Bolton Metropolitan Borough Council v Waterworth and another

Compensation for severance of retained land from other land acquired by local authority — Appeal by authority by case stated from decision of Lands Tribunal, the tribunal member (E C Strathon) acting as arbitrator on a reference by consent under section 1(5) of the Lands Tribunal Act 1949 — Measure of damage the depreciation in the value of retained land at date of severance — Whether arbitrator erred in law in deferring the development value of the retained land for seven years from date of severance, based on a forecast of planning permission as at that date, planning permission having in fact been given about 3 1/2 years from that date — Relevance of ‘Bwllfa principle’ — Planning permission for development of retained land only obtained in combination with permission relating to a much larger area — No error of law by the arbitrator — Appeal dismissed In this appeal by case stated the appellants were Bolton Metropolitan Borough Council and the respondents (claimants) were Mr F and Mr J H Waterworth, owners of agricultural land known as Sharples Hall Farm, Bolton. The larger part, 29.66 acres, had been acquired by the authority, leaving the respondents with 8.5 acres. The issue was as to the amount of compensation to which the respondents were entitled in respect of the severance. The Lands Tribunal’s decision is reported at (1978) 251 EG 963, 1071. L Read QC and C Whybrow (instructed by D A Hoggins, Director of Administration, Bolton) appeared on behalf of the appellants; N McLeod QC and J Male (instructed by Woodcock & Sons, of Bury) represented the respondents. Giving the judgment of the court, SIR PATRICK BROWNE said: This is an appeal by way of case stated from a decision of the Lands Tribunal given on May 24 1978. The decision was given in a reference by consent to the Lands Tribunal as arbitrator under section 1(5) of the Lands Tribunal Act 1949. The question was the amount of compensation payable to Mr F and Mr J H Waterworth, to whom we shall refer as ‘the claimants’, for the severance of land formerly owned by them, part of which was acquired by the council. The tribunal awarded £63,648. The council appeals, and submits that the figure should be £39,379. The parties agreed a statement of facts, which is set out in full in the decision of the tribunal; we do not think we need read it all. The land in question was formerly an agricultural holding of about 40 acres, known as Sharples Hall Farm, owned jointly by the claimants (who are brothers) and farmed by Mr P Waterworth. There was a farmhouse in which Mr F Waterworth lived and which does not come into this case. The land and its surroundings are clearly and helpfully shown on various plans which were put before us. In the development plan of the former County Borough of Bolton, approved in 1957, a substantial part of the 40 acres was allocated as the site for a secondary school. Negotiations for the acquisition by the council of the part of the holding needed for the school began in 1970, and in 1971 the council authorised by resolution the making of a compulsory purchase order. It was, however, not necessary to proceed with the compulsory purchase, because the parties reached agreement for the sale of 29.66 acres at a price of £217,500, which represented £7,250 an acre. This left the claimants with 8.5 acres, excluding the farmhouse. The contract was signed on October 24 1972 and the acquisition was completed by a conveyance dated November 24 1972. It was common ground that this was the date of possession for the purpose of assessing compensation. It was agreed between the parties that this price did not include anything for severance and that the claimants could submit a claim for compensation under that head if planning permission for the development of the 8.5 acres was not obtained. Meanwhile, in March 1972, the claimants had submitted an application to the council as planning authority for outline planning permission for residential development of the 8.5 acres. The then borough planning officer recommended the grant of permission, but on November 29 1972 (five days after the conveyance) the council refused permission, for the reason that the site should be retained as open space as an area of special natural and environmental value. The claimants appealed to the Secretary of State against this refusal and by a letter dated December 11 1972 the claimants’ valuer submitted a claim for £30,000 for severance. The council was naturally reluctant to deal with this claim until the decision of the Secretary of State on the planning appeal was known, and the claimants acquiesced willingly or unwillingly. By a letter dated November 22 1974 the Secretary of State dismissed the appeal, not on the environmental ground on which the council had refused permission but because of access difficulties; at that time the only possible access was from the west, by way of roads called Sharples Hall Drive and Andrew Lane (the problem is clearly shown on the plans which were before us). In the decision letter, the Secretary of State said, and I quote: It is considered that there is no reason to doubt that with careful and sympathetic design and layout the site could be developed in a way which would involve minimal loss of trees and effect on birdlife and would have little effect on the overall character of surroundings. Having regard to the continuing general need to release land for housing purposes it is considered that the contribution which this site could make towards meeting housing needs outweighs the general objections which have been made to its development. The development would however be dependent upon the presence of pedestrian and vehicular access via Sharples Hall Drive but, because of the limited sight lines available, the junction with