UPPER TRIBUNAL (LANDS CHAMBER)

	
UT Neutral citation number: [2012] UKUT 193 (LC)
UTLC Case Number: ACQ/320/2010

	TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

COMPENSATION – compulsory purchase –preliminary issues – injurious affection – right of way – interference with right of way by development carried out on land appropriated by local authority for planning purposes – whether compensation payable on basis of ransom value – held it was not – Town and Country Planning Act 1990 s 237

	IN THE MATTER OF A NOTICE OF REFERENCE 

BETWEEN
	RICHARD THOMAS HOLLIDAY	        Claimant
	and
	BRECKLAND DISTRICT COUNCIL	Compensating
Authority

	Re: 	Shop and premises
	53/55 High Street
	Dereham
	Norfolk

Before: The President and P R Francis FRICS

Sitting at: 43-45 Bedford Square, London, WCIB 3AS
on 29 May 2012 
	Sitting at: 
Christiaan Zwart  instructed by Stevensons, solicitors of Dereham, for the claimant
Barry Denyer-Green instructed by Lloyd Gibson, Solicitor, Breckland Council, for the compensating authority.

The following cases are referred to in this decision:
Thames Water Utilities Ltd v Oxford City Council [1999] EGLR 167
B & Q Plc v Liverpool & Lancashire Properties Ltd [2001] 1 EGLR 92
Hammersmith & City Rly Co v Brand (1869) LR 4 HL 171
Allen v Gulf Oil Ltd [1981] AC 1001
Kent County Council v Union Railways (North) Ltd [2009] RVR 146
Hoveringham Gravels Ltd v Chiltern District Council (1978) 35 P & CR 295
Argyle Motors Ltd v Birkenhead Corpn [1975] AC 99

The following further cases were cited in argument:

Chilton v Telford Development Corporation [1987] 3 All ER 992
Hughes v Doncaster Metropolitan Borough Council [1991] 1 AC 282
R (Sainsbury’s Supermarkets Ltd) v Wolverhampton District Council [2011] 1 AC 437
Transport for London v Spirerose [2009] 1 WLR 1797
Tomkins v Tomkins [1978] P 170
Re Ellenborough Park [1956] Ch 131
Brutus v Couzens [1973] AC 854
North London Railway Co v Metropolitan Board of Works (1859) 28 LJ Ch 909
Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997
Kirby v School Board for Harrogate [1896] 1 Ch 437
Clark v School Board for London (1874) LR 9 Ch App 120
Oppenheimer v Minister of Transport [1942] 1 KB 242
Marten v Flight Refuelling Ltd [1962] Ch 115
Harris v Flower (1905) 74 LJ Ch
Metropolitan Board of Works v McCarthy (1874) LR 7 HL 243
Cowper-Essex v Acton Local Board (1889) LR 14 App Cas 153
Wildtree Hotels Ltd v Harrow London Borough Council [2001] 2 AC 1
In re Elm Avenue [1984] 2 All ER 632
Kettering Borough Council v Anglia Water Services [2001] 2 EGLR 157
Wrotham Park Settled Estates v Hertsmere Borough Council [1993] 2 EGLR 15
Dowty Boulton Paul Ltd v Wolverhampton Corpn (No 2) [1976] Ch13
Burkinshaw v Birmingham and Oxford Junction Railway Co (1850) 5 Exch Rep 475
Attorney-General v Manchester Corpn [1931] Ch 254

