Potter v London Borough of Hillingdon [2010] UKUT 212 (LC)

IN THE MATTER of A NOTICE OF REFERENCE
UT Neutral citation number: [2010] UKUT 212 (LC)Venue BETWEEN WILLIAM GEORGE POTTER, IRMGARD ERICA POTTER Claimants, and, LONDON BOROUGH OF HILLINGDON Respondent, Re: Land at 2 Moor Lane, Harmondsworth, Middx UB7 0AR, Before: The President and P R Francis FRICS, Sitting at: 43-45 Bedford Square, London WC1B 3AS, on, Mr Marty Potter with permission of the Tribunal for the claimants, Richard Langham instructed by London Borough of Hillingdon Legal Services for the acquiring authority, The following cases are referred to in this decision:, Transport for London (formerly London Underground Ltd) v Spirerose Ltd (in administration) [2009] 1 WLR 1797, Pointe Gourde Quarrying and Transport Co v Sub-Intendent of Crown Lands [1947] AC 565, Waters v Welsh Development Agency [2004] 1 WLR 1304, The following further cases were referred to in argument:, Jolley v Carmel Ltd [2000] 2 EGLR 153, Yewbelle Ltd v London Green Developments Ltd [2006] EWHC 3166 ; [2008] 1 O & CR 17, DECISION, Introduction
Between
PotterLondon Borough of Hillingdon
Date 8 December 2009
[1]The claimants seek compensation for the compulsory purchase of land owned by them at Harmondsworth, Middlesex, under the London Borough of Hillingdon (Harmondsworth Moor) Compulsory Purchase Order 2003. The land consists of an open field of rough grass and trees 4.38 ha (10.82 acres) in area on the north side of Moor Lane and immediately to the west of the village. It is abutted on the east by a very large mediaeval tithe barn, which is Grade 1 listed and an ancient monument. From 1998 to 2007 the claimants lived in a mobile home on the land. Heathrow Airport is a short distance to the south, and on the north side of the village and very close to the northern boundary of the subject land is land that has since 2002 been identified as the potential site for a third runway. The claim is put variously at £6,000,000 and £12,000,000 and is advanced without professional assistance, the claimants, who are now elderly, having opted to be represented by their son, Mr Marty Potter. The acquiring authority value the property at £1,000,000.[2]There is a substantial history to the compulsory acquisition and the claim. We set this out below, but in summary it is this. It starts in 1989. The open land around Harmondsworth was within the Green Belt (as it still is), but much of it was derelict, consisting of worked out gravel pits that had to varying extents been used for landfill. The council wished to see the restoration of the land but did not have the financial resources that would have been needed to achieve this. But British Airways had ambitions to build a new company headquarters close to Heathrow, and they submitted a planning application for the reclamation of 20 hectares and the construction on the reclaimed land of a new HQ with a footprint of 5 hectares. The land included the subject land. Following an indication from the council that the application would be likely to be refused because it did not confer enough environmental benefit, however, the application was withdrawn.[3]BA entered into an option agreement with the claimants for the purchase of the land. The price at which it was exercisable was £1.5 m, and the terminal date of the option was 31 December 1991. The option was not exercised within that time. While it was extant BA made a planning application for a new scheme. The site, which extended to the M25 in the west and the M4 to the north, was 100 hectares in area and it included the subject land. The application was called in by the Secretary of State and, following a public inquiry, he granted planning permission on 12 October 1992. Before this, on 6 January 1992, BA had entered into a section 106 agreement with the council in relation to the proposed development. On 13 April 1995 they entered into a replacement agreement, which the claimants have always maintained was unlawful.[4]On 30 June 1993 BA offered to buy the claimants land, but not for £1.5 m. Their offer was £250,000, and this offer was repeated on a number of occasions up to July 1997, but the claimants rejected it, demanding instead the £1.5 m that had been agreed under the option agreement. A final offer of £330,000 was made on 27 November 1997, but this also was rejected.[5]In January 1998 the council resolved to make a CPO in respect of the claimants’ land and two other parcels of land in different ownerships. The claimants sought to challenge this decision in the High Court, but were unsuccessful. Eventually, but not until January 2003, the CPO was made. The claimants and the other landowners objected, and an inquiry was held. The Secretary of State confirmed the CPO, in respect of the claimants’ land and one of the other two parcels, on 11 February 2004. Challenges in the High Court to the confirmation of the CPO were rejected on 28 June 2006, and an appeal to the Court of Appeal was subsequently dismissed. The council made a general vesting declaration in May 2007, and the land vested in them on 6 June 2007.[6]On 21 December 2007 (in compliance, it appears, with a direction from the court in the course of further proceedings taken by the claimants) the council made a further offer. It was for £110,000. The claimants rejected it. Then in April 2008, following valuation advice from Jones Lang LaSalle, the council made an advance payment of £450,000 plus loss payments of £50,000 plus interest. The valuation of the land that they supported at the hearing was, as we have said, £1 million.[7]Throughout this long period of disputes the claimants have always maintained that BA should pay the £1.5m that was agreed under the option agreement back in 1990, and one of the ways in which they now put their case is that compensation should be paid on the basis of this sum updated to the valuation date. It is clear that they have a burning sense of resentment that BA has failed, as they put it, to honour the agreed price for the land. The position of BA and the council is that the £1.5 m in the option agreement was entered into with the first application (the 20-hectare scheme) in mind, and not the 100-hectare scheme that received planning permission and was implemented. Different considerations in relation to the value of the claimants land arise, they say, when this larger and more costly scheme is considered. In any event, it is said, such value as the claimants’ land might have for the purposes of this scheme falls to be left out of account under the Pointe Gourde rule ( Pointe Gourde Quarrying and Transport Co v Sub-Intendent of Crown Lands [1947] AC 565 ).[8]In December 2003 the Government published the Aviation White Paper “The Future of Air Transport”. It stated that the Government supported the construction of a third runway at Heathrow provided air quality limits could be complied with. The runway would be located on the north side of Harmondsworth, and indicative layouts had shown it encroaching on one of the three parcels of land included in the CPO. It was this parcel, which bordered the reference land on the north side, that the Secretary of State excluded from the CPO as confirmed. The valuation of the reference land that the council now support reflects the hope value that it is said that the land has for its potential development for an airport-related use in the event that the third runway proceeds.[9]The claimants assert that the land is worth £10 m on the basis of its potentiality for development associated with the third runway. This figure is not supported by any expert evidence, just as the claim based on the £1.5 m option figure is not supported by any expert evidence or any legal argument. At a directions hearing on 25 November 2008 the President urged the claimants to seek legal and valuation representation for their case in view of the amount in issue and the complexities of the legal and valuation issues. It appears that they did then instruct solicitors and a valuer but that they later withdrew their instructions. It was in the light of this and the age and infirmity of the claimants that we gave permission for them to be represented by their son, Mr Marty Potter.[10]Mr Potter produced a short document entitled “Notes for Hearing” and, following the hearing, some written closing submissions. For the acquiring authority Mr Richard Langham called Mr Richard Asher FRICS of Jones Lang LaSalle, and Mrs Dalia Lichfield B Arch MSC (TP) MRTPI of Lichfield LLP, who gave expert valuation and planning evidence respectively. Mr Asher’s evidence was prepared on the basis that any value that the land might have had for the purposes of the scheme granted planning permission in 1992 was to be left out of account under the Pointe Gourde rule.[11]Following the hearing on 8 December 2009, the parties were invited to make further legal and closing submissions in the light of the recent House of Lords decision in Transport for London (formerly London Underground Ltd) v Spirerose Ltd (in administration) [2009] 1 WLR 1797 and on the question of the application of the Pointe Gourde principle. Mr Asher was also requested by the Tribunal to submit a supplementary report giving an alternative valuation on the basis that nothing associated with the development of BA’s new headquarters offices and the associated parkland was to be disregarded. Mr Asher’s further report, and closing submissions from both parties, were all received by the Tribunal by 29 January 2010. Mr Asher was subsequently asked to provide evidence of the prices paid in respect of BA’s acquisitions of other third party sites in connection its proposals and this was received by 28 May 2010. The claimants’ comments upon it were received on 2 June 2010. The development plan and planning permissions[12]At the valuation date, the relevant development plan was the Hillingdon Unitary Development Plan, adopted in 1998. The reference land was within the Green Belt (policy OL1) and within an area of Environmental Opportunity (policy OL9). As grade 1 agricultural land, policy OL12 preventing the irreversible loss of the best agricultural land (grades 1, 2, and 3a) applied to it. The land was also in a Comprehensive Rehabilitation Area for the purposes of policy OL25, which provided that proposals within such areas should incorporate restoration of the site in question to a standard suitable for public access, but it was agreed that the claimants’ land was not in need of restoration or rehabilitation. The western boundary of the reference land, where it bordered the Duke of Northumberland’s River, was included in an area of a borough-wide importance for nature conservation, and the whole site fell within the Harmondsworth Village Conservation Area.[13]Planning permission was granted on appeal in 1981 for the use of the western half of the subject property as a touring caravan and camping site for 60 units, subject to a condition that prevented its use for that purpose during the winter months (between 31 October and 1 March). Although the permission was implemented (and was thus still effective at the valuation date), it was never fully exploited. An application for 23 houses and garages on part of the land fronting Moor Lane was refused on appeal in 1982, and a further application for residential development was similarly dismissed on appeal in 1987. An application to remove the seasonal restriction on the occupation touring caravans was dismissed on appeal in 1997.[14]The proposal for which BA were granted outline planning permission on appeal in 1992 was for “a corporate headquarters and business centre (5.1 hectares), landscaping, new access and car parking, public parkland and community and leisure and sports facilities on land known as Prospect Park to the west and north of Harmondsworth bounded by the A4 to the south, the M25 to the west and the M4 to the north”. It was subject to some 35 conditions. After the close of the inquiry the section 106 agreement, certain of the provisions of which we refer to below, had been sent to the inspector and it was taken into account by the Secretary of State in his decision to grant planning permission.[15]In his decision letter the Secretary of State said (at paragraph 13) that the main issue was whether there were very special circumstances of sufficient weight to override the harm caused by the inappropriate development proposed by BA to the Green Belt and its functions. He went on:
“14. The Secretary of State notes that the Inspector considered that the ‘business case’ for the [Combined Business Centre] did not on its own amount to such a special circumstance as would justify permitting development normally inappropriate in the Green Belt. The Secretary of State agrees with that conclusion...The Secretary of State also notes that the Inspector further concluded that the combination of the environmental benefits of the proposals (most importantly the removal of a potential health risk from landfill gas and leachate and the positive use of urban fringe land for the general public good) and the ‘business case’ would amount to such very special circumstances as would justify granting planning permission for what is accepted to be inappropriate development in the Green Belt. The Secretary of State agrees with that conclusion...”
