Court of Appeal dismisses HS2 appeals on certificates of appropriate alternative development issue

Today in Secretary of State for Transport v Curzon Park Ltd, Quintain City Park Gate Birmingham Ltd, the Eastside Partnership  and others [2021] EWCA Civ 651 the Court of Appeal (The Senior President of Tribunals, Lewison and Moylan LJJ) dismissed an appeal by the Secretary of State against the decision of the Lands Chamber on a preliminary issue in 4 cases concerned with the question whether, in determining the planning assumptions for the assessment of compensation under s. 14 of the Land Compensation Act 1961, on an application for a certificate under s. 17, there ought to be taken into account other applications or grants of such certificates as if they were planning decisions or planning material considerations. The Lands Chamber held that they were not and that decision was upheld (whilst varying the answer to the preliminary issue) but the Court of Appeal also agreed with the Respondents that they were not relevant due to the application of the cancellation assumption in s. 14(5)(a) and in the context of s. 5A. The case concerned 4 sites in Birmingham compulsorily acquired for the construction of the proposed new HS2 station at Curzon Street. Lewison LJ gave the leading judgment whilst Sir Keith Lindblom, the Senior President, delivered a concurring judgment. Moylan LJ agreed with both. Lewison LJ held:

“47.      It is not merely that the applications for CAADs “would” not have been made, but that they could not have been made. An essential precondition for the making of such an application (namely a proposal for compulsory acquisition) did not exist in the “no scheme world”. It seems to me, therefore, that it is the inevitable consequence of the cancellation assumption that no CAAD applications could have been made. Second, I do not consider that giving effect to the assumption in this way means that the assumption in section 14 (5) (b) is superfluous. As Mr Elvin QC pointed out, in relation to many large scale proposals for regeneration the relevant authority may begin the process of site assembly long before any decision to resort to compulsory powers has been made, let alone before it has been made public; and hence long before the launch date. Merely to assume that the scheme had been cancelled on the launch date would not deal with such a case.

48.  In my judgment, the landowners’ point is well-founded. In my judgment the UT was wrong to reject it. I consider that the cancellation assumption requires it to be assumed that no CAAD applications on other sites have been made. It follows, therefore, that in considering an application for a CAAD on one particular site, applications for CAADs (or the issue of CAADs) on different sites must be disregarded.”

Further, the Court accepted the practical problems with the idea that a CAAD could be material in determining another CAAD application:

“62. Mr King’s preferred solution in a case like that would be for the local planning authority to consider all applications for CAADs together, and to certify in favour of the most suitable of the competing sites. There are, in my judgment, a number of difficulties with that solution. In the first place, as I have said, it requires the local planning authority to take into account matters that have happened after the valuation date applicable to each relevant interest. Second, since the local planning authority is obliged to issue its decision within two months after the application is made, and there is no limit within which the application itself must be made, it can hardly be supposed that Parliament intended the local planning authority to wait indefinitely until all possible applications for CAADs had been received. Moreover, as Mr Elvin QC submitted, some landowners may choose to apply for a CAAD; others may choose to have the compensation determined by (confidential) arbitration without applying for a CAAD; others may choose to have the question decided by the UT; while yet others may reach agreement with the acquiring authority. Third, the local planning authority is not required to advertise an application for a CAAD; and one landowner has no input into a decision affecting his neighbour. Mr King accepted that the sole purpose of a CAAD is to assist in the valuation of the land in respect of which it is given. If, therefore, a CAAD is given in relation to Site A in order to assess the value of Site A, I do not see it as unfair that the value of Site B is unaffected by it. As Mr Glover QC put it: “if the outcome of my neighbour’s application for a CAAD may affect the value of my land, I must be able to influence the decision.” The lack of any such procedure points strongly to the conclusion that applications for CAADs on other land should be ignored. Fourth, if the local planning authority is considering competing applications for planning permission in the real world, it will reach its decision based on matters known to it at the date of the decision. By contrast, in considering applications for CAADs, the local planning authority will consider matters as at each of the valuation dates, which are fixed by statute, and which may be long before the decision is made. Fifth, section 14 (2) (b) allows account to be taken of the prospect of development on “the relevant land or other land”. This allows for hope value on third party land. By contrast, section 14 (4), defining appropriate alternative development, is confined to considering development on “the relevant land alone or on the relevant land together with other land”. That makes it clear that other land is only to be considered if it is part of the same notional planning application as that on the relevant land. In all other respects (“otherwise”) the local planning authority may only take into account what was known to the market at the valuation date. Sixth, suppose that there are four competing landowners, one of whom is given a positive certificate by the local planning authority while the other three receive negative certificates. None of the three disappointed landowners is entitled to appeal under section 18 against the grant of the positive certificate to their competitor. For practical purposes, therefore, on Mr King’s approach that means that the local planning authority’s decision is unappealable. All these factors militate against that solution.

