Transport for London v Spirerose Ltd (In Administration)

Under the no-scheme rule, compulsory purchase compensation must be assessed in a world excluding value attributable to the underlying scheme. Where planning permission would probably have existed by the valuation date in that world, the permission is treated as a certainty and the land is valued at its full development value. It is not reduced to hope value merely because the permission was hypothetical.

Hope value remains appropriate where permission was possible but less than probable. The loss-of-chance approach in a claim for injurious affection of retained land does not govern the purchase-price assessment of acquired land. The statutory planning assumptions support consistency between the statutory and judicial versions of the rule.

Transport for London compulsorily acquired industrial premises for the East London Line Extension. The valuation date was 3 December 2001. The Lands Tribunal, in case ACQ/41/2005, found that mixed-use planning permission would have been granted in the no-scheme world and assessed compensation at £608,000. Transport for London argued that only hope value of £400,000 should be awarded.

The appeal concerned the correct application of the no-scheme rule and the relationship between hypothetical planning permission, the balance of probabilities and market-based hope value under the Land Compensation Act 1961. The central question was whether probable permission should be valued as a certainty or as a percentage chance.

1. Appeal dismissed. The Lands Tribunal’s determination was upheld. The tribunal had found, on the balance of probabilities, that mixed-use planning permission would have been in existence at the valuation date in the no-scheme world. That was a factual conclusion which the court was entitled to respect.
2. The statutory scheme provides useful guidance. Section 5(2) of the Land Compensation Act 1961 requires assessment by reference to an open-market sale. Section 14(3) confirms that the statutory planning assumptions are not exhaustive. A claimant may therefore establish that the land would have had enhanced value from planning permission, or the prospect of permission, outside the specific statutory assumptions.
3. Where the statutory conditions are satisfied, the legislation converts a finding that permission would probably have been granted into an assumption that permission would be granted. The same approach should, so far as possible, apply under the judicial no-scheme rule. It promotes consistency, simplifies valuation and avoids an anomalous result caused by the statutory date for a section 17 certificate falling in 1993 rather than at the 2001 valuation date.
4. Porter v Secretary of State for Transport, [1996] 3 All ER 693, was distinguishable. It concerned section 17 of the 1961 Act and compensation for injurious affection of retained land under section 7 of the 1965 Act. Those were different land interests and different statutory causes of action. A loss-of-chance approach may be appropriate where the assessment depends on a hypothetical third party’s future conduct, but it provides no precedent for valuing the purchase price of acquired land under section 5.
5. The cases in which assumed planning permissions had been upheld, including Jelson Ltd v Blaby DC, Melwood Units Ltd v Main Roads Commissioner and English Property Corp v Kingston LBC, supported valuation at full development value where permission would probably have been obtained. By contrast, hope value remains available where permission was merely possible and less than probable. Excluding such value would conflict with the principle of equivalence.
6. The court also relied on the approach to hypothetical events discussed in Gregg v Scott, [2005] 2 AC 176. The law does not offer one universally applicable solution. The relevant context, the date of assessment and the nature of the hypothetical decision must be considered. Here, the owner could reasonably be assumed to act in its own interests and the planning authority to act rationally and according to applicable planning policies.

The court noted that the statutory mismatch remained a matter for legislative reform, but it did not prevent the appeal being dismissed.

• Court of Appeal (Civil Division): appeal from the Lands Tribunal dismissed and the tribunal’s determination upheld, [2008] EWCA Civ 1230 .
• Lands Tribunal: determined compensation on the basis that mixed-use planning permission would have been granted at the valuation date, assessing £608,000, case ACQ/41/2005.