane which has been referred to conveniently as the Thorley Development Area. The claimants contended that, since the said land was necessary in order to enable the development of the Thorley Development Area to proceed, its value was considerably enhanced. By a calculation relating to the difference between the value of the Thorley Development Area if development was possible and compared with its value if no development was possible the claimants contended that the said land should be valued at £1,240,000, which appears a remarkably large figure for the amount of land in question, particularly as the planning permission granted in respect of the Thorley Development Area does not appear to have required as a condition that an access from the south of the development area should be made available over the said land. The Lands Tribunal determined compensation in the sum of £1,240,000, being Mr Mallett’s assessment of the value of the land under the terms of the relevant statutes. 36 The council appealed to the Court of Appeal. There the council had two arguments. The first was that the Lands Tribunal had not identified the scheme underlying the acquisition and, therefore, had failed to identify, as it was necessary to do, the extent to which the value of the said land was affected by the scheme. The Court of Appeal accepted this argument and remitted the case to the Lands Tribunal, on the issue as to what was the scheme, and any matters consequent upon the Tribunal’s identification of the scheme. They ordered the costs in the Lands Tribunal to be costs in the cause and three-quarters of the council’s costs in the Court of Appeal to be paid by the respondents. On the merits of this part of the case your lordships are not called upon to adjudicate, although, of course, the question of costs in the Court of Appeal may be affected by the decision of this appeal to your lordships’ House. The second argument advanced by the council in the Court of Appeal was the only argument with which your lordships are concerned. If it were to succeed, there would be no need for the case to go back to the Lands Tribunal and the compensation could be determined as the agricultural value of the said land. The assessment of compensation for the compulsory acquisition of the said land is subject to the provisions of section 5 of the Land Compensation Act 1961 which provides: Compensation in respect of any compulsory acquisition shall be assessed in accordance with the following rules: (1)  No allowance shall be made on account of the acquisition being compulsory: (2)  The value of land shall, subject as hereinafter provided, be taken to be the amount which the land if sold in the open market by a willing seller might be expected to realise: (3)  The special suitability or adaptability of the land for any purpose shall not be taken into account if that purpose is a purpose to which it could be applied only in pursuance of statutory powers, or for which there is no market apart from the special needs of a particular purchaser or the requirements of any authority possessing compulsory purchase powers: . . . The only provision relied upon by the council before your lordships is that: the special suitability or adaptability of the land for any purpose shall not be taken into account if that purpose is a purpose to which it could be applied only in pursuance of statutory powers. Counsel made it absolutely clear that, having considered the matter, the council’s argument was based solely on the passage I have just quoted. The statutory powers which the council say are relevant are the powers to stop-up an existing highway which are contained in sections 212 and 219 of the Town and Country Planning Act 1971 (sections 249 and 255 of the Town and Country Planning Act 1990). No order under either of these provisions had been produced and your lordships were informed by counsel for the council that it has not established that any order was made. The argument for the council was that the said land could be used for the realignment of Thorley Lane only if there were a stopping-up order by the Secretary of State in respect of the existing Thorley Lane. It is accepted that no part of the existing Thorley Lane that could be affected by any such stopping-up order lies within the said land acquired from the claimants. In elaborating their contention, the council argued that it could not be disputed that the said land had an enhanced value over its agricultural value only in respect of its special suitability or adaptability for the purpose of providing a realignment of Thorley Lane. Further, that in order that it should be used as a realignment of Thorley Lane it was necessary that part of Thorley Lane should be stopped-up and that, since Thorley Lane was a public highway, such stopping-up required the exercise of statutory powers. On this basis, it was claimed that the part of rule (3) relied upon required the special suitability or adaptability of the said land for use for the realignment of Thorley Lane to be disregarded in assessing the compensation for the compulsory acquisition of the said land and, therefore, required the compensation to be determined at agricultural value, namely £5,500. In support of this argument, the council submitted that all compensation for compulsory acquisition is statutory; that the Acquisition of Land (Assessment of Compensation) Act 1919, in which rule (3) was originally enacted and which is now consolidated in the Land Compensation Act 1961, was passed for the purpose of mitigating the evil of excessive compensation; that special suitability or adaptability of the land for a purpose for which there is no market apart from the special needs of a particular purchaser or requirements of any authority possessing compulsory purchase powers are dealt with in the part of rule (3) not relied upon here; and that it is necessary to give some other subject-matter to the part of the rule relied upon from the subject-matter of the part not relied upon, if a sound construction of the part relied upon is to be made. It was submitted that it was legitimate, in order to arrive at a sound conclusion upon the scope of the part of the rule relied upon, to look at cases decided before Parliament passed the Act of 1919 and that in doing so the case of Cedars Rapids Manufacturing & Power Co v Lacoste [1914] AC 569, a decision of the Privy Council on appeal from the Superior Court of Quebec, provided an example of the class of case which Parliament had in mind in enacting the part of rule (3) relied upon by the council. Finally, it was submitted that the purpose in question in rule (3) must be one to which the land being acquired can be applied and whether the land can be so applied only in pursuant of statutory