Part 2: Section 10 Compulsory Purchase Act 1965
The Valuation Office Agency`s technical manual covering all aspects of compulsory purchase and compensation.
14.66 General
Where no land has been taken from the claimant the right to compensation for injurious affection caused by the execution of the works, as distinct from the use of the works, which is dealt with in Part 1 of section 14, depends upon the provisions of the Act which authorised the works.
14.67 Section 10 - Compulsory Purchase Act 1965
Where the Compulsory Purchase Act 1965 (CPA 1965) applies (for example by the exercise of powers of compulsory acquisition in accordance with the Acquisition of Land Act 1981) the right to claim compensation is provided by section 10 CPA 1965.
The right to compensation is not dependent upon the exercise of compulsory powers of acquisition; section 10 CPA 1965 may also apply where the purchase of the land for the purpose of the work was by agreement or where works have been undertaken but no land acquired. Although many of the Acts that empower the purchase of land by agreement specifically exclude the provisions of section 10 CPA 1965, the Act that authorised the works coupled with the Local Government Act 1972 may permit an authority that has purchased by agreement for specified purposes after 1 April 1974 to disregard restrictive covenants affecting the land subject to payment of compensation having regard to the provisions of section 10 CPA 1965.
14.68 Section 68 - Land Clauses Consolidation Act 1845
Section 10(2) CPA 1965 provides that the right to compensation is the same as that provided for in section 68 Land Clauses Consolidation Act 1845.
Although on the face of it section 68 LCCA 1845 is purely a procedural section, it has been consistently interpreted by the Courts as conferring a right to compensation in respect of land that has been injuriously affected by the execution of works.
14.69 ‘McCarthy’ rules
In order to succeed, a claim for compensation must pass each of four tests that derive from various decisions that were consolidated by the House of Lords in Metropolitan Board of Works v McCarthy (1874) LR 7 HL 243. These are known as the McCarthy Rules and are:
Rule 1: The injurious affection must be the consequence of the lawful exercise of statutory powers otherwise the remedy is by legal action.
This rule defines the field of operation of section 10 CPA 1965. Where a public authority is acting within its statutory powers, claims are governed by the other three rules. If the action causing injurious affection goes beyond the statutory powers, or is the result of the powers being exercised in a negligent manner, the owner of the land has a remedy by means of an action for an injunction or damages.
Rule 2: The injurious affection must arise from that which, if done without statutory authority, would give rise to a cause for action.
This is the principal test of admissibility of a claim under section 10 CPA 1965. Taken on its own, this rule puts the activities of public authorities on the same basis as those of private bodies, as far as admissibility of claims is concerned.
Rule 3: The value of the land or interest must be directly affected by physical interference with some legal right, public or private, that the claimant is entitled to make use of in connection with the claimant’s property.
This rule affects the quantum of a claim. Under it the owner is entitled to compensation only for loss caused by interference with an interest in land and not for damage to trade or business or for damage caused by personal loss or inconvenience, unless such damage is reflected in the depreciation in the value of the land. In the ordinary law of nuisance an action can be maintained only by a person who has an interest in land. This rule was the principle considered by the House of Lords in Argyle Motors (Birkenhead) Ltd v Birkenhead Corporation [1975] AC 99.
Rule 4: The damage must arise from the execution of the works and not from their authorised use.
Execution or construction is taken to mean the physical placing of the works on the land, including any effect that the structure itself may have. Thus, if an embankment carrying a motorway causes flooding or the process of its construction causes excessive noise and dust, the owner of adjoining land may be able to make a claim, but the owner is debarred from claiming under section 10 CPA 1965 eg for such things as noise and fumes caused by the actual use of the completed motorway.
Whether the injury be temporary or permanent does not affect the right to claim compensation although it would be material in assessing the amount of compensation payable.
14.70 Valuation date and interest on compensation
Claims made under section 10 CPA 1965 do not have a statutory valuation date, but interest is payable on the compensation from the date of the claim in accordance with section 63 LCA 1973 and the assessment of compensation at the date of the claim will therefore provide a satisfactory answer in most cases.
