The Supreme Court handed down its judgement in the case of Bloor Homes (Wilmslow) Limited v Homes and Communities Agency on 22 February.
The case concerns the assessment of compensation for compulsory acquisition of two parcels of grazing land (the 'reference land') forming part of a much larger area acquired pursuant to a compulsory purchase order ('CPO') by the North West Development Agency.
The land was required for the development of the Kingsway Business Park (the 'KBP').
The area in and around the KBP had a long planning history, with its potential for development having been recognised since the 1960s.
As a general principle, land which is subject to a CPO will be assessed disregarding any increase or decrease in value which is solely attributable to the development scheme to which it relates. This is known as the Pointe-Gourde or 'no-scheme' rule.
However, the law recognises that in certain circumstances, 'planning assumptions' should be made which allows for an assessment of enhanced compensation based on 'hope value'. In other words, the likelihood or otherwise that planning permission would have been granted for development in the absence of the scheme underpinning the CPO.
In the Upper Tribunal, the claimant's assessment of compensation was £2,593,000 on the basis that the reference land had significant potential for residential development, independent of the scheme of acquisition. Responsibility for the payment of compensation to the claimant sat with the Homes and Communities Agency. They argued that the claim should be limited to the existing use value of the reference land as agricultural land, with that value being assessed as approximately £50,000.
The Upper Tribunal found for the claimant in part, awarding compensation in the sum of £746,000 on the basis that there would have been a 50/50 chance of planning permission being obtained for residential development on the reference land in the 'no-KBP world'.
The HCA appealed, but the Court of Appeal rejected the arguments put by both parties and remitted the issue for re-determination on an alternative basis. The Court of Appeal treated the required disregard of the KBP scheme as extending to all planning policies, past and present, which supported development on the reference land. In other words, the planning potential of the reference land was to be assessed 'without regard to the development scheme and its underlying policies'.
Following a further appeal, the Supreme Court unanimously restored the Upper Tribunal's decision.
The Supreme Court concluded:
- the Upper Tribunal was entitled to regard those planning policies which lent support to the development of the reference land as potentially relevant, notwithstanding the required disregard of the KBP scheme;
- the assessment of the significance of such policies in the 'no-KBP world' was a matter for the Tribunal; and
- the planning status of the relevant land was not conclusively fixed by the statutory 'planning assumptions' - they operate in favour of a claimant and cannot be applied so as to deprive a claimant of his/her right to argue for future 'hope value' under other statutory provisions or the general law.
The Supreme Court acknowledged that the Pointe-Gourde rule, when applied, may result in changes to the planning status of the land under consideration. In addition, there is nothing within Section 6 of the Land Compensation Act 1961 which dictates that a more restrictive approach is required to be taken in respect of the statutory disregards.
As such, it confirmed what has long been accepted by practitioners - that the application of the general law may produce a result more favourable to the claimant in compensation terms than the statutory assumptions.
In its judgement, the Supreme Court recognised the 'substantial controversy and difficulty in practice' which the 'no-scheme' rule has given rise to and expressed a hope that the amendments currently before Parliament in the form of the Neighbourhood Planning Bill will achieve their stated aim of 'clarifying the principles and assumptions for the 'no-scheme' world'.
The Supreme Court's decision is also particularly timely given that the HS2 Bill received Royal Assent on 23 February.
The owners of the many acres of agricultural land located along the HS2 route (which absent the HS2 scheme has the potential for development of one form or another) should take note of this important decision and speak to their professional advisors as a matter of urgency to discuss, and/or potentially re-open discussions, with HS2 Ltd on the level of compensation payable for the compulsory acquisition of their land.