Wandsworth appealed against a decision of the Lands Tribunal. The issue was whether the local authority was required by the provisions of the Land Compensation Act 1961 (the 1961 Act) to pay compensation to the owner of the land in issue of more than one hundred times its market value.
A row of nine Victorian houses and a commercial building were originally constructed on the site in issue but were bomb-damaged in the Second World War. The buildings were cleared from the site some time before 1 July 1948. The land eventually came into private ownership and was sold in 2001 to Greenweb for £30,000. The local authority refused planning permission to build on the site so in May 2002 Greenweb served a purchase notice compelling the local authority to buy the land as it could not be used for any commercial purpose. The purchase notice was accepted and a claim for compensation arose pursuant to the 1961 Act.
Section 14 of the 1961 Act states that certain assumptions in sections 15 and 16 that are applicable to the relevant land “shall” be made in ascertaining the value of the land. Section 15(3)(a) states that it “shall be assumed that” planning permission is granted for any class of developments specified in Schedule 3 of the Town and Country Planning Act 1990 (the TCPA). In particular, paragraph 1 of Schedule 3 of the TCPA includes “the rebuilding of any building in existence on 1 July 1948, or of any building that was in existence before that date but was destroyed or demolished after January 7 1937, including the making good of war damage sustained by any such building”.
The Lands Tribunal assessed the level of compensation to be £1.6 million. This was based on assumed planning permission for the rebuilding of nine houses and one commercial building in accordance with section 15(3)(a) of the 1961 Act and paragraph 1(a) of Schedule 3 of the TPCA. The local authority appealed the decision. It argued that that land was worth no more than £15,000 and that it could not have been Parliament’s intention that section 14 and 15 of the Act would result in the award of £1.6 million to the company. Consequently, section 15(3) of the Act must be interpreted as directory rather than mandatory.
The appeal was dismissed. The Court of Appeal held that whilst making clear that they found the situation “utterly deplorable”, there was no ambiguity in the word “shall” or in the phrase “it shall be assumed that”. The assumption was mandatory.
It is of note that the Law Commission has been calling for the repeal of section 15(3) of the 1961 Act for some time and the Court of Appeal endorsed this recommendation.