The compensation is to be assessed on the difference between the market value of the property with and without the injury, but care must be taken to ensure that compensation is not included in respect of damage arising from the ‘use’ of the works.
Where an access is severed by the works and an alternative access is provided, the mitigating effects of the replacement access should be reflected in the compensation payable.
14.71 Alternative valuation date
There may be cases where, due to exceptional circumstances, an alternative valuation date should be adopted, and in those cases the judicial precedents applied in Dodd Properties (Kent) Ltd v Canterbury City Council [1980] 1 EGLR 15 and Flanagan v Stoke on Trent City Council [1982] 1 EGLR 205 should be considered.
In the Dodd Properties case (not a case heard under section 10 CPA 1965), where the appropriate measure of damages was the cost of repair, the question was whether these should be assessed as at the date at which the cause of action arose or date when repairs could reasonably have begun. It was reasonable to defer repairs until the defendants’ liability had been established and so the Court Of Appeal determined that they should be assessed as at the trial date.
In the Flanagan case the Lands Tribunal referred to the Dodd Properties case and held that the general rule is that damages fall to be assessed as at the date when the cause of action arose and in normal circumstances this would be applicable where the relevant measure of damage was the diminution in the capital value of the property. However, it held that the assessment of damages based on the cost of repair or reinstatement is an exception and in that case the date of valuation or assessment should be adopted as the date that the compensating authority’s works were completed. In doing so the Tribunal had regard to the entitlement of the claimant to interest on the compensation from the date of claim under section 10 CPA 1965.
Where remedial works or repairs are not required to be carried out the general rule should apply and compensation should be assessed as at the date when the cause of action arose ie at the date when the damage actually occurred.
All reports and recommendations of terms provisionally agreed should clearly state the date at which the compensation has been assessed, and where a date other than the date of the claim has been adopted a brief explanation of the circumstances should be given.
14.72 Planning
The planning assumptions contained in sections 14 to 17 Land Compensation Act 1961 do not apply to section 10 claims. Any use of land may be considered if it is a purpose to which it may legitimately be put. However, regard should be had to demand and the prospect of receiving planning permission.
14.73 Betterment
Betterment due to usage should not be reflected in a section 10 claim. However, betterment as a direct consequence of the ‘works’ (such as a new or improved access) could be reflected. Any cases that involve an indirect benefit to the claimant’s land (for example where land has been zoned for development up to the new highway) should be referred to the PS Professional Guidance team.
14.74 Temporary interference
Section 10 CPA 1965 does not contain a provision attempting to limit claims to cases where properties suffer permanent depreciation. Properties suffering damage as a result of temporary interference may have a valid claim (Leake v Wirral MBC [1977] 2 EGLR 171 and Wildtree Hotels v Harrow LBC [2000] 2 EGLR 5).
However, where temporary interference with the enjoyment of land takes place a cause of action would not arise where the ‘works’ were limited in duration or where operations by the authority were a normal and usual use of land in the locality (McCarthy Rule 2 not satisfied). There is no cause of action in any event unless the scale of interference is more than it is reasonable to expect a land owner to suffer. In such cases where the matter is actionable, compensation is assessed by capitalising the loss in rental value over the appropriate period.
14.75 Linkage of interests/lands
In some cases claims are received from persons in the following circumstances:
(i) Although the legal right infringed attaches to one interest (for example leasehold) a claim is made in respect of damage to land held in a separate interest (for example freehold) in adjacent land. Any such claims should be referred to the PS Professional Guidance team.
(ii) Claims are made in respect of the extra costs in travelling between two separate properties owned by the same person.
In case (ii) if the extra costs were not reflected in a depreciated market value of either property the claim would fail. Cases where either property has been injuriously affected by the extra traveling costs resulting from the ‘works’ should be referred to the PS Professional Guidance team for advice.