DECISION ON PRELIMINARY ISSUES
Introduction
1.	The claimant in this reference is the owner of a furniture shop at 53/55 High Street at Dereham in Norfolk, where he has carried on business since 1993.  At the rear of the premises is a separate workshop building.  Until 2004 there was access to the land at the rear of the shop across land to the north that was owned by the council.  This access was wide enough for a large furniture van, and the claimant had the right to use it under an easement benefiting the land on which the shop stands.  Development carried out on the land owned by the council blocked up the access, and the claimant claims compensation for loss of the access under section 237 of the Town and Country Planning Act 1990.  Compensation is sought not just for the injurious affection of the claimant’s dominant tenement but also for the value of the easement, which is said to consist of the amount that the claimant would have been able to extract from the council as owner of the servient tenement in order to secure the extinguishment of the easement.  
2.	The council accept that the claimant is entitled to compensation for injurious affection, consisting of the diminution in value of the shop premises as a consequence of the loss of the right of way, but they deny that he is entitled to compensation based on the development value of the council’s land.  On their application on 30 August 2011 the President ordered that the following two issues, identifying the respective contentions of the parties, be determined as preliminary issues:
(1)	Whether the claimant is entitled to claim compensation under section 237 of the Town and Country Planning Act 1990 on the basis that the benefit of right of way to numbers 53 and 53a High Street, Dereham (“No 53 High Street”) has been appropriated by the acquiring authority and that compensation should be payable for that appropriation on a ransom value basis under section 63 of the Lands Clauses Consolidation Act 1845 for the loss of a ransom value that would otherwise have benefited No 53 High Street on the ground that the claimant was entitled to and has lost the right to grant or refuse consent to the development obstructing the said right of way.
(2)	Whether the claimant is entitled to compensation under section 237 of the 1990 Act and in accordance with section 10 of the Compulsory Purchase Act 1965 (alternatively section 68 of the Lands Clauses Consolidation Act 1845) on the basis only that on a claim for compensation under these statutory provisions the compensation is limited to the diminution in value of No 53 High Street by reason of the lawful obstruction of the said right of way and lawful use of the land over which the right of way was exercisable, without regard to any ransom value.
The facts
3.	There is no disagreement as to the facts.  The claimant is the registered freehold proprietor of land known as 53 and 53a High Street, Dereham, registered at the Land Registry under Title No NK150149.  Number 53 is occupied by the claimant, together with number 55 High Street, which he also owns, as retail premises for the purposes of his business as a retailer and restorer of furniture.  High Street runs north-south, and the claimant’s land fronts it on the east.  To the rear (east) of number 53 is small open area, and beyond that is a workshop; to the east of the workshop is a smaller open area, and finally beyond that is a storage shed.  All of these are within Title No NK150149.  We will refer to this as “the land”.
4.	The land has the benefit of a right of way to pass and repass with or without vehicles over an accessway which is situated on land to the north that is owned by the council and is comprised in registered Title No NK102856 (which we will refer to as the council land).  The terms of the right of way are noted at entry number 2 in the Property Register of the official copy of the registered title, and the servient land is shown tinted blue on the plan thereto.  The right of way is L-shaped and runs from the High Street, behind land abutting the High Street, to the open land between the shop and the workshop.
5.	The council land, together with other adjoining land, was acquired by the council in 1996 by agreement, pursuant to section 120 of the Local Government Act 1972.  On 13 March 2003 the council resolved under section 122 of the Act to appropriate this land, and other land, for planning purposes.  The resolution was confirmed on 26 February 2004.  On 14 November 2003 the council granted planning permission for the development of the council land and the other land for mixed uses.  On 21 April 2004 they granted a lease to Dencora Dereham Retail Partnership LLP, who then proceeded to implement the planning permission and develop the land.  On 19 April 2004 a fence was erected around the council land, obstructing access to the servient land, and the servient land has now been built on.  The claimant can no longer exercise the right of way.  The building constructed on the servient land is now used for retail purposes in accordance with the planning permission.  Construction was completed on or about 17 June 2005.
The statutory provisions
6.	Section 237, so far as material, provides as follows:
“(1)	Subject to subsection (3), the erection, construction or carrying out or maintenance of any building or work on land which has been acquired or appropriated by a local authority for planning purposes (whether done by the local authority or by a person deriving title under them) is authorised by virtue of this section if it is done in accordance with planning permission, notwithstanding that it involves:
(a) interference with an interest or right to which this section applies, or
(b) a breach of a restriction as to the user of land arising by virtue of a contract.
(2)	Subject to subsection (3), the interests and rights to which this section applies are any easement, liberty, privilege, right or advantage annexed to land and adversely affecting other land, including any natural right to support…