[16]Condition 2 of the planning permission prohibited commencement of any part of the development until a Master Plan had been approved showing, among other things, the network of footpaths throughout the site, the programme for the landscape works and the means of achieving restoration of the site to a standard suitable for public access. The Master Plan, for what was initially called Prospect Park but was later re-named Moor Park, was first submitted in September 1993 and underwent various changes before being approved in March 1995. Condition 12(b) prohibited any excavation within the site until a detailed programme of restoration and aftercare had been approved, but occupation of the BA offices was not made conditional on the carrying out of these works. The components of the park[17]At the time of the first section 106 agreement, BA owned the land (areas 1a and 1b) on which the offices and adjacent landscaping was proposed, the council owned a number of parcels of land, and the rest was in third party ownership. Areas 1a and 1b, much of the council’s land and substantial areas of third party land were landfill sites. Gravel extraction was proceeding on one of the sites, which was later needed for landfill.[18]The area to the west of the reference land along Moor Lane comprised ten areas, as follows: i. Saxon Way industrial estate – This had always been privately owned. It was never intended that this should be part of the park nor that BA should acquire it. ii. Brookside – This was an open, undeveloped area. It had always been privately owned, although BA was obliged to seek to acquire it in the second section 106 agreement (but not the first). Despite being identified as part of the park in the second section 106 agreements, it was effectively part of the Saxon Way industrial estate and could not make much contribution to the park. The council decided not to seek to acquire this area compulsorily. iii. The allotments – These were owned by the council but BA was under no obligation in either section 106 agreement to seek to acquire them. They were never proposed to be part of the park, but being in active allotment use, they were regarded as entirely compatible with the surrounding park use. iv. Rear of the allotments – This area was owned by the council and was acquired by BA along with all the other council land in 1993. The area was part of the park in both agreements and has been landscaped. v. Janton Farm – This was privately owned but was acquired by BA under the first section 106 agreement. It was part of the park under both agreements and has been landscaped. vi. Rear of Home Farm – This was privately owned but was acquired by BA under the first section 106 agreement. It was part of the park under both section 106 agreements. It was a derelict yard but is now used as a working area for horticultural purposes. vii. Area to the front of (vi) – This consisted of a bungalow in residential use, outbuildings and large barns and an orchard. It had always been privately owned. It was proposed as part of the park in the first section 106 agreement but not the second. The residential/horticultural use is low key and was regarded as compatible with the surrounding park. viii. Cambridge Lodge – This was privately owned but was acquired by BA under the first section 106 agreement. It was undeveloped land and was laid out as an emergency access to the BA offices. It was identified as part of the park in the first section 106 agreement but not the second. It was acquired in the same transaction as (vi) above. ix. The Rose Cottages site – This was a scrap yard, owned by Mr and Mrs Hall. It was proposed as part of the park in the first section 106 agreement but not the second. However, the second section 106 agreement still provided that BA would use reasonable endeavours to acquire this area: the intention was that the scrap yard use would cease and that the area should be put to a use compatible with the surrounding park. The Rose Cottages site was included in the CPO for this reason. x. Scotchlake Farm – This had always been privately owned. It was part of the park in the first section 106 agreement but not the second. BA was obliged to seek to acquire this area under the first section 106 agreement but not the second. The area is in a residential use.[19]On 25 February 1993 the council sold its land to BA for £1.252m. It amounted to 50 hectares (125 acres), about half of the park. Following the first section 106 agreement BA acquired by agreement nine parcels of land, namely Areas 5, 6, 10, 11, 12 and 13 and the rear of Home Farm, Cambridge Lodge and Janton Farm, totalling about 19 hectares (47 acres). The first section 106 agreement[20]The first section 106 agreement was dated 6 January 1992. Included in its provisions (which defined “Third Party Land” as land within the application site that was not owned by BA or the council) were the following:(a) The agreement was conditional on the grant of planning permission by the Secretary of State (clause 3.1).(b) BA agreed to accept the transfer to it of all the council land within the application site (clause 6.1).(c) BA was obliged to use its best endeavours to acquire the third party land within the application site (clause 6.14).(d) The council covenanted to consider the use of compulsory purchase powers to acquire any third party land not acquired by BA (clause 7).(e) Three areas owned either by BA or the council were referred to as the “First Phase Land”. “The Remainder of the Land for the New Park” comprised all remaining council and Third Party Land.(f) BA had to obtain approval of the ‘Master Plan’ which was to set out comprehensive proposals for the entire park.(g) “The New Park Works” were defined in Schedule 1 and were intended as works to make land suitable for use as a park, in accordance with the Master Plan (see clause 6.3 and 6.5).(h) BA was not allowed to start the new office development until the Master Plan had been approved (clause 6.7)(i) BA was not allowed to occupy the new offices until the New Park Works on the First Phase Land had been substantially completed (clause 6.9) and until identified highway works had been completed (clause 6.23).(j) BA had to carry out the New Parks Works in accordance with the Master Plan to each part of the Remainder of the Land for the New Park as and when it obtained vacant possession (clause 6.12).(k) BA was required to provide a “New Parks Works Fund” of £13.25m (indexed for inflation) to be used to pay for the New Park Works (clauses4.1 and4.2 and 6.3). (Thus there was a financial limit to the works which BA had to carry out to produce the park).(l) BA was also to provide a sum of £1 million (indexed for inflation) to pay for the ongoing maintenance of the park (clause 5 and 6.11).(m) BA was obliged not to use any land incorporated into the new park other than as public open space or for public leisure and recreational uses appropriate to the Green Belt (clause 6.20)(n) It was contemplated that the park, although owned by BA, would be maintained and managed by a body set up by agreement between BA and the council (definitions and clause 6.15). The second section 106 agreement[21]On 13 April 1995, BA and the council entered into a second, replacement, section 106 agreement, which rescinded the first section 106 agreement and contained the following provisions:(a) Most of the obligations were conditional on planning permission being granted for the “Further Applications” (paragraphs (8) and (9), definition of “Further Applications Permission” and clause 3.1.2).(b) Most of the obligations were also conditional on the council granting approval for certain details submitted by BA in reference to conditions in the 1992 planning permission (paragraph (7) and (9)). These included the “New Park Master Plan” required by the planning permission and a programme for the completion of works to create the park (“the Programme”).(c) The first section 106 agreement was rescinded (clause 5).(d) The extent of the planned new park was referred to as “the New Park Land”: this included the additional council land and some areas yet to be acquired (see below). The New Park Land excluded Area 1a, the site of the BA offices, and most of the ten areas to the west of the reference land.(e) The agreement dealt separately with engineering and landscaping works. Engineering works were essentially works required to cap and make safe the old landfill sites. The agreement made specific provision for the engineering works required to prepare the central part of the proposed park, all of which was referred to as the “Phase 1 Engineering Works”.(f) The agreement had a separate concept of “Phase 1 Land”. This was the whole of the New Park Land, minus two areas and those parts not then in the ownership of BA (the Thakrar land, the reference land and Brookside).(g) Following implementation of the planning permission BA was obliged. At its expense and in accordance with the New Park Master Plan and the Programme, to carry out – The Phase 1 Engineering Works; Landscaping works on the Phase 1 Land; Engineering and landscaping works on Areas 2 and 9a; Landscaping works on LBH3 and 4 (clause 6.2).(h) Clause 6.3 contained an enforcement mechanism to be used in the event that BA failed to adhere to the Programme. This was supported by a bond of £17.1 million (definition of “the Bond”).(i) Clause 6.4 contained restrictions on the occupation of the completed offices. One of these was that 40.47 hectares (100 acres) of new Park Land should be available for public access (or was subject to an approved restriction on access). Since BA already owned 50 hectares (125 acres) of ex-council land and 17 hectares (41 acres) of land which had been acquired by agreement by BA from other landowners, this requirement could be satisfied without BA having to acquire further land such as the reference land. The council considered that all the requirements of clause 6.4 were satisfied before the offices were occupied.(j) BA was obliged to permit the use in perpetuity of the New Park Land as public open space (clause 6.5), to observe other obligations concerning public access (clauses 6.6, 6.7); and to maintain the New Park Land in accordance with an approved maintenance specification in perpetuity (clause 6.8).(k) Separate provisions dealt with public access to Area 1a.