powers must be determinative of the application of the first part of the rule. In opening the appeal, counsel did not refer to the second report of the committee dealing with the law and practice relating to the acquisition and valuation of land for public purposes (1918) (Cd 9229) usually referred to as the ‘Scott Report’ because its recommendations had not been implemented in the Act that followed in 1919. Counsel for the claimants replied that the statutory powers referred to in the part of the rule relied upon by the council must be those which empowered the application of the land taken to the purpose for which it was specially suitable or adaptable and that the powers must be powers granted to the person thereby enabled to apply the land taken to the purpose for which it is specially suitable or adaptable. He further submitted that the stopping-up of Thorley Lane, in exercise of powers of the Secretary of State to make a stopping-up order, could affect rights of the public only in respect of those parts of the land comprising Thorley Lane affected by the order, at the time when it took effect, and that this in no way affected or empowered any uses to which the said land acquired from the claimants could be applied. Counsel for the claimants submitted that the construction of the rule relied upon was clear and that accordingly it was not necessary to examine the history of the process by which it had first come to be enacted, but by way of background he referred your lordships to the Scott Report. He also pointed out that the construction advanced by the council would appear to rule out from consideration purposes for which planning permission would be required or building regulation consent might be required under the Building Act 1984, and he gave a variety of illustrations of other types of consent granted under statutory powers as essential to particular uses of land which would fall to be excluded from account if the council’s construction were to prevail. In the course of his reply, counsel for the council referred to the speech of my noble and learned friend Lord Lowry in Hampson v Department of Education and Science [1990] 3 WLR 42, particularly to the paragraph beginning at p 49 between A and B. A comparison of the Act of 1919 and in particular the rules that it enacted for assessing compensation with the pre-existing law makes it clear that the general intention of Parliament in 1919 was to direct the omission from compensation of certain items for compulsory acquisition which under the previous law had been included. This view is strongly supported by the opinion of Scott LJ, as he had by then become, in Horn v Sunderland Corporation [1941] 2 KB 26, at p 40, where he said: The main object of the Act of 1919 was undoubtedly to mitigate the evil of excessive compensation which had grown up out of the theory, evolved by the courts, that because the sale was compulsory the seller must be treated by the assessing tribunal sympathetically as an unwilling seller selling to a willing buyer. To go further and seek to suggest that the meaning of particular provisions adopted by Parliament in 1919 could be discovered by identifying the particular cases in the previous law that these provisions were intended to reverse appears to me to amount to speculation upon which it is not profitable to enter in the present appeal. I regard the language in question as sufficiently plain to reach a clear conclusion upon its application to the present case. The special suitability or adaptability of the land for any purpose is directed to be37 left out of account if that purpose is a purpose to which it could be applied only in pursuance of statutory powers. This is expressed in the passive voice but the context shows that the application referred to is by a person using the land and, therefore, the statutory powers in question must be powers enabling a person entitled to use the land to apply it to the purpose in question and since the purpose in question is one to which the land could be applied only in pursuance of the statutory powers the statutory powers must be necessary to enable such person to use the land for that purpose. I do not see how statutory powers not related to the use of the land acquired could form a basis for the application of this part of the rule. Therefore, I consider that statutory powers conferred upon the Secretary of State to order the stopping-up of a highway on land which is not part of the land being acquired could not form the basis of the application of this part of the rule to the land acquired. Since the only statutory powers here relied upon by the council are the statutory powers of the Secretary of State to stop-up parts of Thorley Lane, I consider that the council’s argument must fail. The construction of the relevant part of the rule which I have adopted is consistent with the approach taken by my noble and learned friend Lord Lowry to the construction of the words ‘in pursuance of’ in a different enactment in Hampson. As I said earlier, in the submissions for the council great stress was laid on the decision of the Privy Council in Cedars Rapids Manufacturing & Power Co v Lacoste [1914] AC 569 as illustrative of the type of case with which the part of the rule founded upon was intended to deal by reversing the committee’s decision. Cedars Rapids was incorporated by a statute of the Parliament of Canada of 1904 and it was thereby empowered to construct and develop water powers in or adjacent to the St Lawrence river in a certain parish and to take by way of expropriation lands within that parish actually required for those purposes. The respondents in the appeal owned, within the limits of the Cedars Rapids Company’s Act, two islands in the river and certain rights over a promontory of land. One of the islands was at the head of the Cedars Rapids, the promontory was at the foot of the rapids and the second island was between. There was a fall of some 28 ft in all from the head to the foot of the rapids. The respondents’ rights upon the promontory consisted of a reservation of a road and the right to erect a mill with the right to use the power of the water flowing by and over the land. The question before the Privy Council related to the basis upon which compensation for the two islands and the respondents’ rights in the promontory should be determined. Giving the judgment of the board, Lord Dunedin said, at pp 579-580: The real question to be investigated was, for what would these three subjects have been sold, had they been put up to auction without the appellant company being in existence with its acquired powers, but with the possibility of that or any other company coming into existence and obtaining powers. It is on account of the latter consideration