Compensation under the Compulsory Purchase Act where Compulsory Purchase Powers have expired and have never been exercised
Thursday, 25th February 2016
Case Comment: Bourne Leisure (Hopton) Limited v Great Yarmouth Port Authority  UKUT 0044 (LC)
On 22 February 2016, the Upper Tribunal (Lands Chamber) handed down its decision in relation to five preliminary issues in this case, which involves a £15 million claim for compensation for injurious affection pursuant to s10 of the Compulsory Purchase Act 1965 ("CPA").
The claimant is the owner of Hopton Holiday Village which is situated near a beach known as Hopton Beach. The respondent is the harbour authority for Great Yarmouth. Between 2007 and 2008 an outer harbour was constructed pursuant to the Great Yarmouth Outer Harbour Act 1986 (as amended). The claimant alleges that the construction of the outer harbour has resulted in a change in the tidal flow, causing increased erosion. This in turn has led to the failure of part of the sea defences on Hopton Beach and the partial collapse of a cliff (including part of the claimant's land). The claim for compensation includes the cost of carrying out remedial and improvement works, operational losses, losses associated with the maintenance and monitoring of the works and diminution in the value of the claimant's land.
The preliminary issues to be determined included, whether, in the circumstances, a claim can be brought under section 10 CPA; if a claim can be made, whether on the facts asserted a claim arises in principle, the measure of compensation and issues related to limitation.
In principle, can a claim be brought under section 10 CPA where the Compulsory Purchase powers have expired and have never been exercised?
Part 1 of the CPA, is incorporated into the Great Yarmouth Outer Harbour Act 1986 ("the 1986 Act") by section 4 of that Act. The 1986 Act was amended by the Great Yarmouth Outer Harbour Revision Order 2005 ("the 2005 HRO"), which also made further provision about the construction of the Outer Harbour. The powers of compulsory purchase contained within the 1986 Act, were time limited and expired in 1991 in respect of part of the works authorised by the 1986 Act and 1996 in respect of others. Therefore, not only was no land compulsorily acquired, at the time that relevant land was acquired by agreement (in 2007) and the construction works were subsequently carried out, the powers of compulsory purchase had ceased to be exercisable over a decade before.
The detailed reasoning in the case is too complex to explain in this short article. However, Judge Robinson held that:
- The claimant is entitled to bring a claim for compensation under Section 10 CPA in respect of any land or an interest in land which is injuriously affected by execution of the outer harbour works. In reaching this conclusion Judge Robinson held that:
a. The application of section 10 CPA does not depend upon any compulsory purchase powers having been exercised at all (this is clear from the case of Kirby School Board for Harrogate , where all the relevant land was acquired by agreement).
b. The fact that the actual powers of compulsory purchase had expired before the development land was acquired and the works were constructed did not destroy the link between a power of compulsory purchase and the power to construct works.
In respect of (b) above, the respondent is likely to consider this to be a harsh conclusion and may choose to challenge it in due course. At the time of the acquisition of the land and subsequent development, there was no current threat of compulsory purchase (which can be used to encourage affected land owners to sell land by agreement) and the powers had ceased to be exercisable over a decade before. If this position remains unchallenged, it will be important for those applying for Harbour Revision Orders (or similar statutory instruments) to authorise development to consider whether any expired compulsory purchase provisions in earlier relevant legislation need to be repealed as part of the process. Where a development is simply being commenced under original statutory powers after expiration of compulsory purchase powers, careful consideration should be given as to whether to apply for a Harbour Revision Order (or other relevant statutory instrument) to repeal them, prior to acquisition of the relevant land and the subsequent construction of works.
On the facts, does a claim arise in principle?
It is settled law that a claim for compensation could only arise if, the claimant would have a claim in nuisance, but for the statutory authority for construction of the outer harbour. In this case the claim in nuisance was made on the basis that the construction of the outer harbour has caused (by altering the coastal drift with consequent erosion to Hopton beach) direct physical injury to the claimant's land and materially interfered with the enjoyment of easements.
Judge Robinson held, that the pleaded claim would give rise to an action in nuisance, but for the statutory authority granted by the 1986 Act (as amended). Whether the pleaded claim is substantiated (i.e. foreseeability and causation) on the facts of the case, was a matter for the full hearing.
Is compensation under section 10 CPA limited to the diminution in open market value of the land or interest in land?
The claim for compensation includes the cost of carrying out remedial and improvement works (including sea defence works), operational losses, losses associated with the maintenance and monitoring of the works and diminution in the value of the claimant's land.
There was no dispute between the parties that personal losses, business or otherwise, are not recoverable under section 10 CPA. However, Judge Robinson restated that business losses which affect land value are recoverable (as held in Argyle Motors (Birkenhead) Ltd v Birkenhead Corporation  AC 99 HL) and stated that in her judgment "there is no reason why, in an appropriate case, the compensation payable under s10 CPA should not include the cost of remedial works" (para 98 judgment), before going on to caution that:
"it must always be remembered that the landowner is entitled to no more than fair and reasonable compensation and is under an obligation to mitigate his loss. Whether the cost of remedial works exceeds the diminution in value of the land the latter may be the proper measure of compensation" (para 101 judgment).
In respect of whether sea defence works to protect against future potential damage were properly recoverable, Judge Robinson stated:
"If it is reasonably foreseeable that the effects of the outer harbour would continue to cause damage to the claimant's land in the future and that the sea defence works were reasonably necessary to protect against such future loss then in my judgment there is no reason in principle why the cost of those works is not recoverable as compensation, subject to the claimant being able to demonstrate that it acted reasonably to mitigate such future loss." (para 106 judgment).
Judge Robinson held that that claimant's right to compensation arose, if at all, upon proof of physical damage to the claimant's land or substantial interference with an easement:
- A claim could not arise under section 10 CPA unless and until a claim would have arisen in nuisance, but for the statutory authority.
- A claim in nuisance, in this case, would not arise until direct physical damage is suffered or there is substantial interference with enjoyment of the easement.
- Therefore a claim could not be brought, following execution of the works, until such works caused something to actually affect the claimant's land, be it encroachment, physical injury or interference with quiet enjoyment.
As such, the claimant's claim was not statute barred (out of time) on the basis that the relevant construction works, (alleged to have resulted in a change in the tidal flow, causing increased erosion) had been completed more than 6 years before the reference to the Tribunal was issued.
It will be interesting to see how this case progresses as at full hearing and whether the respondent, in due course, chooses to challenge any of Judge Robinson's findings.
A full copy of the judgment can be accessed here.
Our experienced planning team is able to advise on all aspects of Compulsory Purchase, Harbour Revision Orders and other development consents. Please contact us, if you would like to discuss any of the above or the points raised in this case.