Part II            
the existing law

introduction

                    2.1             In this Part we explain briefly the historical background against which the present law has developed, and the derivation and scope of the principal enactments. Although this Report is concerned particularly with compensation issues, it is important to see them against the development of compulsory purchase law generally. The history of the “no scheme” rule is discussed in more detail in Appendix 5.

Historical context

The 1845 Act

                    2.2             The origins of the modern law are to be found in numerous private Acts, passed in the late 18th and early 19th centuries, authorising the construction of canals, railways and harbours.[1] These normally contained powers of compulsory acquisition, and provided procedures for implementation and determining compensation. Standard clauses were developed which were consolidated in the Land Clauses Consolidation Act 1845.[2] This did not itself confer the power of compulsory acquisition, which was derived from the private Act authorising the specific project (“the special Act”). However, after 1845, any Act authorising compulsory purchase was treated (unless otherwise provided) as incorporating the 1845 Act.[3]

                    2.3             The framework provided by the 1845 Act remained in place for most of the 19th century. A typical acquisition would be for the purposes of a utility (for example, a railway or water company) under powers contained in a private Act, usually promoted by a limited company. The cases established that compensation should be paid on the basis of “the value to the owner”.[4] Compensation was usually assessed by a jury. The fact that the schemes were promoted for profit, rather than purely public motives, was reflected in the sympathetic treatment of dispossessed owners:

Compulsory acquisition of land to any great extent first took place in connection with the Railway development in the first half of the 19th century, and public opinion in regard to compensation was undoubtedly much influenced by the fact that railway enterprise undertaken for profit rather than the interest of the State was the moving force. The sense of grievance which an owner at that time felt when his property was acquired by railway promoters, then regarded as speculative adventurers, led to sympathetic treatment by the tribunal which assessed the compensation payable to the owner…[5]

                    2.4             By the end of the 19th century and in the period up to the First World War, the role of public authorities became much more important. Local authorities had greatly extended functions in provision of public services, including housing, highways, and public health.[6] To facilitate acquisitions for such purposes, and to avoid the need for a special Act for each project, compulsory powers were conferred by general Acts. Initially, authorisation of particular schemes was still subject to Parliamentary approval, by means of a “provisional order” procedure. But this was gradually replaced by the modern procedure, involving a compulsory purchase order confirmed by the relevant Minister.[7] Implementation of the order and assessment of compensation continued to be governed by the 1845 Act.

The Scott Committee and the 1919 Act

                    2.5             The Scott Committee[8] was established in 1918 to carry out an urgent review of the compensation laws in anticipation of the end of the war, and the likely need for acquisition by public authorities of large quantities of land “in the early stages of the Reconstruction period”.[9] By this time the emphasis was on acquisition for public purposes, and the overriding rights of “the community”:

It ought to be recognised, and we believe is today recognised, that the exclusive right to the enjoyment of land which is involved in private ownership necessarily carries with it the duty of surrendering such land to the community when the needs of the community require it. In our opinion, no landowner can, having regard to the fact that he holds hisproperty subject to the right of the State to expropriate his interest for public purposes, be entitled to a higher price when in the public interest such expropriation takes place, than the fair market value apart from compensation for injurious affection, &c

                    2.6             The Committee was concerned that the “value to the owner” concept had allowed “highly speculative elements of value” to be included.[10] The Committee made a number of specific recommendations relating to compensation,[11] which were enacted as a set of six “rules” in section 2 of the Acquisition of Land Act 1919 (“the 1919 rules”), later replaced by section 5 of the Land Compensation Act 1961. The most significant was the introduction of the “market value” principle (rule (2)): compensation for the land taken should be based on “the market value as between a willing seller and a willing buyer”, with no special allowance for compulsory acquisition.[12] The 1919 Act also established a panel of official arbitrators to determine compensation disputes.[13]

From 1945 to 1961

                    2.7             The next significant developments came in the immediate aftermath of the Second World War. The dominance of the public sector in relation to the use of compulsory purchase powers was confirmed by the wide powers conferred on public authorities for post-war reconstruction, and the nationalisation of the public service providers (such as the railways). There were some limited procedural reforms. The Acquisition of Land (Authorisation Procedure) Act 1946 enacted a uniform procedure for making and confirmation of compulsory purchase orders. The Lands Tribunal Act 1949 established the modern Lands Tribunal, which took over the jurisdiction of the panel of official arbitrators.