(l) Clause 6.12 – 6.31 made provisions particular to individual areas. These included – Areas 7 and 13 (clause 6.11 – 6.14, restricting the use of these Areas); Areas 3 and 4 (clause 6.15, dealing with the specification and treatment of trees); Areas 2 (clause 6.16, requiring best endeavours to be used to secure vacant possession on the expiry of a lease granted by the Council); Area 9a (clause 6.17, requiring reasonable endeavours to be used to acquire this Area); and Area 9b (clause 6.24, making provision should BA acquire this Area)(m) There were provisions dealing with four areas not in BA’s ownership, referred to as “the Remaining Land” (the reference land, the Thakrar land, the Rose Cottages site and Brookside). Clause 6.18 required BA to use reasonable endeavours to acquire these areas in the period until 31 December 2000. Thereafter BA was obliged to reimburse the council for any expenses incurred by the council in making a CPO to acquire these areas and in paying compensation. The council was under no obligation to make a CPO (clause 6.19). Clauses 6.21 – 6.23 imposed obligations on BA should it acquire the rose cottages Site, the reference land, and Brookside.(n) BA was obliged to carry out landscaping works on those parts of the Remaining Land which were acquired by either the Council or BA (clause 6.2.7). The CPO[22]The London Borough of Hillingdon (Harmondsworth Moor) Compulsory Purchase Order 2003 was made under section 226(1)(b) of the Town and Country Planning Act 1990 to acquire land for the purpose of securing the proper planning of the area by the provision of a public park. It included three parcels of land: the reference land (plot 1); plot 2, otherwise known as the Thakrar land, which consisted of a rectangular field on the north side of the reference land and the tithe barn; and plot 3, otherwise known as the Halls’ land or the Rose Cottages site, a scrapyard on the south side of Moor Lane, 0.3 ha (0.74 acre) in area. Following objections by the owners of each of the plots a public inquiry was held in November 2003. On 11 February 2004 the Secretary of State confirmed the CPO but modified it by excluding plot 2.[23]In his report, which was dated January 2004, the inspector made alternative recommendations, which were dependent on the expected policy announcement on the third runway. If the announcement was that there would be no third runway north of Harmondsworth, he recommended that all three areas should be acquired. If the announcement was that there should be such a runway he recommended that only the Rose Cottages site should be acquired. The decision letter noted that the Aviation White Paper “The Future of Air Transport” had been published in December 2003, so that the inspector had not had the opportunity to consider its findings. The inspector’s recommendations had been made on the basis of the earlier consultation document “The future development of air transport in the UK: South East (second edition)”. The consultation document had appeared to include and affect Harmondsworth church and the tithe barn and their immediate setting, but the indicative amended new airport boundary shown in the White Paper excluded a triangle of land in the vicinity of the church and the barn. Plot 2 was nevertheless still shown to be affected by the proposed runway, and the Secretary of State concluded that it should be excluded from the CPO. The decision letter said (at paragraph 32) that the estimate in paragraph 11.66 of the White Paper that the third runway could not come into operation before some time in the period 2015-2020 implied a start to construction some years before that, leaving potentially only a short time before plot 2 could be needed for runway purposes.[24]In relation to plot 1 the decision letter said this:
“42. The Secretary of State considers that while the benefits from the compulsory acquisition of plot 1 would be significantly reduced if plot 2 is not also to be acquired, the benefits from acquiring plot 1 of securing enhancement of the setting of the Tithe Barn and the conservation area, of preventing implementation of the proposal for the caravan site, and of achieving an improvement in access to parkland for residents of Harmondsworth, remain very significant...”
[25]Then, having recorded contentions advanced on behalf of the present claimants by Mr Marty Potter the decision letter went on:
“46. The Secretary of State has taken those arguments into account insofar as they raise new issues. He considers that, particularly in the light of UDP policy OL25 (which defines the area as part of a comprehensive rehabilitation area) and national guidance in PPG15 about the protection of historic buildings and the character of conservation areas, the protection of the setting of the historic buildings is an important interest. For the reasons given above he also agrees with the Inspector (IR 8.24) that non-implementation of the caravan site proposal is a material public benefit. 47. He considers that the other arguments put by Mr Potter do not outweigh these considerations, and that the confirmation of the Order is necessary for the proper planning of the area. He considers on that basis that there is a compelling case in the public interest for confirmation of the Order in relation to plot1.”
[26]Challenges to the CPO by the claimants and the owners of plot 3 were dismissed by the High Court on 28 June 2006, an appeal to the Court of Appeal was dismissed on 6 June 2007, and leave to appeal to the House of Lords was subsequently refused. Heathrow Airport – Third Runway[27]The White Paper of December 2003 stated that provision should be made for two new runways in the South East by 2030, the first to be constructed as soon as possible at Stansted (2011-2012), and the second to be at Heathrow. What would be Heathrow’s third runway was only to be provided after the new one at Stansted and only if stringent environmental limits could be met. The Government expected that the third Heathrow runway would be completed by 2015-2020, and steps should be taken by British Airports Authority (BAA) (owners of Heathrow) to safeguard the land that would be needed for it.[28]The “Air Transport White Paper Progress Report”, which was issued by the Government in December 2006, did not show any changes to the 2003 indicative plan, which we have referred to above, and stated its continued support for the proposals. By November 2007 (after the valuation date, therefore) the plan accompanying a DfT consultation document showed a substantially increased airport perimeter to facilitate the construction of a new, sixth, terminal. The reference land remained outside the perimeter, but the majority of it was designated for “ancillary facilities” including aircraft maintenance. The adjacent tithe barn and manor house were unaffected. The option agreement[29]On 30 January 1990 Mr D N Taylor ARICS, BA’s Property Development Manager, wrote a letter to Mr and Mrs Potter under the heading “10 Acres of Land at Moor Lane, Harmondsworth”. It was said to be “Subject to Contract & Board Approval”. It was in these terms:
“Further to our recent discussions concerning the above property, we confirm our offer to take an option from you to purchase your freehold interest with vacant possession on the following terms and conditions:- 1. The consideration for the grant of the option shall be 6 First Class return tickets London Heathrow to San Francisco for use by you or members of your direct family. 2. The option may be exercised at any time up to the 31 March 1991 by the service by us on you of a notice in writing requiring the sale and purchase of the property. 3. On the service of the notice, a contract for the sale and purchase shall come into being and the contract shall incorporate the National Condition of Sale (20 th Edition) and shall include such terms as shall be agreed between us. 4. The purchase price for the Property shall be £1.5 million paid on completion of the sale and purchase. We would be grateful if you could confirm your acceptance of these heads of terms so that we instruct our solicitors to issue a formal option agreement for your consideration.”
The option agreement was formally entered into on 6 March 1990.[30]It was always the contention of the claimants that the option agreement was entered into with the 100-hectare scheme in mind since the initial planning application, for the 20-hectare scheme, had been withdrawn on 1 March 1990, some five days before the date of the agreement. In a letter of 13 October 1995 to Mr W G Potter, Sir Colin Marshall, the Chairman, set out BA’s position:
“I can confirm that the Option Agreement between yourself and British Airways was dated 6 March 1990 and that our initial application in respect of Prospect Park was withdrawn on 1 March 1990. I cannot agree that the Option agreement was entered into with the ‘second and successful application’ in mind. The negotiations which led to the Option Agreement took place in the context of the discussion British Airways was having with the London Borough of Hillingdon concerning the scheme which was the subject of the first planning application. At the time of withdrawing that application it was not clear what the outcome of those discussions would be and what effect this would have on our desire to purchase your land. In these circumstances British Airways decided to complete the Option Agreement. In the event the outcome of the negotiations with Hillingdon was that we submitted a second planning application for a radically different scheme for which planning permission was granted in October 1992. I also cannot accept the statement in your letter that ‘Mr D Taylor promised that BA would purchase our land as soon as planning permission was granted, which you confirmed in your letter’. As I am sure your solicitors advised you the Option Agreement did not oblige British Airways to buy your land in the event that planning permission for Prospect Park was granted. What the Option Agreement did was to give us the right to acquire the land on the terms set out therein. One of the terms being the right had to be exercised by 31 December 1991. As you know British Airways did not exercise the option and the agreement therefore lapsed. We remain committed to try to secure your land by agreement for the benefit of the park, but its value is substantially less in the approved scheme than it was in the initial application.”