63.  Take a different situation, in which there are four landowners (as in the present case) but the acquiring authority only proposes to acquire land belonging to three of them. They apply for CAADs, and let it be supposed that a positive CAAD is granted to one of them, certifying that appropriate alternative development consists of building student accommodation. Now suppose that the landowner whose land is not to be acquired, applies for planning permission to build student accommodation. In the real world, that is the only application for planning permission to build student accommodation, and the demand for it (in the real world) can be demonstrated. I cannot see how the local planning authority would be justified in refusing planning permission because they had already granted a CAAD to an adjoining owner. The prior grant of the CAAD would, quite simply, not be a material consideration. Mr King, as I understood him, agreed. That, to my mind, shows that it is not possible to mix and match a planning permission on the one hand and a CAAD on the other. But if the prior grant of a CAAD would not have been a material consideration on a real application for planning permission, how can it be a material consideration on a hypothetical application for planning permission? I do not see the answer to that question.”

The Court also rejected the submission that the principle of equivalence required that they be taken into account to prevent landowners from being over-compensated and referred to the principles of statutory construction in cases such as Spirerose and the principle that new counter-factual assumptions should not be read into the statutory code. Emphasising the value to owner principle, Lewison LJ added:

“66. One of the fundamental difficulties in the Secretary of State’s reliance on the principle of equivalence is that, as Mr Pereira QC submitted, he cannot point to any individual landowner and say that that particular landowner has been overcompensated. The potential for overcompensation can only be the cumulative effect of the grant of all four CAADs, for hypothetical cumulative development which would not have been permitted in the real world.

67.  In the real world, if all four landowners had sold their land at the respective valuation dates without having first applied for planning permission, the market would no doubt have valued each parcel on the basis of hope value. It would be necessary for a purchaser to assess the likelihood of planning permission being granted for that particular parcel of land. The price paid would have reflected that assessment. In the real world more than one landowner could have had a reasonable expectation of the grant of planning permission for rationed development, even though only one of them would have actually achieved that. But what section 14 of the LCA does is to convert a reasonable expectation of planning permission into a certainty. It is not surprising that converting four reasonable expectations of planning permission into four certainties may have the cumulative effect of increasing the overall compensation payable to a level beyond that which would have been achieved in the real world. That, to my mind, is a clear encroachment on or modification of the principle of equivalence (as Mr King accepted), to which the courts are bound to give effect.”

Sir Keith Lindblom agreed and on the question of whether it should be assumed that a CAAD was equivalent to a planning consideration to be taken into account in other CAAD applications he said:

“82.      A lesson to be drawn from authority at the highest level in this area of the law is that the court and also the tribunal must refrain from creating, and introducing into the identification of “appropriate alternative development” at the valuation date, any counter-factual assumption not specified in the statute or necessarily implicit in that exercise. They must not venture into the territory of expanding or refining the statutory language. There is a distinction between, on the one hand, an appropriately purposive interpretation of the words used by Parliament in formulating the statutory provisions, and, on the other, a resort to “judicial legislation”, which reads into the statute provisions that are not there. The first approach is legitimate; the second is not.

83.  In Spirerose, conscious of the “principle of equivalence” and the underlying aim of “fair compensation”, the House of Lords unanimously and firmly rejected an approach in which perceived anomalies in the statutory code were seen as justifying the addition of non-statutory assumptions to the assessment. Their Lordships were wholly unattracted by the Court of Appeal’s attempt to overcome what it regarded as an unsatisfactory feature of the legislation, whose effect was, in its view, to produce an unfair outcome.”

An appeal with regard to costs under s. 17(10) of the Land Compensation Act 1961 was also dismissed. Neil King QC and Guy Williams represented the Secretary of State. David Elvin QC and Richard Moules represented the Second and Third Respondents (who acted as lead Respondents in the Tribunal and Court of Appeal). A copy of the judgment can be seen here.