                    2.8             The most dramatic change of policy was represented by the Town and Country Planning Act 1947 (“the 1947 Act”), under which planning control was extended to the whole country,[14] and local authorities were given extensive powers to acquire land for comprehensive redevelopment.[15] At the same time, all development value was expropriated by the State, resulting in land acquisitions being made at existing use value.[16] A succinct summary was given by the Lord Chancellor in 1959:[17]

… the 1947 Act set up a new financial system, designed to solve once and for all the problems of compensation and betterment that prevented effective planning in the pre-war years. The State took over all development rights. Before anybody could carry out development, he had to buy back the right to develop by paying a development charge. Owners were to be compensated for the loss of the development values existing in 1947 out of a £300 million find, and machinery was set up for the making and establishment of claims on the fund. It was assumed that, in these circumstances, land would be bought and sold in the market at existing use value. As a logical consequence of this it was provided that compensation for land bought compulsorily should be limited to existing use value.

                    2.9             This system was not a success. Continuing the same summary:

As is well known, the system did not work well in practice. The public found it difficult to understand and the development charge was regarded simply as a tax on development. The Conservative Government in the Town and Country Planning Acts of 1953 and 1954, therefore abolished development charge, so leaving owners of land free to realise the development value of their land provided that they could get planning permission… [18]

Even after abolition of development charge in 1954, compulsory acquisitions continued to take place at existing use value, plus a share of the 1947 compensation fund. Since this was based on 1947 development values, there was an ever-widening gap between compensation payments and prices at which land was being sold in the market.[19]

                2.10             The market value principle for compensation was not fully re-established until 1959. The Town and Country Planning Act 1959 restored the principles established by the 1919 Act, but supplemented them with an elaborate set of provisions relating to disregard of associated development, and to planning assumptions, intended to take account of the comprehensive system of planning control introduced in 1947. The relevant provisions were in sections 2-9 of the Act. [20]

                2.11             The Land Compensation Act 1961 was a consolidation of the relevant parts of the 1919 Act and the 1959 Act. It became (as it remains today) the principal statute governing the assessment of compensation. However, significant aspects of compensation (notably, compensation for disturbance, and for severance or injurious affection) were not covered by the 1961 Act, and continued to be governed by the 1845 Act and cases under it.

From 1961 until today

Towards privatisation

                2.12             The following 15 years saw two further attempts[21] by Labour Governments to take direct control of land development and deal with the perceived problem of betterment, but neither survived a change of Government. In one respect, however, the legacy of the 1947 Act survived. Development potential had ceased to be seen as an intrinsic right of land-ownership, the restriction or removal of which would attract compensation.[22] Thus, even in cases where restriction would formerly have carried a right to compensation, the right could in effect be nullified by planning controls.[23] 

                2.13             The first two terms of the Conservative Administration (from 1979) opened a new phase. The role of public authorities as direct providers of services or initiators of development was drastically reduced. Even where development schemes were initiated by public authorities they were usually in partnership with private developers.[24] Land acquisition powers were exercised with a view to handing the land over to the private developer, who might indemnify the authority against the cost. Privatisation resulted eventually in most of the major utilities passing into the hands of companies owned by private shareholders, and operated for profit (albeit subject to regulatory control). The Transport and Works Act 1992, which replaced the private Bill procedure for railway and other transport works, enabled any undertaking (public or private) to apply for compulsory powers for such projects.

                2.14             The change of Government in 1997 did not result (uniquely in the post-war period) in a radical change of direction in terms of land or development policy. There are currently no proposals to take greater public control of development, or to tax development gains as such. The utilities remain privatised. Developments involving public authorities are likely to be carried out through some form of public/private partnership or private finance initiative. As in the 19th century, many compulsory purchase projects are likely to be financed, directly or indirectly, by private organisations, with a view to profit for their shareholders. From the public point of view, development appears to be seen as a desirable end in itself, without the need to secure direct public control, or to recoup the resulting betterment.

Legislative change

                2.15             At the end of this period, most of the rules governing procedure and compensation remain as they were in 1961. The Compulsory Purchase Act 1965 re-enacted, without material change, the main extant provisions of the 1845 Act, but did not repeal that Act.[25] It is the principal Act governing the implementation of compulsory purchase orders. It was supplemented in 1981 by the Compulsory Purchase (Vesting Declarations) Act 1981, which enabled orders to be implemented by a vesting declaration, as an alternative to the traditional notice to treat procedure.[26] The Acquisition of Land Act 1981 reproduced (again without substantive change) the 1946 Act and subsequent legislation, relating to the making and authorisation of orders.

