Michael Michael v Salford City Council

Compensation for compulsory acquisition is assessed under the statutory open-market rule. Where land has an extant, self-contained planning permission, the valuation should reflect that permission rather than a wider scheme which requires third-party land.

A residual valuation may be checked against comparable evidence, but its assumptions must be tested against the market. A claimant cannot recover a separate developer’s profit where the land’s market value already reflects its development potential and risk. Nor is an unsupported ransom or premium value recoverable.

Reasonable costs and losses caused by the acquisition may be allowed where properly proved, but claims must avoid duplication and satisfy causation and remoteness.

The claimant referred to the Tribunal the compensation payable after Salford City Council compulsorily acquired his derelict redevelopment site in Salford. The vesting date, and valuation date, was 28 April 2008.

The land was included in a wider neighbouring development permission, but the claimant also held a separate permission for a 12-apartment scheme wholly capable of implementation on the reference land. The parties advanced widely differing valuations. The claimant also claimed a 10% premium, lost development profit, basic loss and pre-reference costs.

The principal issues were the proper development basis and valuation method, whether the additional premium and profit claims were recoverable, and which ancillary costs had been proved.

1. The claim succeeded in part. Compensation was assessed at £321,702.61, plus statutory interest. The award comprised £280,000 for the land, £21,000 basic loss, and specified reasonable expenses.

2. Under section 5 rule (2) of the Land Compensation Act 1961, the statutory basis was the price obtainable on an open-market sale by a willing seller. The appropriate development assumption was the claimant’s separate 12-apartment permission. It was capable of implementation without third-party land. An apportionment of the neighbouring wider permission was therefore not the correct basis.

3. The Tribunal preferred a residual valuation, checked against available transactions. It assessed gross development value from nearby sales, adopted appropriate construction, finance and profit assumptions, and reached a residual land value of £280,000. Comparable evidence was useful as a check but could not be adjusted mechanically to produce a reliable land value.

4. The claimed 10% premium was rejected. The claimant had not established that adjoining development required the land or that any premium was justified. The separate claim for development profit was also rejected. Applying Ryde International plc v London Regional Transport [2004] EWCA Civ 232, the statutory market value already reflected both the prospective profit and the development risk. A further profit award under rule (6) would duplicate that value.

5. The Tribunal allowed basic loss and those pre-reference costs which were reasonably incurred and proved. It rejected unsupported or insufficiently particularised items, including loan interest. In the costs addendum, it held that the claimant was the successful party and was entitled to reasonable reference costs subject to the stated limitations; his conduct as an unrepresented litigant was not unreasonable.

not stated in the judgment.