Abbey Homesteads (Developments) Ltd v Northamptonshire County Council

Compensation for acquisition — Restrictive covenant planning agreement — Whether Pointe Gourde principle applies — Whether section 9 of the Land Compensation Act 1961 applies In March 1974 the appellant county council conveyed 13.88 ha of building land to the respondent, Abbey Homesteads (Developments) Ltd — The respondent had previously been informed that, before planning permission could be granted, a planning agreement would have to be entered into — In June 1976 the respondent entered into a planning agreement under section 52 of the Town and Country Planning Act 1971 with Northamptonshire County Council which reserved for school purposes 1.23 ha (‘the subject land’) — In August 1983, following the making of the compulsory purchase order in respect of the subject land and an application by the respondent, the district council issued a certificate under section 17 of the Land Compensation Act 1961 that, if the subject land were not proposed to be acquired, planning permission would have been granted for residential development — Possession of the subject land was taken in May 1984 following notices to treat and of entry — The tribunal made orders on a preliminary issue of law which were appealed by the appellant council — The Court of Appeal [1986] 1 EGLR 24 declared that the planning agreement covenant was a restrictive covenant intended to remain permanent and compensation for the subject land was on the basis that the land was affected by the covenant In subsequently determining the amount of compensation for the compulsory acquisition of the subject land, the tribunal [1991] 1 EGLR 224 awarded £300,000, deciding that: (1) the imposition of the restrictive covenant in the planning agreement was part of the scheme underlying the acquisition; (2) the execution of the agreement was a response amounting to an ‘indication’ under section 9 of the 1961 Act, alternatively the agreement itself was an ‘indication’ — In the alternative the tribunal awarded £255,000 on the basis that the scheme inhibited the removal of the covenant — The county council appealed Held: The appeal was allowed — Applying Rugby Joint Water Board v Shaw-Fox the interest to be valued is the freehold of the subject land subject to the restrictive covenant in the planning agreement; neither the Pointe Gourde principle nor section 9 of the 1961 Act could apply so as to remove that restriction or require it to be disregarded — However, in the no-scheme world there would still have been a need for a school for which the appellants could have acquired an alternative site — Accordingly, any prospective purchaser of the subject land would have anticipated that, if the appellants acquired a further site for the school, an application to the tribunal for the removal of the restrictive covenant would be successful — There was, therefore, no error of law in the alternative award of the tribunal for £255,000 The following cases are referred to in this report. Birmingham City District Council v Morris & Jacombs (1976) 33 P&CR 27; [1976] EGD 513; 240 EG 539, [1976] 2 EGLR 143, CA Birmingham Corporation v West Midland Baptist (Trust) Association (Inc) [1970] AC 874; [1969] 3 WLR 389; [1969] 3 All ER 172; (1969) 67 LGR 571, HL Camrose (Viscount) v Basingstoke Corporation [1966] 1 WLR 1100; [1966] 3 All ER 161; (1966) 64 LGR 337, CA Fraser v City of Fraserville [1917] AC 187; 116 LT 258; 33 TLR 179, PC Margate Corporation v Devotwill Investments Ltd [1970] 3 All ER 864; (1970) 22 P&CR 328; 69 LGR 271; [1971] EGD 313; 218 EG 559, HL Minister of Transport v Pettitt (1968) 20 P&CR 344; 67 LGR 449; [1969] EGD 69; 209 EG 349; [1969] RVR 26, CA Pointe Gourde Quarrying & Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565, PC Rugby Joint Water Board v Shaw-Fox; Rugby Joint Water Board v Foottit [1973] AC 202; [1972] 2 WLR 757; [1972] 1 All ER 1057; (1972) 70 LGR 339; 24 P&CR 256; [1972] EGD 356; 222 EG 815, HL Salop County Council v Craddock [1970] 10 RVR 63; (1969) 213 EG 633, CA Wilson v Liverpool Corporation [1971] 1 WLR 302; [1971] 1 All ER 628; (1971) 22 P&CR 282; [1971] EGD 144; 217 EG 987, CA This was an appeal by way of case stated from the decision of the Lands Tribunal ([1991] 1 EGLR 224) awarding £300,000 plus surveyors’ fees to the respondent, Abbey Homesteads (Developments) Ltd, for the compulsory purchase of land by the appellants, Northamptonshire County Council. Gavin Lightman QC and John Whittaker (instructed by the solicitor to Northamptonshire County Council) appeared for the appellants; and Michael Burke-Gaffney QC and Mark West (instructed by Dickins Batty & Bidder, of Potters Bar) represented the respondent. Giving the first judgment at the invitation of Neill LJ, GLIDEWELL LJ said: This is an appeal by way of case stated against the decision of the Lands Tribunal (V G Wellings QC, President) given on October 11 1990.