Welford & Ors v EDF Energy Networks (LPN) Ltd

Compensation for a statutory electricity wayleave is assessed on the general principles governing compulsory acquisition. Market value will ordinarily reflect a proposed business use and its development potential. Profits from a business which does not exist at the relevant date are therefore usually too remote.

However, a disturbance claim may be available where the business is already in existence, investment in the intended land has been made, and work connected with that business has begun. In those circumstances the land may have a special value beyond its ordinary market value, even if trading from that land has not yet begun. A separate occupier’s business loss is not compensated by an award made to the freehold owners.

EDF obtained statutory wayleaves for underground cables crossing site A, land owned by the first and second respondents and occupied by their company. The cables prevented the construction and operation of a planned waste-transfer station.

The Lands Tribunal held that the company could claim disturbance compensation for profits lost through the delayed commencement of that business. It also awarded compensation for injurious affection, assessed by the diminution in the freehold value. EDF appealed only on remoteness, contending that the waste-transfer use had not begun at the relevant date and that the claimed profits were therefore irrecoverable.

The central issue was whether a business which existed and had received investment, but had not yet traded from the affected site, could support a loss-of-profits disturbance claim under paragraph 7 of Schedule 4 to the Electricity Act 1989.

1. Appeal dismissed. Thomas LJ, with whom Chadwick and Scott Baker LJJ agreed, held that the Lands Tribunal had been correct in law to reject EDF’s remoteness objection.

2. Compensation under paragraph 7 of Schedule 4 to the Electricity Act 1989 was to be assessed by the general principles applicable to compulsory acquisition. Those principles distinguish injurious affection, measured by the loss in land value, from disturbance, which may compensate a personal loss not reflected in that value.

3. Ordinarily, profits from a business merely contemplated for land not yet used for it are too remote. The market value of the land will generally reflect its development potential and enables the owner to acquire replacement land as part of the investment needed to start the business. Further payment for the hoped-for profit would not ordinarily be fair compensation.

4. That ordinary position did not govern the Tribunal’s findings. The waste-transfer business was found to be in existence. Substantial time and money had been devoted to fitting site A for the business, and planning permission and plans had been obtained. Once a business exists and investment and work connected with it have commenced on the intended land, the land may have a definite and ascertainable special value arising from that business. Disturbance loss, including lost profits, can then be recoverable although the intended use has not yet begun on the land.

5. The award for diminution in the value of the freehold could not compensate the company’s distinct loss of business profits, because the freehold award belonged to the individual owners. Further, the Tribunal had excluded any waste-transfer development premium from its valuation of the land.

6. Khan v Miah was not determinative because it concerned the formation of a partnership, not the compensability of disturbance on compulsory acquisition. Pastoral Finance Association Ltd v The Minister (NSW) did not assist: it concerned different legislation and land on which no work had been done to commence the proposed business.

7. The court also refused renewed permission to appeal on mitigation. The Tribunal’s conclusion that EDF had not proved an earlier failure to mitigate was a factual assessment and disclosed no error of law.

• Court of Appeal (Civil Division): EDF’s appeal on remoteness was dismissed in [2007] EWCA Civ 293. Renewed permission to appeal on reasonableness and mitigation was refused.
• Lands Tribunal: In LCA/30/2004, the Tribunal held that the loss-of-profits disturbance claim was not too remote, while assessing injurious affection by the diminution in the value of site A.
• High Court / arbitration reference: Proceedings concerning losses before the statutory wayleave was granted were compromised by an agreement referring the dispute to the Lands Tribunal on the same compensation principles.