Andrew Lane is considered unsuitable in its present form. To overcome this deficiency improvements would be needed at the road junction including work on land forming part of No 24 Andrew (Drive), but as this is not in your client’s control it is not open to the Secretary of State to grant planning permission subject to a condition requiring such work. Because of the inadequacy of the means of access and because it is not possible to deal with the matter by means of a planning condition it is considered that planning permission must be refused. On November 24 1975 the claimants made another application for outline planning permission for residential development of the 8.5 acres, but this was refused by the council on February 26 1976 partly on the access ground but partly still on environmental grounds. On March 15 1976 the claimants entered into a contract for the sale of the 8.5 acres to a company known as Price Brothers8 (Somerford) Ltd for £50,000, payable in three instalments. On March 8 1976 Price Brothers (Somerford) Ltd had submitted to the council an application for planning permission for residential development of the 8.5 acres and also of about 30 acres of land immediately to the east of them. According to the agreed statement of facts: ‘The application embodied proposals for access to the two sites which overcame the difficulties referred to in the decision letter’ of the Secretary of State and the application was granted on May 27 1976. By an agreement dated April 29 1977 the claimants and the council agreed to refer to the Lands Tribunal for arbitration pursuant to section 1(5) of the Lands Tribunal Act 1949 their dispute as to the amount of compensation payable for severance, the issue being stated as follows: It is hereby agreed by the claimants and the borough council that the issue between them which they desire to refer to the Lands Tribunal is as follows: The determination of the sum payable by the borough council to the claimants under an agreement whereby the land edged blue on the plan annexed hereto (the Sharples School land) was acquired by the borough council’s predecessors (the Mayor, Aldermen and Burgesses of the County Borough of Bolton) being a sum in respect of the severance of the land edged green on the said plan from the Sharples School land that sum to be the sum which would have been payable under section 7 of the Compulsory Purchase Act 1965 had the Sharples School land been compulsorily acquired by the said predecessor pursuant to powers contained in the Education Act 1944 and had the said predecessor completed compulsory acquisition and entered on and taken possession of the Sharples School land on November 24 1972 but taking into account inter alia the decision of the Secretary of State for the Environment in his letter dated November 22 1974 (Reference APP/873/A/73/2395) and the contents thereof. On the same day the parties gave notice of reference to the Lands Tribunal, stating the issue in the same terms. The case was heard by a single member of the Lands Tribunal (E C Strathon FRICS) on January 24 and 25 1978 and on May 24 1978 he gave a very full and careful written decision, which is annexed to the case stated. The questions asked by the case are: (1)  Whether, having regard to the fact that planning permission was granted, in respect of the severed land, 3 years 6 months and 3 days after the date of the occurrence of the severance, and having regard to the authorities, I erred in law in my assessment of the compensation to which the claimants were entitled in that I deferred the development value of the said land for a period of 7 years from the said date. (2) Whether there was any evidence to support my said decision. The arbitrator stated the question he had to decide, in our view with complete accuracy. He said: The sum to be determined is that which would have been payable under section 7 of the Compulsory Purchase Act 1965 if the Sharples School land, which was purchased by the borough council, had been compulsorily acquired. 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.’  It is common ground that the question for determination is what is the damage caused by severance measured by the depreciation in market value at the date of severance, namely November 24 1972, the date of the conveyance of the land purchased. He said again: The question to be determined is, pursuant to section 7 of the 1965 Act, the damage, if any, to be sustained by the owner of the land by reason of the severance. It appears that there was some argument in the Lands Tribunal, and there was some discussion in the argument in this court, about the relationship between rule (2) and rule (6) in section 5 of the Land Compensation Act 1961 and their application to this case. We do not find it necessary (or wise) to express any opinion on these problems, which seem to us to involve some difficulties, because Mr Read, for the council, while emphasising that what has to be determined is ‘the damage . . . sustained’, accepted that in this case the measure of that damage is the diminution, as at November 24 1972, in the market value of the 8.5 acres by reason of the taking of the rest of the claimants’ land. According to paragraph 22 of the agreed statement of facts: ‘It is agreed by the parties that at the date of severance (ie November 24 1972) the agricultural value of the land retained by the claimants was £500 per acre and that had it possessed the benefit of a residential planning permission on that date it would have had a value of £12,000 per acre’ — a total of £102,000. At the hearing before the Lands Tribunal each party called one valuer, the claimants Mr Carlton Kirkpatrick FRICS and the council Mr L Higginbottom FRICS, chief estate surveyor of the council. Each valuer produced two alternative valuations, but we need only refer