Supreme Court rules on No Scheme Rule

The Supreme Court has considered the relationship between the Land Compensation Act 1961 ("the Act") and the Pointe Gourde principle (i.e. the no scheme rule) in the case of Homes and Communities Agency v JS Bloor (Wilmslow) Ltd.

When land is compulsory purchased and the compensation is calculated, any development value is an important part of any assessment. The Act provides that the value of the land is "the amount which the land if sold in the open market by a willing seller might expect to realise." However, this general principle is subject to a number of disregards including: any increase or diminution in value attributable to the actual or proposed development of land other than the land to be acquired should be disregarded (section 6) and any diminution in the value of the land being acquired attributable to the proposed compulsory purchase should be disregarded (section 9). Further, the Act includes various planning valuation assumptions for calculating compensation.

The Pointe Gourde principle provides that, when calculating compensation for the compulsory purchase of land, any increase or diminution in the value of the land attributable to the underlying scheme of the acquiring authority should be disregarded.

In the case of Homes and Communities Agency v JS Bloor (Wilmslow) Ltd, 420 acres of land were compulsory purchased for the development of the Kingsway Business Park ("the Development"). The compulsory purchase land included 26.85 acres of grazing land and the compensation attributable to this land was the question in dispute as the land had a long planning history, including allocations in local planning policy and previously refused applications for residential development.

The appellant argued that planning permission for residential development may have been granted if it wasn't for the Development and therefore the hope value for residential development should be included in the assessment for compensation. The authority held the compensation should be assessed on the existing use value only.

The Upper Tribunal held:

1. The statutory assumptions were to be applied to the relevant land only, i.e. the grazing land;
2. The statutory disregards were to be applied to the relevant land and the other land subject to the compulsory purchase order, i.e. the 420 acres; and
3. It is necessary to consider two parallel universes, the "cancellation universe" (the prospects of development of the grazing land going ahead if the Development went ahead but excluded the grazing land) and the "no KBP universe" (the prospects of development of the grazing land going ahead if the Development did not go ahead). The Tribunal assessed the compensation on the basis of the no KBP universe and decided there was a 50/50 chance that planning permission would be granted for residential development and calculated the compensation accordingly.

Following an appeal to the Court of Appeal, an appeal was made to the Supreme Court. The Supreme Court held the principle and the Act are difficult to apply as they each draw a separate distinction between the relevant land, the whole land being compulsory purchased and all land comprised in the scheme of development.

The Supreme Court reinstated the Upper Tribunal's decision and held:

1. Section 6 of the Act is a statutory but not exhaustive embodiment of the Point Gourde principle;
2. Although the statutory disregards apply to land other than the relevant land, the same approach should be applied to the relevant land;
3. The statutory assumptions were not exclusive and arguments can be made for prospective value under other provisions or the general law;
4. The Tribunal was entitled to have regard to the underlying planning policies, including the allocation in the development plan, except those relating to the Development. The Upper Tribunal's reasoning was described by the Supreme Court as exemplary;
5. The right to claim for potential development value is long-established; and
6. It has been long accepted that the application of the general law may produce a more favourable result for the claimant than the statutory planning assumptions.

It is hoped that the Neighbourhood Planning Bill if enacted will simplify the law governing the assessment of compensation for compulsory purchase.

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.