Earlier this year, the High Court dismissed a claim which challenged the validity of a compulsory purchase order (CPO) made by the London Borough of Newham Council under the Acquisition of Land Act 1981.
In this article we provide a background to the case of Saravanamuthu v Secretary of State for Communities, Housing and Local Government & Anor case and explored the High Court's judgment, outlining why the claim was dismissed.
The CPO was concerned with James Riley Point in Stratford – a 132 flat 1960s tower block that the council proposed to refurbish as part of its wider regeneration of the Carpenters Estate. The council had attempted to negotiate possession of the leasehold flats to avoid using compulsory purchase powers, but were unable to reach an agreement. At the time the CPO was made, the claimant was the sole remaining leaseholder in possession – although she and her family had since ceased to be in actual occupation.
The claimant objected to the making of the CPO, and an inspector was appointed to hold a public local inquiry. The claimant’s objections included:
The inspector confirmed the CPO, rejecting the claimant’s grounds of challenge.
In the High Court, the claimant challenged the validity of the CPO on three main grounds:
The High Court rejected all three grounds and dismissed the claim.
The scheme was to be funded as a standalone project through the London Borough of Newham Council’s capital programme. The principal source of funds would be a loan from the Public Works Loan Board borrowed via their housing revenue account. Although the council would seek to recover the costs of the project through the wider redevelopment of the Carpenters Estate, the project was not intended to be financially viable in the sense that it would return a positive return on investment and the loan would not be repaid as a result of the regeneration.
The claimant argued at the inquiry that the project required independent assessment and scrutiny of the costs budget approved by the council’s cabinet, and that no reasonable conclusion could be drawn about the funding and delivery of the scheme in the absence of this evidence. The inspector had considered and rejected this argument.
The court found that this conclusion was not unreasonable – identifying that the CPO guidance makes no requirement for independent scrutiny or verification of funding arrangements. Instead, the requirement was simply that the acquiring authority indicate their funding intentions and evidence the source of funds. This bar had been met by the council. The court accepted that there may be scenarios where the information provided by an acquiring authority is so questionable that independent scrutiny is called for. However, it considered it very difficult to conceive of a case in which an inspector will fail to identify this fact – as a consideration of the acquiring authority’s adherence to the CPO guidance is the very reason for the public inquiry.
This demonstrates that the court will be reluctant to entertain wholesale re-evaluations of acquiring authorities’ funding arrangements, as the claimant sought to do in this case. Although the possibility that the acquiring authority failed to properly demonstrate viable funding was accepted as a live concern, the inspector’s role is to interrogate such matters. To make the finding the claimant sought, the court would need to accept that an Inspector failed to engage with the question in any meaningful way – which, as stated by the court in this case, would be “a rare case indeed.”
The court also distinguished the case from a recent decision against confirming a Dagenham CPO on the grounds of financial viability. The Dagenham scheme was intended to be commercially viable, whereas the council in this case had always acknowledged that it’s scheme at the scheme was not intended to produce a positive return on investment.
This distinction is important, as it makes clear that a different approach is required for commercial privately funded projects intended to produce a return on investment. In the Dagenham decision, the acquiring authority’s private development partner was unlikely to continue to fund the project where its viability was uncertain. The relevant consideration arising from CPO guidance is not financial viability in the sense that a return in investment will be secured, but rather that funding can be demonstrated to the extent that the scheme is likely to be delivered. A return in investment is therefore relevant to the extent that the failure of this will result in the project not being delivered, as was the case in the Dagenham decision.
The court made clear that the requirement to make reasonable efforts to acquire by agreement was for the acquiring authority to attempt negotiation – not to insist upon its successful outcome. If it were otherwise, there would never be cases in which the acquiring authority was permitted to proceed to compulsory purchase powers when negotiation fails.
The court took the view that what will count as a reasonable effort to acquire the land and rights for schemes by agreement will vary from case to case. Indeed, the claimant’s submissions in this case were very specific to the facts. They amounted to allegations that the inspector failed to account for the long period of uncertainty over the redevelopment of the property; allegations of mismanagement by the London Borough of Newham Council and an offer which was made to the claimant for an uplift payment which expired due to a loss of Greater London Authority grant funding.
The court emphasised that it's for the inspector to assess whether the acquiring authority took the necessary action to meet that bar under CPO guidance – subject only to review by the court on principles of Wednesbury unreasonableness. The court ultimately found that the Inspector was reasonably entitled to come to the conclusion that a lack of engagement on the part of the council was not the reason the parties were unable to come to an agreement on the acquisition of the property. Rather, as explained by the court, the inspector’s conclusion was that the council had good reason for acting in the way it did – and that it had not acted unreasonably.
The court had rehearsed above the unsuccessful negotiations between the parties for the acquisition of the property by agreement. They were therefore unconvinced by the final ground – which sought to argue that the claimant’s offer of a license for the purposes of the works made compulsory purchase powers unnecessary. Having previously endorsed the Inspectors finding that the London Borough of Newham Council did not fail to take reasonable steps in negotiation, the court’s view was that this offer by the claimant’s solicitor of a licence “subject to agreement being reached on the protections contained within the draft agreement” was, “in substance, no more than a statement that the Claimant and her family remained willing to negotiate.”
Because of the different between them, the court found there was no realistic prospect that they would reach agreement on the terms of a license. The use of compulsory purchase powers was thus necessary, and the third ground also failed.
To read about the case in full, click here. For further information, please contact our planning & infrastructure consenting team.