*  The tribunal’s decision was on a reference by Northamptonshire County Council (‘the county council’) for the determination of the amount of compensation to which Abbey Homesteads (Developments) Ltd (‘the company’) was entitled for the compulsory acquisition by the county council of 1.23 ha of land owned by the company in Towcester, Northamptonshire. The tribunal’s award was in the sum of £300,000 together with surveyors’ fees. The tribunal made an alternative award (on a basis to be explained hereafter) in the sum of £255,000 plus fees. *Editor’s note: Reported at [1991] 1 EGLR 224. The subject land, which I shall call ‘the site’, is an area of 1.23 ha forming part of a larger area of 13.88 ha lying to the west of the town of Towcester. The county council acquired the site under the powers of a compulsory purchase order made on July 7 1983 for the purpose of providing a site for a new county primary school. The order was confirmed by the Secretary of State for the Environment on November 25 1983. By that date the company had completed, or substantially completed, the development of the remainder of the 13.88 ha by constructing dwelling-houses on that land. In addition,19 another company had built further houses on adjoining land to the north and north-west of the site. The history Until March 20 1974 the 13.88 ha were owned by the county council. From 1969 onwards there were discussions between the company and the county council about the prospect of the company’s buying the 13.88 ha from the county council for residential development. Almost from the start it was made clear in discussion between the parties that the growth of the population of Towcester, which would result from the development of this land and of the adjoining land to the north-west, would require the construction of a new primary school. On March 17 1971 the county council contracted to sell the 13.88 ha (then described as 34 acres) to the company, which was entitled under the agreement to call for the conveyance within 10 years. In effect this agreement was for an option. In April 1973 a firm of architects acting for the company and the adjoining landowners prepared a proposed layout plan for the development of the whole area, which included the siting of the school on an area of land slightly larger than, but including, the site. In the summer of 1973 there was correspondence between the county council and the company’s solicitors, in which it was made clear that, before the county council (which was then the local planning authority) granted planning permission to the company for the residential development of the larger area, it would be necessary for the company to enter into an agreement under section 52 of the Town and Country Planning Act 1971 [section 106 of the Town and Country Planning Act 1990]. With a letter of September 10 1973 the county council sent a draft section 52 agreement to the company’s solicitors. The draft agreement included a provision that ‘an area of 3.25 acres’ — which is the same as 1.23 ha — ‘adjacent to the playing field and amenity open space areas shall be reserved for school purposes’. On March 20 1974 the county council conveyed the 13.88 ha to the company. I break off to comment that if the county council had instead conveyed the land less the 1.23 ha the problem which has confronted the Lands Tribunal and this court would not have arisen. However, they conveyed the whole of the site and on March 31 1976 the company applied to the South Northamptonshire District Council (by then the local planning authority) for planning permission for residential development of the 13.88 ha. On June 4 1976 the district council and the company entered into an agreement under section 52 of the 1971 Act. That section, now replaced by section 106 of the Town and Country Planning Act 1990, provided that such an agreement might be made ‘for the purpose of restricting or regulating the development or use of land, either permanently or during such period as might be prescribed by the agreement . . .’. Such an agreement might be enforced by the local planning authority ‘as if the local planning authority were possessed of adjacent land and as if the agreement had been expressed to be made for the benefit of such land’. The agreement of June 4 1976 provided that ‘the company agrees declares and covenants with the District Council that from the date on which planning permission is granted . . . the land shall be subject to the conditions restricting and regulating the development specified in the first schedule hereto . . .’. Para 5 of the first schedule provided ‘an area of 1.3 hectares adjacent to the playing field and amenity open space areas shall be reserved for school purposes’. It will be observed that save for the reference to hectares this was in the same terms as the proposed paragraph in the draft agreement of 1973. In a second schedule to the agreement were set out conditions which the planning authority proposed to insert in any planning permission granted. Condition 12 read: An area of 1.3 hectares in the approximate position indicated on the deposited plan 710/2 adjacent to the playing field and amenity open space area shall be reserved for school purposes . . . The area so identified was slightly larger than, but included, the whole of the site. On the same day as the section 52 agreement was concluded, the district council granted outline planning permission to the company for the residential development of the 13.88 ha, subject to conditions in the same terms as those set out in the second schedule to the section 52 agreement. Also on June 4 1976 planning permission was granted to the other company for the residential development of almost 50 acres of land lying to the north and north-west of the company’s land. On July 13 1978 the county council resolved to purchase the site as a reserved provision for the construction of the school. There then followed negotiations between the county council and the solicitors for the company, but the parties were unable to reach agreement on the proper basis for the assessment of a purchase price for the site. The company argued that the section 52 agreement did not impose a valid restrictive covenant. On May 20 1982 the county council therefore resolved to make the compulsory purchase order under the Education Act and, as I have said, it was duly made on July 7 1983. In the meantime, on May 25 1983 the company applied for a certificate of alternative development under section 17 of the Land Compensation Act 1961. On August 10 1983 a certificate was granted to the company by the district council which stated that ‘in their opinion, if the land in question were not proposed to be acquired by any authority possessing compulsory purchase powers, planning permission would have been granted for the following development: residential development . . .’