to their respective first valuations. Before severance, there was no problem about access for the 8.5 acres over the land taken by the council to the south to and from a public highway. But as a result of the severance and of the decision of the Secretary of State of November 22 1974 as to access, the 8.5 acres became landlocked. The arbitrator summarised the evidence of Mr Kirkpatrick and Mr Higginbottom on that point: Both witnesses were of the opinion that the owner of 24 Andrew Lane would not sell any land at any price for the purpose of remedying the inadequacy of the access, although if it were assumed that every man has his price, Mr Kirkpatrick thought that such a price would be in excess of 50 per cent of the development value. The proposition was not pursued. Although the relevant market value is the value as at November 24 1972, that value would necessarily depend on the forecasts or conjectures of the market as to then future events — in particular, the time when the 8.5 acres would cease to be landlocked and regain its ‘dead ripe’ for development value. Mr Kirkpatrick took the view that ‘taking into account the 1974 decision of the Secretary of State . . . there was no possibility of securing access to the 8.5 acres at any time in the future. The land possessed no potential development value, not even hope value, because there was no prospect whatever of obtaining planning permission.’  His valuation 1 was therefore: 8.5 acres at £12,000 an acre £102,000 Less (existing use value) 8.5 acres at £500 an acre 4,250 £97,750 Mr Higginbottom, on the other hand, thought that the development value was not extinguished but was deferred. His evidence is summarised in the decision as follows: Mr Higginbottom was not so pessimistic about the grant of planning permission. He accepted that, taking into account the decision of the Secretary of State, a deferment factor was introduced; he had formed the view that in November 1972 a purchaser would have estimated that planning permission would be obtained in 6, 7 or 8 years, because within that period it would be imperative for the development of land to the east (Ashworth Village) to have access through Sharples Hall Drive, and so provide the subject land with an access. Having conferred with the borough council’s planning officers the forecast was altered by Mr Higginbottom to a period of 4 years and as can be seen the period which he has adopted for his valuation is 3 years 6 months 3 days, the exact time span from the date of severance, November 24 1972, to the date of the planning permission, May 27 1976. [The borough director of planning] had consistently recommended the borough council to grant consent to the applications of 1971, 1972, 1975 and finally to the 1976 application which was approved with access along Sharples Hall Drive to Andrew Lane for use in common with the Ashworth Village land to the east. In 1972 his forecast of the grant of such an approval would have been between 3 to 4 years. Mr Higginbottom’s valuation was therefore: Market value ‘dead ripe’ at November 24 1972, 8.5 acres at £12,000 an acre £102,000 ‘Dead ripe’ value deferred to May 27 1976 £102,000 Present value of £1 in 3 years 6 months 3 days at 15% 0.614 £62,628 £39,372 Neither valuer relied on the sale for £50,000 in March 1976. 9 The arbitrator accepted the approach of Mr Higginbottom. He said: In the eyes of Mr Kirkpatrick the severed land had become completely landlocked, and, being directed to take the Secretary of State’s decision into account, he claimed the loss of the whole of the development value at the date of severance, November 24 1972. But Mr Higginbottom considered that sometime in the future access would be secured in conjunction with the development of Ashworth Village to the east. I think this is a fair conclusion. He then referred to the intention of the council as to a new road on the line of Sharples Hall Drive and went on: I think this would alert a prudent purchaser to the probability that the severed land was not in fact landlocked and that development, using Sharples Hall Drive as an access, could reasonably be foreseen. I have therefore concluded that the cause of damage sustained by the claimants is deferment, not extinction of the development value of the severed land, which the valuation witnesses agree should be taken to possess a market value of £102,000 at the moment of severance on November 24 1972. But he did not accept Mr Higginbottom’s deferment period of 3 years 6 months and 3 days to the date when planning permission was in fact granted. He took instead a deferment of 7 years, which he found would have been ‘the reasonable expectation’ as at November 24 1972, preferring on this point the estimate of Mr Higginbottom to that of Mr Ogden, the planning officer. He therefore awarded £63,648, calculated as follows: Market value of 8.5 acres, ‘dead ripe’ at November 24 1972 £102,000 ‘Dead ripe’ value to be deferred 7 years £102,000 Present value of £1 in 7 years at 15% 0.376 38.352 Damage sustained £63.648 The only question in this appeal is whether the arbitrator was wrong in law in taking the period of deferment as 7 years and not as 3 years 6 months and 3 days. There cannot be, and is not, any complaint that he preferred Mr Higginbottom’s forecast of 6, 7 or 8 years to the planning officer’s forecast of 3 to 4 years, nor is there any challenge to a forecast as at November 24 1972 of 7 years. The complaint is that on what Mr Read, for the appellants, called ‘the Bwllfa principle’ (Bwllfa and Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Company [1903] AC 426, which has been applied in various other fields of the law) the arbitrator was wrong to act on conjecture as to the date when planning permission would be granted when the fact was known. In the Lands Tribunal, the council argued that by the time of the hearing it was known as a fact that planning permission was granted on May 27 1976, which was 3 years 6 months and 3 days after November 24 1972, and the arbitrator ought to take that as the period of deferment. The claimants argued in the tribunal (but not in this court) that no account should be taken of anything which happened after November 24 1972 except the decision of the Secretary of State of November 22 1974 which was expressly brought in by the issue referred to the tribunal. The arbitrator in his decision referred in some detail to the Bwllfa case, and quoted from the speech of Lord Macnaghten at p 431 a passage relied on by Mr Mann, who then appeared for the council: ‘Why should (the arbitrator) listen to conjecture on a matter which has become an accomplished fact?  