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Practice & Law comPuLsory Purchase

9 October 2010

It was all meant to be so simple. In 2004, parliament widened the power of local authorities to acquire land compulsorily for planning purposes.

Subsequent cases demonstrated how the broader powers made the task of objectors – at the compulsory purchase stage or later in court – extremely difficult.

However, in R (on the application of Sainsbury’s Supermarkets Ltd) v Wolverhampton City Council [2010] UKSC 20; [2010] 2 WLR 1173, Lord Hope argued that “risks making it impossible for projects of urban renewal which can only be achieved by using compulsory purchase powers to assemble the site for redevelopment to include measures for improvements in

the public interest which lie outside the site’s perimeter”.

Section 99 of the Planning and Compulsory Purchase Act 2004 significantly changed the power of local planning authorities (LPAs) to acquire land compulsorily for planning purposes set out in section 226 of the Town and Country Planning Act 1990. It was said at the time that these powers “are intended to provide a positive tool to help acquiring authorities with planning powers to assemble land where this is necessary to implement the proposals in their community strategies and local development documents. These powers are expressed in wide terms and can therefore be used by such authorities to assemble land for regeneration and

other schemes where the range of activities or purposes proposed mean that no other single specific compulsory purchase power would be appropriate”: see Appendix A to Circular 06/2004.

Significant amendmentsSection 226 was amended in two significant ways. Subsection (1)(a) now provides that an LPA can acquire land compulsorily if it believes that this will facilitate the carrying out of development, redevelopment or improvement on or in respect of the land. In the view of the government in para 5 of Appendix A, “the use of the words ‘on, or in relation to’ means that the scheme of development, redevelopment or improvement for which the land needs to

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the week Focus Practice & Law eG LiFethe market

In the courtsAn opinion of the advocate general, whose role is to present impartial assessments of european court of Justice cases, could offer a lifeline to uK development agreements. his opinion on European Commission v Kindgom of Spain, concerns the application of eu procurement rules. In Auroux v Commune de Roanne, it was stipulated that uK councils had to follow lengthy and expensive advertisement and tendering processes. this led to a crisis of confidence in the uK development industry and the stalling of projects. the advocate general calls for “restraint” and warns of “the consequences of discouraging private initiatives”. see www.egi.co.uk/ 723891.nw

9 October 2010

a thorny issueCompulsory purchase orders Legal challenges may become easier following a Supreme Court decision, argue Martin Edwards and John Martin. Illustration by Tim Marrs

be acquired does not necessarily have to be taking place on that land so long as its acquisition can be shown to be essential to the successful implementation of the scheme. This could be relevant, for example, in an area of low housing demand where property might be being removed to facilitate replacement housing elsewhere within the same neighbourhood.”

The second amendment introduced the “well-being” power in a new subsection (1A). This provides that the acquiring authority must not exercise the subsection (1)(a) power unless it thinks that the proposed development, redevelopment or improvement is likely to promote or improve the economic, social or environmental well-being of its area.

The revised powers proved to be a popular means of advancing regeneration projects, but they were viewed by some as potentially going too far. The amended section 226(1)(a) went even further than the power that existed in section 15(1) of the Community Land Act 1975, which allowed LPAs to acquire “any land which in their opinion was suitable for development”. An inherent problem with widely drawn powers is that they invite challenges in the courts when it is felt that an LPA has overstepped the mark.

It is therefore no surprise that a challenge to the new power of compulsory acquisition of land for planning purposes would soon reach the highest court in the land. What is a surprise, however, is the

ObligationsDistinctions are blurred between “best” and “reasonable” endeavourspage 99

Mainly for studentsTenants should think carefully before exercising a break optionpage 100

CommentHow independent does a dispute resolver have to be?page 102

Legal notesThe drafting of an overage agreement must be absolutely clear page 103

Law reportHildron Finance Ltd v Sunley Holdings Ltd: Contract; frustrationpage 104

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Practice & Law comPuLsory Purchase

9 October 2010

The division in the Supreme Court shows how thorny an issue extraneous benefits is

manner in which the Supreme Court was divided over the issue, with one of their justices suggesting that another had “put the cart before the horse”.

It is curious that although the court was divided over the outcome, both sides were united in reasserting the constitutional limitations on an acquiring authority’s powers of compulsory acquisition. This case is significant in two respects: first, in how it dealt with the scope of the amended power in section 226 and, second, how acquiring authorities should use their powers.

The facts were straightforward. Tesco and Sainsbury’s each owned part of a site in Wolverhampton (Sainsbury’s owned around 86%) and each wanted to construct a supermarket on its land. Both sought planning permission for their schemes.