14.76 Trade losses
Although actual trade or personal losses cannot be included in a section 10 claim, if a legal right has been infringed and losses have been caused by the execution of the ‘works’ that cause the market value of the property to fall, the loss in value of the property is compensatable. The legal right infringed can be a private right or a public right ie the right to travel along a highway. Prime examples are claims in respect of trade related properties such as petrol filling stations or public houses where a drop in throughput resulting from a loss of trade will normally be reflected in a lower market value of the property.
14.77 Sporting rights
Holders of sporting rights severed from land are not entitled to receive a notice to treat when land is acquired, although the right itself may qualify as an ‘interest in land’. Compensation would be payable under the provisions of section 10 in respect of that area of land remaining over which the rights are held and an approach based upon the full compensation code is not appropriate.
14.78 Physical damage to property caused by works
Physical damage to property caused by the authorized works will always give rise to a section 10 claim as in Flanagan v Stoke on Trent City Council [1982] 1 EGLR 205 (structural damage) andClift and Clift v Welsh Office [1998] RVR 303 (dust damage) whether or not the authority carried out the works with due care or was negligent.
14.79 Stopping up orders
In Jolliffe v Exeter Corporation (1967) 18 P&CR 343 a stopping up order was held not to give rise to a section 10 claim. However, in that case the Court of Appeal determined that the stopping up order was a separate step and not part of the authorised works. The stopping up had been executed under separate statutory powers to those used to authorize the works and by a separate authority and therefore no compensation was payable.
However, in the case of Moto Hospitality Limited v Secretary of State for Transport [2008] 2 All ER 718 the authorized works, the CPO and the orders made thereunder, including the stopping up orders, had all been undertaken under the authority of the Highways Act 1980. Thus all the scheme works came within the ambit of section 10 and Joliffe v Exeter Corporation could be distinguished. Where a private means of access to any premises is proposed to be stopped up by virtue of sections 124 or 125 HA 1980, compensation is payable for damage caused in accordance with section 126 HA 1980.
14.80 Property bypassed by new road
In Wagstaff v DETR [1999] 2 EGLR 108 the claimant owned a petrol filling station (PFS) leased to BP (who was also a claimant in the case). The PFS stood at the junction of the A11 and A505 and had access from both roads. As part of a road improvement scheme a new section of the A11 was constructed from a point approximately one km south of the PFS and joined up with the old A11 approximately one km north of it. The PFS was thus effectively bypassed.
In addition as part of the scheme the A505 was stopped up. The new road was opened to traffic in December 1995 and in January 1996 the PFS closed due to the reduction in throughput. It was agreed that the scheme had devalued the land.
The Lands Tribunal determined that the stopping up of the A505 (the side road) gave rise to a claim under section 10 when the physical obstruction of that road took place. The stopping up order was an integral part of the CPO. The other road alterations were not relevant. The road works one km to the south were not included in the CPO and the alterations to the A11 one km to the north were too remote.
In Moto Hospitality Limited v Secretary of State for Transport [2008] 2 All ER 718 the Court of Appeal stated ‘There needs to be a direct interference with the access to an individual site which goes beyond what is ordinarily incidental to the traffic objectives of the scheme as a whole’.
Thus a simple bypassing of a property would not give rise to a section 10 claim where no direct interference with access to the property had occurred.
14.81 Common law claims
Section 10 claims can only be made in situations where the injurious affection suffered is a consequence of the lawful exercise of statutory powers. When an authority has not exercised its statutory powers lawfully a section 10 claim will not be valid but a claim may lie at common law. In such cases a claim may be made for damage to chattels as well as for damages to property.
14.82 Specific statutory entitlement
In certain instances specific statutory provisions (for example sections 66, 77, and 126 Highways Act 1980) provide an entitlement to claim damages for interference with legal rights. The specific provisions usually contain their own compensation provisions and need to be considered individually.
14.83 Admissibility
Claims under section 10 CPA 1965 should be made direct to the authority responsible for the scheme. Those received direct by the valuer should be forwarded to the authority and the claimant advised that this has been done. The valuer should not treat a section 10 claim as valid without the concurrence of the compensating authority.