The claimants’ case[31]Mr Potter said, firstly, that it was accepted by the claimants that all their appeals against the validity of the CPO had been exhausted and it was not proposed to use this hearing as a forum to re-argue or debate the legalities of it. He said it was appreciated that, under the rules for assessing compensation, section 5 of the Land Compensation Act 1961 provided (rule (1)) that no allowance shall be made for the acquisition being compulsory; (rule (2)) the value of the land shall be assessed as if being sold in the open market by a willing seller to a willing purchaser; and (rule (5)), account should be taken of the cost of acquiring a replacement parcel of land.[32]The offer so far made by the acquiring authority, he said, fell far below meeting those criteria, and the main reason for this reference proceeding was because the developer, BA, and its co-developer, LBH, had reneged on the option agreement under which a price for the land had been agreed at £1,500,000 in 1990. Taking inflation into account, that sum would equate to approximately £6 million at the valuation date (expressed as £6.5 million in the Statement of Case), and that was the level of compensation for which the claimants were principally arguing. Mr Potter said that, despite LBH’s refusal to purchase the land, they acted as if they owned it. Boreholes had been drilled on the land without permission, and a part of it had been cordoned off and padlocked, essentially taking possession of that area. Thus, in the claimants’ view, the former option agreement had become a “collateral contract”. That option agreement had been accepted by the Inspector at the CPO Inquiry as sufficient evidence to allow the “interest in the land” element to be satisfied so as to allow the Order Lands to be included in the proposed section 106 agreement. Section 6.18, Mr Potter said, was quite specific:
“Not to make use of the Caravan Park permission.”
It would be unreasonable for the developer to commit to a planning obligation that specifies extinguishing the benefit of a planning consent that belonged to a third party without a contract that satisfied that obligation.[33]Having failed to honour the option agreement, the reference land became a “ransom strip” as BA were now obligated under the section 106 agreement to remove the caravans, and to provide a public park of a certain size - the land being essential to enable that obligation to be fulfilled, and to provide a pay-to-use car park. Planning consent was granted upon the understanding that the s.106 agreement would and could be fulfilled, but without the land it could not.[34]Mr Potter said that the land was thus an integral part of the scheme of development proposed for BA’s new offices, and as such the claimants should be eligible for an element of the planning gain enjoyed by the developer for which the land was specifically required. According to a valuation undertaken by Mr Edward Westlake BSc FRICS of Edwin Hill, Chartered Surveyors, the valuer formerly appointed but no longer acting for the claimants, it had been assumed the planning gain to BA was worth in the region of £35 million. As one of only three additional parcels of land required, the subject land should, Mr Potter said, be worth £12 million.[35]In addition to the since withdrawn offer of £1.5 million for the whole site, a number of third-party offers had been received over the years for a 4 acre section of the land with the benefit of the caravan consent, and if those offers (which did not proceed due to the CPO threat) were rounded up to valuation date values, they would range between £1.6 million and £6 million. A further offer for the whole site had been made by Dorcas Holdings in 2001 on the proviso that the threat of the CPO was lifted. The land, he said, could have been sold many times over, in the absence of the scheme, for sums far in excess of what was being offered. Under rules (1) and (2) of section 5 of the 1961 Act, the claimants were entitled to fair compensation that reflected to value of the land in the real world.[36]Whilst it was accepted that the subject land was, and still is, outside the perimeter of the land which would be required for the provision of the third runway for Heathrow, it is designated for ancillary uses in connection with that proposal, including aircraft maintenance, even though it has been acquired under the guise of “proper planning for the area” as an adjunct to BA’s office development. As such, it was totally absurd, Mr Potter said, for the acquiring authority to make an offer for the land on the basis of “hope value” deferred for some 15 years. On the basis of land values in the area, he estimated its value for the said ancillary purposes at £10 million.[37]All of the above, Mr Potter said, demonstrated beyond doubt the inadequacy of the compensation offered by the acquiring authority. How could it be, he asked, that after 16 years, the land was assessed to be worth only 2/3 of the sum offered in 1990. By basing their valuation on hope value relating to the proposed Heathrow expansion, and the third runway in particular, he said that that was an admission by the acquiring authority that the land was not intended to be used for the purposes specified in the CPO. Indeed, since the land was taken, it had fallen into a derelict state, indicating that it was intended to be used for another purpose, other than the proposed park.[38]As to rule (5), there was no doubt that a replacement parcel of 10 acres of land within the M25, with permission for touring caravans, would cost very substantially more than £1 million to acquire. Acquiring authority’s case[39]Mrs Lichfield is the senior partner of Lichfield Planning LLP, and has been working as a planning consultant since 1976. She said she had acted as a consultant to BA in respect of the planning applications for their new headquarters building, including consideration of the requirement for additional land (including the subject property) to accommodate the park. Her instructions in respect of this reference were to consider the planning policies and considerations that would affect the prospects of obtaining immediate planning consent on the land in the no-scheme world at the valuation date, or the prospects (in connection with hope value) for the future. Plans for the third runway at Heathrow were, she said, a material consideration in this regard, and her views took account of the position that might apply whereby permission was granted for it both where the land was identified for associated development, and where it was not.[40]As to any prospect of immediate development, Mrs Lichfield said that in the light of the site’s allocation within the adopted Local Plan (the 1998 UDP) as Grade 1 agricultural land located in the Green Belt, in an area of Environmental Opportunity within the Harmondsworth Conservation Area, an Archaeological Priority Area and its proximity to listed buildings and ancient monuments, there was little likelihood of proposals for commercially viable development obtaining consent. The immediately adjacent tithe barn, and the setting of Harmondsworth as a special environment and as a preserved village militated against any development opportunities. The council’s intention was to use the Green Belt and other policies to transform the area and provide opportunities for access to open countryside and outdoor sports and recreation facilities, whilst securing nature conservation interest and retaining agricultural land. Para 5.22 of the Harmondsworth Village Conservation Appraisal of March 2007 said:
“The larger green spaces to the west of the Great Barn and to the east of Home Farm are important features of the Conservation Area, and help characterise the area as a rural setting. The green space also provides attractive views into and out of the area and creates a definable boundary for it.”
Thus, the only uses that would be immediately acceptable included the extant caravan site permission, open air recreational use (such as a golf course), cemeteries or agriculture. Whatever limited development might be considered acceptable would have been adversely affected by the potential impact of the third runway as that prospect materialised.[41]As far as the permission for touring caravans was concerned, Mrs Lichfield pointed out that whilst the Inspector in 1981 considered that the proposal could be regarded as acceptable within the green belt, inspectors in subsequent appeals related to further development proposals on the land had disagreed, and made it clear that implementation of that permission would be severely harmful. It was apparent from the CPO inspector’s report relating to this matter that a significant reason for allowing the acquisition of the reference land was to prevent the 1981 permission being implemented.[42]Regarding speculative hopes, Mrs Lichfield concluded that there would have been no opportunity for even limited residential development along the southern boundary of the land (onto Moor Road) due to the abundant availability of vacant brownfield sites within LB Hillingdon generally. As far as hopes for future development on the back of the third runway proposals, any prospective purchaser would, at the valuation date, have been fully aware of them. However, the prospects of such a scheme actually going ahead were uncertain at the valuation date, and delays whilst it went through the requisite planning and environmental processes could allow circumstances to change, thus increasing those uncertainties. The extent of opposition in the light of environmental and climate change concerns was significantly in the public consciousness in 2007, and it was by no means certain that it would ever be approved. Whatever date a purchaser might have assumed to be appropriate for it going ahead, if at all, would necessitate the potential development value being discounted – that being a matter covered by Mr Asher.[43]There would also be considerable uncertainty as to whether this “small and poorly accessed” site would be identified for development associated with the third runway, even if it were to proceed, as it was not shown designated as such on the 2005 Master Plan. However it was reasonable to assume that a speculative purchaser might have contemplated it being included at some later stage. Indeed, that did happen, and on the November 2007 revision, the land was included for “ancillary facilities, including aircraft maintenance”. In theory those uses could include hotels, car parking or hangars/maintenance sheds. Nevertheless, the Green Belt designation, noise restrictions in the Conservation Area, and the close proximity of the Grade 1 listed tithe barn would be limiting factors, as would the nature conservation area along the riverbank to the west of the site. Furthermore, as the land would be outside the main airport operational area (and thus not under BAA control), development opportunities would be further limited, and it was a fact, she said, that both BA and BAA considered the site unsuitable for aircraft maintenance. It was too small and there would be restrictions on building heights (such as hangars) under their safeguarding provisions.[44]In Mrs Lichfield’s opinion, the constraints of the site meant that the only suitable use would be for car parking on part, and limited storage use on other areas. The overall prospects, however, were so limited and uncertain as to lead her to the conclusion that a prospective purchaser would at best consider a 30 year minimum time span to be realistic, and would factor his valuation accordingly.