Assessing compensation where an interest in land is acquired
Rules of valuation and the 'no scheme rule' (Pointe Gourde)
An established principle of compensation is that the amount payable must 'exclude any increase or decrease in value which is entirely due to the scheme underlying the acquisition'.
The statutory effect of this is set out in section 6 of the Land Compensation Act 1961 and the decision in Pointe Gourde Quarrying and Transport Company Ltd v Sub-Intendent of Crown Lands (1947) AC 565 - hence what is commonly referred to as the 'Pointe Gourde principle'. To this must now be added Waters v Welsh Development Agency (2004) UK HL 19. In this decision, it is stated that 'Tribunals and practitioners in future will not find it necessary to refer to any other authority apart from this on the matters covered'.
The Law Commission in its December 2003 Final Report, Towards a Compulsory Purchase Code: (1) Compensation, described this as 'the most difficult subject we have had to address on this project'.
Essentially, although planning permission can be assumed, demand for the property with that consent has to be taken ignoring the scheme itself. Put simply, if the scheme can be envisaged without requiring the use of compulsory purchase powers, the value of the land taken can reflect the permission. If it is not possible to envisage demand for property with that consent without the land being acquired compulsorily, then permission for the scheme is of no assistance. Roberts v South Gloucestershire District Council (2002) EWCA Civ 568 and Myers v Milton Keynes Development Corporation (1974) 27 P&CR 518 provide helpful guidance on these points.
Nevertheless, the concept is simple: the adverse effect on the value of blight in the run-up to implementation, and any enhancement in value resulting from completion of the scheme, are both to be ignored. The value to be assessed is that which applies in a 'no scheme world'.
Difficulties arise from the need to construct such a 'no scheme world', involving as this inevitably does the rewriting of history, perhaps over many years. This does not, however, result in the need to ignore any additional value over and above existing use value that exists prior to the acquisition. It is only such additional value when it is created by the authority's own proposals for development that is to be ignored. Two cases involving residential development value and 'ransom' strips illustrate the point: Ozanne v Hertfordshire County Council (1992) 13 EG 157 HL and Batchelor v Kent Council (1990) 59 P&C 357 (1989).
In Waters v Welsh Development Agency the compulsory purchase order (CPO) was made by the Land Authority for Wales for the creation of a replacement wetlands habitat for birds, following the loss of such habitat arising from construction of the Cardiff Bay Barrage. The Lands Tribunal held that:
- Rule 3 did not apply, as the land was not uniquely suitable for a nature reserve; and
- the scheme underlying the acquisition was the Cardiff Bay Barrage. As a result, no enhanced or 'ransom' value arose. Both the Court of Appeal and The House of Lords upheld the Lands Tribunal's decision.
Section 6 has to be read alongside Schedule 1 of the Land Compensation Act 1961, which contains a table that sets out a series of circumstances and development relating to those circumstances. In essence, when read together section 6 and Schedule 1 provide a rule that is very similar to Pointe Gourde and which limits compensation so as to disregard any enhanced or reduced value brought about by the scheme except where the development might have taken place apart from the scheme.