                2.16             The most substantial changes in this period were made by the Land Compensation Act 1973. This followed a “full scale review of the compensation code”.[27] In addition to numerous detailed amendments, there were some major innovations, including:

                                            (1)             A new right to compensation for depreciation in the value of land due to “physical factors caused by the use of public works”;[28]

                                            (2)             A new category of payments for those displaced from land, including “home loss payments” and “farm loss payments”; and “disturbance payments” for those without compensatable interests;[29]

                                            (3)             A right to advance payment of 90% of the authority’s estimate of compensation;[30]

                                            (4)             Substantial extension of the rights of those affected by planning blight.[31]

                2.17             Less significant amendments and additions, of a piecemeal nature, have been made by other Acts, including:

                                            (1)             Local Government (Miscellaneous Provisions) Act 1976 (including provisions for compulsory acquisition of rights over land);

                                            (2)             Local Government, Planning and Land Act 1980;

                                            (3)             Planning and Compensation Act 1991.[32]

 

The Human Rights Act

                2.18             The Human Rights Act 1998 requires existing compensation law to be interpreted and applied, as far as possible, in conformity with the European Convention of Human Rights.[33] Article 1 of the First Protocol provides:

Every natural and legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and the general principles of public international law.

                2.19             As hitherto interpreted, this provision does not impose any specific standard of compensation. The general principle is that the property taken should be compensated by payment of an amount “reasonably related to its value”; but this does not “guarantee full compensation in all circumstances”, since “legitimate objectives of ‘public interest’, such as pursued in measures of economic reform or measures designed to achieve greater social justice, may call for less than reimbursement of the full market value”.[34]

                2.20             It is implicit in this statement, and in general principles of Convention law, that any departure from “full compensation” needs to be adequately justified by considerations of public interest, such as those mentioned, and must be reasonably proportionate to the aim pursued.[35] Further, the law must not discriminate unfairly as between different groups of property owner affected by the interference.[36]

                2.21             Also relevant is Article 6(1), which guarantees a right to a fair hearing by an independent tribunal in the determination of civil rights. In the recent Alconbury case, the House of Lords has held that the role of the Secretary of State in confirming compulsory purchase orders does not breach this principle, in view of the policy content of the issues involved, and the supervisory role of the High Court.[37] Lord Hoffmann explained the balance between democratic and legal accountability:

Importantly, the question of what the public interest requires for the purposes of art 1 of protocol 1 can, and in my opinion should, be determined according to the democratic principle – by elected local or central bodies or by ministers accountable to them. There is no principle of human rights which requires such decisions to be made by independent and impartial tribunals. There is however another relevant principle which must exist in a democratic society. That is the rule of law. When ministers or officials make decisions affecting the rights of individuals, they must do so in accordance with the law. The legality of what they do must be subject to review by independent and impartial tribunals. This is reflected in the requirement in art 1 of Protocol 1 that a taking of property must be ‘subject to the conditions provided for by law’. The principles of judicial review give effect to the rule of law. They ensure that administrative decisions will be taken rationally, in accordance with a fair procedure and within the powers conferred by Parliament.[38]

                2.22             This decision leaves some issues unresolved. Thus, there may be doubts over the Secretary of State’s role in determining appeals in respect of “certificates of appropriate alternative development”, which might be said to have no policy relevance in the real world, sufficient to satisfy the Secretary of State’s involvement.[39]

                2.23             Article 6 may also be breached if determination of compensation is unreasonably delayed.[40]

The law today

                2.24             The previous section outlined the historical development of the law. It will be helpful to conclude this Part by summarising the main sources of the law, as it stands before the present reform proposals, and to give an indication of the extent and nature of its use in practice.

Sources of the current law

                2.25             The sources of the current law are most conveniently considered under separate heads:

                                            (1)             Powers of compulsory purchase;

                                            (2)             Making and authorisation;

                                            (3)             Implementation;

                                            (4)             Determination of compensation;

                                            (5)             Compensation rules;

 

(1)  Powers of compulsory purchase

                2.26             The vast majority of compulsory acquisitions are made under powers granted by numerous general Acts, for the purposes of functions of public authorities or utilities.[41] It is not part of our terms of reference to review these powers. The Government has announced its intention to supplement them by new powers which would:

enable local planning authorities to exercise compulsory purchase powers for a full range of planning and regeneration purposes, including halting the physical, economic and/or social deterioration of an area.[42]

                2.27             Until recently it was common practice for transport and other similar undertakings to promote Private or Local Bills to authorise particular projects.[43] However, their use has become less important, since the Transport and Works Act 1992 enabled compulsory powers to be obtained without recourse to Parliament in most cases.

                2.28             There appear to be no detailed, up to date statistics of the numbers of orders promoted under different powers. A 1995 study for the DETR showed an annual average of 255 orders over the preceding three and a half years, broken down between Housing, Planning, Local Roads, Trunk Roads and Motorways, and Public Utilities.[44] The figures relate solely to acquisition of land, as such. Thus, for example, the figures for public utilities do not include powers obtained for the acquisition of rights in land, such as wayleaves for electricity lines or easements for pipelines.[45]

(2) Making and authorisation

                2.29             The law relating to the making and confirmation of compulsory purchase orders is in the Acquisition of Land Act 1981, and regulations made under it.[46] The Act contains separate (but substantially similar) sets of rules for orders promoted respectively by ministerial and non-ministerial authorities. It contains special rules for particular categories of land, such as land of local authorities or statutory undertakers, National Trust land or commons. It also contains an exclusive procedure for court challenges to the validity of orders.