[45]Mr Asher is a chartered surveyor with over 35 years experience in the valuation of property, and is a director of the Valuation Department of Jones Lang LaSalle, Real Estate Consultants, based in their London offices. He said that he had had a meeting and various without prejudice discussions with the claimants’ former valuer, Mr Westlake, between January 2008, and 14 April 2008, the date upon which he was informed that Mr Westlake was no longer acting. Three days after this, the claimants submitted their notice of reference to the Tribunal. He said that the first Advance Payment was made by the acquiring authority on 6 May 2008 and was broken down as to(a) £450,000 being 90% of the authority’s estimate of the value of the land,(b) a statutory Home Loss Payment of £50,000 and(c) interest of £22,409.31.[46]In his view the payment under (a), being based upon a figure of £500,000 was generous in that his detailed valuation of the land assessed upon its existing and permitted uses, amounted to £426,000. In reaching that figure, he had split the land into two elements: 1.6 ha (3.95 acres) with permission for a touring caravan site, and 2.78 ha (6.87 acres) agricultural. The value of the first element was arrived at on the assumption that the site was properly fitted out, ready to trade and with adequate working capital, as per RICS valuation guidance. He assessed the rental value to be £56,471 pa based upon total annual turnover of £101,544 less staff costs and rates. To this, he applied a multiplier of 10YP to give £574,714. Estimated building costs of £166,078 were then deducted to leave £398,637. Adding the value of the agricultural land at £7,000 per acre (£48,090) produced a market value of £426,418 – say £426,000. This valuation was not disputed by the claimants.[47]Mr Asher said that, in his professional opinion, the hope value attaching to the land for development associated with the proposed third runway exceeded the existing use value. He was of the view that the reference land could one day have the potential for a future change of use to that of B1, B2 and B8 (under the Town and Country Planning, Use Classes Order 1992) associated with the airport development. However, he said, there was significant risk attached to such potential for the reasons given by Mrs Lichfield. Also, it was relevant to note that, if the Government were to approve an additional runway at Gatwick, that could set the Heathrow third runway project back by many years. There was also the risk that the designation of the subject land in the Master Plan could change (due perhaps to a proposed realignment of the runway). He said that, in any other scenario (than the third runway), the prospect of the land being granted planning permission for any form of commercially viable development was “so remote as to be negligible”.[48]In identifying the additional value attributable to the hope of development in the future, Mr Asher said he had considered a number of sales of comparable green belt sites in and around Heathrow and Gatwick airports, but pointed out that directly comparable sites were hard to find, and analysis of achieved prices was therefore difficult and highly subjective. Nevertheless, the analyses he had been able to perform (as set out in detail in appendices to his report) suggested a value of around £250,000 per ha (£100,000 per acre) – giving a total value of £1,082,000 which he rounded to £1 million.[49]Mr Asher also undertook an alternative valuation approach, whereby he assessed the end value of the subject property with the benefit of planning consent, and then factored in the risks to arrive at a bid price applicable as at the valuation date. He assumed that the whole of the land would be suitable for industrial development, either just inside or just outside the new airport perimeter. His research indicated a value of £1 million per acre, and thus the gross value for development purposes would be £10,500,000 or thereabouts. It was then necessary to apply a present value discount to that figure for 15 years, this being the period before which, he thought, such a consent would be likely to be forthcoming. This, therefore, represented the current value of the land assuming no risk regarding obtaining planning permission.[50]The 15 year delay was applied because the timescale for the third runway was, at the valuation date, 2015–2020 (ie 8–13 years). A small allowance for optimism was added. He then allowed a discount rate of 7%, which represented the rate of return for good industrial investments at the valuation date, and deducted a further discount to reflect uncertainty as to whether or not the third runway would ever be built and, even if it was, the risk that the land might not be allocated for related development, and would have to remain within its existing use. That discount, he said, was “robustly” applied at 75%. The valuation, which also amounted to £1,000,000 was set out thus: Rate per acre for industrial development £ 1,000,000 Total acreage 10.82 Total site value with planning consent £10,820,000 P V of site value in 15 yrs @ 7% 0.3624460 £ 3,921,666 Hope value – take 25% £ 980,416 Say £ 1,000,000[51]In cross-examination, Mr Asher said that whilst the claimant’s land was outside the designated extended airport perimeter that would be created if the third runway were to proceed, he accepted that it fell within the area designated for aircraft maintenance and ancillary operations. He did not, however, consider that fact would have any effect upon his valuation, as it had already taken the potential into account. It was the long-term nature of the prospects for development, and the risks of the proposals not proceeding, that were the key. It was, he said, unusual in the marketplace for land with long-term hope value of this nature to be sold, as owners normally waited until there was more certainty. The references he had made in his main report to ancillary uses resulted from a plan that had been attached to a document produced by the DoT on 22 November 2007: “Adding Capacity at Heathrow”, and which showed the indicative third runway layout in 2030. That was, of course, after the valuation date.[52]Mr Asher subsequently produced a comprehensive supplementary report in response to the Tribunal’s request that he should consider the value of the subject land on the assumption that the BA headquarters development, and the associated parkland, were not to be disregarded. He said that in order to carry out this exercise, he had reviewed the history behind the acquisition of all the land required for the office development and the parkland, together with the valuation implications of both the original and the second section 106 agreements. He had also obtained precise details of the areas and specification of the office complex, including costs incurred by BA in the development, and had inspected the premises.[53]Mr Asher said that under the second section 106 agreement of 13 April 1995 (which superseded the first, and was the one relevant to the BA development that has actually taken place), there were restrictions in clause 6.4 that prevented the occupation of the new offices before certain obligations were met. One of those was that 40.47 ha (100 acres) of land for the new park should basically be available for public access. Given that BA already owned 50 ha (125 acres) and had acquired another 19 ha (47 acres) from other third party landowners by agreement, that requirement could be satisfied without BA having to acquire the reference land. The council had confirmed that all the obligations under that clause had been satisfied, and the offices upon which building works started in 1995 were first occupied in 1998. There was no question, therefore, Mr Asher said, of the owners of the reference land being able to hold BA to ransom before the office development could be occupied. It was worth noting, he said, that the obligations relating to the reference land were the same as those that applied to the Halls’ land (which was not required for the park) and the Thakrar land (which was not acquired).[54]Clause 6.18 obliged the council to use “reasonable endeavours” to acquire the remaining land (of which the reference land was part) by 31 December 2000. In his view, and that of the council’s Policy and Resources Committee in their report of 4 February 1997, that obligation was satisfied from the history of offers and negotiations that had taken place. Clause 6.19 of the agreement referred to the CPO process and obligations for reimbursement by BA of costs and compensation payments related to it, if “in its absolute discretion” the council chose to proceed on that basis. The council did so, but, Mr Asher said, in his view from the wording, it was not obliged to.[55]Mr Asher said that in his view, BA ceased to be any kind of special purchaser on 1 January 2001, after the reasonable endeavours obligation had expired, (if indeed it ever had been, which he doubted). As to the option agreement, he said that BA was aware that it would expire before planning permission was granted, but did not renew it. At no time after it expired did BA do anything to suggest that the reference land was worth anything like £1.5 million to them, as the offers made during the “reasonable endeavours” period were only a fraction of this sum.[56]In the light of these facts, Mr Asher said that he was satisfied that, even if the scheme and the attendant section 106 agreement had to be taken into account, this could not in any way enhance the value of the land to more than the £1 million he considered it was worth in the no-scheme world. Nevertheless, and for completeness, he said he had undertaken a comprehensive development appraisal on the assumption that the planning permission or the second s.106 agreement contained a Grampian style restriction preventing BA from occupying the offices until it had acquired all the land identified for the new park. That appraisal, he said, had the merit of showing that the £1 million of compensation offered still exceeded any ransom value that such a restriction would have given to the land in the scheme world.[57]In his attempt to ascertain the increase in value to the 18 ha (44 acres) owned by BA upon which the offices were to be built resulting from the grant of planning permission, he assumed that all owners of the land to be acquired under the assumed Grampian restriction would have been able to demand 50% of this increase. He said that for ease of calculation, he had assumed that the office development did not commence until the valuation date in 2007 (which was the most extreme situation, and the one most favourable to the claimants). From the figures that had been provided by BA, Mr Asher calculated the actual building cost on completion in 1998 at £139.5 million which ignored a number of figures for bespoke items such as furniture, fitting out and IT installations included within the information provided. That figure, factored by use of the RICS Building Cost Information Service (BCIS) index to 2007, became £208 million.[58]However, in order to construct a fair appraisal that reflected a commercially viable development, rather than what was actually built, he calculated the 2007 cost of providing 506,681 net internal area of offices with underground car parking at £119.2 million. This was, Mr Asher said, dramatically favourable to the claimants in that the lower the building cost, the higher became the residual value of the land. After adding the cost of park works effected to date and a further sum for its completion, fees, finance, section 106 costs and developer’s profit the gross development cost became £233 million. He calculated a gross development value of £252 million, assuming a market rental value for the offices of £25 per sq ft, and a yield of 4.75% on the basis of BA undertaking a sale and leaseback arrangement, which left a gross residual land value of £19 million and a net, actual, value of £13.5 million after deduction of relevant costs.