. The certificate contained 10 conditions subject to which the permission would have been granted, none of which related to the use of the site for school purposes. On September 30 1983 the company applied to the tribunal to discharge the covenant contained in para 5 of the first schedule to the section 52 agreement under section 84(1)(a) and/or (c) of the Law of Property Act 1925. As I have said, on November 25 1983 the Secretary of State confirmed the compulsory purchase order. On December 30 1983 the county council served a notice to treat on the company. The interest being acquired was the interest which existed at that date. On February 6 1984 the county council applied to the tribunal to determine the amount of compensation. On May 3 1984 the county council gave notice of entry and took possession of the site on May 18 1984. This, therefore, is the relevant date for the valuation of the interest being acquired for the purposes of the assessment of compensation: see Birmingham Corporation v West Midland Baptist (Trust) Association (Inc) [1970] AC 874. On November 9 1984 the tribunal, on the company’s application to discharge the covenant contained in para 5 of the first schedule to the section 52 agreement, decided that the covenant was positive rather than negative and therefore did not amount to a restrictive covenant running with the land. In the alternative, if that were wrong, the tribunal discharged the covenant under section 84 of the 1925 Act. The county council appealed against this decision and on March 19 1986 this court allowed the appeal.*  It decided that para 5 did create a restrictive covenant running with the land, unlimited in duration. It achieved a proper planning purpose and therefore should not have been discharged. *Editor’s note: Reported at [1986] 1 EGLR 24. It was not until four years later, in May 1990, that the county council’s reference to the tribunal of the dispute as to compensation was heard, resulting in the tribunal’s decision on October 11 1990 now under appeal. Principles of valuation The basic principles for the assessment of compensation on a compulsory purchase are set out in section 5 of the Land Compensation Act 1961. In this case the rules which apply are rules (1) and (2) in that section, which are as follows: (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. A logical result of these two rules is the further long-established principle of valuation which is referred to as the Pointe Gourde principle after the decision of the Judicial Committee of the Privy Council in Pointe Gourde Quarrying & Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565. That case was an application of the principle which had earlier been expressed in Fraser v City of Fraserville [1917] AC 187 by Lord Buckmaster giving the judgment of the Judicial Committee at p 194: The principles which regulate the fixing of compensation of lands compulsorily acquired have been the subject of many decisions, and among the most recent are those of In re Lucas and Chesterfield Gas and Water Board, Cedars Rapids Manufacturing & Power Co v Lacoste, and Sidney v North Eastern Ry Co. The principles of those cases are carefully and correctly considered in the judgments the subject of appeal, and the substance of them is this: that the value to be ascertained is the value to the seller of the property in its actual condition at the time of expropriation with all its existing advantages and with all its possibilities, excluding any advantage due to the carrying out of the scheme for which the property is compulsorily acquired, the question of what is the scheme being a question of fact for the arbitrator in each case. 20 That principle still applies save for the substitution of the words ‘Lands Tribunal’ for the word ‘arbitrator’. It will be seen that the principle as so expressed applied only to require that an increase in value resulting from the scheme for which the property is compulsorily acquired should be disregarded. The Pointe Gourde principle was given statutory expression in the 1961 Act in section 6, subsection (1) of which starts: Subject to section eight of this Act, no account shall be taken of any increase or diminution in the value of the relevant interest which, in the circumstances described in any of the paragraphs in the first column of Part I of the First Schedule to this Act, is attributable to the carrying out or the prospect of so much of the development mentioned in relation thereto in the second column of that Part as would not have been likely to be carried out if — a . . . the acquiring authority had not acquired and did not propose to acquire any of the land . . . There follows in the schedule a number of categories of transaction to which that section applies, but none of them includes the present situation. The statute also contains in section 9 another provision which is analogous to the Pointe Gourde principle and I shall come back to that because it forms part of the basis of Mr Burke-Gaffney’s argument in this case. It was argued at one time that the 1961 Act defined comprehensively the limits of the application of the Pointe Gourde principle, but in