National Grid Electricity Transmission Plc v Arnold White Estates Ltd

Compensation for the grant of a statutory wayleave under paragraph 7(1) of Schedule 4 to the Electricity Act 1989 is not confined to diminution in the land’s open-market value. It may include the loss of a conditional land-sale contract caused by the wayleave, provided the loss is suffered in the claimant’s capacity as owner or occupier. The assessment follows the principle of equivalence and is based on the value of the land to the owner at the grant date. A genuine contract may therefore establish the relevant value, even where it exceeds or falls below open-market value. Any residual value retained under a time-limited wayleave must be brought into account. Tribunals should scrutinise contracts for collusion or artificial inflation.

Arnold White Estates Limited owned development land crossed by an overhead power line. It entered into a conditional contract to sell the relevant strip for a price which, by the time a statutory wayleave was granted, substantially exceeded its open-market development value. The wayleave caused the conditional contract to fall away.

The Upper Tribunal (Lands Chamber), in LCA582011, awarded compensation under paragraph 7(1) of Schedule 4 to the Electricity Act 1989 by reference to the indexed contract price, because the land subject to the wayleave had only nominal residual value. National Grid appealed, contending that compensation should be measured by open-market development value. The central issue was whether the contractual value or market value provided the proper measure of compensation.

Briggs LJ gave the leading judgment. The Master of the Rolls and Sir Stanley Burnton agreed. The appeal was dismissed.

1. Statutory distinction. Schedule 4 makes bespoke provision for wayleaves. Compensation under paragraph 7(1) is compensation in respect of the grant. Paragraph 7(2) concerns damage or disturbance caused by exercising rights under the wayleave. The compulsory-purchase categories of compensation therefore provide no basis for restricting paragraph 7(1). A wayleave does not compulsorily acquire land or an existing interest in land.
2. Scope of paragraph 7(1). The provision is expressed in general terms. The relevant limitation is that the loss must be suffered in the claimant’s capacity as owner or occupier, rather than in an unrelated capacity. The statutory meaning of land includes interests in land. Accordingly, the loss of a conditional contractual right to sale proceeds may be compensable where the contract falls away because of the wayleave.
3. Valuation principle. The principle of equivalence requires fair and full compensation, but no more than fair compensation. The valuation date is the date of the wayleave grant. Compensation is based on the value to the owner, which may be higher or lower than open-market value. The principle applies equally to statutory wayleaves.
4. Application. The wayleave prevented the owner from realising the development value of the strip. It made no difference that the owner had already crystallised that value through a conditional contract. Since the residual value of the land subject to the wayleave was nominal, the indexed contract price was the appropriate measure. The loss was caused by the grant and was not too remote.
5. Safeguard against abuse. Tribunals should be alert to collusive or artificial contracts designed to inflate compensation. The contract here was negotiated at arm’s length for genuine commercial reasons and was not a sham.

• Court of Appeal (Civil Division) — Dismissed National Grid’s appeal and upheld the compensation award.
• Upper Tribunal (Lands Chamber) — In LCA582011, awarded compensation by reference to the indexed price under the conditional sale contract.