[59]If the Grampian restriction were to require the provision of a park of 80 ha (197 acres), the claimant’s 50% share of the net land value based upon their acreage, would be £347,255 or, Mr Asher said, about one-third of the land’s value in the no-scheme world. Even if the restriction had only required the land for the provision of the park to be the third party land (35 ha/87 acres), the value of the claimants’ land would still only be £789,735. Needless to say, Mr Asher reiterated, if the actual development cost to BA were taken, the actual land value would be negative to a considerable extent. Even when the additional value of the parkland was included at, say, £5,000 per acre or £1.1 million, this made no material difference to the resulting value.[60]In summary, therefore, Mr Asher said that it was his initial no-scheme world valuation that produced the highest compensation at £1 million, and that was the sum that the Tribunal should determine. Submissions[61]Mr Langham submitted that the £1.5 million identified in the 1990/91 option agreement, and which was the base figure against which the claimants calculated their principal argument for compensation of £6 million to £6.5 million was not a reflection of the subject property’s value in the no-scheme world. The land had never, as Mr Potter was suggesting, had any ransom value because, if it had, it would have been as a direct result of the scheme.[62]On the identity of the scheme for the purposes of the application of the Pointe Gourde rule, Mr Langham submitted that, as a matter of fact, the scheme should be identified as the office and park development for the following reasons. The park was in substance enabled by the offices. The planning Inspector had found that there was little chance of the level of funding needed to reclaim the landfill sites being provided other than by private investment. Moreover the provision of the park was a fundamental part of the very special circumstances which led to the grant of planning permission by the Secretary of State. Agreeing with the Inspector, the Secretary of State had made it clear that the “business case” for the BA offices alone was not sufficient to justify a grant of planning permission.[63]It was impossible in any practical sense to separate the offices from the park, Mr Langham said. The offices were on Area 1a which provided a parkland setting, including a lake. There was public access to footpaths through Area 1a, required by the second section 106 agreement. There would be little point in requiring Cambridge Lodge, the Rose cottages Site and Scotchlake Farm to be used in a manner compatible with the park if Area 1a did not function as part of the park. The fact that Area 1a was not “New Park Land” in the second section 106 agreement was not a point of decisive importance, merely a reflection of the need to impose different covenants there.[64]Mr Langham submitted that the connection between the park, including the reference land, and the BA office development was far closer than the connection between the wetlands and the barrage in Waters v Welsh Development Agency [2004] 1 WLR 1304 . The barrage did not contain mitigation measures at all. The area to be taken for wetlands had not been identified when the barrage was started. It was 15 miles away. There was never a requirement that the wetlands should be provided in any particular location.[65]In addition there was only one grant of planning permission, embracing both the offices and the park. This authorised the development currently proposed on the reference land. The council had been clear that compulsory purchase powers might need to be used to secure the development covered by application from the outset. The possible need to resort to compulsory purchase was obvious from both section 106 agreements, the first of which was seen by the planning inspector and the Secretary of State. The CPO was made under section 226(1)(b) (land “required for a purpose which it is necessary to achieve in the interests of the proper planning of an area in which the land is situated”) rather than section 226(1)(a) (the acquisition “will facilitate the carrying out of development/redevelopment or improvement on or in relation to the land”). The council’s case at the CPO inquiry was summarised by the Inspector as being that the order lands should be acquired “so as to overcome existing or potential harm caused by the Order Lands and to secure the completion of the public park by BA … which was an integral part of the planning permission granted in 1992”. The Secretary of State’s reasons for confirming the CPO included the completion of the park and the achievement of all the benefits relied on as very special circumstances in 1992 and that acquisition and development of the CPO plots would enhance the public benefit being provided by the existing parkland.[66]Mr Langham said that the fact that the CPO was confined to small areas and did not include any land required for the offices was neither here nor there. The extent of the CPO was determined by accidents of history – much of the degraded land was already owned by the acquiring authority; BA succeeded in acquiring much of the remaining land by agreement. The CPO in Waters did not include land needed for the barrage. Any narrower version of the scheme would be simply unreal: it would have to be the provision of public open space on the reference land alone (or perhaps in conjunction with the Thakrar land). There never was any such scheme. Such a scheme would not explain the acquisition of the Rose Cottages Site.[67]The scheme so delineated was, Mr Langham said, precise and limited and accorded with the pointers in paragraph 63 of Waters in the following respects. In relation to Pointer 1 defining the scheme as above (and disregarding it) produced a sensible result – that the compensation for land taken is £1 million. The fact that the scheme in fact had no enhancing effect did not neutralise this point. In Waters the House of Lords did not know whether the scheme had any enhancing effect. In relation to Pointer 2 defining the scheme as above (and disregarding it) led to a valuation exercise that was straightforward. Imagining the relevant planning policy and the position of the reference land on the valuation date in the no scheme world was easy. Of course the assessment of hope value involved speculation – but this was because of the nature of the hope, not because of complications arising because the scheme was being disregarded. In relation to Pointer 3 defining the scheme as above (and disregarding it) did not produce a gross disparity between the measure of compensation payable to the claimants and the market value of comparable adjoining properties which were not being acquired. There was certainly no question of comparable adjoining non-scheme properties commanding a market value which is grossly greater than the reference land. All comparable adjoining land remained in the Green Belt. In relation to Pointer 4 plainly the analogy was with Class 1, as was the case in Waters . The scheme embraced the land acquired under the CPO, the land acquired by agreement and the land already owned by BA. Finally, in relation to Pointer 5 all the formal resolutions and documents of the acquiring authority pointed in favour of the suggested definition of the scheme.[68]Mr Langham submitted that the case for disregarding the scheme in the present reference was as strong as, if not stronger than in Waters , and that it would not be possible to disregard it without suggesting that Waters was wrongly decided. There was no suggestion by the House of Lords in Spirerose that Waters was wrongly decided. Issues[69]The claimants’ case is unsupported by any expert evidence. However, the acquiring authority, quite properly, do not ask us to dismiss the case on the basis that the claim for compensation has simply not been made out, and they have addressed the contentions advanced on behalf of the claimants and have adduced evidence that seeks to establish the value of the claimants’ land at the valuation date. They have also assisted by providing further valuation evidence that, on two occasions after the hearing, we requested since it appeared to us to be needed if the claimants’ contentions, inadequately articulated as they were, were to be fairly explored.[70]The case canvassed by Mr Potter essentially advances two alternative bases of valuation. The first is the ransom value that he says that the land had in view of BA’s need to acquire it so that it could be provided as part of the park, and he relies on the option price agreed in 1990 as evidence of that value. This basis of valuation is rejected by the acquiring authority both on the facts – they say that the claimants were not in a position to achieve a ransom price for their land – and also because, they say, if the land did have a ransom value, this was a value given to it by the scheme underlying the acquisition and so would fall to be disregarded under the Point Gourde rule. The second basis on which the claim is advanced is the hope value that the land is said to have for development associated with the third runway. This basis is accepted by the acquiring authority.[71]It appears to us that the ransom value claim is advanced in two different ways. The first consists of the contention that the claimants would have sold the land to BA for the price in the option agreement if the acquiring authority had not indicated that it was prepared to acquire the land compulsorily. Put this way the case is one that relies on section 9 of the Land Compensation Act 1961. The other way in which it is put, it seems, is that the land had a ransom value at the valuation date and the option agreement price, updated to 2007 values, was evidence of its worth.[72]In the light of this the issues for our determination are, therefore, these:(a) Whether the option agreement establishes that at the time that it was entered into the land had a value of £1.5m.(b) If the land did have such value, whether such value was lost by an indication on the part of the acquiring authority that the land was liable to be compulsorily acquired.(c) If the land did not have such a value, whether it had a value to BA as a special purchaser that was lost by an indication on the part of the acquiring authority that the land was liable to be compulsorily acquired; and, if so, what that value was and, in particular, whether transactions in which BA bought other land within the areas of the proposed park provides useful comparable evidence.(d) Whether the land had a value to BA as a special purchaser on the valuation date and, if so, what it was.(e) If the land did have any such value as is referred to above, whether that value falls to be left out of account under the statutory provisions or the Pointe Gourde rule.(f) What hope value the land had at the valuation date. Conclusions[73]The House of Lords decision in Spirerose is a reminder to practitioners and those deciding claims for compensation that for the compulsory purchase of land that valuation for this purpose is to be made by applying the provisions that are contained in the Land Compensation Act 1961. The claimants’ case referred simply to rules (1), (2) and (5) of section 5. Rule (5), dealing with equivalent reinstatement clearly has no application to a claim that is based in the on ransom value or alternatively hope value. The acquiring authority’s approach was to take an initial leap into the no-scheme world and to proceed from there. The scheme, they said, was the scheme for which planning permission was granted in 1992, and, applying the Pointe Gourde rule, compensation was to be assessed at the value that the land would have had if the scheme had not existed. We think that in future valuers and their advisers will need to adopt a more methodical approach, considering the potentially relevant statutory assumptions and applying them to the facts of the case and only moving on to consider whether some additional assumption is required under Pointe Gourde when those earlier steps have been taken.