Transport for London (London Underground Limited) (Appellants) v Spirerose Limited (in administration) (Respondents)

Land compulsorily acquired under rule (2) of section 5 of the Land Compensation Act 1961 must be valued in the hypothetical open market. An unrealised prospect of planning permission is not converted into certainty merely because permission would probably have been granted. Unless an applicable statutory assumption requires otherwise, the market must value that prospect as hope value and discount it for uncertainty.

The civil balance of probabilities determines disputed historical facts. It does not remove uncertainty from a valuation. The Pointe Gourde no-scheme principle is a principle of statutory interpretation associated with value to the owner. It cannot create an additional assumption of planning permission outside the statutory code.

Transport for London (London Underground Limited) v Spirerose Limited (in administration) concerned compensation for a small printing-works site compulsorily acquired for the East London Line Extension. The owner unsuccessfully sought a certificate of appropriate alternative development under section 17 of the Land Compensation Act 1961. The relevant certificate date preceded a material change in planning policy.

The Lands Tribunal found that mixed-use planning permission had a good prospect of being granted by the valuation date. It nevertheless treated permission as certain and valued the land at £608,000, rather than the £400,000 representing hope value. The Court of Appeal dismissed the acquiring authority's appeal in [2008] EWCA Civ 1230.

The central question was whether a probable but uncertain grant of planning permission could be treated as certain when none of the statutory assumptions of permission applied.

1. Disposition. The House of Lords unanimously allowed the appeal and awarded compensation of £400,000 on the hope-value basis. Lord Collins of Mapesbury delivered the principal speech. Lord Walker of Gestingthorpe agreed fully and added reasons, particularly concerning the Pointe Gourde principle. Lord Mance and Lord Neuberger of Abbotsbury agreed with both speeches. Lord Scott of Foscote agreed with the core conclusion and reasoning.

2. Market valuation. Per Lord Collins, the governing requirements were that the land be valued in the open market, that scheme-caused depreciation be disregarded, and that its development potential be included. A prospect of planning permission remained an uncertain attribute of the land. The hypothetical market would discount the price to reflect the risk that permission might not be obtained. The proper valuation was therefore hope value, rather than the full value of land possessing permission.

3. Probability and valuation. Per Lord Scott, the balance of probabilities determines whether a disputed historical fact is proved. It does not transform an uncertain future or hypothetical event into a certainty for valuation purposes. Rule (2) of section 5 of the Land Compensation Act 1961 required the valuer to consider the attributes actually possessed by the land at the valuation date.

4. Statutory assumptions. Per Lord Collins and Lord Walker, Parliament had specified the circumstances in which planning permission must be assumed. A certificate under section 17, operating through section 15(5), could convert the prescribed planning conclusion into an assumed permission. None of those provisions applied. Section 14(3) preserved the owner's ability to obtain compensation for development potential, but did not require a non-statutory assumption of permission. The court could not correct a perceived anomaly by adding another assumption to the statutory code.

5. No-scheme principle. Per Lord Collins, with Lord Walker and Lord Neuberger agreeing, the principle associated with Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565 is a principle of statutory interpretation which explains and amplifies statutory value. It removes value changes attributable to the acquisition scheme. It does not authorise a court to characterise an uncertain planning prospect as a certain permission or to legislate by analogy with the express statutory assumptions.

1. House of Lords: The appeal was allowed unanimously. The land was valued at £400,000 on the hope-value basis, reversing the Court of Appeal.
2. Court of Appeal: In [2008] EWCA Civ 1230 , the court dismissed Transport for London's appeal and upheld valuation on the basis of assumed planning permission.
3. Lands Tribunal: The Tribunal treated the probable grant of planning permission as certain and assessed compensation at £608,000. It found an alternative hope value of £400,000.