Assessment of compensation
Effect of planning permission
Transport For London (London Underground Ltd) V Spirerose Ltd (In Administration)
 UKHL 44
This House of Lords judgment overturned both the Lands Tribunal and Court of Appeal judgments on how compensation should be assessed having regard to the unrealised potential for development.
The courts below had applied an approach which allowed compensation to be assessed on the basis that planning permission “would” have been granted in the “no scheme” world pursuant to the principle in Pointe Gourde Quarrying & Transport Co v Sub-Intendent of Crown Lands (1947) AC 565 PC (Trin) despite the fact that none of the statutory assumptions under the Land Compensation Act 1961 applied.
The courts below had considered that the principle in Pointe Gourde could be applied as an adjunct to the statutory provisions relating to assumed planning permissions.
However the House of Lords rejected this approach and held that the valuation had to take into account the land’s potential for development and that the development potential had to be valued by discounting future uncertainties. Therefore the correct basis for assessment was on the “hope” value of the land for its unrealised potential. It was not correct to assess the value of the land on the assumption that planning permission would have been granted once it had been demonstrated on the evidence that planning permission would have been likely to have been granted.
The House of Lords considered that the statutory scheme provided for the situation that the development value of planning permission could be taken into account even where the statutory assumptions did not apply by way of s14 (3) of the 1961 Act. However it was not open to the court to establish an assumption that planning permission would be obtained by analogy with the specific statutory rules that provided for such assumptions. To do so was an impermissible exercise of statutory construction.
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