Waters & Ors v Welsh Development Agency

This appeal concerned the correct basis for assessing compensation for compulsory acquisition of land taken to form part of a compensatory nature reserve associated with the Cardiff Bay barrage project. The House restated and applied the long-established "value to the owner" principle and the related Pointe Gourde ("no-scheme") rule: compensation is market value as between a willing seller and a willing buyer but excludes any enhancement in value that is entirely due to the scheme underlying the acquisition. The court examined the scope of rule 3 of section 5 of the Land Compensation Act 1961 and section 6 (and Schedule 1) codifying certain disregards, and held that where land is acquired as an integral part of a larger project the increased value attributable to the acquiring authority's need generated by that project must be disregarded.

The House concluded that the acquisition of the claimants' land, once selected as part of the intended compensatory site, formed an integral part of the barrage project and that any value attributable solely to the need to provide compensatory wetlands for the barrage must be left out of account. The appeal was dismissed.

The claimants owned some 225 acres of low-lying farmland on the Severn estuary, purchased compulsorily by the Land Authority for Wales to form part of a 1,000-acre Gwent Levels Wetlands Reserve. The reserve was developed to provide compensatory habitat in connection with the Cardiff Bay barrage, which had damaged inter-tidal mudflats designated a site of special scientific interest. At the valuation date (25 February 1998) the claimants advanced three valuation measures: agricultural value, value as a nature reserve (assumed planning permission), and a higher "ransom" or "particular" value said to reflect the land's indispensable role in meeting the barrage project's compensatory obligations.

The Lands Tribunal directed two preliminary issues: (1) whether rule 3 of section 5 of the Land Compensation Act 1961 applied (disregard of special suitability where the purpose can be pursued only by statutory powers or where there is no market apart from compulsory purchasers); and (2) whether the relevant "scheme" for Pointe Gourde purposes was the nature reserve alone or the Cardiff Bay barrage, and whether the increase in value due to the need to acquire land as a palliative for the barrage must be discounted. The President answered issue (1) in favour of the claimants (rule 3 not applying on his findings) and issue (2) in favour of the acquiring authority (the barrage was the scheme and the increased value must be disregarded). The Court of Appeal dismissed the claimants' appeal and their appeal to the House followed.

The House reviewed the historical development from the Lands Clauses Consolidation Act 1845 through the Acquisition of Land (Assessment of Compensation) Act 1919 to the Land Compensation Act 1961, explaining the interaction between the "value to the owner" rule, the Indian case (Vyricherla) and the Pointe Gourde principle. The Lords emphasised that identifying the ambit of the "scheme" is a judgmental exercise, guided by the overall purpose of achieving fair compensation but not more. They provided practical pointers for tribunals on defining the scheme's extent and on when to construe the scheme narrowly. Applying these principles, the House held that the land, once chosen for the compensatory reserve and acquired to meet a need generated by the barrage project, formed an integral part of the barrage scheme. Therefore any enhancement in value attributable solely to that need had to be disregarded.

• Nature of the claim: claim for compensation for compulsory acquisition of land; challenge to valuation basis, including alleged ransom/key value tied to the Cardiff Bay barrage.
• Issues framed: applicability of rule 3 of section 5 of the Land Compensation Act 1961; identification of the "scheme" for Pointe Gourde/no-scheme purposes; whether increases in value due solely to the barrage-linked need are to be disregarded.
• Court’s reasoning: restated 'value to the owner' principle; explained that potentiality is part of market value unless the enhancement is solely due to the scheme of which the acquisition is an integral part; concluded the compensatory reserve was integral to the barrage project and that scheme-related enhancement must be disregarded; offered guidance on identifying the scheme and urged legislative reform of the statutory code.

Appeal dismissed. The House held that (1) the governing principles are the 'value to the owner' rule and the Pointe Gourde ('no-scheme') rule; (2) the ambit of a "scheme" is a matter of evaluative judgment guided by achieving fair compensation and, on the facts, the acquisition of the claimants' land as part of the Gwent Levels Wetlands Reserve was an integral part of the Cardiff Bay barrage project; and (3) any increase in value attributable solely to the authority's need to acquire land to compensate for environmental effects of the barrage must be disregarded when assessing compensation.

Lands Tribunal (President George Bartlett QC) preliminary rulings [2001] 1 EGLR 185; Court of Appeal dismissed the claim [2002] EWCA Civ 924; appeal to House of Lords from Court of Appeal, judgment [2004] UKHL 19.