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Thenoschemeprincipleandrules:

S.6AoftheNeighbourhoodPlanningAct2017

DavidElvinQC

Introduction

1. Thelawofcompensationforcompulsorypurchaseisfrequentlycomplexandoftenlacking

inclarity.Ofthemanycomplexities,fewhaveprovedasdifficulttooperateandasthe“no

scheme world” hypothesis. Simple in conception, it has proved remarkably tricky in its

application. The Government has at long last thought to tackle this, though at some

remove fromtheLawCommission’s thoroughconsiderationof the issue.Thesechanges,

madeintheNeighbourhoodPlanningAct2017,mainlycameintoforceon22September

2017(thatdateofwritingofthispaper).

2. TheLawCommission(initsconsultationpaperandfinalreportswhichGovernmentlargely

ignored at the time1) wrote in its Consultation Paper Towards a Compulsory Purchase

Code(1):Compensation(2002,ConsultationPaperNo165)2:

“It is an established principle of compensation law that compensation “cannot include anincrease in valuewhich is entirelydue to the schemeunderlying theacquisition.” This rule,followingthenameofthecasefromwhichthisformulationistaken,isoftencalledthe“PointeGourderule”3.Therulerequiresthedisregardofdecreasesinvaluecausedbythescheme,aswellasincreasesinvalue.Inotherwords,thevaluemustbeassessed“uponaconsiderationofthestateofaffairswhichwouldhaveexisted,iftherehadbeennoschemeofacquisition”.

Althoughtherulewasdevelopedbythecourts,itseffecthasbeenreproduced,orreflected,inanumberofprovisionsnowcontainedintheLandCompensationAct1961.Theyaresections5(3) (“special suitability”); section 6 (disregard of changes in value due to actual andprospective development); section 9 (depreciation due to prospect of acquisition); sections14-16 (planning assumptions); and section 17ff (certificates of appropriate alternativedevelopment).…

Theconcept

1www.lawcom.gov.uk/project/towards-a-compulsory-purchase-code/.Notethattheprovisioninthe2017Actdrawtosome extent on the draft Code drafted by the Law Commission though see the comments in the Government’sResponsetoConsultation.2SeetheCPSection6.3 Pointe Gourde Quarrying & Transport Co v. Sub-Intendent of Crown Lands [1947] AC 565 at 572, per LordMacDermott.SeealsoVyricherlaNarayanaGajapatirajuv.RevenueDivisionalOfficer,Vizagapatam[1939]AC302.

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The concept is reasonably simple. For example, a railway scheme may cause blight andreducedlandvalueswhileitisbeingplannedandconstructed.Conversely,theprospectofitsuseonce completedwill give the landenhancedvalue to thepromoter (as compared to itsexistingusevalue),andmayalsoresultinhigherlandvaluesinthearea,forexamplenearnewstations.Theno-schemerulesaysthat landacquiredbytheauthority fortheprojectshouldbe bought at values which reflect neither the blight nor the enhancement. The rule wasoriginally developed by the Courts in the 19th century, as part of the principle thatcompensation should be based on the “value to the owner”, rather than its value for thepromoter’sscheme.Thiswasrelativelyeasytoapply in theearlycaseswherethe increasedvaluedependedontheuseofstatutorypowersonlyavailabletothepromoter,andwheretheenablingstatuteusuallydefinedthescopeoftheproject.However,thissimplemodelwasnotreadily adapted to themore complex schemes, andmore general statutory powers, whichbecamethenorminthelastcentury,particularlyfollowingtheradicalreformoftheplanningsystemin1947.After150yearsofevolution,thepresentlawisacomplexmixtureofstatutoryandcommonlawrules,withmanyunresolvedconflictsandinconsistencies.”

3. TheReportTowardsACompulsoryPurchaseCode:(1)Compensation(LawComNo.286,December2003)(“LCR”)describedtheissueatpara.7.1as-

“themostdifficultsubjectwehavehadtoaddressinthisproject:thecomplexandintractableproblemsarisingfromthesocalledPointeGourde(or“no-scheme”)rule.”

See also, among many case references to the issues, Lord Nicholls inWaters v. Welsh

Development Agency [2004] 1 WLR 1304 and the Tribunal in Pentrehobyn Trustees v.

NationalAssemblyforWales[2003]RVR140.

4. InWaters, LordNicholls reviewed theauthorities in the contextof theprovisionsof the1961Act(whicharetoberepealedbythe2017Act)andexplainedthepositionasfollows:

“17Onanarm'slengthsaleintheopenmarketasellerwouldnormallyexpecttorealiseanyenhanced value possessed by the land because its locationmakes it specially valuable to aparticularbuyeror classofbuyers. The landmighthaveparticular attraction, and thereforevalue, to an adjoining landowner. Or the landmight be particularly adaptable for a certainpurpose.…

18Inprinciple,subjecttoonequalification,thisapproachisequallyapplicablewhenassessingvalue for the purposes of compensation. It is this qualification which has given rise todifficulty.Thequalificationisthatenhancementinthevalueofthelandattributablesolelytotheparticularpurposeforwhichitisbeingcompulsorilyacquired,andanacquiringauthority'spressingneedofthelandforthatpurpose,aretobedisregarded....Whengrantingapowerto acquire land compulsorily for a particular purpose Parliament cannot have intendedtherebyto increasethevalueof thesubject land.Parliamentcannothave intendedthattheacquiring authority should pay as compensation a larger amount than the owner couldreasonablyhaveobtainedforhislandintheabsenceofthepower…

19Thisapproachisencapsulatedinthetime-hallowedpithy,ifimprecise,phrasethatvalueinthiscontextmeansvaluetotheowner,notvaluetothepurchaser.InStebbingvMetropolitanBoardofWorks(1870)LR6QB37,42,thegraveyardscase,CockburnCJsaid:

“When Parliament gives compulsory powers, and provides that compensation shall bemade to the person from whom property is taken, for the loss that he sustains, it isintendedthatheshallbecompensatedtotheextentofhisloss;andthathislossshallbetestedbywhatwas the valueof the thing tohim, not bywhatwill be its value to thepersonsacquiringit.”