(4)	In respect of an interference or breach in pursuance of subsection (1)…, compensation–
(a) shall be payable under section 63 or 68 of the Lands Clauses Consolidation Act 1845 or under section 7 or 10 of the Compulsory Purchase Act 1965, and
(b) shall be assessed in the same manner and subject to the same rules as in the case of other compensation under those sections in respect of injurious affection where– 
(i) the compensation is to be estimated in connection with a purchase under those Acts, or
(ii) the injury arises from the execution of works on…land acquired under those Acts.”
7.	It should be noted that, with effect from 6 April 2009, section 237 was amended by the addition of the following subsection:
“(1A)	Subject to subsection (3), the use of any land in England which has been acquired or appropriated by a local authority for planning purposes (whether the use is by the local authority or by a person deriving title under them) is authorised by virtue of this section if it in accordance with planning permission even if the use involves–
(a) interference with an interest or right to which this section applies, or
(b) a breach of a restriction as to the user of land arising by virtue of a contract.”
This provision was inserted following the decision in Thames Water Utilities Ltd v Oxford City Council [1999] EGLR 167, in which it was held that section 237(1) did not authorise a use of land that interfered with an easement.  It does not have retrospective effect, and thus does not apply for the purposes of the present case.
8.	Section 63 of the Lands Clauses Consolidation Act 1845, so far as material, provides:
“In estimating the purchase money or compensation…regard shall be had…not only to the value of the land to be purchased or taken …but also to the damage, if any, to be sustained by the owner of the lands by reason of the severing of the lands taken from the other lands of such owner, or otherwise injuriously affecting such other lands by the exercise of the powers of this or the special Act, or any Act incorporated therewith.”
9.	Section 68 of the 1845 Act, as amended, provides:
“If any party shall be entitled to an compensation in respect of any lands, or of any interest therein, which shall have been taken for or injuriously affected by the execution of the works, and for which the promoters of the undertaking shall not have made satisfaction under the provisions of this or the special Act, or any Act incorporated therewith, such party may have the same settled.”
10.	Section 7 of the Compulsory Purchase Act 1965 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 of this or the special Act.”
11.	Section 10 of the 1965 Act provides:
“(1) If any person claims compensation in respect of any land, or any interest in land, which has been taken for or injuriously affected by the execution of the works, and for which the acquiring authority have not made satisfaction under the provisions of this Act, or of the special Act, any dispute arising in relation to the compensation shall be referred to and determined by the Upper Tribunal.
(2) This section shall be construed as affording in all cases a right to compensation for injurious affection to land which is the same as the right which section 68 of the Lands Clauses Consolidation Act 1845 has been construed as affording in cases where the amount claimed exceeds fifty pounds…”
The claimant’s case
12.	For the claimant Mr Christiaan Zwart’s contention was that compensation fell to be assessed under section 63 of the 1845 Act on the basis of the market value of the claimant’s interest in the easement and that this encompassed the amount that could be negotiated for its removal.  The route by which, he suggested, this result was reached was as follows.  Section 237(1) distinguished between acquisition on the one hand and appropriation on the other.  Here the interference with the easement had been through appropriation.  Under subsection (4) compensation was payable for the interference permitted by subsection (1).  Sections 7 and 10 of the 1961 Act had no application because there had been no compulsory acquisition.  Section 63 distinguished between a “purchase” and a “taking”, and appropriation equated in substance with taking.  What was taken was land as defined in section 237(1) and (2), and this definition should be applied to section 63.  Section 237(4)(b) had no application because neither of its conditions (a purchase under (i) or an acquisition under (ii)) was satisfied.  Therefore compensation had to be assessed under section 63 for the taking of the easement.  
The compensating authority’s case
13.	For the compensating authority Mr Barry Denyer-Green summarised their case as follows:
(a)	There was an interference with the right of way by the erection of a fence and building works in 2004-5 on the land across which the right existed, and section 237 applied to this interference.
(b)	But for the statutory authority of section 237 such interference would have been a private nuisance giving rise to an action for the substantial obstruction of the right of way.
(c)	The right of way, although an interest in land, was not “acquired” or “appropriated” in the sense of a compulsory acquisition, by section 237 or any other provision.
(d)	Section 237(4) provides for compensation for such interference in accordance with the rules of injurious affection.
(e)	As the land across which the right existed (and other land) was acquired by agreement by the compensating authority in 1991 and no land was acquired from the claimant, the provisions of the 1845 Act cannot have application, nor can section 7 of the 1965 Act apply.
(f)	The measure of compensation where section 10 has application is the diminution in value of the land of the claimant in consequence of the interference with the right of way by the works on the land over which the right of way existed.
Discussion