14.84 Negotiations and reports
When the valuer has received from the authority all relevant details together with a request to negotiate, the valuer should open negotiations with the claimant. Provisional agreements should be reported on form VO 2015 deleting paragraphs (4) and (5). The valuer should consider all aspects of any claim before advising the authority that a claim for compensation could not be substantiated. In particular, where the claim is merely for damage to trade or business that cannot be sustained under McCarthy Rule 3, the valuer should consider whether a valid claim could be framed on the basis of depreciation in the market value of the property affected.
14.85 Abortive negotiations
If the valuer were unable to reach agreement after a reasonable period a report to the authority should be made stating:
a) the amount of the claim;
b) the lowest amount the claimant will accept (if known);
c) the amount of valuation fees that the valuer considers would be payable in respect of the proceedings so far, and whether the valuer is aware that the claimant has incurred legal costs.
The valuer should inform the claimant of the action taken. Disputes arising may be referred to the Upper Tribunal (Lands Chamber) for determination.
14.86 Principles derived from case law
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Compensation for business losses is not payable but if the claimant can prove that a loss of profitability affects the value of the land, for example trade related properties, compensation could be recovered for this loss of value (Argyle Motors (Birkenhead) Ltd v Birkenhead Corporation [1975] AC 99 and the subsequent case of Leake v Wirral Metropolitan Borough; Argyle Motors (Birkenhead) Ltd v Same [1977] 2 EGLR 171)
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A claim under section 10 could never be founded on the effects of dust, noise and vibration from building works (unless they had caused actual physical damage). This is because in order to gain immunity from action the works must be carried out with due regard to their effect on neighbouring owners and thus would not be actionable in accordance with Andreae v Selfridge [1938] Ch 1. If the works were carried out negligently so as to cause unreasonable disturbance to neighbours they would fall outside the immunity of the statute and would be actionable at common law, not under section 10.
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In cases of interference with access rights, there needs to be a direct interference with the access to an individual site that goes beyond what is ordinarily incidental to the traffic objectives of the scheme as a whole (Moto Hospitality Limited v Secretary of State for Transport [2008] 2 All ER 718).
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The creation of a cul-de-sac from a through road is likely to give rise to a claim, subject to proof of loss in value (Flanagan v Stoke on Trent City Council [1982] 1 EGLR 205).
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Temporary hoardings in position for a substantial period would give rise to a valid claim under section 10 (Westminster City Council v Ocean Leisure Limited [2004] EWCA Civ 970). Damages would be limited to the result of the excessive nuisance not the total loss. Interference in substantial measure and over a substantial period of time with the right of the public to make use of the highway constitutes a public nuisance which is not subject to any rule of ‘give and take’.
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For a public nuisance (for example obstruction of a public highway) to be actionable, the claimant must show that he has suffered particular damage over and above that suffered by members of the public in general.
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Temporary damage is compensatable, usually measured by a capitalised loss of rental value (Leake v Wirral MBC [1977] 2 EGLR 171 and Wildtree Hotels v Harrow LBC [2000] 2 EGLR 5).
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The ‘special Act’ for the purposes of section 10 comprises the Act authorising the works (for example the Highways Act 1980), the CPO and all the orders made under it (Moto Hospitality Limited v Secretary of State for Transport [2008] 2 All ER 718).
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The works complained of need not have taken place on the land acquired for the scheme (Westminster City Council v Ocean Leisure Limited [2004] EWCA Civ 970).
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The land required for the scheme could have been acquired by agreement not CPO.
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The simple by-passing of a property without a direct interference with that property’s access will not give rise to a claim (Wagstaff v DETR [1999] 2 EGLR 108).
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Physical damage to a property, including physical damage from dust and mud, will be compensatable under section 10 whether caused negligently or not (Clift and Clift v Welsh Office [1998] RVR 303).
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The stopping up of a highway would not form part of the scheme works only where undertaken by a different authority to the scheme promoter and under a different statutory provision to that authorizing the scheme (Jolliffe v Exeter Corporation (1967) 18 P&CR 343).