…21 Drawing a distinction between value to the owner and value to the purchasermakes it

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necessarytodistinguishtheonefromtheother. It isnecessarytoseparatefromthemarketvalueof landanyenhancement invalueattributablesolely to thepresenceof theacquiringauthority in themarket as a purchaser of the land in exercise of its statutory powers. It isimportanttorecognisethat,forthispurpose,itisnottheexistenceofapowerofcompulsoryacquisitionwhich increases thevalueof land.What is relevant,because thismayaffect thevalue of the land, is the use the acquiring authority proposes to make of the land it isacquiring. Accordingly, in identifying any enhanced value which must be disregarded it isalwaysnecessarytolookbeyondthemereexistenceofthepowerofcompulsorypurchase.Itisnecessarytoidentifytheuseproposedtobemadeofthelandundertheschemeforwhichthelandisbeingtaken.Hencetheintroductionoftheconceptofthe“scheme”orequivalentexpressionssuchasprojectorundertaking.”

“36…Potentiality ispartofthemarketvalueof landandmustbetakenintoaccountwhenassessingcompensation.Potentialityshouldbevaluedeveniftheonlylikelypurchaseristheacquiring authority itself. Thatwas decided in the Indian case4. Butmarket value does notincludeenhancedvalueattributablesolelytotheparticularuseproposedtobemadeofthelandunderaschemeofwhichcompulsoryacquisitionofthesubject landisanintegralpart.Thiselementofvalueisnotpartofmarketvaluebecauseitisnotanelementtheownercouldhaverealisedintheopenmarket.Thatisthetraditionalview,whichhaslongbeenacteduponin this country. It is much too late now for judicial interpretation to set the law on analtogether different course, even if that were otherwise appropriate. Potentiality is to beassessed and valued as matters stood before the particular scheme, of which the subjectland'sacquisitionispart,cameintobeing.”

5. Lord Nicholls observed that the no-scheme principle based on “value to owner”encompassesatcommonlawmorethanthevalueofthesubjectlanditself:

“41…The“valuetotheowner”principleisapttoembraceenhancedvaluearisingfromtheproposed use of the subject land and also enhanced value arising from the use made orproposed tobemadeofother landalsobeingacquired.ThePointeGourde caseconcernedenhanced value arising from the proposed use of other land. But, not surprisingly, LordMacDermott'smuch quoted observation in thePointeGourde case refers to the applicableprinciple in termscoveringbothsourcesofenhancedvalue.LordMacDermottsaid, inquitegeneral terms, that“compensationfor thecompulsoryacquisitionof landcannot includeanincrease in value which is entirely due to the scheme underlying the acquisition”: PointeGourdeQuarryingandTransportCoLtdvSub-IntendentofCrownLands[1947]AC565,572.

42Inconsequence,thephrase“thePointeGourdeprinciple”isoftenusedasacompendiousreferencecoveringbothtypesofcases.Thiscanbeconfusing.Itisimportanttokeepinmindthat,despiteitslatearrivalonthescene,theexpression“thePointeGourdeprinciple”isnotareferencetoaprincipleseparateanddistinctfromthe“valuetotheowner”principle.Itisnomore than the name given to one aspect of the long established “value to the owner”principle.…

43NotoriouslythepracticaldifficultywiththePointeGourdeprinciple lies in identifyingtheareaofthe“scheme”inquestion…”

6. LordNichollsheldthatthestatutorycoderelatingtotheno-schemeprinciplesins.6andSchedule1tothe1961Actwasnotexhaustive:

“51Thefirstandmostobviousoddityofthisenactmentisthatitmakesnoprovisionregardingvalue attributable to the prospect of development of the subject land itself. It is franklyimpossibletobelievethatParliamentintendedthatenhancementofvalueattributabletotheprospectofdevelopmentofassociated landshouldbedisregardedbutnotenhancement invalue attributable to the prospect of development of the subject land itself. The statutory

4RajaVyricherlaNarayanaGajapatirajuvRevenueDivisionalOfficer,Vizagapatam[1939]AC302(PC).

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assumptionsregardingplanningpermissionsinrespectofthesubjectland,setoutinsections14 to16,donotprovideanadequateexplanation for thisdifference in treatment.Planningpermissionisonething,theprospectofdevelopmentisanother.