Viscount Camrose v Basingstoke Corporation [1966] 1 WLR 1100 this court held that the principle can be applied where appropriate in situations which do not fall within either Schedule 1 to the 1961 Act or section 9. Section 9 relates to planning blight — that is to say, the depreciation of the value of property which has not yet been the subject of compulsory acquisition, but which ‘(whether by way of designation, allocation or other particulars contained in the current development plan, or by any other means) an indication has been given that the relevant land is, or is likely, to be acquired by an authority possessing compulsory purchase powers’. It has been held, although there are very few reported examples of this, that the Pointe Gourde principle does apply outside the statutory provisions to require the valuer to disregard the decrease in value due to the carrying out of the scheme underlying the compulsory purchase: see Birmingham City District Council v Morris & Jacombs (1976) 33 P&CR 27 at p 34, where there is a dictum which approved a similar proposition in Salop County Council v Craddock [1970] 10 RVR 63. Despite the paucity of authority on this particular point, it is accepted on both sides that it could apply in this case. So the argument for the company before the tribunal was, and the submission to us is, that the effect of the restrictive covenant imposed by the section 52 agreement reserving the site for school purposes was to decrease the value of the site well below the value it would have with the planning permission for residential development which is to be assumed as a result of the section 17 certificate. The Pointe Gourde principle requires this decrease to be disregarded. Therefore, the value to be assessed is the open market value to a willing seller with the assumed planning permission. The tribunal’s award was based upon acceptance of this argument. The counter-argument by Mr Lightman for the county council can be summarised as follows. Before reaching the stage of valuation, it is necessary first to determine what is the interest which is being compulsorily acquired. The restrictive covenant was an integral part of the interest being acquired. In other words, what was being acquired was the freehold of the site subject to the restrictive covenant. That was the interest for the sale of which a value had to be ascertained. To the process of deciding what was the interest the Pointe Gourde principle does not apply. The authority for that proposition upon which Mr Lightman relies is Rugby Joint Water Board v Shaw-Fox [1973] AC 202. In that case there had been a compulsory purchase of farmland for the construction of a reservoir. The land formed a large part of two farms which were let to tenants on normal agricultural tenancies subject to the Agricultural Holdings Act 1948. The effect of section 3 of the 1948 Act is to give very considerable security of tenure to agricultural tenants. The value to a landlord of land subject to such a tenancy is therefore normally its residual value subject to the tenant’s security of tenure. However, by statute the landlord is entitled to serve a notice to quit in a number of situations which are defined in section 24 of the Act. One such situation is where the land is required for a use other than agriculture for which planning permission has been given. In such a case the landlord’s interest is his freehold subject to a tenancy, but a tenancy terminable on 12 months’ notice. In the Shaw-Fox case the landowner argued that the planning permission granted for the construction of the reservoir had converted his interest from restricted interest subject to the security of tenure to the wider interest of a freehold subject to a tenancy terminable by notice to quit. The water board argued that this infringed the Pointe Gourde principle. The Court of Appeal held that it did not. It accepted the argument for the landowner and the House of Lords upheld that decision. Lord Pearson, who delivered the first speech, at p 215B posed the question to be answered. He said: The question to be decided is, I think, whether the Pointe Gourde principle can be extended so as to apply not only to the ascertainment of the value of a defined parcel of land or a defined interest in land, but also to the ascertainment of the nature and extent of the interest to be valued in a case where the genesis or execution of the scheme has brought about an alteration of the interest itself. In the present case the interest of the respondents as landlords, before it was affected by the scheme, was a reversion to a protected tenancy. The scheme converted it into a reversion to an unprotected tenancy and thereby enhanced its value. Can it be said, in accordance with the appellants’ proposition, that the change which the scheme has brought about in the nature of the reversion is to be disregarded in assessing the compensation? After considering a number of authorities, Lord Pearson answered that question at p 216E as follows: One can take what is common ground, namely, the principle that the nature of the claimant’s interest is to be ascertained at the time of (or immediately before or immediately after) the service of the notice to treat. As Lord Donovan said in West Midland Baptist (Trust) Association (Inc) v Birmingham Corporation [1970] AC 874, 909: ‘In the words of the textbook writers, the notice to treat fixes the interest which is to be acquired.’  This is borne out by section 5(2) of the Compulsory Purchase Act 1965 which provides that: ‘Every notice to treat — (a) shall give particulars of the land to which the notice relates, (b) shall demand particulars of the recipient’s estate and interest in the land, and the claim made by him in respect of the land, and (c) shall state that the acquiring authority are willing to treat for the purchase of the land . . .’ It seems to me, therefore, that the respondents are entitled to compensation for the interest which they held in the land at the date of the notice to treat, even though the nature of this interest had been altered in their favour by the inception of the appellant’s scheme. There is the possible argument that the respondents’ reversionary interest remained the same though its value was increased by the appellants’ scheme enabling the respondents to give an effective notice to quit. But I do not think that argument is right: I think the reversion to an unprotected tenancy is a different interest from a reversion to a protected tenancy. The respondents’ interest to be valued is the reversion as it existed on the date of the notice to treat, when it was a reversion to an unprotected tenancy. That is what the respondents had to sell and what the appellants must pay for. I agree with the majority decision in Minister of Transport v Pettitt (1968) 67 LGR 449. Lord Hodson at p 219 and Lord Cross of Chelsea at p 263, both agreeing with Lord Pearson, quoted with approval a brief passage from the judgment of Russell LJ (as he then was) in Minister of Transport v Pettitt (1968) 67 LGR 449, the passage being at p 462, where he said that the Pointe Gourde principle relates ‘not to the ascertainment of what is the interest to be valued, but the value of the interest when ascertained’. In Shaw-Fox Lord Simon of Glaisdale dissented, but Lord Gardner said that he agreed with Lord Pearson. Mr Burke-Gaffney for the company seeks to distinguish Shaw-Fox on its facts, but the distinctions, in my view, do not affect the application to the present case of the ratio of that decision. However, Mr Burke-Gaffney advances a further argument, which is as follows. The covenant in the section 52 agreement reserving the site for a school had two effects. First, it was a part of — that is to say, a restriction on — the interest held by the company and, second, it was also a part of the scheme or project for the construction of the school. It follows, the argument continues, that at the valuation stage the effect of the covenant is to be disregarded. In effect — this is my interpretation of Mr Burke-Gaffney’s words rather than his own words — the Pointe Gourde principle is to be applied as if the company’s interest were not subject to the restriction imposed on the company. As to the argument that the restriction can be both a part of the interest and a part of the scheme or project, I agree. In Wilson v Liverpool Corporation [1971] 1 WLR 302 Lord Denning said at p 309: A scheme is a progressive thing. It starts vague and known to few. It becomes more precise and better known as time goes on. Eventually it becomes precise and definite, and known to all. Correspondingly, its impact has a progressive21 effect on values. At first it has little effect because it is so vague and uncertain. As it becomes more precise and better known, so its impact increases until it has an important effect. It is this increase, whether big or small, which is to be disregarded at the time when the value is to be assessed. I also agree with Mr Burke-Gaffney’s alternative argument that the restriction in the covenant can be considered to have been an indication for the purposes of section 9 of the 1961 Act. I remind myself that that section provides: No account shall be taken of any depreciation of the value of the relevant interest which is attributable to the fact that (whether by way of designation, allocation or other particulars contained in the current development plan, or by any other means) an indication has been given that the relevant land is, or is likely, to be acquired by an authority possessing compulsory purchase powers. In my view, in order to come within that section, an indication given ‘by any other means’ must share this characteristic with an indication to be found in the development plan, that it provides information which is available not merely to the landowner-vendor but also to a potential purchaser. The point of section 52 is to remove planning blight arising from information which potential purchasers may come to receive. In the circumstances of the present case both the restrictive covenant in the section 52 agreement and the conditions of the planning permission for the larger site would be capable of being registered and, if registered, would be open to discovery by a potential purchaser. However, whether we are considering whether to apply the Pointe Gourde principle or section 9, we come back to the same question: does the principle or section 9 require the interest to be valued as if it were not restricted by the covenant? The tribunal in its decision did not address that question directly. The learned president expressed himself when he arrived at his award on p 20 of his decision in the following terms:* I have given careful attention to the judgments of the Court of Appeal in the present case and to the declaration (that the amount of compensation to be paid by the county council for the compulsory acquisition of the 1.23 ha be determined on the basis that such land is affected by the restrictive covenant) which I have mentioned on p 5 of this decision†  and I have given careful thought to the question whether the Lands Tribunal is inhibited by the judgments and the declaration in the assessment of compensation. Mr Whittaker — who appeared for the county council before the Lands Tribunal as he has