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.
Challenge to a general vesting declaration
R (on the Application of Iceland Foods Ltd) v Newport City Council
 EWHC 2502 (Admin)
The court held that the local planning authority, having obtained a power of compulsory purchase that was expressed or limited by reference to a particular purpose, had not sought to use the power for some different or collateral purpose.
The claimant applied for judicial review of the decision of the defendant council to proceed to acquire land by way of a general vesting declaration (GVD), contending that the defendant had done so for a purpose that was different to that for which the compulsory purchase order (CPO) had been made.
The main argument raised by the claimant was that the development partner that had intended to redevelop the area with the defendant had gone into administration, and the regeneration of the area was not viable any longer. Therefore, it was argued that the defendant should not have proceeded to acquire the land in circumstances where it was in effect merely accumulating a land bank to facilitate some unspecified development in the future.
The court rejected the claim, noting that it was clear from the title of the CPO and the accompanying statement of reasons that the purpose of the CPO was to allow for a comprehensive redevelopment of the area to include many and various different land uses. Moreover, the court was not prepared to accept that the purpose of the land acquisition was to secure the carrying out of a comprehensive scheme of development by a particular developer.
The various reports considered by the defendant set out various courses of action that would best facilitate the carrying out of a redevelopment scheme. The defendant had decided to remarket the development. This did not mean that it had decided that the scheme was unviable, and it had not acted unreasonably. The scheme had to be delayed pending the obtaining of necessary funds to undertake the scheme. However, the defendant had clearly taken the view that the scheme was well placed to proceed and remained viable albeit that alternative funding had to be obtained. That being so, the public benefits that would accrue from the implementation of the scheme remained unchanged, and the compelling case in the public interest for the making of the compulsory purchase order remained.
This decision is important because:
- It affirms that a GVD is susceptible to judicial review on all Wednesbury grounds, including collateral purpose. This is a warning to acquiring authorities not to suppose that they can simply go ahead with vesting regardless of whether the reasoning behind the original CPO may have lapsed.
- It shows that the challenge is likely to fail where the acquiring authority - as on the facts of this case - still plans to achieve the objects of the CPO, albeit more slowly than originally envisaged and with a different development partner. This will be a relief to acquiring authorities whose schemes have been partially frustrated by the financial and economic downturn of the past three years.
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