52 InViscountCamrosevBasingstokeCorpn[1966]1WLR1100,theCourtofAppealrightlydeclinedtoacceptthatParliamentintendedthisresult.Apossibleexplanationfortheabsenceofastatutorydisregardinrespectofenhancedvalueattributabletoproposeddevelopmentofthe subject land itself is that, as already noted, in such cases the difficulties inherent inidentifyingtheambitoftheschemedonotarise.Thisbeingso,theexclusionofthesecasesfromthescopeofthestatutorydisregardisnottobeconstruedasimplicitlychangingthelaw.Ratheritistherecognitionofawellknownsituationforwhichlegislationwasnotnecessary:see Russell LJ, at p 1111. Accordingly, in these cases the Pointe Gourde principle shouldcontinuetobeapplied.

53Hadthematterrestedtheresection6mightwellhavebeenopentotheinterpretationthatinallotherrespectsthenewstatutorycodewasexhaustive.Butthereisatleastonefurthergaping lacuna in thecode.This is illustratedbyWilsonvLiverpoolCorpn [1971]1WLR302,where an authority acquired some of the land needed for a scheme of development byagreementandmadeacompulsorypurchaseorderinrespectoftheremainder.Enhancementinvalueofthesubjectlandattributabletothedevelopmentofthelandboughtbyagreementwouldbeoutsidecase1.Hereagain,thatcannothavebeenintendedbyParliament.

54Thecourts therefore found themselvesdriven toconclude that thestatutorycode isnotexhaustive and that thePointeGourde principle still applies. This conclusion is open to thecriticismthatinmanyinstancesthismakesthestatutoryprovisionsotiose.Thisisso,butthisislessrepugnantasaninterpretationoftheActthanthealternative.”

7. TheLawCommissionsummarisedcriticismsofs.6ofthe1961Act:

D.58 … section 6 (with the First Schedule) has been subject to particular criticism: theconvolutedwordingwasdifficulttointerpret;thesectionappliedto“otherland”,butmadenoequivalentprovisionforthesubjectland;andthestatutefailedtoindicatewhetherornotthenew ruleswere intendedas a completeno-schemecode,or simply as a supplement to thejudicialrule.”

8. Other issueshavearisen, summarised (at leastasat2003) in LCRat§7.13, including theextenttowhichtheno-schemeassumptionleadstotheneedtoreconstructtheplanninghistoryoftheacquiredland:seethediscussionofthe“cancellationassumption”ands.17of the 1961Act in Fletcher Estates v. Secretary of State [2000] 2 AC 307, appliedmostrecentlyinBolandvBridgendCBC[2017]R.V.R.243.Atpp.322-3ofFletcherEstatesLordHopeheld:

“Thecriticalwords inthesubsectiontowhichattentionmustbedirectedaretobefoundinthephrase"if itwerenotproposed tobeacquired."Thosewordsmustbeexamined in thelight of the agreed fact that the relevant date, as at which the local planning authority isrequiredbythesubsectiontoissueitsopinionregardingthegrantofplanningpermission,isthedateof thesection22(2)(a)notice.The language is…notof thepastbutof thepresentconditional. The assumptionwhich has to bemade is that the land is not "proposed to beacquired" at the relevantdate. Thewords "proposed tobe acquired" are given aparticularmeaning by the statute. They appear in section 17(1) which identifies the time when theparties may apply for a certificate of alternative development, and they appear again insection 17(3) which describes the contents of the application for a certificate. Thecircumstances inwhich an interest in land shall be taken to be an interest proposed to beacquired: are defined in section 22(2). It is by reference to the circumstances defined insection 22(2) that the relevant date for the determination of the issue about planningpermission is identified. The effect of that subsection is that an interest in land cannot be

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takentobean interestproposedtobeacquired for thepurposesofsection17untiloneorotherofthecircumstanceswhichitdescribeshasoccurred.

The position appears therefore to be quite straightforward upon a consideration of theordinarymeaningofthewordsusedinthestatute.Theassumptionwhichthelocalplanningauthoritymustmakerelatestothesituationasattherelevantdate.Theschemeforwhichthelandisproposedtobeacquired,togetherwiththeunderlyingproposalwhichmayappearinanyof theplanningdocuments,mustbeassumedon thatdate tohavebeen cancelled.Noassumptionhastobemadeastomayormaynothavehappenedinthepast…

It is one thing to examine these factors5, on the assumption that the proposal has beencancelledontherelevantdate,inthelightofexistingcircumstances.Itisquiteanothertolookbackintothepastandtotrytoreconstructtheplanninghistoryoftheareaontheassumptionthattheproposalhadnevercomeintoexistenceatall.Thefurtherbackintimeonegoes,themorelikelyitisthatoneassumptionastowhatwouldhavehappenedmustfollowonanotherand the more difficult it is likely to be to reach a conclusion in which anybody can haveconfidence.”

9. In Boland, the issue of what the planning consequences were of the cancellationassumption came under close scrutiny since the issue was whether the redrawing of asettlement boundary was part of the underlying scheme. Summarising the Court ofAppeal’sconclusions,HickinbottomLJheldat[42]”

“42However:

i)Whetherapolicyfallswithinthe"underlyingproposal"ofaschemeisessentiallyaquestionoffactfortherelevantdecision-maker(inthiscase,theUpperTribunal)todetermine.It isaquestionof fact andplanning judgment. Theobservationsof LordNicholls ofBirkenhead inWaters v Welsh Development Authority [2004] UKHL 19; [2004] 1 WLR 1304 at [55] andfollowing (especially at [61]), on how the underlying scheme should be identified for thepurposesoftheassessmentofcompensationunderPartII,withwhichtherestoftheHouseagreed, are equally apposite here. In respect of matters involving planning judgment, theLandsChamberoftheUpperTribunalhasparticularexpertiseandexperience.