14.	It is important to understand the function of section 237.  In the absence of statutory powers, interference with a right of way would be actionable as a private nuisance: see Gale on Easements 18th edn para 13-06 and B & Q Plc v Liverpool & Lancashire Properties Ltd [2001] 1 EGLR 92.  Where, however, works which are carried out under statutory powers cause damage that would otherwise give a cause of action in nuisance, there is no actionable nuisance: see Hammersmith & City Rly Co v Brand (1869) LR 4 HL 171 per Lord Cairns at 215 and Allen v Gulf Oil Ltd [1981] AC 1001, where Lord Wilberforce said (at 1011):
“It is now well settled that where Parliament by express direction or by necessary implication has authorised the construction and use of an undertaking or works, that carries with it an authority to do what is authorised with immunity from any action based on nuisance.”
Where land is compulsorily acquired an easement “may be overridden to the extent necessary to implement the statutory scheme, and compensation payable accordingly (under 1965 Act, s 10)”: see Kent County Council v Union Railways (North) Ltd [2009] RVR 146, per Carnwath LJ at paragraph 7.  There is no statutory scheme of development (or works carried out under statutory powers) in the case of the development of land which has been acquired or appropriated for planning purposes by a local authority.  The function of section 237(1) is to make lawful in relation to such development interference with an easement that would otherwise constitute a private nuisance.  Subsection (4) then makes provision for the payment of compensation for such interference.
15.	Mr Zwart’s contention was that the right to compensation arose under section 237(4) but fell to be assessed under section 63 of the 1845 Act.  The key element of his argument was that section 237(4)(b), which provides for assessment of compensation on the basis of injurious affection, has no application, so that compensation is to be assessed on the basis of the market value of the easement, which he said was “land taken” for the purposes of section 63.  The fundamental flaw in this argument is that it assumes that section 237(4)(b) is laying down alternative requirements, one of which has to be satisfied on the facts of the case, (ii) being that there has been an acquisition.  That, however, is not what it says.  What paragraph (b) provides is that compensation is to be assessed “in the same manner and subject to the same rules as in the case of other compensation under those sections in respect of injurious affection where – (i) the compensation is to be estimated in connection with a purchase under [the 1845 and 1965 Acts], or (ii) the injury arises from the execution of works on…land acquired under those Acts”.  This is a prescription of how compensation is to be assessed, and it has nothing to do with the circumstances under which the interference with the interest or right arose.  The two limbs of paragraph (b) cover the two ways in which compensation for injurious affection may be payable under the Acts: where some land of the claimant has been acquired and his retained land has been injuriously affected (section 63 of the 1845 Act and section 7 of the 1965 Act) and where no land of the claimant has been acquired (section 68 of the 1845 Act and section 10 of the 1965 Act).  Clearly subparagraph (i) does not contain a requirement that has to be satisfied on the facts of the case.  If compensation was to be estimated in connection with a purchase under the Acts, it would be assessed in accordance with the Acts, and this provision would have no role to play.  Similarly, in relation to subparagraph (ii), if compensation was to be estimated in respect of injury arising from the execution of works on land acquired under the Acts, it would be assessed under the Acts and the provision would have no role to play.  Section 237 only comes into play where there has been no acquisition under the Acts.
16.	Compensation, therefore, falls to be assessed, as it would be assessed under sections 63 (or 7) or 68 (or 10) in respect of injurious affection.  It is not to be assessed as though the land had been taken.  Where section 63 or section 7 applies the basis of compensation for injurious affection is the diminution in the value of the retained land of the claimant: see Hoveringham Gravels Ltd v Chiltern District Council (1978) 35 P & CR 295.  Where section 68 or section 10 applies, again the basis of compensation for injurious affection is the diminution in the value of the retained land: see Argyle Motors Ltd v Birkenhead Corpn [1975] AC 99.  Compensation for injurious affection under section 237(4) is to be assessed on the same basis.  It cannot include ransom value.
17.	That is the short answer to Mr Zwart’s contention, which, based as it is on a misreading of section 237(4), is in our view simply misconceived.  It becomes unnecessary therefore to deal with his submission that the interference with the easement constituted a taking of land for the purposes of section 63.  Even if it was correct that such interference constituted a taking of land it does not seem to us that that would impinge on the operation of section 237.  We confine ourselves to saying that it is in our view not correct that it constituted a taking of land; and the contention that the easement had been “appropriated” (and that an appropriation means a taking) is also not correct: appropriation in section 237 is used in its established sense to refer to the act of a statutory authority in assigning to a particular statutory purpose land in its ownership.  It does not relate to the taking of land from another person.
Conclusion
18.	The claimant’s contention that compensation should be assessed on the basis that an interest in land had been acquired from him is misconceived.  Compensation under section 237(4) is payable in respect of injurious affection only.  We accept the contentions of the compensating authority.  The answers to the questions contained in the preliminary issues are: (1) No; (2) Yes.
19.	The parties are now invited to make submissions on costs, and this decision will become final when the question of costs has been determined.
								Dated 13 June 2012