In planning terms, there was little to choose between them. The council was keen to see the site developed, since this would contribute to the well-being of the area, but neither company was prepared to sell its part of the site to the other. Compulsory acquisition was the only way of breaking the deadlock. The council would acquire the land from the reluctant owner and sell it to the other owner in a back-to-back deal under section 233 of the 1990 Act. The key question for the council was whose land it would acquire. Tesco owned another site, approximately 850m away, that was run-down and in need of regeneration. The council wanted Tesco to

develop it in a way that Tesco considered to be uneconomic. Nevertheless, Tesco agreed to enter into an obligation to develop that site if the council preferred it to Sainsbury’s in the competition to develop the supermarket site. The council resolved to acquire Sainsbury’s land compulsorily and indicated that one of the purposes of the compulsory purchase order (CPO) was to facilitate the development of the other site. Sainsbury’s objected and sought a judicial review of the council’s decision. The case reached the Supreme Court, where the decision narrowly went against the council.

Important aspectsThis decision contains a number of important aspects. The first is the depth of division between their justices. Lord Collins, Lord Mance, Lord Walker and Lady Hale found against the council, while Lord Phillips and Lord Hope dissented. However, in some important respects Lords Phillips and Hope agreed with the reasoning of Lord Collins but disagreed with the result. Lord Brown also dissented, but he adopted a different approach to his fellow dissenters. The second is the reliance, if not re-emphasis, by both the majority and those dissenting, on the constitutional

legal principles that apply to compulsory acquisition. The third is that a clear analogy was drawn between an LPA determining a planning application and one deciding to use compulsory purchase powers and the applicability of established case law to both sets of circumstances, which potentially affects developers offering planning gain and LPAs seeking back-to-back deals.

The first aspect concerns the depth of division between the majority and the dissenters, even given broad agreement on the underlying principles and reasoning, demonstrates how thorny the issue of extraneous benefits is in planning law.

The second aspect is potentially far-reaching. Case law over the past 15 years has suggested that the courts were becoming more difficult to persuade when challenging the making or confirmation of a CPO. Almost without exception, they have dismissed such challenges. However, the Supreme Court was clear on fundamental principles. As Lord Collins said, compulsory acquisition by public authorities for public purposes has always been a creature of statute: see Rugby Joint Water Board v Shaw-Fox (1972) 222 EG 815.

The courts have imposed a strict construction on statutes expropriating private property and ensured that rights of compulsory acquisition that are granted for a specified purpose may not be used for a different or collateral purpose: see Simpson’s Motor Sales (London) Ltd v Hendon Corporation (No 1) [1964] AC 1088. Both Lord Collins and Lord Phillips cited Lord Denning MR in Prest v Secretary of State for Wales (1982) 266 EG 527:

I regard it as a principle of our constitutional law that no citizen is to be deprived of his land by any public authority against his will, unless it is expressly authorised by Parliament and the public interest decisively so demands.

Given the clear public interest in regenerating Tesco’s distant site, this passage underlines the constitutional role of the courts in scrutinising the use of compulsory purchase powers. On future legal challenges, claimants will no doubt point to this decision and lower courts will find it difficult to brush aside these clear statements of principle.

The third aspect is also potentially far-reaching. The Court of Appeal found that it was not helpful to draw an analogy between an LPA’s powers of compulsory acquisition set out in section 226(1) and those determining planning applications. The Supreme Court took the contrary view, holding that the link was relevant and the consequence of it may be significant. There is no reason, for instance, why the link should not work in both directions, so that what was decided in respect of the powers of compulsory purchase applies equally to the process of determining planning applications. It is arguable that the approach taken by the Supreme Court can be seen as introducing a limit on the effectiveness of the decision in Tesco Stores Ltd v Secretary of State for the Environment [1995] 27 EG 154, which has led to an explosion in the use of planning gain and particularly the offer of off-site benefits. The Supreme Court has achieved this by reminding us that “there must be a real connection between the benefits and the development”.

Lord Walker advocated “a real (rather than a fanciful or remote) connection” between any off-site benefits and the development. Lord Phillips, although disagreeing with the conclusion, aligned himself with Lord Collins on this issue:

an offer of benefits that have no relation to or connection with the development is not material, for it is no more than an attempt to buy planning permission, which is objectionable in principle. Tesco was right, on its application for planning permission, to drop any attempt to link the development of the site with the RHS development.

providence – not profitIt seems clear that LPAs will now re-examine regeneration schemes that require the compulsory acquisition of third-party land. It may be more difficult to justify this because planning considerations must be central to the decision-making process. As Lord Walker said: “The public purse is to be protected against improvidence, but the local authority should not be exercising its powers in order to make a commercial profit.”

Martin Edwards is a specialist planning barrister in 39 Essex Street Chambers and John Martin is a freelance writer