ii)However,theconstructionofthepolicyitselfis,ofcourse,amatteroflaw.Thatappliestoadevelopmentplan,asmuchastonationalpolicy.

iii) IntheBridgendUDP,thesettlementboundaryhasbroadpolicysignificance, inthesensethatdifferentpoliciesapplytolandinsidethatboundaryfromthepoliciesthatapplytolandoutside. Generally (and subject to the Policy EV1 caveat in respect of land outside thesettlement boundary allocated to a particular use by other specific policies), Policy EV12proscribesdevelopmentoutsidesettlementboundaries.Insidetheboundary,developmentisacceptable in principle, the circumstances in which development will be allowed beingassessedbyreferencetocriteria-basedpolicies,includingPolicyH4.

iv) The settlement boundary is tested through the rigorous statutory process thatdevelopment plans involve,which includes consultation and independent examination. Theincorporation of settlement boundaries into the development plan has substantialsignificance, given that applications for planning permission or for the renewal of planningpermissionaretobedetermined inaccordancewiththeapprovedoradopteddevelopmentplanforthearea,unlessmaterialconsiderationsindicateotherwise...

v) In this case,asMsGandyaccepted inevidence… therewasnothing in thedevelopmentplantosuggestthatthesignificanceofthesettlementboundarytothewestofPen-y-fai,oncere-drawn, was any different from the broad policy significance to which I have referred. …otherthanPolicySC5(15),therearenospecificpoliciesintheplanthatrestricttheuseofthe

5Onesrelevanttoplanningdecisions“suchaspredictionsofpopulationgrowthandtheavailabilityofsuitablelandfordevelopmentaffecttheneedformorelandtobereleasedforhousinginthearea…”

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BolandLandandtheNorthField,nowenclosedbytheboundary.

…

viii)However,inthiscase,there-drawingofthesettlementboundarytothewestofPen-y-faiwas such as to include theNorth Fieldwithin the settlement,which re-drawing,…wasnotpartoftheunderlyingscheme,inthesensethattheNorthFieldcouldhavebeendevelopedwith(e.g.)housingunderthewithin-settlementPolicyH4evenifthenewschoolschemedidnotgoahead.

…

x)…WhethertheboundarydrawnaroundtheReferenceLandwassuchastocomprisepartofthe underlying scheme was a matter of fact for the Upper Tribunal, using their planningjudgment,asIhavedescribed.

xi)Idonotconsiderthatthetribunalerredinlawintheirapproachtothatissue.Inparagraph36 of their decision, they properly acknowledged that the redrawing of the settlementboundarytoincludetheBolandLandandtheNorthFieldwaspromptedbytheproposalforanewschool.Thatthatre-drawwasnotnecessaryfortheproposaltocomplywiththepoliciesofthe(thenemerging)UDPwasalso,inmyview,amaterialconsideration.Thereisnothinginthedecision to suggest that the tribunal considered that thatwas, in itself,determinative–otherwise the decision would no doubt have been somewhat shorter – and I reject thecontention, insofar as it was made, that the weight the tribunal gave to that matter wasexcessiveasamatteroflaw.

xii)Importantly,inmyview,thetribunalfocuseduponthedevelopmentplanitself;andnotedthatitdidnotcontainanypoliciesthatrestricteddevelopmentinanypartoftheland"takeninto"thesettlement(i.e.theReferenceland,theNorthernBolandLandandtheNorthField).Ifthedevelopmentplanhadintendedtherestrictionforwhichitnowcontends,itcouldeasilyhavemadeclearprovisionforit.Intheevent,itmadenoprovision.Inthecircumstances,theUpperTribunalwasentitledtoconcludethat,asamatteroffact,thepolicythatre-drewthesettlementboundarywasnotapartoftheunderlyingscheme…”

10. Assetoutbelow,thelanguageofcancellationisbroughtintos.6AviathenewRule1(s.6A(4)). The implication is that cancellation does not require wholesale rewriting of theplanninghistoryofthesite,thoughthisisnowthesubjectoftheplanningassumptionsins.14ofthe1961ActasamendedbytheLocalismAct2011.

11. TherecentSupremeCourtjudgmentinJSBloor(Wilmslow)Ltdv.Homes&CommunitiesAgency [2017] 2 P. & C.R. 5 concerned compensation for compulsory acquisitionwhichraisedquestionsconcerningtheexisting“no-scheme”rule inthe1961Act(togetherwithcaselaw),inparticulartherelationshipbetweenthegeneralprovisionsforthedisregardoftheschemeandthemorespecificprovisionsrelatingtoplanningassumptions.

12. LordCarnwathgavethejudgmentoftheSupremeCourtandstatedatparas.9-10:

“9. The rule has given rise to substantial controversy and difficulty in practice. InWaters vWelsh Development Agency [2004] 1 WLR 1304, … para 2 (“Waters”), Lord Nicholls ofBirkenheadspokeof the lawas“fraughtwithcomplexityandobscurity”. Inareport in2003theLawCommissionconductedadetailedreviewofthehistoryoftheruleandtherelevantjurisprudence, and made recommendations for the replacement of the existing rules by acomprehensivestatutorycode(TowardsaCompulsoryPurchaseCode(1)CompensationLawCom No 286 (Cm 6071)). Since that report aspects of the rule have been subject toauthoritativeexpositionbytheHouseofLordsinWatersitself,andmorerecentlyinTransportforLondonvSpireroseLtd[2009]1WLR1797;[2009]UKHL44(“Spirerose”).