with Mr Lightman before us — has not taken that point and it appears to me that Mr Burke-Gaffney was right when he said that, although the interest to be valued is the freehold subject to the restrictive covenant, and although the Court of Appeal was dealing with the real world, the Lands Tribunal in assessing compensation is not concerned with the real world and is unfettered by the decision and declaration of the court. I can, therefore, proceed to assess compensation in the normal way. Having regard to my assessment of the full open market residential value of the company’s interest acquired, to my finding as to the identity of the scheme and to my decision with respect to section 9 of the Land Compensation Act 1961, I award to the company by way of compensation for that interest the sum of £300,000 together with surveyor’s fees . . . *Editor’s note: Reported at [1991] 1 EGLR 224 at p 229F. † Editor’s note: Reported at [1991] 1 EGLR 224 at p 225K-L. In my view, Mr Burke-Gaffney’s argument is the same as the argument considered and rejected by the House of Lords in the Shaw-Fox case. Lord Cross expressed it clearly at p253a where he said: That principle is being invoked here in order to induce the court to say that the landlord’s interest in the land . . . is not what in truth it was . . . but something quite different. In my judgment, the ratio of the decision in Shaw-Fox applies to the present case. The interest to be valued is the freehold of the site subject to the restriction imposed by the covenant in para 5 of Schedule 1 to the section 52 agreement. Neither the Pointe Gourde principle nor section 9 of the 1961 Act could apply so as to remove that restriction or require it to be disregarded. I therefore conclude that on this main issue the decision of the tribunal was wrong in law. However, that does not mean that the value of that interest was necessarily the value of the land solely for agricultural purposes. Mr Paul Westoby BSc ARICS, giving evidence for the company, put before the tribunal an alternative valuation which I must now consider. The president of the tribunal summarised Mr Westoby’s approach to the alternative valuation as follows:§ (1)  The interest for sale in the open market comprises the freehold of the 1.23 ha with vacant possession having a planning permission for use as a primary school and the assumption of a planning permission for residential development. The land is affected by a restrictive covenant ‘reserving the land for school purposes’. (2)  For the purposes of calculating the compensation, any decrease in value entirely due to the scheme underlying the acquisition is to be ignored; so, too, is any decrease attributable to the giving of any indication by any means that the land is or is likely to be compulsorily acquired. (3)  In the open market the prospective purchasers or bidders would include private individuals, housebuilding companies, housing associations and others interested in purchasing land for residential development; school site purchasers, including possibly the county council and possibly also certain church bodies which operate primary schools; the district council; the vendor company; and land investors and speculators. (4)  It was to be assumed that the county council was in the market for a school site but not the 1.23 ha. If it did bid for that land it would have to bid alongside other bidders and be prepared to pay, like them, the full market price less a small percentage. (5)  The county council had an urgent need for a school site in Towcester and it would consider other suitable sites, of which there were six in addition to the 1.23 ha. Two of those sites were particularly suitable and — Mr Westoby went on to describe them and said that one of them was his proposed site — If the county council were to bid for the 1.23 ha, that would encourage other bidders to bid more, since the county council was not going to exercise compulsory purchase powers. (6)  In the no-scheme world he would expect the county council to purchase one of the six alternative sites, if necessary, using compulsory purchase powers. (7)  A purchaser of the 1.23 ha in the open market would expect that, so soon as the county council had bought one of the other sites, the district council, acting reasonably, would be willing to lift the covenant. Alternatively, he would assume that he would have to go to the Lands Tribunal and that, if so, he would be successful there. (8)  Such a purchaser would be willing to pay the full open market residential value for the 1.23 ha less 5%, that is to say [a figure based upon Mr Westoby’s valuation]. (9)  He would be patient just as he would be if there were some problem relating to access: he would be prepared to ‘bank’ the land and wait. § Editor’s note: Reported at [1991] 1 EGLR at p 229H. I go back to those numbered assumptions or hypotheses in order to comment on them. With the first I agree save that I myself would have defined the interest before referring to the actual or assumed planning permission. Second, the second hypothesis refers to the scheme underlying the acquisition. ‘What is the scheme?’ was said in the passage which I have already quoted from Fraser v City of Fraserville to be a question of fact. The president defined it at two passages in his decision. At the bottom of p 17 he said: The scheme underlying the acquisition in the present case consists of or includes physical development in the form of the erection of a primary school on the 1.23 ha. At p19 he said: In summary, the scheme consisted of the erection of a primary school of at least 245 places on land which was the subject of the requirement in para 5 of Schedule 1 to the section 52 agreement, the imposition of which requirement was itself part of the scheme. I comment on the hypotheses set out in paras 3, 4, 5 and 6 together. Mr Westoby was envisaging in this valuation that at the valuation date of May 18 1984 the potential buyers for the site would include those who were interested in building houses. However, although the particular scheme for the construction of the school on the site was to be disregarded, he thought he could not disregard the fact that the increased population had created and was creating the need for a new primary school somewhere in the vicinity and he therefore considered how the county council as education authority would meet that need. The assumptions he made were that the county council might be a competitive bidder for the site, but in relation to the site they would not be armed with powers of compulsory purchase. However, if they came to consider alternative sites, they would have powers of compulsory purchase. The relevance of that presumably was that the county council, knowing that they could acquire an alternative site at whatever was the proper value under section 5 of the 1961 Act, would therefore be bidding for this site with that knowledge, which would restrain them in their bidding for this site. Mr Lightman criticises this approach. Both parties, apart from their clear oral submissions to us, set out their submissions in skeleton arguments. I find it most helpful to quote from the skeleton argument of counsel for the county council in relation to this point. He says: The fundamental flaw in this approach/thesis is its mixture of the imaginary no-scheme world and the real world. The Appellant does not challenge the findings that (i) in 1984 it did have a pressing need to build a new primary school and (ii) two of the alternative sites mentioned would have been suitable for erection of a primary school. It was this pressing need which gave rise to the CPO and the scheme underlying the CPO The correct approach is either (1)  in the imaginary no-scheme world there is to be ignored the real world pressing need of the CC for a primary school (and therefore the imaginary likelihood of a CPO for one of the alternative sites, and exclusion of the possibility of a CPO for this site) [or] (2)  if one brings into the imaginary world (as the Tribunal does) (i) the CC’s (real world) pressing need for a new primary school (ii) the availability of the CC of this site and the CC being a prospective purchaser in the market-place (because of its pressing need) and (iii) the availability of other suitable sites in Towcester which the CC could compulsorily purchase, then it is false and unrealistic in this imaginary world to say that the CC could find, and decide to use a CPO for, any of the competing sites, but to exclude the possibility of the CC finding this site and deciding to use a CPO for it. Either one is postulating a world in which the Council is a possible purchaser with a pressing need to acquire a school site, or one is not. If one is, then in that world the CC would have, and would be perceived to have, compulsory purchase powers in relation to all possible sites. To say this in relation to the Acquired Land is in the imaginary world being postulated not to give weight to the actual scheme but to recognise the possibility in the imaginary world being postulated that a local education authority with a pressing need might decide (although it has not yet decided) to exercise compulsory powers of acquisition. This is an inevitable corollary of the pressing need in the imaginary world being postulated: see eg East End Dwellings Co v Finsbury Borough Council [1952] AC 109. [We] submit that of possible approaches (1) and (2) above, (1) is probably more correct In my view, Mr Westoby was correct in his assumption that in the no-scheme world there would still have been the need for a new primary school to serve the locality just as in Margate Corporation v Devotwill Investments Ltd (1970) 22 P&CR 328 it was accepted that in the no-scheme world there would still have been a problem of traffic congestion to be solved. Mr Westoby then concluded that the county council could meet the need by acquiring an alternative site, for which purpose he took the view (in my view correctly) that the council would have the power of compulsory purchase. The relevance is that the county council’s knowledge that they could acquire an alternative site at a price to be determined in accordance with section 5 would cause them to be restrained in the price they would be willing to pay for the site. If one envisages the site being sold by auction on the relevant date in the no-scheme world, either the county council would not bid at all or, if they did bid, their bid would be restrained and thus would, Mr Westoby postulates, not be the highest bid; the highest bid would come from a house-builder. The vital part of Mr Westoby’s hypothesis is that expressed in para (7), which I have already read but will repeat: A purchaser of the 1.23 hectares in the open market would expect that, so soon as the county council had bought one of the other sites, the district council, acting reasonably, would be willing to lift the covenant. Alternatively he would assume that he would have to go to the Lands Tribunal and, if so, he would be successful there. That is on the assumption, of course, either that the county council had bought an alternative site before the hypothetical auction on May 18 1984 or that they were not successful in their bid at that auction and bought an alternative thereafter. Mr Westoby on that hypothesis