								George Bartlett QC, President

								P R Francis FRICS

Addendum on costs
20.	We have received submissions on costs.  The claimant submits that there should be no order as to costs.  It is said that the preliminary issue was a vital matter between the parties on which the Tribunal’s guidance was necessary.  In addition the Tribunal had ruled against the compensating authority’s contention that the Oxford City Council case was wrongly decided.  It was entirely reasonable for the claimant to seek the Tribunal’s guidance in relation to these two issues.  As a matter of equity, in a case such as this the costs of the reference should be borne by the compensating authority.  The claimant had a substantial legitimate interest to defend in that the loss of the potential to use the blue land has unarguably deprived him of an easement critical to his business.
21.	The compensating authority say that the decision disposes of the claimant’s primary case against the authority, and they should therefore have their costs.  They had always rejected the contention that compensation should be paid on a ransom value basis and had offered compensation on the basis of the diminution in value of the claimant’s land.  The claimant’s contention was pursued at his own risk.  It had no merit in it and was founded on a misreading of the relevant statutory provision.
22.	The claimant has failed on his contention that compensation should be paid on a ransom value basis, and we can see no reason why he should not pay the compensating authority’s costs.  Such loss as he may have suffered through the obstruction of an easement that he used for his business will be the subject of the substantive hearing if compensation is not agreed.  We would add that we made no ruling about the Oxford City Council case.  The contention of the authority was that, although they considered that it was wrongly decided, it should be treated as binding; but that it did not assist the claimant because it concerned a covenant against the use of land, whereas here there was physical interference with the easement.  We expressed no views on the case.  It was of no materiality for the reason given by the authority.
23.	The claimant must pay the compensating authority’s costs of the preliminary issue, such costs if not agreed to be the subject of detailed assessment by the Registrar on the standard basis.
								Dated 30 August 2012

								George Bartlett QC, President

								P R Francis FRICS