10. Although the Law Commission’s recommendations for a complete new code were not

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adopted by government, limited amendments to the 1961 Act in line with theirrecommendations were made by the Localism Act 2011 section 232 (relating to planningassumptions). Further proposed amendments, dealing with the no-scheme principle moregenerally, are currently before Parliament in theNeighbourhood Planning Bill 2016-17. Thepurposeofthelatterissaidtobethatof“clarify[ing]theprinciplesandassumptionsforthe‘no-scheme world’, taking into account the case law and judicial comment” (ExplanatoryNotespara70).Thepresentappealfallstobedecidedbyreferencetothe1961Actasitstoodbeforethe2011amendments.”

13. Inhisconclusion,LordCarnwathcommentedonthepresentcomplexity,andhopedthattheBill’sreformswouldbeapproved:

“43. The Upper Tribunal’s decision in the present case is a powerful illustration of thepotential complexities generatedby the1961Act in its unamended form. It is to behopedthattheamendmentscurrentlybeforeParliamentwillbeapproved,andthattakenwiththe2011amendmentstheywillhavetheirdesiredeffectofsimplifyingtheexerciseforthefuture.Itisnocriticismofthetribunalifpartsoftheirreasoningmayappearobscureatfirstsightandrequiresomeunpicking.However,oncethatisdone,IamsatisfiedthatthecriticismsmadebytheCourtofAppealandinthiscourtbytherespondentsaremisplaced.Overall,thetribunal’sapplication of these difficult provisions to the complex facts of this case is in my viewexemplary.Ifindnoerroroflaw.”

14. Theplanningassumptions,whichformpartofthecomplexseriesofconsiderationswhich

areinvolvedinthehypothesestobeappliedtotheassessmentofcompensation,foundin

the original version of ss. 14 to 17 of the 1961 Act,were substantially amended by the

LocalismAct2011.Thenewprovisionstakethereformastepfurther.

The2017Act:abriefhistory

15. The Neighbourhood Planning Act, completed its Parliamentary “ping pong” on 26 April

20176,receivedRoyalAssenton27April2017andcontainsanumberofwide-rangingfor

theplanningandcompulsorypurchasesystem.ThesefollowthechangesmadeinPart7of

theHousingandPlanningAct2016.TheCPOandcompensationprovisions(otherthanthe

powersforthemakingofregulations)comeintoforceonadatetobeappointed:s.46(1).

16. TheGovernmentconsultedoncompulsorypurchasereformsinthefirsthalfof2016,andseeks to implement those reforms in Part 2 of the Act7. The CPO provisions apply toEnglandandWalesonly.

17. ThecompulsorypurchaseprovisionspassedthroughtheCommitteeStageintheHouseofCommons (October 2016) with only some probing amendments to clarify technicalmatters.AttheReportStage,technicalamendmentswereintroducedbytheGovernment,anda fewsubstantiveamendmentsweretabledbutnotcalled.TheThirdReading intheCommonspassedwithoutmuchcommentontheCPOprovisions,otherthantheShadowCommunitiesSecretarysignallingtheOpposition’ssupportfortheamendmentsandtheir

6Seehttp://services.parliament.uk/bills/2016-17/neighbourhoodplanning.html7www.gov.uk/government/consultations/further-reform-of-the-compulsory-purchase-system

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desirefora“full-scalereviewofCPOlegislation”.

18. The only substantial changes to the CPO provisions occurredwhen the Bill reached theHouseofLords.Asubstantialproportionof theLords’amendmentsweredirectedat theCPOprovisions.AllofthemanyamendmentsproposedbytheLordswereagreedtobytheHouseofCommonsand,asaresult,themostrecentconsiderationoftheBillbytheLordson26April2017wasconcernedwithmattersotherthantheCPOprovisions.

19. RoyalAssentwasgivenon27April2017.

20. The first commencementorder (theNeighbourhoodPlanningAct 2017 (CommencementNo. 1) Regulations 2017 SI No 767) came into force on 18.7.17 and dealt largely withplanningmattersandtheregulationmakingpowerforreinstatementfollowingtemporarypossession.

21. The second order which was made on 21.9.17 (the Neighbourhood Planning Act 2017(CommencementNo.2)Regulations2017SINo936)bringsintoforceon22.9.17themainCPOprovisionsincludings.32whichamendsthenoschemeruleprovisionsandsubstitutesthenewss.6Ato6Eofthe1961Act.Therearetransitionalprovisionsinreg.4whichapplythenewrulesonlytoCPOsauthorisedonorafter22.10.17,meaningconfirmedonorafterthatdate,aministerialCPOmadeonorafterthatdate,aTWAOrderdeterminedunders.13(1) on or after that date, or compulsory powers in legislation enacted (presumablymeaning received Royal Assent) or after that date (and similarlywith other comparablepowers).

22. The Government announced on 22.9.17 further reforms to speed up the CPO systemincluding a new standard claim for compensation8. The CPO Guidance 2015 appears toremainunchanged.