[74]The starting point consists of the planning assumptions. Two planning permissions were in force at the date of the service of notice to treat, and therefore fall to be taken into account under section 14(2). The first was the 1981 planning permission for a touring caravan site. We note that Mr Asher’s valuation of £426,000 is undisputed, and we accept it. Since, however, it is not suggested by either party that the value of the land for this purpose at the valuation date was higher than the value that it would have had in the absence of the BA permission, no further consideration needs to be given to it. Secondly there was the 1992 permission for the BA offices and the park. This falls to be taken into account for the purposes of the claimants’ ransom value claim. In addition such hope as there might have been that the land might achieve planning permission for a use associated with a possible third runway can be taken into account under section 14(3). There is no suggestion that any of the assumptions contained in sections 15 and 16 apply and so fall to be taken into account under section 14(1).[75]Subject to the other provisions of the Act the value of the land is the amount that it might have been expected to realise on the valuation date if sold by a willing seller: rule (2) of section 5. Any reluctance that the claimants might have felt to sell the land for less than the option price would not be relevant. The assumption is of a hypothetical willing seller. Such value as the land might have to BA as a special purchaser can be taken into account provided that it is not excluded by some other provision. Rule (3) may require consideration for this purpose.[76]Under section 6 and Case 1 of Schedule 1 there is to be left out of account any increase or decrease in value due to development or the prospect of development of other land in the CPO which would not have been likely in the absence of a proposal by the council to acquire it. The only other land included in the CPO as confirmed was the Halls’ (Rose Cottages) land, but there is no suggestion that the prospect of its development has affected the value of the subject land.[77]Under section 9 no account is to be taken of any depreciation of the value of the relevant interest which is attributable to the fact that an indication has been given that the land is or is likely to be acquired by an authority possessing compulsory purchase powers. This provision requires consideration in relation to the claimants’ contention that it was the CPO that prevented them from selling the land to BA at the option price.[78]These being the relevant statutory provisions, we turn to consider the issues that we have identified. First, issue (a). We have no reason to doubt that the price in the option agreement represented BA’s genuine assessment of the value of the land to them. It appears, however, that the price was negotiated at a time when the 20-hectare scheme was in contemplation, and, although at the time the agreement was formally entered into the planning application for that scheme had been withdrawn, we do not think that it follows from this that the land must have had the same value to BA for the 100-hectare scheme. This is clearly evident from the contents of Sir Colin Marshall’s letter (see paragraph 30 above). In relation to issue (b), as it might apply to the option price, the evidence does not show that the option price value was lost by reason of the indication on the part of the council that it proposed to use compulsory powers to acquire the reference land. Instead it was the abandonment of the 20-hectare scheme in favour of the larger scheme that rendered the option price no longer of relevance to a sale of the land.[79]Issue (c) raises the question of the value that the reference land would have had to BA as a special purchaser seeking to implement the development permitted in 1992. This was the subject of the further evidence contained in Mr Asher’s supplementary report. We have summarised this above. His conclusion, on the basis of his appraisal, was that the claimants’ share of the assessed net residual land value of £13.5m would have been £347,255 at 2007 prices and values. We do not regard Mr Asher’s conclusion as sound. He makes the assumption of construction costs totalling £119m, which, he says, would have produced a gross development value of £252m against gross development costs of £233m, giving a residual land value of £19m gross, £13.5m net. But such a calculation played no part in BA’s thinking. BA was not a speculative developer. It spent on construction not £119m but £208m, an expenditure that would have meant a substantial loss for a speculative developer. BA spent that amount, clearly, because fine new offices in this location had a much greater value to it than they would have had to a purchaser in the market. It is impossible to conclude, therefore, that the amount that BA would have seen as being available for purchase of the land needed to enable the development to be carried out would have been limited by the residual land value in Mr Asher’s appraisal.[80]How much would BA, seeking to implement the 1992 permission, have been prepared to pay for the reference land? We do not think that this is capable of being established by any appraisal because of the unique motivation of BA. What we do have, however, is the evidence of a number of transactions in which BA bought other land required for the park. This was provided to us in a further supplementary report dated 28 May 2010, which we had sought from Mr Asher and on which Mr Marty Potter later commented. We are grateful to Mr Asher for seeking out from a wide number of sources information that was clearly not easily available. The nine third party parcels upon which we sought evidence are: Area 5: 9.59 acres of restored landfill north-west of Moor Lane acquired on a long-leasehold (150 years) basis from the London Diocesan Fund for £200,000 in December 1991. The land was required for haul road for the removal of sand and gravel being extracted from adjacent sites. Mr Asher said that documentary evidence relating to the urgent need for a haul road (which he attached to his report) indicated that BA may have paid a premium over market value due to the considerable additional costs that would be incurred taking the road through other land where owners were seeking “exorbitant” figures. The price devalued to £20,839 per acre. Area 6: 9.46 acres of worked out and roughly filled land between areas 5 and 7. This was part of the land acquired from LBH for 1.52 million and was not therefore, strictly speaking, third party land. It was also, Mr Asher said, due to re-numbering of site plans, impossible to identify an exact price for this particular area. Area 10: Approximately 10.1 acres comprising a smallholding of bungalow and a substantial range of outbuildings run as a piggery by a Mr & Mrs Stanley. Transferred in December 2004 at £372,000 which Mr Asher considered to be a low price, although he understood the land to have been contaminated, and that the bungalow had to be demolished as a result. £36,826 per acre. Area 11: Land forming a triangle between Tarmac Way and Colnbrook Bypass on the southern edge of the proposed parkland site. There is some confusion, Mr Asher said, about the precise extent of land comprising area 11, and some of it had been owned by LBH but was claimed by Mr B S Rosser, whose Statutory Declaration was accepted by the Land Registry. The land was then transferred to BA in May 1989 at £420,879 and on the basis of his understanding of its area (c.2.92 acres) that equated to £143,645 per acre. The land was required by BA to provide access to the new offices from the bypass, and it was considered therefore that there was a ransom element in the price. Area 12: Approximately 1.08 acres of land adjacent to plot 11 and straddling the River Colne. Evidence of the purchase price of £20,000 in August 1993 suggested that there may have been an option agreement, subsequently abandoned, under which the price was to be staggered to mitigate the vendor’s CGT liability. Mr Asher considered the price to be high for the area and type of land involved, but that in the overall scheme of things it was negligible against the overall cost of the scheme. £18,487 per acre. Area 13: 17.64 acres of cultivated agricultural land in the most north-easterly corner of the proposed site. Having not previously been worked for gravel extraction, that, Mr Asher said, was where the value lay, and the purchase price in February 1994 of £1,000,000 (£56,686 per acre) fairly represented its estimated sand and gravel capability, and land-fill potential of some 300,000 tonnes. That area of land, since being worked to provide sand and gravel for the development, has become a lake. Cambridge Lodge and Land at Rear of Home Farm: Mr Asher dealt with these two properties together as it appeared they were in the same ownership and the subject of a single transfer. Cambridge Lodge was a derelict and vacant Victorian detached house with a range of outbuildings on a plot of 1.06 acres fronting Moor Lane, and with a return frontage to Accommodation Lane. The land to the rear of Home Farm, extending to 0.76 acres was on the opposite side of that lane and had, since 1983, been used for car repairs without planning consent. A retrospective application had been refused, but enforcement action had not been taken. Correspondence to the owner, a Mr Freebody, from BA’s agents in June 1993 suggested an open market value for the two areas of £170,000. Although the precise date of transfer could not be established, the sites were eventually acquired for £250,000 (£137,170 per acre) between November 1993 and April 1994. Mr Asher said he considered that to have been a “full” price that may have reflected some hope value. Janton Farm: This comprised an area of 4.13 acres fronting Moor Lane and adjacent to the reference land on the other side of the Duke of Northumberland River. The land, which housed a bungalow and a range of outbuildings that had been used as a stud farm, was transferred in September 1994 for £350,000 (£84,612 per acre). Mr Asher said that if a CPO had been made, the compensation would have had to take into account business loss, which may have been reflected in the price paid.[81]Excluding Area 6, for which no transfer price could be established, the remaining eight sites amounted to some 47.4 acres for which a total price of £2,612,879 was paid over a period stretching between 1989 and 2004. That was an average of £55,124 per acre, but Mr Asher said that comparison between individual sites would be misleading as the characteristics of each were very different. However, he said, he had been able to build up a picture of the negotiations that would have occurred between BA and the respective landowners. BA wanted to build a new headquarters on the land that it had previously acquired, but was forced to abandon its original proposals due to the planners’ requirement for it to fund the creation of a park that was very significantly larger than that which had originally been anticipated. Hence the first section 106 Agreement, under which all the third party land acquisitions were made. Through that, it was known that CPO powers could be used if necessary failing purchase by agreement of certain areas which included the reference land.