Why should he guess when he can calculate?  With the light before him, why should he shut his eyes and grope in the dark?’  He dealt with this point as follows: In the present case, where the claimants, after the date of severance, have retained their interest as owners in the severed land, I consider Bwllfa should be followed so that a consideration of the events and happenings after the date of severance should not be shut out. How do these matters influence the assessment of damage?  In my view the relevant events of importance are: (1) The planning refusal by the Secretary of State on November 22 1974. By agreement it is a matter to be taken into account. (2) The submission of the further planning application on November 24 1975, taken over by the eventual purchasers as their own application and which was refused by the planning authority on February 26 1976. (3) Following the refusal of February 26 1976, the sale of the severed 8.5 acres by the claimants at a price of £50,000 payable by instalments over two years after the date of completion. (4) The grant of permission on May 27 1976 (to the purchasers of the severed land) for the development of the severed land and of some 30 acres of land to the east. The consent related to proposals for access to the two sites which overcome the difficulties referred to in the Secretary of State’s decision letter of November 22 1974. It appears to me that the planning refusals of November 22 1974 and February 26 1976 do not put in question a deferment factor estimated at 7 years from November 24 1972. The sale of the severed land by the claimants at £50,000 was considered to be unhelpful by Mr Higginbottom, who criticised it as a rush sale, probably a matter concerning the (unknown) tax position of the claimants, who might thereby have enjoyed a tax advantage. The claimants were reluctant to accept that the sale had any relevance to the solution to the question. In my view the sale does not suggest that it is a fact which affects an initial considered estimate of a deferment period of 7 years. The fourth fact or event, the grant of permission after the claimants had sold the land, is the happening which the compensating authority submits the claimants should have waited for, the moment when the land regained its quality of being ripe for development, so providing the best data for the assessment of damage sustained 3 years 6 months and 3 days earlier at the date of severance. The evidence as to the value of the severed land with the 1976 permission, ripe for development, was that it would be about £127,500 (£15,000 per acre). I was not told whether the whole of the development value would have accrued to the claimants, or whether such value could have been realised only by bargaining with the developers of other land or whether the claimants would have been called upon to share the burden of providing the cost of access. An essential linkage of planning permission and the value benefit of it is missing. It leads to a further set of estimation and assumptions, which do not measure up to accomplished facts which under Bwllfa should be preferred to conjecture. I am satisfied that the facts of the happenings after the date of severance do not support an assessment of damage less than the amount of £63,648 which has been shown to result from the application of a deferment period of 7 years. At the beginning of his opening, Mr Read said that the question of law raised by this appeal was whether, in assessing compensation for damage sustained by severance, the tribunal should imagine itself sitting at the date when possession of the land was taken, conjecture as to the future and prefer that conjecture to evidence available at the hearing of what actually happened. But in the end, this appeal, in our opinion, does not raise that — or indeed any other — question of law. It is clear from the passage which we have read from the decision that the arbitrator held as a matter of law that he was entitled to look at what happened after November 24 1972, including the planning permission of May 27 1976 and Mr McLeod, for the claimants, did not argue to the contrary in this court. Having so held, and having considered the subsequent events, the arbitrator found that the planning permission of May 27 1976 did not affect his assessment of compensation. In our judgment, this was a finding of fact. We are bound to say that the arbitrator’s reasons for this finding are not very fully or clearly explained, but in our view there was ample evidence to support it. The 8.5 acres as such never got planning permission. They only got it in May 1976 because they were combined with another 30 acres of land in which the claimants had not, and never had had, any interest, and over which they had no control. This seems to us to throw no light on the question when the 8.5 acres, on their own, would have got planning permission. We answer the questions asked in the cases as stated: (1) No. (2) Yes, and dismiss the appeal. The appeal was dismissed with costs.