Newrules

23. In the light of the major changes to the “no-scheme world” rules, and the apparentintention to replace the common law and statutory rules (see below) with a new self-contained statutory code, the Explanatory Notes draftedwhen the Billmoved from theCommonstotheLordsinDecember20169curiouslystate:

“9. Following the reforms introducedby theHousingandPlanningAct2016, theBillmakesfurther changes to the lawon compulsorypurchase. Itwill seek todo thisby clarifying thestatutory framework for compensation,whichwill not affect the fundamental principles onwhichitisassessed.”

24. The explanation for the new provisions is found in the Government’s Consultation

8www.gov.uk/government/publications/compulsory-purchase-process-and-the-crichel-down-rules-guidance9TheofficialENsfortheActwerenotavailableatthetimeofwriting.

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Response(Sept2016)10:

“7.Acoreprincipleofcompulsorypurchasecompensationisthatlandshouldbeacquiredatmarket value in the absence of the schemeunderlying the compulsory purchase. Since theprinciplewasfirstestablished,overacenturyofcaselawhassoughttoclarifythebasisuponwhich the landvaluation in thesecircumstances iscalculated,basedaroundtheprincipleofwhatisknownasthe‘noschemeworld’.

8. The ‘no schemeworld’principlehas,however,been interpreted inanumberof complexandoften contradictoryways. This lack of claritymaymake it very difficult to establish thebasisforcalculatingmarketvalueinsomecasesandcausessignificantdelaysanduncertaintyinthedeterminationofcompensation.

9. The consultation sought views on proposals to establish the principle of the ‘no schemeworld'fairlyandeffectivelyinthevaluationprocessbycodifyingitinstatuteandintroducinga:

• clearerdefinitionof theprojector schemethat shouldbedisregarded inassessingvalue

• clearer basis for assessingwhether the project forms part of a larger ‘underlying’schemethatshouldalsobedisregarded

• more consistent approach to the date on which the project is assumed to becancelled

• broadeningofthedefinitionofthe‘scheme’toallowthe identificationofspecifiedtransport infrastructure projects that are to be disregardedwithin a defined area,overadefinedperiodoftime”

25. Support was high, and so the Consultation Response stated that provisions would beincludedintheBill:

“20. The governmentwelcomes the strong support for this proposal.We acknowledge thatextending the definition of ‘the scheme’ to exclude specified transport infrastructure mayresult in claimants receiving less compensation than they might otherwise have done.However, we believe it is right that the public purse, rather than private interests, shouldbenefitfromincreasesinlandvaluesarisingfrompublicinvestment.

21.Thegovernmentwilltherefore,takeforwardtheproposaltocodifythe‘noschemeworld’valuation principle in legislation. In doing so we will take account of the points raised byprovidingappropriatesafeguardstolimitthescopeofthispower.WewillbasethedraftingontheLawCommission’sRule13.Wenotethatwhiletherewasoverallsupportfortheproposalto use the launch date instead of the valuation date as the date on which the scheme isassumed to be cancelled, a number of expert practitioners were opposed. After furthercareful consideration,wehavedecided to follow the LawCommission’s suggestion that thevaluation date should be used as the cancellation date. We have been persuaded thatalthoughinvaluationtermsalaunchdatecancellationisappropriateforplanningassumptionsitwouldbebettertoestablishthevaluationdateasthestatutorycancellationdatebecausethiswouldreflectwhat iscurrentlyhappeninginpractice.Usingthevaluationdatewillhavethe benefit of avoiding potential disputes,with the associated delays and costs, overwhatmightormightnothavehappenedintheperiodbetweenthelaunchdateandthevaluationdateandmeetourobjectivesforaclearerandfairersystem.

22.Wewillalsotakeforwardtheproposaltoextendthedefinitionof‘thescheme’toincluderelevanttransportinfrastructureprojectssubjecttosafeguardstoensureadirectlinkto“thescheme”.Wenotethesupport forextendingthedefinitionfurtherto includeothertypesof

10www.gov.uk/government/uploads/system/uploads/attachment_data/file/551059/CPO_Phase_2_reform_govt_response.pdf

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infrastructure project. However, on balance, we consider that as transport infrastructureprojects have the most discernible impact on land values, the proposal to extend thedefinitionof‘thescheme’shouldbelimitedtothosetypesofinfrastructureproject.”

26. TheExplanatoryNotespublishedwiththeActstate:

“Section32:No-schemeprinciple

106 Compensation for land taken by compulsory purchase is assessed in the “no-schemeworld”.Thisassumesthattheschemeunderlyingthecompulsorypurchasewascancelledonthevaluationdate(thedateofentryandtakingpossessionoftheland–ifnotagreedearlier).Compensation for interests in land is its open market value in the “no-scheme world”,disregardingbothanyincreaseordecreaseinthevalueofthelandwhichissolelyattributabletotheparticularpurposeforwhich it isacquired,andtheacquiringauthority’sneedforthelandforthatpurpose.

107Theprinciplesandassumptions concerning theno-schemeworldand theextentof theschemetobedisregardedaremainlytobefoundinsections6to9oftheLandCompensationAct 1961 (‘1961 Act’) and around 100 years of case law on these provisions and theirpredecessors.

108 This section clarifies the principles and assumptions for the “no-schemeworld”, takingintoaccountthecaselawandjudicialcomment.

109Subsection(3)insertsnewsections6Ato6Etoreplacesections6to9ofthe1961Act.