[82]Mr Asher said that, from the researches he had undertaken, and from the documentation he had seen, he believed that BA were expecting to pay a generous figure to landowners, but such a figure was clearly to be based upon open market value. There was nothing, he said, to suggest that BA had had to pay ransom value, other than perhaps for site 11, or part of it, which provided the access off Colnbrook Bypass. In his view the prices paid for the various parcels appeared to be somewhat high for what was being acquired, but they reflected a realistic assessment of the market value taking into account the negotiating strength of the vendors, the desire, possibly, to avoid paying business disturbance in certain cases, and any hope value for potential development that may have existed on individual sites. A willingness on the part of BA to pay slightly over the odds for the required pieces of the jigsaw would also have reflected, Mr Asher said, the purchaser’s knowledge that the need to secure a CPO would be costly and time consuming. The fact that a number of land owners were willing to sell to BA without CPO powers being invoked was an indication that they felt they would not be able to achieve higher values if they resisted a sale.[83]Mr Potter said in response to this report from Mr Asher that, in fact, Cambridge Lodge was not derelict (although in disrepair) and was still occupied at the date of acquisition. He also said that Janton Farm was the subject of planning enforcement proceedings, and the bungalow as described by Mr Asher was actually an unlawful mobile home. That property, which was adjacent to the reference land, had no valid planning consent and was unlawfully occupied, yet it was sold for what amounted to almost £85,000 per acre. The price achieved for plot 11 amounted to £140,000 per acre, and it stood to reason, therefore, that the £150,000 per acre that the £1.5 million price in the option agreement offered for the reference land must have been its market value at the time, as it had planning consent for the caravan park, and was lawfully occupied.[84]Mr Potter also reiterated the claimants’ view that at the time of signing the first section 106 Agreement, BA had no legal interest in the reference land. It was not in a position to fulfil the planning requirement that the caravan park permission should not be implemented, and therefore the conditions could not be fully complied with unless they acquired the land.[85]The evidence of these third party transactions indicates that BA paid significantly different prices (on a per acre basis) for the various areas of land and, as Mr Asher said, rightly in our view, it is clear that they appeared to be willing to pay a “full” price that would have reflected their needs, the benefits of reaching a negotiated settlement and the avoidance of the requirement to instigate CPO powers. Only in connection with one of those areas was it apparent that a very significant premium had been paid over market value (area 11), but the precise reasons and circumstances are not known other than that that area provided a key access point into the development. Indeed, the purchase was in 1989, well before the first section 106 agreement, and this renders it less comparable than the others.[86]There is nothing from the evidence that Mr Asher has provided to lead us to conclude that the circumstances relating to the reference land would be particularly different to those that applied to the other sites, other than, as Mr Potter said, the fact that BA would know it was required to comply with the condition relating to the termination of the caravan park. We consider that the Janton Farm transaction is helpful since the land was virtually adjacent to the reference land, although it was known that, if a CPO route became necessary, compensation for business loss in addition to land value might be payable, and this could have affected the price that was agreed. Furthermore, there was evidence of lower prices paid per acre on sites that may have had some development potential (hope value), and we are also mindful of the price paid for area 5 and the circumstances that applied there. Doing the best that we can on the evidence that has been provided, we conclude that a fair value for the reference land to BA in 1992 (when it was first indicated that CPO powers might be sought) was in the region of £55,000 per acre – say £600,000. It will be recalled that the existing use value of £426,000 at the valuation date of 6 June 2007 was not disputed. That was some 15 years on, and it is clear therefore that the value that we have determined the land had to BA in 1992 would have been significantly more than its market value for existing use at that time.[87]We do not consider, however, that the amount that we have identified as the value of the land in 1992 was lost as the result of the expressed intention on the part of the acquiring authority to use its compulsory powers (so as to bring section 9 into effect). The claimants did not realise this value because they were not prepared to negotiate on the offers that BA made from 1993 onwards to buy the land for £250,000 (subsequently raised to £330,000 in November 1997). If they had negotiated, we think it likely that agreement would have been reached at, or close to, the value that we have assessed in the previous paragraph.[88]This brings us to issue (d), whether the land had a value to BA as a special purchaser on the valuation date. Under the second section 106 agreement BA was obliged to use its reasonable endeavours to acquire the land, but that obligation had come to an end on 31 December 2000. Thereafter its obligation was to reimburse the council for any expenses it incurred in compulsorily acquiring the land. Its obligations to maintain the New Park Land and to permit its public use clearly could not be enforced by the council if they had not pursued compulsory acquisition. Nor did BA have any other incentive to acquire the land, since, if it failed to do so, it would not suffer any adverse consequences either under the planning permission or under the section 106 agreement, neither of which made its continued enjoyment of the offices dependent on the acquisition.[89]In the light of these conclusions issue (e), the application of the Pointe Gourde rule, does not arise. We should, however, have rejected Mr Langham’s submissions as to the identity of the scheme. The scheme is not, in our view, to be identified by reference to the 1992 planning permission but by reference to the essential public purpose underlying the acquisition, the reclamation of land to form the park. The BA offices were of great commercial importance to BA – to the extent, according to Mr Asher, that it was prepared to incur, at 2007 prices, construction costs of about £90m more than would have been justified by the market value that the offices would have had on completion. It would be surprising in the light of this if the Pointe Gourde rule could be invoked so as to enable BA to acquire the land that it needed at a price less than the value that it had for it as a special purchaser.[90]In Waters at paragraph 63 Lord Nicholls of Birkenhead set out “some pointers which may be useful” in the identification of the scheme for the purposes of Pointe Gourde . It is to be noted that under (1) Lord Nicholls said that “The principle is soundly based but it should be applied in a manner which achieves a fair and reasonable result.” We do not think that it would be a fair and reasonable result if BA were enabled to acquire the land at a discount to such value as it might have for it as a special purchaser looking to carry out a development to its own commercial advantage. At pointer (5) Lord Nicholls said that the scope of the intended works and their purpose would appear from the formal resolutions or documents of the acquiring authority but that this formulation should not be regarded as conclusive. In its resolution of 23 January 1998 the council said in relation to the four parcels of land that it resolved should be acquired compulsorily:
“This land is required by the Local Planning Authority for the purposes of the creation of a major new public open space and the protection of the amenity of the Harmondsworth Conservation area and some of the major listed buildings which it contains.”
It appears to us that this was indeed the underlying purpose.[91]Pointer (6) was that “When in doubt a scheme should be identified in narrower rather than broader terms”, and this supports the narrower definition that we favour. We see nothing in the other pointers that would suggest that the alternative possibility is to be preferred. So far from it being impossible in any practical sense to separate the offices from the park, as Mr Langham suggested, the separation was made in terms, as it had to be, in the second section 106 agreement, which defined the “New Park Land”.[92]Mr Langham contended that the case for disregarding the scheme, identified in terms of the 1992 planning permission, was as strong as, if not stronger than the case for doing so in Waters and that it would not be possible to disregard it without suggesting that Waters was wrongly decided. We disagree. The land in Waters was required as a nature reserve in order to enable the Cardiff Bay Barrage to go ahead. The barrage was a scheme of such public importance that statutory powers had been conferred to enable it to be carried out, including compulsory powers of acquisition that were given to the development corporation established under the Act. Those powers did not extend beyond Cardiff Bay, so that the land for the replacement nature reserve had to be acquired by another authority with compulsory purchase powers, the Welsh Development Agency. But the underlying public purpose, the achievement of the barrage scheme, manifestly embraced that land as well as the land required for the barrage itself. In the present case, by contrast, no powers of acquisition had been conferred on BA. The development of its offices was seen as beneficial (and this was one of the reasons for the planning permission being granted), but that is the case for much, if not most, commercial development. It was only made acceptable, however, by the promise of the park. Unlike the replacement nature reserve in Waters , however, the need for the park was not created by BA’s office proposal. It was a desirable scheme in its own right.[93]We come, finally, to issue (f), hope value. Mr Potter was of the view that a prospective purchaser would have paid the full potential development value of the land for uses ancillary to the third runway development straight away (although he produced no evidence to substantiate what that value might be), but Mr Asher said, rightly in our view, that any such potential value must be discounted for delay and risk. He undertook his valuation on two bases (summarised at paragraphs 48-51 above) and each produced the same result. He admitted that reliance upon evidence from directly comparable sites was subjective, but from a number of transactions was able to establish what he thought represented a realistic value per acre. To support this, he assessed the end value with planning consent from his own research, and then factored in a 15 year delay which, from the evidence available relating to the prospects of the third runway going ahead, he considered appropriate, if not even a little optimistic. Applying the relevant discount rate of 7% this produced just under £4 million which, he said, should be discounted by 75% for risk. We are satisfied that what, to Mr Potter, appeared to be an excessive discount was, in fact, appropriate given the circumstances, and we accept that Mr Asher’s assessment of £1,000,000 fairly represented the hope value at the valuation date.[94]We therefore determine compensation for the compulsory acquisition of the reference land in the sum of £1,000,000. The parties are invited to make submissions on costs, and a letter dealing with this accompanies this decision, which will become final when the question of costs has been determined. Dated 28 June 2010 George Bartlett QC, President Paul Francis FRICS

Cited in 2 later judgments