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ENDING A VALUERS’ NIGHTMARE

AN ARTICLE by Peter Scrafton FIRRV, FCIArb, MRSA(Hon) Solicitor (Non-Practising)

October 2008.

If government wants to reduce litigation costs and payments of interest on compensation, s10 Compulsory Purchase Act 1965 is a prime candidate for reform.

 

The section permits claims for compensation for the execution of statutory works (but not their use) resulting in injurious affection but without the taking of land.  “Injurious affection” means damage which would be wrongful and the claimant must show that but for the statute he would have had an action for damages for public or private nuisance.  Further, to succeed he must prove that he has suffered greater damage than the public at large - a rule (per Lord Hoffman in Wildtree Hotels v Harrow LBC [2000] 2 EGLR 5) which: “... offers considerable scope for dispute on the facts”. 

 

Compensation is payable only if the acquiring authority acts outside statutory powers but is limited to direct physical damage to the claimant’s land or interest therein and not for non-physical damage caused by noise, dust and vibration.  Non-compliance with a restrictive covenant might satisfy the rules.

 

In the case of a public nuisance type wrong, the Court of Appeal clarified the law in relation to obstructions in Ocean Leisure Limited v Westminster CC [2004] 3 EGLR 9, stating that there was no reason in principle to exclude a claim for special loss suffered due to an obstruction of adjoining highways, such as by hoardings.  For further examples see Wagstaff v DETR [1999] 2 EGLR 108.

 

The measure of compensation is the depreciation in the value of the claimant’s land.  Loss of ransom value is not recoverable; but for temporary interference, loss of rental value for the relevant period may be recoverable.  To win, however, the claimant is more than likely to have to go at least to the Lands Tribunal if not to the Court of Appeal in order, first of all, to establish the facts and that as a matter of law, the fact pattern falls within the ambit of the  Section. So it is rather difficult for a valuer to be expected to give reliable advice - such as he might in the case of a Part 1 claim.

 

In its final report, the Law Commission concluded, first of all, that claims under Part 1 of the Land Compensation Act 1973 should remain substantially as they are.  However, s10 needed to be recast in modern form.  Third, s10 compensation should be payable not only for loss in the value of land but for any consequential loss not reflected in the value of the land.

 

The Commission recommended that what now would constitute two claims should be subject to the same set of rules subject to minor differences - and it seems to the CPA that there is no objection to such a recommendation as such claims are, fundamentally, claims made in lieu of actions in nuisance, save for the defence of the activities are in exercise of statutory powers.  There are certain reservations, however.

 

Any compensation entitlement must be workable in practice.  Part 1 claims satisfy that criterion, the principal determinative being based on market values (depreciation), the causative factors being such things as noise, dust and vibration.  The huge database of market information and the pool of valuers experienced in practice in this area ensure that very few claims are even referred to the Lands Tribunal. 

 

On the other hand, s10 claims do not satisfy the criterion of practical workability.  I have already suggested that it would be extremely difficult (if not unreasonable) to expect the existing pool of valuers to be able to advise on the legal issues.  In fairness, even if that question is put to lawyers, no certain answer can be given in respect of those civil wrongs dependent upon tests of reasonability.  Temporary interferences and obstructions to premises during the course of public works are the most common candidates for s10, but there is no workable way of answering the principal determinative question without litigation.  Both Wildtree and Ocean Leisure involved simple and common problems, but one went to the House of Lords and the other to the Court of Appeal!

 

Put shortly, the current rules, dependent as they are first upon proof of actionability but for the exercise of statutory powers and secondly on proof of damage in value, provide no workable basis for proof of actionability.  Contrary to the situation under Part 1, it is all too easy for a compensating authority to contend that actionability has not been proved; while it is extremely difficult for a claimant to establish actionability other than by way of litigation or a reference to the Lands Tribunal.

 

There is a way round this, however.  Enacting a list of physical factors (similar to those contained in Part 1) would (as with Part 1) become the determinative factors, rather than the principle of actionability.  They would be the statutory equivalents of actionability (as in Part 1) but they would introduce much more certainty.  There is a partial precedent for this in s237 of the Town and Country Planning Act 1990.

 

The second matter is that of causation.  At present under s10 a claim can only be made where the works are within the boundary which comprises: “... the Special Act” which can include Order land and any slip roads or side roads orders.  Public works which may give rise to deprecation are often carried out outside such boundaries on land already owned by the public authorities.  The adoption of the Law Commission’s recommendation as to the employment of a simple and wider definition of public works contained in Part 1, would solve this problem.

 

Third, as to the measure of compensation, the Law Commission recommendation to include any consequential loss not reflected in the value of the land, it is true that the House of Lords held in Argyle Motors (Birkenhead) Limited v Birkenhead Corporation [1975] AC 99 that a claim for loss of profit caused by a temporary or permanent obstruction of an access to business premises was not recoverable under s10.  However, such consequential losses have been held to be payable under several statutory provisions containing words similar to s10 (see s278 Public Health Act 1936, s100(3) Highways Act 1980 and Leonides v Thames Water Authority [1979] 2 EGLR 8).

 

Although in theory the widening of the potential measure of damages may be feared to increase the burden of compensation on public authorities, in practice few claims are made under these other provisions where such consequential losses are properly payable.  One might also argue that the principle of equivalent reinstatement is contravened by s10.

 

A list of physical factors for inclusion in the replacement for s10 would have to be drawn up, provided that any one of them must cause loss in value or consequential loss in order to be compensatable.  Practitioners and administrators could between them rapidly compile a suitable and comprehensive list.

 

CPA recommends that s10 be reformed as indicated above.  As the nation moves from “green field” development to “brown field” works and urban regeneration, such a course seems more than ever desirable, bearing in mind that s10 is itself a child of the Act of 1845.

 

Therefore, let s10 be repealed and recast in modern form in accordance with the principles of Part 1, removing the restriction in Part 1 to certain categories of claimants and containing certain physical factors to be listed (as a parallel to those in Part 1).  The measure of compensation should remove the artificial restriction at present imposed on s10 cases and comply with the principle of equivalent reinstatement by compensating consequential losses apart from loss of land value.

 

As with the other articles in this series, while the labour and thought underlying the proposals described in this article is that of the CPA membership, the phrasing (and any errors) are my own.

 

©J.P. Scrafton, 2008

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