was envisaging a housebuilder buying the site on the relevant date, subject to covenant, in the expectation that since the county council either had purchased an alternative site or had not purchased this site they were no longer seeking to acquire the site for a school. Thus the restrictive covenant no longer served any useful purpose and would probably be discharged by agreement or, if not, as a result of an application under section 84 of the Law of Property Act 1925. I must turn to consider the material parts of that section. Section 84(1) provides: The Lands Tribunal shall (without prejudice to any concurrent jurisdiction of the court) have power from time to time, on the application of any person interested in any freehold land affected by any restriction arising under covenant or otherwise as to the user thereof or the building thereon, by order wholly or partially to discharge or modify any such restriction on being satisfied — (a)  that by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Lands Tribunal may deem material, the restriction ought to be deemed obsolete; or (aa)  that (in a case falling within subsection (1A) below) the continued existence thereof would impede some reasonable user of the land for public or private purposes or, as the case may be, would unless modified so impede such user; or (b)  . . .; or (c)  that the proposed discharge or modification will not injure the persons entitled to the benefit of the restriction . . . Subsection (1A) provides: Subsection (1) (aa) above authorises the discharge or modification of a restriction by reference to its impeding some reasonable user of land in any case in which the Lands Tribunal is satisfied that the restriction, in impeding that user, either — (a)  does not secure to persons entitled to the benefit of it any practical benefits of substantial value or advantage to them; or (b)  is contrary to the public interest; and that money will be an adequate compensation for the loss or disadvantage (if any) which any such person will suffer from the discharge or modification. (1B)  In determining whether a case is one falling within subsection (1A) above, and in determining whether (in any such case or otherwise) a restriction ought to be discharged or modified, the Lands Tribunal shall take into account the development plan and any declared or ascertainable pattern for the grant or refusal of planning permission in the relevant areas, as well as the period at which and the context in which the restriction was created or imposed and any other material circumstances. In my judgment, Mr Westoby has accurately described the features of the no-scheme world. The tribunal was entitled to accept his hypothesis and in particular was entitled to accept that in the no-scheme world a situation would be reached in which a potential purchaser of the land would be entitled to say that there was a very good chance that the restrictive covenant would be discharged by agreement or by the tribunal under section 84. The alternative decision of the tribunal on that basis was:* Alternative award Mr Whittaker said that even in the no-scheme world it was permissible to assume that the county council might make a compulsory purchase order for the 1.23 ha. Mr Burke-Gaffney said that that was not permissible. I agree with him: see the passage from the judgment of Lord Denning MR in Myers which I have quoted. It is to be assumed that the county council has no scheme of acquisition for the 1.23 ha. Subject to quantum, I accept Mr Westoby’s thesis. I agree with Mr West [for the claimants] that if there were no proposal to put a school on the 1.23 ha then the purchaser in the open market would assume that the original purpose of the covenant had gone. Accordingly, the purchaser would believe that the district council, acting reasonably, would agree to the discharge of the covenant. If the matter had to go to the Lands Tribunal, then the purchaser would assume that the covenant would be discharged under para (a) of section 84(1) of the Law of Property Act 1925. It is not necessary to consider the other grounds available in that subsection, but I accept Mr West’s argument in relation to them. I think that Mr Westoby is rather optimistic in assuming that the prospective purchaser would be willing to pay as much as 95% of the full open market residential value of the land. As a matter of caution, I would substitute 85%. Therefore, if it were necessary for me to do so I would make an alternative award to the company of £300,000 less 15%, namely £255,000 together with fees as before. *Editor’s note: Reported at [1991] 1 EGLR 224 at p 230A. I find no error of law in that approach. The decision by the president to discount full residential value by 15% was not based specifically on evidence. It was a matter of his judgment. The tribunal, as we were reminded, is a specialist tribunal, specifically charged with dealing, among other matters, with problems of compensation. There is no material upon which we could disagree with that judgment of the president. I would therefore allow the appeal, set aside the award of £300,000 and substitute for it an award in the sum of £255,000 plus surveyors’ fees. The case stated posed a considerable number of detailed questions. Provided my lords agree with the judgment which I have just delivered, I hope the answers to the questions are apparent from what I have said and therefore that it will be unnecessary to answer them specifically, but if the parties invite us to answer them specifically, we must endeavour to do so. McCOWAN and NEILL LJJ agreed and did not add anything. Appeal allowed; no order as to costs.