110 New Section 6A sets out the ‘no scheme principle’ that any increases or decreases invalueoflandcausedbytheschemeorbytheprospectofthatschememustbedisregardedinvaluingthelandwhichhasbeencompulsorilyacquiredandliststhefive‘no-schemerules’tobe followed when applying the ‘no-scheme principle’. Subsection 6A(10) provides a cross-referencetotheplanningassumptionsinsection14ofthe1961Act.”

27. S.32,entitled“No-schemeprinciple”isintendedtoclarifytheprinciplesandassumptionsforthe“no-schemeworld”.S.32(3)providesthatss.6to9oftheLandCompensationAct1961(“the1961Act”)shallbereplacedwithnewss.6A-6E, in lightofwhichthevalueofacquiredlandistobeassessed.

28. S.32(2)insertsanewruleintos.5ofthe1961Actats.5(2A):

“(2A)Thevalueoflandreferredtoinrule(2)istobeassessedinthelightoftheno-schemeprinciplesetoutinsection6A.”

29. However,unliketheLCRrecommendationss.6Adoesnot:

(1) Expresslyrepealallpreviouscommonlawprinciples(“clearingthedecks”)11;or

(2) Abolishrelianceonthe“scheme”concept12,thoughitseekstodefineitmorecloselyinss.6Dand6E.

30. TheLChadproposedaprovisionwhichwouldhavemadethepositionabsolutelyclear13:

“Allpreviousrules,statutoryor judge-made,relatingtodisregardof“thescheme”willcease

11LCR§§7.4-7.6.12LCR§§7.16-7.18;§§7.26-7.28.13PartVIII,para.8.3theNewCode,rule13(1).

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tohaveeffect.”

31. Giventhecircumstancesitmighthavebeenthoughtobvious,oratleastprudent,thatsuchaprovisionbeincluded.However,itwasnot.

32. Thelanguageofthenews.5(2A)(above)maynonethelesshavethateffectbyimplicationsince it requires assessment against thenew statutoryprinciple in s. 6A andnot againstanyotherno-schemeworldprinciple.

33. ApplyingtheapproachinWaters(seeabove),aswellass.5(2A),thequestioniswhetherthenewcode isexhaustive?Onthefaceof it,andunliketheprovisions itreplaces,s.6Aappears:

(1) To dealwith both the land being acquired and other land and draws a distinctionbetween“theland”and“thevalueofland”(seee.g.s.6A(1)),definingtheprincipleas relating to effects on the “value of land caused by the scheme for which theauthorityacquirestheland”;

(2) It uses the scheme cancellation assumption discussed inFletcher Estateswhich, intandemwiths.14of the1961Act, limits theextentof theneedtoreconstructtheplanninghistoryapplicabletothelandacquired;

(3) Thatbroaddefinitionappearstodealwiththe issueof landacquiredbyagreementalso as part of the development scheme,which is not an unusual situation in CPOcases. An authority will usually seek to acquire land by agreement first (indeed isadvisedtodosobynationalguidance)beforemakingaCPO. If this iscorrect, thentheproblemidentifiedinWatersasarisinginWilsonvLiverpoolCorpn[1971]1WLR302doesnotariseinthecaseofthenewprovision.

34. Indeed,therecastingofthestatutorydisregardins.6Aingeneraltermsseekstoavoidthepitfallsoftheold1961ActprovisionsbynotsettingouttheequivalentoftheoldSchedule1cases(whichdidnotcoverthewholeofthevaluetoowner/noschemeprinciple).

35. S. 32(4) “omits” (presumably repeals) s. 15 and Schedule 1 of the 1961 Act. Thoseprovisions are replaced by the newprovisions. The removal of Schedule 1 is an obviousnecessitygiventhereplacementofitsassumptionswiththenewrulesandtheremovalofs. 15 removes the potential for inconsistency between the scheme cancellationassumptions and the requirement to assume that proposals of the authority enjoyplanningpermission.AstheLawCommissionnotedinLawCom286:

“D.100Section15(1),inconsistentlywiththejudicialrule,requirespermissiontobeassumedfor development of the subject land in accordance with the proposals of the planningauthority, whether or not it would have been granted in the absence of the underlyingscheme…”

36. Themains.6Aisasfollows:

“6ANo-schemeprinciple

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(1)Theno-schemeprincipleistobeappliedwhenassessingthevalueoflandinordertoworkouthowmuch compensation shouldbepaidby the acquiring authority for the compulsoryacquisitionoftheland(seerule2Ainsection5).

(2)Theno-schemeprincipleistheprinciplethat—

(a) any increase in the value of land caused by the scheme for which the authorityacquirestheland,orbytheprospectofthatscheme,istobedisregarded,and

(b) any decrease in the value of land caused by that scheme or the prospect of thatschemeistobedisregarded.

(3) In applying the no-scheme principle the following rules in particular (the “no-schemerules”)aretobeobserved.

(4)Rule1:itistobeassumedthattheschemewascancelledontherelevantvaluationdate.

(5)Rule2:itistobeassumedthatnoactionhasbeentaken(includingacquisitionofanyland,andanydevelopmentorworks)bytheacquiringauthoritywhollyormainlyforthepurposesofthescheme.

(6) Rule 3: it is tobe assumed that there is noprospectof the same scheme,or anyotherprojecttomeetthesameorsubstantiallythesameneed,beingcarriedoutintheexerciseofastatutoryfunctionorbytheexerciseofcompulsorypurchasepowers.