                2.30             The procedure in outline is as follows:

                                            (1)             Authorisation of compulsory purchase is conferred by a compulsory purchase order, which is made by the acquiring authority and confirmed by the relevant Minister (“the confirming authority”).[47] The order must be in the prescribed form, including a description of the land by reference to a map, and a statement of the purpose for which the land is required.[48] Notices of the making of the order must be published in local newspapers, and served on owners and occupiers (other than tenants for less than a month).[49]

                                            (2)             All those served with, or entitled to service of, a notice (“statutory objectors”) have the right to object or make representations within the time specified by the notice. Other objections or representations may be received by agreement with the acquiring authority or at the discretion of the confirming authority. Objections may be disregarded if they relate exclusively to issues of compensation.[50] A public inquiry or hearing must be held for objections by statutory objectors, but is discretionary in other cases.[51]

                                            (3)             After consideration of the objections, and the report of the inquiry or hearing, the order may be confirmed by the confirming authority, with or without modifications (but not, except by agreement, so as to extend the area of land taken).[52] Notices of confirmation must be published, and served as under (1).[53]

                                            (4)             There is a statutory right to challenge the order on legal grounds in the Courts within 6 weeks of publication of the notice of confirmation.[54] Otherwise, the validity of the order is immune from challenge in legal proceedings.[55]

(3) Implementation

                2.31             The procedures for implementing compulsory purchase orders, following confirmation are largely contained in the Compulsory Purchase Act 1965. In particular, this reproduces the equivalent provisions of the 1845 Act, with more recent amendments, relating to the notice to treat procedure and entry on land in advance of the determination of compensation. The alternative vesting declaration procedure is covered by the Compulsory Purchase (Vesting Declarations) Act 1981.

                2.32             In the result, there are two alternative ways by which an acquiring authority may secure title to land, once the CPO has ministerial confirmation: by notice to treat and by vesting declaration:[56]

                                            (1)             The notice to treat procedure involves service of a statutory notice on each affected landowner to initiate the process of agreeing or determining compensation. Title does not pass to the authority until compensation (both eligibility and amount) has been settled, but the authority may take possession in the meantime by serving notice of entry.[57] The land is valued at the date of entry (or the date of determination of compensation if earlier) and interest runs from that date.

                                            (2)             The more recent vesting declaration procedure enables the authority, after confirmation, to make a declaration, vesting in itself title and authorisation to enter after expiry of a defined period (not less than 28 days) from the service of a notice on those affected. Title passes on the date so fixed, whether or not compensation has been settled. [58]

                2.33             The 1965 Act also contains provisions enabling the owner of land partly included within an order, to compel the purchase of the whole.[59] These have been supplemented by provisions of the Land Compensation Act 1973. [60]

(4) Determination of compensation

                2.34             The Land Compensation Act 1961 requires unresolved issues of compensation to be referred to the Lands Tribunal.[61] The constitution and jurisdiction of the Tribunal, and procedures before it, are governed by the Lands Tribunal Act 1949, and rules made under it.[62]

(5) Compensation rules

                2.35               As indicated in the historical review, the law relating to compensation, as it exists today, represents a complex amalgam of statute law and judicial interpretation. The principal statutory sources are:

                                            (1)             Land Compensation Act 1961:

                                                                   (a)              “1919 rules” (including market value principle, rules for compensation based on equivalent reinstatement etc);

                                                                   (b)              Disregard of value attributable to associated development on adjoining land;

                                                                   (c)              Planning assumptions, including provision for certificates of appropriate alternative development.

                                            (2)             Compulsory Purchase Act 1965:[63]

                                                                   (a)              Compensation for severance or injurious affection relating to land held with the land taken (s 7);

                                                                   (b)              Compensation for injurious affection caused by the works, where no land is taken, and compensation for interference with easements or restrictive covenants (s 10)[64];

                                                                   (c)              Treatment of short tenancies (s 20).

                                            (3)             Land Compensation Act 1973:

                                                                   (a)              Compensation for depreciation caused by the use of public works (Part I);

                                                                   (b)              Extra payments for displacement from land (Home or Farm Loss Payments, Disturbance Payments (Part III));

                                                                   (c)              Advance payment of compensation (s 52).

                                            (4)             Acquisition of Land Act 1981:

Disregard of new interests or works intended to enhance compensation
(s 4(2)).