that their Lordships, while unable to accept the judgment under appeal, are also unable to restore the judgment of the arbitrators. Unfortunately, the appellants led no evidence except as to bare agricultural value. Now with regard to the Ile aux Vaches and the reserved water rights, it seems possible that there may be some value over and above the bare value. If the situation be naturally favourable to the establishment of power works like those of the appellants, then it is possible that the respondents and others might have been prepared to offer an enhanced value on this account, taking the chances of a situation in which they might or might not obtain the requisite Parliamentary powers to work out a commercial scheme. But the value emerging through a grant of such powers having been actually given cannot after the event be taken into account . . . These considerations, however, point to the possibility of something more being given for the subjects than the bare value; or in other words, that if they had been put up to auction as before said, there was a probability of a purchaser who was looking out for special advantages being content to give this enhanced value in the hope that he would get the other powers and acquire the other rights which were necessary for a realised scheme. In the passages that I have quoted, the Privy Council was recognising that the application of the lands to be acquired for use by a company obtaining the necessary statutory powers to work out a commercial scheme was a matter that should be taken into account in determining the compensation. It appears clear, from the facts, that the Privy Council made these observations in connection with lands and rights over lands which were required to be used in order to implement a scheme which required Parliamentary powers. The interpretation which I have placed upon the part of rule (3) relied upon in this case would have the effect that the enhancement of value referred to by the Privy Council in Cedars Rapids in the passage to which I have referred would not be taken into account in a case to which rule (3) of section 2 of the Act of 1919 and its statutory successor applied. I consider, therefore, that the council’s submission was correct that the Cedars Rapids decision provides an illustration of the cases that Parliament has covered by the part of the rule founded upon, although wrong in contending that it applies to the present case. In Cedars Rapids the purpose giving rise to the enhancement of value, namely the use of the lands in question as part of a water power development of the type in question, could arise only where the appropriate statutory powers had been granted, whereas in the present case the land acquired could have been used for a highway without the exercise of any statutory power and certainly was not dependent upon the Secretary of State exercising any statutory power to stop-up any part of Thorley Lane. I should perhaps add that it is clear, from the passage that I have quoted from the decision in Cedars Rapids, that the obtaining of the requisite Parliamentary powers was to be borne in mind as providing opportunity for realisation of the enhanced value. Even after the company had obtained the necessary statutory powers, they also required the consent of the Dominion Government to erect works in the bed of the river and to abstract water from it, but the provisions of rule (3) do not refer to this. This I think goes to emphasise the distinction referred to by counsel for the claimants when he pointed out that, if the present case was covered by the rule, it was very difficult to see why the rules should not also cover a purpose to which a piece of land could be put only after obtaining some particular statutory consent such as planning permission, consent under the Building Acts, or the like. It is clear from the modern statutory provisions governing compensation for the compulsory acquisition of land that the question of what types of development would receive planning consent is highly relevant to the determination of compensation for compulsory acquisition and any construction of the provision founded upon which resulted in any enhancement of the value of a piece of land resulting from its use for a purpose which required planning permission being disregarded would be absurd. The Lands Tribunal came to the same conclusion as I have done on the submission of the council which has been the subject of appeal to your lordships’ House. Mr Mallett said [1988] 2 EGLR 213 at p 216: Clearly the first limb of the provision of rule (3) cannot apply in that the special suitability or adaptability of the land can be realised other than by the use of statutory powers. In the Court of Appeal Mann LJ dealt with the argument in this way [1989] 2 EGLR 18, at p 20: Mr Rich relied upon the first limb of the rule, and put the matter in this way: the Thorley Lane improvement included not only the construction of a new carriageway but also the closure of certain parts of the existing lane (none of which were on the reference land). That, he said, could be achieved only in the exercise of statutory powers, the exact nature of which I do not particularise because there may be doubt as to whether the proper procedures were subjected to adherence. Undoubtedly the reference land was locationally suitable for the improvement, and it may even be taken that it has ‘a special suitability’. However, I am not persuaded by the argument. Mr Horton countered it by saying that private developers can and do so construct roads or road improvements upon land which they own, subject only to the obtaining of planning permission. He also pointed out that developers frequently have to stop-up existing highways and they may be authorised to do so at their own instance under section 209 of the Town and Country Planning Act 1971. That being so, and bearing in mind that the statutory closure was not upon the reference land, I do not see, in common with the tribunal (albeit for different reasons) that rule (3) applies. The order for costs made in the Court of Appeal no doubt reflects the fact that the Court of Appeal decided against the council on this argument, although in their favour on the other argument which resulted in the Court of Appeal deciding to remit the case to the Lands Tribunal. Since, in my opinion, the result on the argument adduced to your lordships is the same as it was both in the Lands Tribunal and in the Court of Appeal, the decision of the Court of Appeal as to costs should stand, but the council having failed in their appeal to this House must pay the claimants’ costs here. LORDS KEITH OF KINKEL, BRIGHTMAN, OLIVER OF AYLMERTON and LOWRY agreed that the appeal should be dismissed, and did not add anything.