(7) Rule 4: it is to be assumed that no other projects would have been carried out in theexercise of a statutory function or by the exercise of compulsory purchase powers if theschemehadbeencancelledontherelevantvaluationdate.

(8)Rule5:iftherewasareductioninthevalueoflandasaresultof—

(a) the prospect of the scheme (including before the scheme or the compulsoryacquisitioninquestionwasauthorised),or

(b)thefactthatthelandwasblightedlandasaresultofthescheme,

thatreductionistobedisregarded.

(9)Inthissection—

“blighted land” means land of a description listed in Schedule 13 to the Town andCountryPlanningAct1990;

“relevantvaluationdate”hasthemeaninggivenbysection5A.

(10)Seealsosection14forassumptionstobemadeinrespectofplanningpermission.”

37. As providedby s. 6A(10), once the no-schemeworld has been established, the planningassumptions in s. 14 of the 1961 Act are engaged to determine what (if any) planningpermissionswouldbeavailableforthatlandinthecircumstancesoftheno-schemeworld.

38. Thenewrulesins.6Acastthenetofthenew“no-scheme”principlewidelyinthat:

(1) Bothincreasesanddecreasesinvaluecausedbytheschemeortheprospectofthatschemearetobedisregarded(s.6A(2));

(2) Rules 1 (s. 6A(4)) assumes that the Scheme has been cancelled on the relevantvaluation date, which limits the extent of the need to construct hypotheses withregardtothepreviousplanninghistory,thoughifrelevantplanningpolicycanonlybeapplied by reference to the Scheme then it should probably be disregarded (seeHickinbottomLJinBolandvBridgendCBC[2017]R.V.R.243);

(3) Rule2(s.6A(5))assumesnoactionhasbeentakenwhollyormainlyforthepurposes

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of theschemewhich includesdisregardedacquisitionbyprivateagreementso thatactionsincontemplationoftheschemewhichmightotherwiseaffectlandvaluesarestrippedoutofthecompensationassessment;

(4) Rule 3 (s. 6A(6)) assumes there is no prospect of the sameor a similar scheme tomeetthesameorsubstantiallythesameneedastheCPPbeingcarriedouteitherintheexerciseofastatutory functionorpursuanttoCPOpowers14.Rule3and4ruleoutthetakingintoaccountofthewhattheLCRcalled“addedvalue”astheresultoftheexerciseofstatutorypowers;

(5) Rule4(s.6A(7)equallyassumesthatnootherprojectswouldhavebeencarriedoutintheexerciseofastatutoryfunctionorpursuanttoCPOpowersiftheCPOhadbeencancelledon the relevant valuationdate.The rational is similar toRule3 though itdoesnotexcludeconsiderationofthepotentialforprivateprojectswhichdonotrelyonstatutorypowersorCPO.

(6) Rule5 (s.6A(8))disregards reductions invalueasa resultof statutoryblight15 asaresultoftheschemeortheprospectofthescheme.Itdoesnotintermsrefertotheblightingeffectofadevelopmentplanpolicy,butthisappearstobesubsumedwithinthephrase“prospectofascheme”.

39. S.6D(6)appearstomirrors.14(5)(d)16ofthe1961ActinapplyingnewRule3:

“In the application of no-scheme rule 3 in relation to the acquisition of land for or inconnectionwiththeconstructionofahighway(the“schemehighway”)thereferenceinthatrule to “anyotherproject” includes a reference to anyotherhighway thatwouldmeet thesameorsubstantiallythesameneedastheschemehighwaywouldhavebeenconstructedtomeet.”

40. Theremainingprovisionsofthereplacementstos.6dealwithotherissues:

(1) S.6Bprovidesforlowercompensationtobepaidifotheradjacentlandofthepersoncompensatedgainsvalueasaresultofthescheme,and

(2) S.6Cprovidesforthecreditingofanearlierpaymentofcompensationfor injuriousaffection by reducing the compensation payable if the other land affected issubsequently compulsorily acquired. Thiswill also allow for such a reduction to bemade in the caseofpaymentof compensation to a successor in title to thatotherland(s.6C(3)).

(3) s. 6D defines “the scheme” for the purposes of ss. 6A-6C S. 6D(1) states that thescheme “means the scheme of development underlying the acquisition (subject tosubsections (2) to (5))”, with disputes to be determined by the Lands Chamber in

14SeeLCR§§7.23-7.25whichadvisedtheadoptionofsuchanapproach.SeeitsproposedRule13inLCR§8.3.15UnliketheLCRproposals,noreferenceismadetodiminishedprospectsofplanningpermission.SeeLCRRule13(6)at§§8.3and8.16,butthismaynotbenecessarysincetheassessmentofplanningprospectsshouldfollows.14.16Themeaningandeffectofthes,14(5)(d)disregardisamatterlikelytocomebeforetheLandsChamberlaterthisyear.

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accordancewiths.6D(5)

(4) S. 6E supplements s. 6D(3) andmakes furtherprovisionwhere land is acquired forregenerationor redevelopmentwhich is facilitatedormadepossiblebya“relevanttransportproject”17.

DavidElvinQCLandmarkChambers

2October2017

17 Defined by s. 6D(4)(a - “means a transport project carried out in the exercise of a statutory function or by theexerciseofcompulsorypurchasepowers(regardlessofwhetheritiscarriedoutbefore,afteroratthesametimeastheregenerationorredevelopment)”.Seealsos.14(5)(d)ofthe1961Act.